JC Master Legal News Issue 964

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 the evening of March 31, the Shenzhen Stock Exchange website published an article titled “The Merger of the Shenzhen Stock Exchange’s Main Board and the SME Board Will Officially Take Effect on April 6.” With the specific date of the merger now finalized, China’s capital market is once again poised to undergo a historic transformation.
Guangzhou: Strengthening Real Estate Market Regulation; Talent Housing May Be Transferred Only After Three Years of Ownership.
On April 2, the General Office of the Guangzhou Municipal People’s Government issued the “Opinions on Further Promoting the Stable and Healthy Development of the Real Estate Market” (hereinafter referred to as the “Opinions”), which introduces regulatory measures for Guangzhou’s real estate market across six areas, including residential land supply and oversight, as well as price‑registration management. Notably, the Opinions stipulate that housing newly purchased by individuals benefiting from talent‑related policies may not be transferred until three years have elapsed from the date of obtaining the real estate ownership certificate.
Announcement of the State Taxation Administration on Issues Related to the Administration of VAT Exemption for Small-Scale Taxpayers
On March 31, the Ministry of Finance and the State Taxation Administration issued the “Announcement of the Ministry of Finance and the State Taxation Administration on Clarifying the Policy of Exempting Small-Scale VAT Payers from VAT” (No. 11, 2021). This announcement implements the requirements set forth in the “Opinions on Further Deepening the Reform of Tax Collection and Administration,” jointly issued by the CPC Central Committee and the State Council, ensuring that administrative measures and tax‑and‑fee preferential policies are promulgated and interpreted concurrently, thereby enhancing the timeliness, certainty, and consistency of policy implementation. In line with the overarching principle of “self‑determination, self‑declaration, and post‑event supervision,” small-scale taxpayers who meet the threshold of monthly sales revenue below RMB 150,000 are eligible for VAT exemption, which can be claimed through self‑declaration, thus ensuring that tax and fee preferential policies are delivered promptly and enjoyed directly.
The criminalization of “dangerous operations” provides a statutory basis for the supervision and enforcement of workplace safety.
Recently, the emergency management authorities of Hangzhou City in Zhejiang Province and Qingdao City in Shandong Province have each referred two cases suspected of the crime of dangerous operations through the mechanism for linking administrative enforcement with criminal prosecution. On December 26, 2020, the 24th session of the Standing Committee of the 13th National People’s Congress adopted the Eleventh Amendment to the Criminal Law, which came into effect on March 1, 2021. With the inclusion of the “crime of dangerous operations” in the criminal code, emergency management agencies across the country have strengthened their coordination with law enforcement and judicial authorities, enhancing communication and collaboration to impose strict legal penalties on crimes endangering workplace safety.

Table of Contents
Table of Contents

Finance & Capital Markets
The merger of the Shenzhen Stock Exchange’s Main Board and the SME Board officially took effect on April 6.
Encouraging Whistleblowers: The China Securities Regulatory Commission Plans to Reward Informants in Five Cases
The SSE’s 2021 International Promotion Event for Index-Based Investing Concluded Successfully.
The People’s Bank of China: Will implement a filing-based regulatory regime for directors, supervisors, and senior management personnel of financial holding companies.

Corporate & Commercial
Guangzhou: Strengthening Real Estate Market Regulation; Talent Housing Units May Be Transferred Only After Three Years of Ownership
Two ministries will organize and carry out “look-back” inspections of steel capacity reduction efforts.
JD Digits “withdraws” from the STAR Market.
“The first publicly listed company in the shared charging sector” has been born, as Monster Charging debuts on the Nasdaq.

Taxation
Announcement of the State Taxation Administration on Issues Related to the Administration of VAT Exemption for Small-Scale Taxpayers
Announcement of the Ministry of Finance and the State Taxation Administration on Clarifying the Policy of Exempting Small-Scale VAT Payers from VAT
Announcement of the State Taxation Administration on the Issuance of the “List of Matters Subject to ‘No Penalty for First Violation’ in Tax Administrative Penalties”
Notice from the National Development and Reform Commission and Four Other Departments on Requirements for Properly Carrying Out the Preparation of Lists of Integrated Circuit Enterprises and Software Enterprises Eligible for Tax Preferential Policies
Announcement of the State Taxation Administration on Further Optimizing Procedures and Services Related to the Administration of Value-Added Tax Preferential Policies

Litigation & Arbitration
The criminalization of “dangerous operations” provides a statutory basis for the supervision and enforcement of workplace safety.
The Shanghai Financial Court has released its Top Ten Typical Cases of 2020.
A court in Yunnan has issued a “protection order”: electronic data may be used as evidence of domestic violence.
Strengthening Online Protection of Children’s Personal Information! The nation’s first civil public-interest lawsuit on online protection for minors has concluded.

Other

Finance & Capital Markets
The merger of the Shenzhen Stock Exchange’s Main Board and the SME Board officially took effect on April 6.
On the evening of March 31, the Shenzhen Stock Exchange issued the “Notice on Arrangements Related to the Merger of the Main Board and the SME Board” (hereinafter referred to as the “Notice”). According to the Notice, with the approval of the China Securities Regulatory Commission, the merger of the Main Board and the SME Board will officially take effect on April 6. The Shenzhen Stock Exchange stated that all preparatory work is now in place. Going forward, the Shenzhen market will adopt a structure centered on the Main Board and the ChiNext Board.
The notice states that on February 5, 2021, with the approval of the China Securities Regulatory Commission (CSRC), the Shenzhen Stock Exchange initiated preparatory work for the merger of the Main Board and the SME Board (hereinafter referred to as the “two-board merger”). Under the unified guidance of the CSRC, the Shenzhen Stock Exchange, together with all market participants, has steadily advanced various tasks in accordance with the overarching principle of “two unifications and four invariances,” integrating relevant business rules and regulatory operating models, facilitating adaptive adjustments to related indices and fund products, successfully implementing technical system upgrades, and smoothly advancing arrangements for issuance and listing. All preparatory measures are now in place. Recently, with the CSRC’s approval, the Shenzhen Stock Exchange issued a notice on the two-board merger and associated rules, clarifying the arrangements following the merger’s implementation, which will officially take effect on April 6.
During the process of integrating the business rules for the merger of the two boards, the Shenzhen Stock Exchange made adaptive revisions to seven regulations, including the trading rules, the detailed implementation rules for margin and short‑selling transactions, and the guidelines on high‑ratio stock dividends and share transfers. It also repealed two notices, such as the “Notice on Piloting a Continuous Supervision Commissioner System at Selected Sponsor Institutions,” primarily by removing references to the SME Board, standardizing the definition of high‑ratio stock dividends and share transfers, adjusting the benchmark indices used to calculate relevant trading indicators, and abolishing the continuous supervision commissioner system. These adjustments took effect upon the implementation of the two‑board merger on April 6.
The merger of the two boards is a key measure in the capital market’s comprehensive deepening of reform. It is of great significance for improving market functions, strengthening the market foundation, enhancing market vitality and resilience, promoting the market‑based allocation of capital factors, and better serving the overall national strategic development agenda. The Shenzhen Stock Exchange will remain guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, accurately grasp the new stage of development, thoroughly implement the new development philosophy, and advance the establishment of a new development pattern. It will actively uphold the principles of “establishing sound systems, non‑interference, and zero tolerance,” as well as the requirements of “four respects and one concerted effort,” and, in line with the working ethos of “openness, transparency, integrity, and rigor,” ensure the effective and meticulous implementation of all reform measures. The Exchange will continue to refine the market structure centered on the Main Board and the ChiNext Board, fully leverage the functions of the Shenzhen market, and better support the high‑quality development of enterprises at different stages of growth and of diverse types. By striving to build a premier center for innovative capital and a world‑class stock exchange, it will help ensure a strong start and steady progress for the capital market during the 14th Five‑Year Plan period.

Encouraging Whistleblowers: The China Securities Regulatory Commission Plans to Reward Informants in Five Cases
On April 2, the China Securities Regulatory Commission announced that it plans to award whistleblowers who provided leads in five cases involving violations of laws and regulations by Jiangsu Sihuan Biological Co., Ltd., Lu Keping, and others, in accordance with the Securities Law and the Provisional Regulations on Reporting Securities and Futures Violations.
The China Securities Regulatory Commission stated that it plans to award whistleblowers who provided leads in five cases: violations of laws and regulations by Jiangsu Sihuan Biotechnology Co., Ltd. and Lu Keping; violations of information disclosure laws and regulations by Dalian Tianbao Green Food Co., Ltd.; violations of information disclosure laws by Jiyao Holdings Group Co., Ltd.; violations of information disclosure laws by Dehua Hengyi Ceramic Art Co., Ltd.; and violations of laws and regulations regarding information disclosure by Jilin Sendong Electric Power Equipment Co., Ltd.
Among them, Sihuan Bio was found to have engaged in illegal conduct, including making false statements in its annual reports from 2014 to 2018 regarding information on its actual controller; Tianbao Food committed violations by failing to disclose material guarantee matters as required; Jiyao Holdings’ announcement dated July 24, 2019 contained information that did not correspond to the facts and included misleading statements; Dehua Hengyi failed to disclose external guarantees in accordance with the law; and Sendong Electric failed to disclose, as required by law, details of shareholdings by relevant persons and artificially inflated operating revenue.
The new Securities Law, which came into effect on March 1, 2020, has introduced a whistleblower reward system. Specifically, Article 176 of the new Securities Law sets out the relevant provisions governing this system. First, any organization or individual is entitled to report suspected securities-related violations or breaches to the securities regulatory authority under the State Council. Second, for substantiated leads concerning serious violations or breaches that are reported under the reporter’s real name, the securities regulatory authority under the State Council shall grant rewards in accordance with applicable regulations. Third, the securities regulatory authority under the State Council is required to maintain the confidentiality of the whistleblower’s identity information.
Previously, in June 2014, the China Securities Regulatory Commission issued the Provisional Regulations on Reporting Securities and Futures Law‑Violating and Rule‑Breaking Activities, which set out detailed provisions for handling such reports. With respect to reward amounts, the specific rules are as follows: where the reported facts are clear, the leads are well‑defined, the investigation conoffices their validity, and administrative penalties have been imposed in accordance with the law—provided that the total amount of fines and confiscations exceeds RMB 100,000—a reward equal to 1% of that amount shall be granted to the informant; if, after lawful referral to the judicial authorities, a final guilty verdict is rendered, an additional reward may be awarded at the discretion of the competent authority, with the total reward not exceeding RMB 100,000. For leads involving cases of significant national impact or substantial sums of money, if the investigation conoffices their validity, the reward amount shall not be subject to the limits set forth in the preceding paragraph, but shall in no case exceed RMB 300,000.
In August 2019, the China Securities Regulatory Commission (CSRC) issued an announcement stating that it intends to award whistleblowers who provided leads in three cases: market manipulation by Liao Yingqiang, illegal information disclosure by Jiangsu Yabait Technology Co., Ltd., and violations of information disclosure regulations by Renzihang Network Technology Co., Ltd.
The CSRC stated that it has entrusted the China Securities Investor Protection Fund Co., Ltd. with handling specific matters related to the registration of whistleblowers for this reward program; applicants may log in to the “Whistleblower Reward” section on the official website of the China Securities Investor Protection Fund Co., Ltd. to complete the necessary procedures.
The China Securities Regulatory Commission (CSRC) stated that it sincerely welcomes reports from all market participants—particularly those who are well‑versed in the facts, possess solid evidence, and are committed to safeguarding investors’ legitimate rights and interests and upholding the sound functioning of the capital market—regarding serious violations of laws and regulations in the securities and futures sectors. For substantiated, real‑name reports involving suspected major illegal or non‑compliant conduct, the CSRC will grant rewards in accordance with applicable regulations. The CSRC shall strictly protect the confidentiality of whistleblowers’ information in accordance with the law.

The SSE’s 2021 International Promotion Event for Index-Based Investing Concluded Successfully.
On March 30, the “SSE 2021 International Promotion Event on Index-Based Investing (Online),” co-hosted by the Shanghai Stock Exchange and China Securities Index Co., Ltd., was successfully held. The event was aimed at international institutional investors and featured in-depth discussions on topics including trends in China’s index‑based investing, the STAR 50 ETF, ESG investment opportunities, and the internationalization of domestic indices. Separate morning and afternoon sessions were tailored to investors from the Asia‑Pacific, North America, and Europe–Africa–Middle East regions, drawing more than 200 institutional representatives from over 20 countries and territories worldwide.
Liu Ti, Deputy General Manager of the Shanghai Stock Exchange, delivered a speech at the event. He provided a brief overview of the latest developments in the SSE’s equity, bond, fund, and derivatives markets over recent years, as well as the innovative achievements of the SSE Composite Index. He also highlighted the Exchange’s strategic vision for the future of its index‑based business, focusing on refining existing index‑construction methodologies, prioritizing the development of ESG‑related indices, and exploring new models of international cooperation.
Index investing, the STAR 50 Index, and the ESG index framework constituted the three main highlights of this promotional event. The event provided attendees with a detailed overview of the domestic index market system and showcased the achievements of China’s index‑based investment sector. With ESG indices as a key focus, the program featured dedicated presentations on the logic and distinctive features of China’s ESG rating system, the structure of its ESG index framework, and the evolution of ESG investing in the domestic market, aiming to deepen international investors’ understanding of ESG trends among Chinese listed companies and the unique characteristics of China’s ESG index ecosystem. In addition, a roundtable discussion, viewed from the perspective of international investors, brought together representatives of global institutional investors to share their insights and practical experiences in ESG investing in the A‑share market, offering valuable lessons and best practices to encourage greater participation by international investors in ESG‑focused A‑share investments.
At present, domestic index‑based investing has entered a phase of rapid growth. The domestic index ecosystem—led by the SSE and CSI series—has developed a robust product suite that includes stock index futures, stock index options, ETFs, ETF options, and index funds. Meanwhile, the international influence of the SSE Composite Index is steadily increasing, with the scale of overseas‑issued index products continuing to expand. Recently, overseas markets such as the United States and Hong Kong have successively launched multiple CSI 50‑related index products, marking a new milestone in the SSE’s index‑based business. In addition, as China places ever greater emphasis on green development, both domestic and international institutional investors have become increasingly active in allocating capital to Chinese green assets. Consequently, several A‑share ESG ETFs benchmarked against Chinese ESG indices have been listed one after another in both domestic and overseas markets.
Going forward, the SSE will focus on refining its index system, optimizing the methodology for existing indices, expanding its index product lineup, and intensifying international promotion of domestic indices. It will facilitate the issuance of more products that track these domestic benchmarks in both domestic and overseas markets, offering Chinese solutions for global asset allocation and enhancing the SSE’s level of market internationalization as well as the international influence of its domestic indices.

The People’s Bank of China: Will implement a filing-based regulatory regime for directors, supervisors, and senior management personnel of financial holding companies.
According to the People’s Bank of China’s website on April 2, the central bank recently issued the Provisional Regulations on the Filing and Administration of Appointments for Directors, Supervisors, and Senior Management Personnel of Financial Holding Companies (hereinafter referred to as the “Directors, Supervisors, and Senior Management Regulations”), which will take effect on May 1.
According to reports, in November 2020, the People’s Bank of China issued the Provisional Regulations on the Filing and Administration of Appointments for Directors, Supervisors, and Senior Management Personnel of Financial Holding Companies (Draft for Comments) (hereinafter referred to as the “Draft”). At that time, in its explanatory note accompanying the draft, the central bank stated that financial holding companies are subject to the regulatory framework applicable to financial institutions and, compared with individual financial institutions, exhibit greater specialization and higher complexity. In line with the principle of professional suitability, directors, supervisors, and senior management of financial holding companies should possess sound knowledge of financial regulation, robust risk‑management capabilities, and a strong commitment to compliance, ensuring that their qualifications are commensurate with their respective roles. This is intended to enable them to fulfill their duties effectively, form objective and sound judgments, and better safeguard the legitimate rights and interests of both financial institutions and financial consumers.
The central bank stated that, in the next phase, it will adhere to the principles of openness, fairness, and impartiality, and, in accordance with the law, implement a filing-based regulatory regime for directors, supervisors, and senior management personnel of financial holding companies, thereby promoting their sound and orderly development.
I. Clarifying the Qualification Requirements for Directors, Supervisors, and Senior Management of Financial Holding Companies
Earlier, the State Council and the People’s Bank of China successively issued the “Decision of the State Council on Implementing Access Management for Financial Holding Companies” (Guofa [2020] No. 12, hereinafter referred to as the “Access Decision”) and the “Provisional Measures for the Supervision and Administration of Financial Holding Companies” (PBOC Order [2020] No. 4, hereinafter referred to as the “Financial Holding Measures”), which officially came into effect on November 1, 2020.
It is worth noting that both the “Access Decision” and the “Financial Holding Company Measures” set forth clear requirements for the qualifications of directors, supervisors, and senior executives of financial holding companies. Furthermore, in November 2020, the People’s Bank of China issued a draft opinion that further refined the eligibility criteria and governance requirements for key positions such as chairman, supervisor, and general manager of financial holding companies. For instance, individuals serving as chairman, vice-chairman, chairperson of the supervisory board, general manager, deputy general manager, or performing the duties of these roles, must have at least eight years of experience in the financial sector or ten years of experience in related economic fields, and must maintain an excellent professional record. In addition, the draft opinion establishes term limits for certain positions, including chairman, chairperson of the supervisory board, and general manager, stipulating that, in principle, no individual may serve in the same position at the same financial holding company for more than a cumulative total of ten years.
The central bank stated that, as financial holding companies are subject to the same regulatory framework as financial institutions and are characterized by a broad range of business activities, a large number of entities, and high levels of interconnectedness, the financial expertise, risk-management capabilities, and compliance‑oriented governance of their directors, supervisors, and senior management play a crucial role in ensuring the sound and orderly development of both the holding company itself and its subsidiaries.
II. Filing-based management will be implemented for directors, supervisors, and senior management.
In accordance with the Regulations on Directors, Supervisors, and Senior Management, when a financial holding company appoints directors, supervisors, or senior management personnel, or authorizes relevant persons to perform the duties of such positions, it shall verify that they meet the applicable qualification requirements and, within five business days from the date the decision is made, submit the required filing materials to the People’s Bank of China, with a copy sent to the local branch of the People’s Bank of China at the entity’s registered address.
The central bank stated that the Regulations on Directors, Supervisors, and Senior Management, in line with the principle of personnel suitability and tailored to the characteristics of financial holding companies, clearly define the qualifications and filing procedures for such positions. Individuals must possess the skills, experience, and knowledge appropriate to their roles, while strengthening appointment management to mitigate risks associated with key positions and standardizing practices such as part-time appointments, acting in lieu of others, and the public disclosure of personnel information. At the same time, the Regulations specify that the People’s Bank of China is responsible for the filing and supervisory oversight of directors, supervisors, and senior management at financial holding companies, reinforcing ongoing and post‑event supervision and intensifying accountability.
Going forward, the People’s Bank of China will, in accordance with the principles of openness, fairness, and impartiality, implement registration-based oversight over the directors, supervisors, and senior management of financial holding companies, thereby promoting their sound and orderly development.

Commercial & Corporate
Guangzhou: Strengthening Real Estate Market Regulation; Talent Housing Units May Be Transferred Only After Three Years of Ownership
On April 2, the General Office of the Guangzhou Municipal People’s Government issued the “Opinions on Further Promoting the Stable and Healthy Development of the Real Estate Market” (hereinafter referred to as the “Opinions”), which introduces regulatory measures for Guangzhou’s real estate market across six areas, including residential land supply and oversight, as well as price‑registration management. Notably, the Opinions stipulate that housing newly purchased by individuals benefiting from talent‑related policies may not be transferred until three years have elapsed from the date of obtaining the real estate ownership certificate.
1. Housing for talent may be transferred only after three years; projects with excessively high pricing or those unable to obtain the necessary documentation are excluded.
The “Opinions” state that efforts to provide categorized guidance and implement targeted policies must be further strengthened. Specifically, housing newly purchased by individuals benefiting from talent‑related policies—whether newly built or secondhand—may not be transferred until three years have elapsed from the date of registration of the real estate ownership certificate. In addition, talent eligibility reviews will be tightened, speculative activities will be officely curbed, and region‑specific, precision‑based regulatory measures will be put in place. Furthermore, price‑registration guidelines for both pre‑sale and ready‑to‑move‑in prices of newly built commercial housing will be strictly enforced.
Meanwhile, with regard to housing prices, the Opinions state that projects that refuse to comply with government price guidance will temporarily be denied pre-sale permits or will not be processed for online registration of transactions. The Opinions also stipulate that price guidance will continue to be applied to the pre-sale prices of newly built commodity housing and the sales prices of existing homes, with the aim of helping developers set reasonable pricing.
Regarding the aforementioned price‑guidance policy, some industry experts believe it is primarily aimed at addressing recent trends—such as Guangzhou’s leading role in driving housing‑price increases among first‑tier cities, a low inventory‑clearance cycle, and certain developers’ reluctance to release units for sale. By means of appropriate government intervention, the policy seeks to restore market normalcy and provide sufficient room and time for lagging supply to catch up.
II. Land will be put up for sale in three concentrated rounds throughout the year to increase the supply of rental housing.
With regard to land supply, the Opinions propose further strengthening the provision and oversight of residential land, rigorously implementing the requirements for categorized regulation of residential land, expanding the overall scale of residential land supply, and releasing information on residential land sales in a timely and appropriately concentrated manner. Residential land will be put up for sale in three batches throughout the year, with efforts made to comprehensively enhance market transparency. In addition, the implementation of the Guangzhou Municipal 2021 Land Supply Plan will be advanced in an orderly fashion to stabilize market expectations.
According to the “Opinions,” Guangzhou will adopt a “price-capped housing, competitive land bidding” approach in certain areas, refining the mechanism for linking housing and land prices in land auctions. Bidders are required, at the time of registration, to submit a signed commitment letter acknowledging the results of the housing–land price linkage inquiry for the auctioned parcel and pledging to bid rationally.
In addition, the Opinions stipulate that efforts to increase the supply of land for rental housing will be further intensified. When allocating land for market‑oriented residential development, building on the existing mechanisms of “price caps,” “competitive ancillary facility construction,” and “competitive self‑holding,” the total floor area of rental housing to be built on each parcel will be systematically expanded.
III. Strengthen oversight of business loans and rigorously investigate and prosecute market violations.
Notably, the Opinions stipulate that Guangzhou will intensify oversight and enforcement to address the illicit flow of business‑purpose loans into the real estate sector. Specifically, banking and financial institutions are required to tighten mid‑loan and post‑loan management, enhance monitoring of loan‑funds’ subsequent use, and implement early warning mechanisms. They must also provide borrowers in writing with clear warnings about the legal risks and potential consequences of misusing credit funds for home purchases, and require borrowers to sign a commitment letter on the intended use of funds at the time of contract execution. Should any diversion of loan proceeds to the real estate market be detected, the institution shall immediately recall the loan, reduce the credit line, and pursue relevant legal liabilities.
Guangzhou’s proactive introduction of policies to regulate business‑loan lending will help bolster stability in the loan market. Under this latest policy, for loans secured by real estate, authorities will rigorously assess the reasonableness of financing requests submitted shortly after a property transaction—particularly when such loans are sought for business purposes. This measure is designed to curb practices whereby some homebuyers use their properties as collateral to obtain business loans, only to reinvest the proceeds in speculative real‑estate trading. Going forward, other cities are expected to roll out similar measures, further contributing to greater stability in the lending sector.
At the same time, the Opinions also set out regulatory requirements for the real estate market, stating that citywide joint inspections of the real estate sector will continue. Such inspections will rigorously address illegal and non-compliant practices by real estate developers and intermediary agencies, including unlicensed sales, the sale of fictitious listings, false advertising, selling at prices exceeding government‑approved rates, imposing additional charges beyond the listed price, withholding properties from the market, and inducing, instigating, or assisting homebuyers in obtaining business or consumer loans through illicit means. In addition, intermediary agencies found to be engaging in speculative real estate trading, inflating housing prices, publishing false listing or pricing information, or committing other unlawful acts, as well as any form of transaction fraud, will be severely cracked down upon. Cases suspected of criminal offenses will be referred to the judicial authorities in accordance with the law for prosecution.
The Opinions also impose strict regulations on the release of information in the real estate market. With regard to illegal and unlawful acts that disrupt market order—such as the false dissemination of real estate policies and market conditions, the fabrication and spread of claims about rising housing prices, and the deliberate creation of market panic—relevant authorities will investigate and prosecute such conduct rigorously in accordance with the law and relevant regulations.
Two ministries will organize and carry out “look-back” inspections of steel capacity reduction efforts.
According to an announcement posted on the website of the National Development and Reform Commission on April 1, the NDRC and the Ministry of Industry and Information Technology will, in 2021, conduct nationwide “look-back” inspections of steel capacity‑reduction efforts and implement measures to curtail crude steel output, guiding steel enterprises to abandon the extensive development model that prioritizes quantity and promoting high‑quality growth in the steel industry.
According to reports, the “look-back” review of steel capacity‑reduction efforts will focus on assessing the implementation and follow-up rectification measures in relevant regions since 2016. Specifically, it will examine: first, the decommissioning and phase-out of smelting equipment associated with addressing excess steel capacity and cracking down on “strip‑steel”; second, the progress of steel smelting project construction, commissioning, and operation; third, the status of rectification and implementation of issues identified in previous inspections; fourth, the verification of reported leads and the corresponding corrective actions; fifth, the performance of the leading group tasked with resolving excess steel capacity; and sixth, the implementation of the 2021 plan to reduce crude steel output.
In 2021, the effort to reduce crude steel output will build on the consolidated and enhanced achievements of capacity‑reduction in the steel sector, while comprehensively taking into account the need to ensure “six stabilizations,” fulfill the “six guarantees” tasks, meet the milestones of the long-term carbon‑peak and carbon‑neutral goals, and maintain the stable operation of the industry. While upholding the continuity and stability of supply‑side structural reform policies for the steel sector, the approach will adhere to market‑based and rule‑of‑law principles, adopt a differentiated and category‑specific guidance strategy, and focus on curbing crude steel production at enterprises with poor environmental performance, high energy consumption, and relatively outdated process and equipment standards—avoiding one‑size‑fits‑all measures—to ensure that national crude steel output declines year on year in 2021.
According to the 14th Five-Year Plan, during the 14th Five-Year period, China is expected to complete ultra-low emission upgrades for 530 million tons of steel production capacity.

JD Digits “withdraws” from the STAR Market.
On April 2, information on the Shanghai Stock Exchange’s official website indicated that the IPO review status of JD Digits Holding Co., Ltd. (hereinafter referred to as “JD Digits”) had been changed to “terminated.” This follows Ant Group’s decision in November 2020 to suspend its planned listing, marking another fintech company whose IPO application has been halted.
A document issued on April 2 by the Listing Review Center of the STAR Market of the Shanghai Stock Exchange indicates that, on March 30, JD Digits, together with its sponsors, Guotai Junan Securities Co., Ltd. and Minmetals Securities Co., Ltd., voluntarily submitted a request to the SSE to withdraw their IPO application. In accordance with Article 67 of the Rules for the Review of Issuance and Listing of Stocks on the STAR Market of the Shanghai Stock Exchange, the SSE has decided to terminate the review of JD Digits’ initial public offering and listing on the STAR Market. In its withdrawal announcement, JD Digits stated that the decision to withdraw the STAR Market IPO application was made in light of the company’s own strategic development considerations.
According to the prospectus, JD Digits plans to issue no more than 538 million shares, representing at least 10% of the total share capital after the offering, with a targeted fundraising amount of RMB 20.367 billion. In the prospectus, JD Digits categorizes its core business into four segments: digital solutions for financial institutions, digital solutions for merchants and enterprises, digital solutions for governments and other clients, and other services. From 2017 through the first half of 2020, JD Digits reported annual revenues of RMB 9.07 billion, RMB 13.62 billion, and RMB 18.20 billion, respectively, with revenue reaching RMB 10.33 billion in the first half of 2020.
During the various periods covered in the prospectus, the amounts of goods sold and services provided to JD Group were RMB 2.675 billion, RMB 3.960 billion, RMB 5.312 billion, and RMB 3.086 billion, accounting for 29.50%, 29.08%, 29.18%, and 29.89% of the respective period’s operating revenue. Net profits attributable to shareholders of the parent company were RMB –3.820 billion, RMB 130 million, RMB 790 million, and RMB –670 million, reflecting significant fluctuations.
Prior to this voluntary withdrawal of its IPO application, JD Digits made adjustments to both its business operations and personnel appointments. On March 31, JD Group announced that it had entered into a definitive agreement with its subsidiary, JD Digits, under which JD Cloud and its artificial intelligence businesses would be spun off to JD Digits, for a total consideration of RMB 15.7 billion.
In December 2020, JD Group announced in an internal notice that Chen Shengqiang, the former CEO of JD Digits, would assume the roles of Vice Chairman of JD Digits and Chief of Staff of JD Group, while Li Yayun, formerly JD Group’s Chief Compliance Officer, would take over as CEO of JD Digits. Subsequently, in January, the JD Technology sub‑group—formerly part of JD Digits—was officially established, with Li Yayun, the former CEO of JD Digits, appointed as its CEO.
Building the JD ecosystem through JD Technology, JD Logistics, and JD Retail has become an unmistakable strategic priority for the JD Group. Following the integration of its cloud and AI businesses, the JD Technology subsidiary—having completed its business restructuring—may resubmit its IPO application. If successful, JD Technology would become the third listed entity under the JD umbrella, following JD Health and JD Logistics.
JD Digits’ withdrawal of its IPO was widely anticipated by the market. Amid a tightening regulatory environment, and in response to new rules governing online micro‑finance services, JD Digits has been adjusting its related business lines. In fact, it is readily apparent that since first filing for an IPO last September, the company’s name, business model, and executive team have all undergone changes, with its financial‑oriented profile gradually diminishing—views that see these shifts as a reflection of compliance with the latest regulatory policies.

“The first publicly listed company in the shared charging sector” has been born, as Monster Charging debuts on the Nasdaq.
On the evening of April 1, Beijing time, Monster Charging officially listed on the Nasdaq under the stock symbol “EM.” The company issued a total of 17.65 million ADSs at an offering price of $8.50 per ADS, raising $150 million in aggregate.
On its debut day, Monster Charging opened at $10, up 17.6% from its IPO price, valuing the company at $2.49 billion based on the opening price. However, the stock repeatedly fell below its IPO price during trading, closing at $8.54 and ultimately trending lower after a strong opening.
According to the prospectus, as of December 31, 2020, Monster Charging had established a shared charging network comprising more than 664,000 points of interest (POIs), with cumulative registered users exceeding 219 million, and its system was monitoring and processing data from over 5 million shared power banks in real time.
Monster Charging was founded in Shanghai in 2017. According to its prospectus, the company’s revenue reached RMB 2.0223 billion and RMB 2.8094 billion (USD 430.6 million) in 2019 and 2020, respectively, with year-on-year growth of 38.9% in 2020. In 2019, Monster Charging reported a net profit of RMB 166.6 million, corresponding to a net margin of 8.2%. In 2020, its net profit stood at RMB 75.4 million, with a net margin of 2.7%. Under non‑U.S. GAAP, the company’s adjusted net profits were RMB 206.6 million and RMB 112.6 million (USD 17.3 million) for 2019 and 2020, respectively.
Monster Charging plans to use the proceeds from its IPO to further expand into new markets, continue scaling its key‑account (KA) network, enhance operational efficiency, strengthen its technological capabilities, bolster its brand, pursue strategic alliances and investment opportunities, and explore new business prospects.
In its prospectus, Monster Charging positions itself as a consumer technology company. Beyond its core business, leveraging a vast consumer network built jointly by users and merchants and supported by IoT and big data technologies, Monster Charging is forging new frontiers in the consumer tech space. Earlier this year, the company launched “Kaihuan,” an emerging baijiu brand incubated internally, which is now available both online and offline. Targeting young consumers, Kaihuan blends time-honored baijiu‑making traditions with internet‑centric culture, offering a “new‑style” baijiu that is smooth, sweet, and easy to drink—leaving no lingering heaviness.
At the IPO event, Cai Guangyuan, founder of Monster Charging, stated that by rapidly establishing a grassroots distribution network centered on shared power banks, the company can leverage and integrate with channels in other product categories—such as gift‑vending machines, smart retail lockers, and IP‑themed toy cabinets. By building an extensive network of users and merchants, Monster Charging aims to become a technology‑plus‑retail enterprise. Today, the shared power‑bank business increasingly functions as a connectivity hub for a new consumer ecosystem, creating a platform that brings together both consumers and merchants—and unlocking substantial opportunities. However, identifying a viable new business model remains an open question.
Notably, on April 1, Jiedian and Soudian officially announced their merger. According to their joint statement, the combined entity will boast a user base exceeding 360 million, with peak daily orders reaching 3 million per day. This news underscores the intensifying competition in the industry, where defending established market share and capturing new growth opportunities will define the battleground ahead.

Taxation TAXATATION
Announcement of the State Taxation Administration on Issues Related to the Administration of VAT Exemption for Small-Scale Taxpayers
State Taxation Administration Announcement No. 5 of 2021
In order to implement the spirit of the Two Sessions of the National People’s Congress and the CPC Central Committee and the State Council, as well as the “Opinions on Further Deepening Tax Collection and Administration Reform” issued by the General Office of the CPC Central Committee and the General Office of the State Council, and in accordance with the provisions of the “Announcement of the Ministry of Finance and the State Taxation Administration on Clarifying the Policy of Exempting Value-Added Tax for Small-Scale VAT Payers” (No. 11 of 2021), the following administrative issues are hereby announced:
I. Small-scale taxpayers whose aggregate monthly sales from taxable VAT‑subject transactions do not exceed RMB 150,000 (or, for those with a quarterly tax period, whose quarterly sales do not exceed RMB 450,000; the same applies hereinafter) are exempt from VAT.
For small-scale taxpayers, if the aggregate monthly sales amount from VAT‑taxable sales exceeds RMB 150,000 but, after deducting the sales revenue from real estate transactions in the current period, the remaining amount does not exceed RMB 150,000, the sales revenue derived from goods, labor services, services, and intangible assets shall be exempt from VAT.
II. For small-scale taxpayers subject to the VAT differential taxation policy, eligibility for the VAT exemption stipulated in this announcement shall be determined based on their sales revenue after the deduction of the relevant amounts.
In the “Value-Added Tax Return (for Small-Scale Taxpayers),” the relevant columns for “Exempt Sales Amount” shall be filled in with the sales amount after applying the applicable tax exemption.
III. Small-scale taxpayers who file taxes on a fixed-period basis may elect either a one-month or a one-quarter tax period; once such an election is made, it cannot be changed within the same accounting year.
IV. With respect to “other individuals” as referred to in Article 9 of the Implementing Rules of the Provisional Regulations of the People’s Republic of China on Value-Added Tax, rental income derived from the leasing of real estate under a one-time rent‑collection arrangement may be allocated evenly over the corresponding lease term. If the monthly rental income after such allocation does not exceed RMB 150,000, it shall be exempt from value-added tax.
V. Small-scale taxpayers who, in accordance with the current regulations, are required to make advance payments of value-added tax shall, if their monthly sales revenue at the place of advance payment does not exceed RMB 150,000, be exempt from making such advance payments for the current period.
VI. For units and individual business households among small-scale taxpayers, the sale of real estate shall be subject to the determination of whether value-added tax is prepaid in accordance with their tax period, Article 5 of this Announcement, and other applicable current policies; for other individuals selling real estate, the existing provisions on the exemption or taxation of value-added tax shall continue to apply.
VII. Small-scale taxpayers who have already been using tax control-specific devices such as the Golden Tax Disk or the Tax Control Disk to issue VAT invoices, and whose monthly sales do not exceed RMB 150,000, may continue to use their existing equipment to issue invoices, or they may voluntarily apply to the tax authorities for a free replacement with a Tax U‑Key to issue invoices.
VIII. This Announcement shall take effect as of April 1, 2021. The “Announcement of the State Taxation Administration on Relevant Administration Issues Concerning the Policy of Exempting Small-Scale Taxpayers from Value-Added Tax” (No. 4, 2019) is hereby repealed simultaneously.
This is hereby announced.
State Taxation Administration
March 31, 2021

Announcement of the Ministry of Finance and the State Taxation Administration on Clarifying the Policy of Exempting Small-Scale VAT Payers from VAT
Announcement No. 11 of 2021 by the Ministry of Finance and the State Taxation Administration
To further support the development of small and micro enterprises, the policy exempting small-scale VAT taxpayers from VAT is hereby announced as follows:
From April 1, 2021, to December 31, 2022, value-added tax is exempted for small-scale VAT taxpayers whose monthly sales do not exceed RMB 150,000 (inclusive).
Article 1 of the “Notice of the Ministry of Finance and the State Taxation Administration on Implementing Universal Tax Relief Measures for Small and Micro Enterprises” (Cai Shui [2019] No. 13) is hereby repealed concurrently.
This is hereby announced.
Ministry of Finance, State Taxation Administration
March 31, 2021

Announcement of the State Taxation Administration on the Issuance of the “List of Matters Subject to ‘No Penalty for First Violation’ in Tax Administrative Penalties”
State Taxation Administration Announcement No. 6 of 2021
To implement the “Opinions on Further Deepening Tax Collection and Administration Reform” issued by the General Office of the CPC Central Committee and the General Office of the State Council, as well as the relevant arrangements adopted at the State Council Executive Meeting, and to carry out in depth the 2021 “Doing Practical Things for Taxpayers and Payers and the Spring Breeze Action for Convenient Tax Services,” the State Taxation Administration has formulated the “List of Matters Subject to ‘No Penalty for First-Time Violations’ in Tax Administrative Penalties.” In accordance with the Administrative Penalty Law of the People’s Republic of China, the Law of the People’s Republic of China on the Administration of Tax Collection, and their implementing rules, among other relevant laws and regulations, this list provides that, for first-time occurrences of the matters listed where the resulting harm is minor, no administrative penalty shall be imposed if the taxpayer voluntarily corrects the violation prior to its discovery by the tax authorities or within the time limit set by the tax authorities for rectification. The tax authorities shall also strengthen tax law publicity and guidance for the parties concerned.
The “List of Matters Subject to ‘No Penalty for First-Time Violations’ in Tax Administrative Penalties” is hereby promulgated and shall take effect as of April 1, 2021.
This is hereby announced.
State Taxation Administration
March 31, 2021

List of Matters Subject to “No Penalty for First-Time Violations” in Tax Administrative Penalties
For first-time occurrences of the matters listed below, where the resulting harm is minor and the taxpayer voluntarily rectifies the issue prior to discovery by the tax authorities, or does so within the time limit prescribed by the tax authorities for corrective action, no administrative penalty shall be imposed.
Serial Number Matter
1 The taxpayer has failed to report all of its bank account numbers to the tax authorities in accordance with the Tax Collection and Administration Law and its implementing rules, among other relevant provisions.
2 The taxpayer has failed to establish and maintain accounting books, or to keep accounting vouchers and relevant documents, in accordance with the Tax Collection and Administration Law and its implementing rules and other applicable provisions.
3 The taxpayer fails to file tax returns and submit tax-related documents within the time limits prescribed by the Law on the Administration of Tax Collection and its implementing rules, as well as other relevant provisions.
4 Where a taxpayer uses a tax control device to issue invoices but fails to submit the invoice‑issuance data to the competent tax authority within the time limits prescribed by the Law on the Administration of Tax Collection, its Implementing Rules, the Measures for the Administration of Invoices, and other relevant provisions, and has no illegal gains.
5 Where a taxpayer fails to obtain invoices in accordance with the Tax Collection and Administration Law, its implementing rules, the Regulations on Invoice Management, and other relevant provisions, and uses alternative documents in lieu of invoices without any illegal gains.
6 The taxpayer has failed to cancel and surrender invoices in accordance with the Tax Collection and Administration Law, its implementing rules, the Invoice Management Measures, and other relevant provisions, and has not derived any illegal gains.
7 The withholding agent has failed to establish and maintain, in accordance with the Tax Collection and Administration Law and its implementing rules, accounting books for withheld and remitted taxes or collected and remitted taxes, or to keep the relevant accounting vouchers and supporting documents pertaining to such tax withholding and collection.
8 The withholding agent fails to submit, within the time limits prescribed by the Tax Collection and Administration Law and its implementing rules, the relevant documentation pertaining to the withholding and remittance of taxes.
9 The withholding agent failed to issue tax receipts in accordance with the provisions of the Measures for the Administration of Tax Receipts.
10 When domestic institutions or individuals subcontract engineering works or labor services to non-residents, they fail to report the relevant matters to the competent tax authority in accordance with the Provisional Measures for the Administration of Taxes on Engineering Works and Labor Services Subcontracted by Non-Residents.

Notice from the National Development and Reform Commission and Four Other Departments on Requirements for Properly Carrying Out the Preparation of Lists of Integrated Circuit Enterprises or Projects and Software Enterprises Eligible for Tax Preferential Policies
NDRC High-Tech [2021] No. 413
To the Development and Reform Commissions, Departments of Industry and Information Technology, and Finance Departments (Bureaus) of all provinces, autonomous regions, municipalities directly under the central government, cities separately listed for planning purposes, and the Xinjiang Production and Construction Corps; to the Guangdong Sub‑Administration of the General Administration of Customs and all directly affiliated customs offices; and to the tax authorities of all provinces, autonomous regions, municipalities directly under the central government, and cities separately listed for planning purposes of the State Taxation Administration:
In accordance with the “Notice of the State Council on Issuing Several Policies for Promoting the High-Quality Development of the Integrated Circuit and Software Industries in the New Era” (Guofa [2020] No. 8, hereinafter referred to as the “Several Policies”) and the relevant provisions of its supporting policies, and in order to effectively carry out the preparation of the list of integrated circuit enterprises or projects and software enterprises eligible for tax preferential policies (hereinafter referred to as the “List”), the relevant procedures, the eligibility criteria for enterprises, and the project standards for enjoying such tax incentives are hereby notified as follows:
I. For the purposes of this Notice, the “list” refers to the list of integrated circuit production enterprises or projects specified in Article 1 of the “Several Policies,” which are encouraged by the state and have feature sizes of 28 nanometers or less (inclusive), 65 nanometers or less (inclusive), or 130 nanometers or less (inclusive); as well as the key integrated circuit design and software enterprises encouraged by the state, as set forth in Articles 3, 6, 7, and 8 of the “Several Policies,” and in the “Notice of the Ministry of Finance, the General Administration of Customs, and the State Taxation Administration on Import Tax Policies Supporting the Development of the Integrated Circuit and Software Industries” (Cai Guan Shui [2021] No. 4) and the “Notice of the Ministry of Finance, the National Development and Reform Commission, the Ministry of Industry and Information Technology, the General Administration of Customs, and the State Taxation Administration on the Administrative Measures for Import Tax Policies Supporting the Development of the Integrated Circuit and Software Industries” (Cai Guan Shui [2021] No. 5). It also includes manufacturers of logic circuits and memory devices with feature sizes of 65 nanometers or less (inclusive), producers of specialty‑process integrated circuits with feature sizes of 0.25 microns or less (inclusive), manufacturers of compound‑material integrated circuits with feature sizes of 0.5 microns or less (inclusive), advanced packaging and testing enterprises, producers of critical raw materials and components for the integrated circuit industry (including targets, photoresists, photomasks, packaging substrates, polishing pads, polishing liquids, silicon single crystals of 8 inches or larger, and silicon wafers of 8 inches or larger), as well as major integrated circuit projects and their implementing entities.
II. Enterprises applying to be included on the list shall, in principle, submit their applications and the requisite supporting documents (both electronic and paper versions) through the Information Reporting System (https://yyglxxbs.ndrc.gov.cn/xxbs-front/) between March 25 and April 16 each year. If, due to special circumstances, an audit cannot be completed on time, enterprises may first submit unaudited financial statements; within ten working days after April 16, they must supplement the submission in the Information Reporting System with audited financial statements. Applications should be submitted to the Development and Reform Commissions or the departments in charge of industry and information technology of the respective provinces, autonomous regions, municipalities directly under the central government, separately listed cities, and the Xinjiang Production and Construction Corps—designated receiving agencies determined by the local Development and Reform Commissions.
III. The Development and Reform Commissions and the departments in charge of industry and information technology of all provinces, autonomous regions, municipalities directly under the central government, cities separately listed for planning purposes, and the Xinjiang Production and Construction Corps (hereinafter referred to as “local NDRC and MIIT authorities”) shall, in accordance with the eligibility criteria for enterprises and the project standards set forth in the Appendix, conduct a preliminary review and make recommendations on the information submitted by enterprises, and then submit such materials to the National Development and Reform Commission and the Ministry of Industry and Information Technology. The lists of key raw material and component manufacturers in the integrated circuit industry, as specified in Articles 1, 3, 6, and 7 of the “Several Policies” and in Document No. 4 [2021] issued by the Ministry of Finance and the General Administration of Customs, shall be jointly reviewed and conofficeed by the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Finance, the General Administration of Customs, and the State Taxation Administration, and subsequently promulgated jointly. As for the major integrated circuit projects mentioned in Article 8 of the “Several Policies,” after the National Development and Reform Commission and the Ministry of Industry and Information Technology have drawn up the corresponding list, they shall notify the Ministry of Finance; the Ministry of Finance, in coordination with the General Administration of Customs and the State Taxation Administration, will make the final determination.
IV. Prior to the issuance of the list, enterprises may, in accordance with relevant tax administration regulations, temporarily avail themselves of applicable domestic tax preferential policies based on their own eligibility and the project‑specific criteria. Following the publication of the list, if an enterprise is not included, it shall, as required, make up for any corporate income tax benefits previously claimed. For applications seeking to benefit from Articles 1, 3, 6, and 7 of the “Several Policies,” as well as the tariff‑preferential measures referred to in Document No. 4 [2021] of the Ministry of Finance and the General Administration of Customs, enterprises may, prior to the conclusion of the annual tax reconciliation and final settlement, check through the information‑filing system whether they have been listed. With respect to the preferential treatment under Article 8 of the “Several Policies,” the directly affiliated customs authority at the enterprise’s location shall notify the relevant enterprises.
V. Enterprises or projects that have already benefited from Articles 1, 3, 6, and 7 of the “Several Policies,” as well as the tariff preferential policies stipulated in Document No. 4 [2021] of the Ministry of Finance and the General Administration of Customs, shall promptly report to the local development and reform and industry and information technology authorities upon undergoing name changes, spin-offs, mergers, reorganizations, or significant changes in their principal business activities, and submit the relevant supporting documents. The National Development and Reform Commission and the Ministry of Industry and Information Technology, in conjunction with the relevant departments, will determine whether the entity continues to meet the eligibility criteria for enterprises or the project standards following such changes.
VI. Local development and reform commissions and departments of industry and information technology, in coordination with the finance, customs, and tax authorities, shall strengthen routine oversight of enterprises on the list. During such oversight, if it is discovered that an enterprise has obtained tax‑exemption or reduction eligibility through false or misleading information, a joint verification shall be promptly conducted, and the case shall be jointly reported to the National Development and Reform Commission and the Ministry of Industry and Information Technology for review. Following review by these two agencies in conjunction with relevant departments, any enterprise or project found to no longer meet the prescribed eligibility criteria or project standards shall be notified in writing to the Ministry of Finance, the General Administration of Customs, and the State Taxation Administration for handling in accordance with applicable regulations.
VII. Enterprises shall be responsible for the authenticity of the materials and data they submit. Applying enterprises must sign a commitment letter, undertaking that, in the event of any breach of trust, they will accept handling by the relevant authorities in accordance with applicable laws, regulations, and national provisions. Information pertaining to unlawful acts shall be recorded in the enterprise’s credit file, incorporated into the National Credit Information Sharing Platform, and publicly disclosed on the “Credit China” website.
VIII. This Notice shall take effect from the date of its issuance and shall apply to enterprises benefiting from the 2020 corporate income tax preferential policies and the import tax policies stipulated in Cai Guan Shui [2021] No. 4. The National Development and Reform Commission and the Ministry of Industry and Information Technology, in coordination with relevant departments, shall, based on developments in industrial sectors and technological progress, make timely adjustments to the eligibility criteria for enterprises or the project standards under these preferential policies.

National Development and Reform Commission
Ministry of Industry and Information Technology
Ministry of Finance
General Administration of Customs
State Taxation Administration
March 29, 2021

Announcement of the State Taxation Administration on Further Optimizing Procedures and Services Related to the Administration of Value-Added Tax Preferential Policies
State Taxation Administration Announcement No. 4 of 2021
To implement the “Opinions on Further Deepening Tax Collection and Administration Reform” issued by the General Office of the CPC Central Committee and the General Office of the State Council, to deepen the tax system’s “delegation, regulation, and service” reform, further optimize the tax-related business environment, better deliver tangible benefits to taxpayers and payers, and effectively carry out the Spring Breeze Action for Convenient Tax Services, and in order to further streamline the procedures and formalities for accessing preferential policies, the relevant matters are hereby announced as follows:
I. Units and individual business households (hereinafter collectively referred to as taxpayers) that are eligible for the VAT reduction or exemption policies may enjoy such benefits by completing the relevant tax‑exemption or reduction sections of the VAT return form in accordance with the prescribed procedures. Supporting documentation as stipulated in the applicable policies shall be retained for record‑keeping purposes.
II. Taxpayers eligible for the value-added tax immediate refund policy shall, upon their first application for a VAT refund, submit to the competent tax authority, in accordance with applicable regulations, the refund application documents and the supporting documentation prescribed by relevant policies.
When a taxpayer subsequently applies for a VAT refund, if the relevant supporting documents have not changed, they need not be resubmitted; only the refund application materials are required, along with an explanation of the relevant circumstances in the application. If the conditions under which the taxpayer is eligible for the immediate VAT refund upon collection change, the taxpayer shall submit a written report to the competent tax authority at the time of the first tax return following such change.
III. Unless otherwise provided, where a taxpayer no longer meets the conditions for VAT preferential treatment, such treatment shall be discontinued effective from the month in which the taxpayer ceases to meet those conditions.
This announcement shall take effect as of April 1, 2021.
This is hereby announced.
State Taxation Administration
March 29, 2021
Litigation & Arbitration
The criminalization of “dangerous operations” provides a statutory basis for the supervision and enforcement of workplace safety.
According to an official WeChat post by the Ministry of Emergency Management, the Office of the State Council Safety Production Committee and the Ministry of Emergency Management recently released two exemplary law-enforcement cases involving the crime of hazardous operations in Hangzhou and Qingdao.
On March 1, the Eleventh Amendment to the Criminal Law officially came into effect. Just days later, the emergency management authorities of Hangzhou City in Zhejiang Province and Qingdao City in Shandong Province each referred cases suspected of the crime of dangerous operations through the mechanism for linking administrative and criminal enforcement in workplace safety. Since the amendment’s entry into force, emergency management departments across the country have maintained a zero‑tolerance stance, concentrating their efforts and enforcing strict oversight with high pressure. They have further tightened and strengthened the linkage between administrative and criminal enforcement, enhanced communication and collaboration with judicial authorities, and imposed severe legal penalties on workplace safety offenses, thereby bolstering the deterrent effect of law enforcement and achieving the goal of “deterring an entire sector by punishing a single offender.”
I. A criminal case will be filed and investigated on suspicion of the crime of dangerous operations.
At present, China’s work on workplace safety is at a critical juncture, facing significant challenges and obstacles. The newly promulgated Eleventh Amendment to the Criminal Law has introduced the crime of hazardous operations, further strengthening the legal framework underpinning regulatory oversight and law enforcement in the field of workplace safety.
Recently, enforcement officers from the Emergency Management Bureau of Xiaoshan District, Hangzhou City, Zhejiang Province, conducted an inspection at a certain company. The officers found that in a warehouse constructed under a makeshift steel shed on the factory premises, all the glass windows had been deliberately obstructed. The inspection revealed that the warehouse was storing a large quantity of hazardous chemicals, including 176 gas cylinders filled with carbon dioxide, oxygen, acetylene, and other substances. The warehouse was erected adjacent to the company’s employee dormitory building, which is also occupied by dozens of workers; should an explosion occur, the consequences would be catastrophic.
Upon inspection, it was determined that the company does not hold a license for the operation of hazardous chemicals, and the warehouse lacks the necessary safety conditions for storing such materials. Enforcement officers immediately issued a decision on on-site remedial measures in accordance with the law, ordering the company to cease storing hazardous chemicals without delay and arranging for the off-site seizure of all gas cylinders at the site.
Following the official entry into force of the Eleventh Amendment to the Criminal Law, enforcement against illegal activities in the field of workplace safety has been further strengthened. Under the new provisions, the emergency management authorities of Xiaoshan District in Hangzhou have coordinated closely with public security organs, and the Xiaoshan District Public Security Sub-bureau has lawfully placed the suspect, Yu Moumou, under criminal detention on suspicion of the crime of dangerous operations.
In Qingdao, Shandong Province, after the Emergency Management Bureau of the West Coast New Area sealed and seized 163.2 tons of hazardous chemicals suspected of being illegally handled by the company involved, it promptly coordinated with the judicial authorities. Meanwhile, the Development Zone Branch of the Qingdao Municipal Public Security Bureau has initiated a criminal investigation into the relevant suspects on suspicion of the crime of dangerous operations.
A relevant official from the Ministry of Emergency Management stated that since the enactment of Criminal Law Amendment (XI), emergency management authorities across the country have maintained a zero-tolerance stance, further tightening and strengthening the coordination between administrative enforcement and criminal prosecution, enhancing communication and collaboration with judicial organs, and imposing strict legal penalties on crimes related to workplace safety, thereby bolstering the deterrent effect of law enforcement in this area.
II. Three Scenarios Meet the Criteria for the Crime of Dangerous Operations
The revised Criminal Law explicitly stipulates three scenarios constituting the crime of hazardous operations: (1) shutting down or sabotaging monitoring, alarm, protective, or life‑saving equipment and facilities that are directly related to production safety, or tampering with, concealing, or destroying relevant data and information; (2) refusing to comply with lawful orders to suspend production, business operations, construction, or the use of specific equipment, facilities, or premises, or to immediately implement corrective measures to eliminate hazards, despite the existence of serious accident risks; and (3) engaging, without lawful approval or authorization, in highly dangerous production activities—such as mining, metallurgical smelting, construction, or the production, operation, or storage of hazardous materials—related to workplace safety.
A relevant official from the Ministry of Emergency Management stated that the criminalization of “dangerous operations” marks the first time in China that criminal liability is imposed for unlawful acts in the field of workplace safety that have not yet resulted in serious casualties or grave consequences but pose an imminent danger. This move fully demonstrates the determination to crack down on pre‑emptive offenses in workplace safety and to prevent and defuse major safety risks, delivering a powerful legal deterrent to serious violations in this area, effectively urging production and business entities to conscientiously comply with safety laws and regulations, foster respect for the rule of law, and proactively mitigate significant safety risks, thereby curbing the occurrence of major and especially serious accidents.
The Office of the State Council Work Safety Committee and the Ministry of Emergency Management have emphasized that emergency management authorities at all levels must thoroughly implement the Eleventh Amendment to the Criminal Law, strengthen coordination between administrative and criminal enforcement, and strive to enhance the quality of law enforcement in workplace safety. They should focus on precision, rigor, standardization, and improved efficiency in enforcement, break through bottlenecks in safety supervision and law enforcement, and resolutely prevent and control major safety risks in key sectors such as mining, hazardous chemicals, industrial and commercial enterprises, fire safety, road traffic, fireworks and firecrackers, and construction, thereby safeguarding the lives and property of the people.

The Shanghai Financial Court has released its Top Ten Typical Cases of 2020.
Table of Contents
1. Precisely Determining Investors’ Losses from Securities Misrepresentation Based on a “Multi-Factor Quantitative Model” — Case of Xu et al. v. Shanghai Putian Post & Telecom Technology Co., Ltd. Regarding Liability for Securities Misrepresentation
2. Criteria for Recognizing and Enforcing in the Mainland Judgments of the Hong Kong Special Administrative Region Court Involving “Wai Hao Agreements” — Case of Shihe Global Investment Fund SPC v. Shihe Value Investment Fund Seeking Recognition and Enforcement of a Civil Judgment Rendered by a Court of the Hong Kong Special Administrative Region
3. Judicial Determination of the Trustee’s External Liability in Channel‑Type Trust Transactions — Case of Property Damage Compensation Dispute between Appellant Wu and Appellant China International Trust Co., Ltd.
4. Determination of the Nature of the Close-out Netting Clause in ISDA Agreements — Case of Dispute over Financial Derivatives Transactions between the Appellant, Zhangjiakou United Petrochemical Co., Ltd., and the Respondent, Standard Chartered Bank (China) Limited
5. Principles for Determining the Validity of Performance-Based Clauses Between Limited Partners and General Partners in Private Equity Limited Partnership Enterprises — Case of Other Contract Disputes between Chang’an Wealth Asset Management Co., Ltd. and Great Wall Film & Television Culture Enterprise Group Co., Ltd., Zhao Mouyong, and Chen Moumei
6. Determination of the Validity of External Related-Party Guarantees Provided by a Listed Company — Appeal Case between the Appellant, Hunan Tianrun Digital Entertainment Culture Media Co., Ltd., and the Respondent, Hengwang Management Consulting (Shenzhen) Co., Ltd., et al., concerning other contractual disputes.
7. Qualification Review of Asset Management Plans as Bidders in Judicial Auctions — Case of Enforcement Application by Haitong Securities Co., Ltd. against China Huali Holdings Group Co., Ltd. and Ding Moushan in a Dispute over Repurchase of Securities under Pledge
8. Liability for Compensation in Co‑Insurance Cases Where the Issuing Insurer Illegally Makes Externally Paid Claims — Appeal Case Between the Appellant, the Shanghai Branch of The People’s Insurance Company of China Co., Ltd., and the Respondent, the Shanghai Branch of Ping An Property & Casualty Insurance Company of China Co., Ltd., Concerning a Dispute over a Liability Insurance Contract
9. Exercise of a Futures Company’s Right to Liquidate Positions by Forced Closeout and Allocation of Losses Arising Therefrom — Guangda Futures Co., Ltd. v. Bao Mouming Dispute over Forced Liquidation of Futures Positions
10. A legal contractual relationship of funds settlement exists between the credit card acquiring institution and the issuing bank, pursuant to which each party bears the corresponding contractual obligations—Other ownership dispute between the appellant, Kayou Payment Service Co., Ltd., and the appellee, the Pacific Credit Card Center of the Bank of Communications Co., Ltd.
01 Precisely Determining Investors’ Losses from Securities Misrepresentation Based on a “Multi-Factor Quantitative Model” — Case of Xu Mouxin et al. v. Shanghai Putian Postal and Telecommunications Technology Co., Ltd. Regarding Liability for Securities Misrepresentation
Basic facts of the case:
Shanghai Putian Post & Telecom Technology Co., Ltd. (hereinafter referred to as “Putian”) was a company listed on the Shanghai Stock Exchange from October 1993 to May 2019 and was delisted on May 23, 2019, with its shares ceasing to be traded. On January 19, 2017, Putian issued an announcement stating that it had received a notice of case filing and investigation from the China Securities Regulatory Commission. On January 10, 2018, Putian announced that it had received a “Pre‑Notice of Administrative Penalty” from the Shanghai Bureau of the China Securities Regulatory Commission (hereinafter referred to as the Shanghai CSRC). The notice indicated that, in order to make up for a shortfall in its 2014 profits, Putian engaged in fictitious trading, artificially inflating its total profit by 73.68% of the total profit reported in its 2014 consolidated financial statements. Consequently, the false disclosures made in its 2014 annual report, released on March 21, 2015, constituted securities‑related false statements. Following March 21, 2015, investors including Xu Mouxin purchased shares of Putian; relying on the relevant facts established in the “Administrative Penalty Decision,” they brought suit against Putian, seeking compensation for losses caused by the company’s violations of information‑disclosure requirements. During the proceedings, the China Institute of Finance at Shanghai Jiao Tong University, commissioned by the Shanghai Financial Court, issued a “Report on Loss Assessment” on February 19, 2020, determining the investment‑losses incurred by investors as a result of Putian’s false statements.
In the first instance, the Shanghai Financial Court ruled that Putian Company shall pay compensation in the amounts of RMB 7,571.17 to Xu Mouxin, RMB 9,406.06 to Li Mouhong, RMB 10,301.83 to Hu Mou, and RMB 54,727.19 to Wang Moujun. Following the judgment, Putian Company filed an appeal. The Shanghai Higher People’s Court, in its second-instance ruling, dismissed the appeal and upheld the original judgment.
Expert Commentary:
There are two major challenges in adjudicating cases involving securities fraud and disclosure violations: first, establishing the factual basis of the unlawful conduct and the existence of tortious harm; second, on that foundation, assessing the extent of investors’ losses and determining the legal liabilities and compensation amounts that the wrongdoer must bear.
Globally, these challenges pose significant difficulties for the adjudication of securities fraud and disclosure‑related cases. Drawing on financial market theory and relevant research, it is possible to conduct relatively precise quantitative analyses of the damages caused by fraud. By accounting for market risk, stock‑specific risk, liquidity risk, and investor behavioral choices, one can arrive at a comparatively accurate assessment of investor losses and the scope of legal liability that should be imposed on the perpetrators.
The adjudication of this case not only set a significant precedent for leveraging financial research and modeling to quantify investor losses arising from securities fraud disclosures, but also represented a crucial effort to foster closer integration between judicial proceedings and capital market practice, serving as an important model.
02 Criteria for Recognizing and Enforcing in the Mainland Judgments of the Hong Kong Special Administrative Region Courts Involving “Wai Hao Agreements” — Case of Shihhe Global Investment Fund SPC v. Shihhe Value Investment Fund Seeking Recognition and Enforcement of a Civil Judgment Rendered by a Court of the Hong Kong Special Administrative Region
Basic facts of the case:
Zheyuan International Limited is an indirect wholly owned subsidiary of Shanghai Huaxin International Group Co., Ltd. (hereinafter referred to as Huaxin Group), established in the British Virgin Islands. Shihe Global Investment Fund SPC—Shihe Value Investment Fund (hereinafter referred to as the Shihe Fund) purchased euro‑denominated bonds issued by Zheyuan International Limited, and Huaxin Group executed a Keepwell Deed in favor of the Shihe Fund. Under this agreement, Huaxin Group undertakes to take measures to ensure that Zheyuan International Limited maintains a positive net worth and adequate liquidity, thereby safeguarding the interests of the bondholders. The agreement expressly clarifies that such undertaking does not constitute a guarantee; however, Huaxin Group shall bear the corresponding legal liabilities if it fails to fulfill its obligations. This agreement is governed by English law, and any related disputes shall be subject to the jurisdiction of the courts of the Hong Kong Special Administrative Region.
Shihe Fund brought an action before the Court of the Hong Kong Special Administrative Region, alleging that Huaxin Group had breached the terms of the maintenance agreement. Huaxin Group failed to appear in response, and the Court of First Instance of the High Court of the Hong Kong Special Administrative Region rendered Civil Judgment No. HCA 1712/2018, ordering Huaxin Group to pay Shihe Fund the principal of the bonds, accrued interest, and certain specified costs. Following the judgment’s entry into force, Huaxin Group failed to comply with its obligations under the judgment, whereupon Shihe Fund applied to the Shanghai Financial Court for recognition and enforcement of the Hong Kong High Court’s judgment.
The Shanghai Financial Court ruled to recognize and enforce Civil Judgment No. HCA 1712/2018 of the Court of First Instance of the High Court of the Hong Kong Special Administrative Region. Following the issuance of the ruling, neither the applicant, Shihe Fund, nor the respondent, Huaxin Group, filed an appeal.
Expert Commentary:
As China’s reform and opening-up enter a new era and deepen further, cross-border commercial transactions are becoming increasingly frequent, placing higher demands on the establishment and improvement of mechanisms for resolving cross-border commercial disputes, including the recognition and enforcement of cross-border civil and commercial judgments.
At present, China’s legal framework in this area urgently requires strengthening. As of 2019, China had concluded only 39 bilateral treaties on the recognition and enforcement of civil and commercial judgments, most of which were with non‑developed economies. More importantly, for various reasons, the number of cross‑border civil and commercial judgments that China has recognized and enforced under these treaties remains very limited, with the vast majority involving ordinary contract and tort cases; financial‑related cases are relatively rare. As an international financial center, Hong Kong, operating within the “One Country, Two Systems” framework, has entered into a series of agreements with mainland China concerning the recognition and enforcement of cross‑border civil and commercial judgments. Currently, the applicable arrangement is the Supreme People’s Court’s 2008 “Arrangement on the Mutual Recognition and Enforcement of Civil and Commercial Judgments in Cases Where the Parties Have Agreed to Jurisdiction,” hereinafter referred to as the 2008 Arrangement.
This case marks the first instance nationwide in which a Hong Kong court judgment—rendered in favor of a domestic company that issued a “keep‑well agreement” to support bond issuance by an overseas affiliated entity—has been sought for recognition and enforcement in a mainland Chinese court. In cross‑border financing transactions, keep‑well agreements are a commonly employed mechanism through which domestic entities provide credit enhancement for bond issuances by their overseas affiliates. In this case, the Court of First Instance of the High Court of Hong Kong entered a default judgment on liability arising from the keep‑well agreement. Relying on the provisions of the 2008 Arrangement, the Shanghai Financial Court reviewed the Hong Kong judgment at issue, recognized the applicant’s status as an independent investment portfolio under the Cayman Islands Companies Law, and held that, although the judgment was rendered by default, the respondent failed to seek judicial relief within a reasonable time; accordingly, it qualifies as a final judgment enforceable under Chinese law. Importantly, the Court ruled that the nature and legal effect of a keep‑well agreement, as determined under mainland law, may not serve as the standard for assessing whether the recognition and enforcement of the Hong Kong judgment would contravene China’s public interest. Instead, the focus must be on whether the consequences of such recognition and enforcement would undermine the public interest prevailing at the time the case was adjudicated. Violation of public interest constitutes a statutory ground for refusing recognition and enforcement of foreign judgments in China; however, its highly abstract and generalized formulation has engendered legal uncertainty and drawn criticism from foreign stakeholders. By adopting a stringent interpretation of “public interest” and clarifying the relevant criteria, this case carries significant practical implications.
The judgment in this case fully demonstrates the Shanghai Financial Court’s professionalism and pioneering spirit, rendering well-reasoned rulings on key issues such as the standing of the parties involved, the finality of the judgment, and the determination of the public interest, thereby serving as an important normative guide. This case helps enhance international rating agencies’ assessments of the relevant bonds, reducing the interest costs for Chinese companies issuing bonds overseas. At the same time, it contributes to strengthening Hong Kong’s status as an international financial center, safeguarding its long-term prosperity and stability, and enabling Hong Kong to play an even greater role in China’s efforts to internationalize its financial markets.
03 Judicial Determination of the Trustee’s External Liability in Channel‑Type Trust Transactions — Case of Property Damage Compensation Dispute between Appellant Wu and Appellant Hua’ao International Trust Co., Ltd.
Basic facts of the case:
Shanghai Yinxun Investment Management Center (Limited Partnership) (hereinafter referred to as “Shanghai Yinxun”) entered into a Single‑Fund Trust Agreement (hereinafter referred to as the “Trust Agreement”) with Hua’ao International Trust Co., Ltd. (hereinafter referred to as “Hua’ao Trust”), under which Shanghai Yinxun designated that RMB 280 million of trust funds would be managed by Hua’ao Trust and used to extend a loan to Zhejiang Lianzhong Construction Co., Ltd. (hereinafter referred to as “Zhejiang Lianzhong”). Subsequently, Shanghai Yinxun raised funds from the general public under the name “Zhejiang Lianzhong Hangzhou Affordable Housing Investment Fund Project,” with the offering documents specifying the product type as “Hua’ao Trust Lianzhong Single‑Fund Trust Loan Limited Partnership Fund.” Mr. Wu subscribed for RMB 1 million. Thereafter, Hua’ao Trust executed a Working Capital Loan Agreement with Zhejiang Lianzhong, and, in accordance with the terms of the Trust Agreement, disbursed the trust funds received from Shanghai Yinxun—including Mr. Wu’s investment—to Zhejiang Lianzhong. Upon maturity of the fund, Shanghai Yinxun failed to return the principal to Mr. Wu.
Upon investigation, it was found that the RMB 1 million invested by Mr. Wu was used by Chen Mouzhi and other representatives appointed by the managing partner of Shanghai Yinxun to repay external debts owed to shareholders of Liaoyang Hongmei Real Estate Co., Ltd., a party unrelated to this case. In 2018, the No. 1 Intermediate People’s Court of Shanghai rendered a criminal judgment, holding that Zhejiang Lianzhong Company was effectively controlled by Chen Mouzhi. Specifically, Chen fabricated documents, including contracts purportedly evidencing Zhejiang Lianzhong’s undertaking of a housing‑affordability project in Hangzhou, and, together with Mr. Wang, exploited the name of Shanghai Yinxun to solicit funds from the general public at exorbitant interest rates under the guise of the “Zhejiang Lianzhong Hangzhou Housing‑Affordability Investment Fund Project.” The proceeds were then remitted to Hua’ao Trust, which subsequently extended loans to Zhejiang Lianzhong. Upon receipt, Zhejiang Lianzhong utilized these funds to settle outstanding liabilities to shareholders of Liaoyang Hongmei Real Estate Co., Ltd., among other purposes.
Mr. Wu filed a lawsuit alleging that Hua’ao Trust failed to exercise effective oversight over the trust project, thereby causing losses, and should therefore bear full liability for compensation. In the first-instance judgment, the People’s Court of Pudong New Area, Shanghai, held that Hua’ao Trust shall assume supplementary liability for damages up to RMB 200,000—limited to the portion of Mr. Wu’s losses that could not be recovered through the criminal‑judgment‑based asset‑recovery procedure—and dismissed the remainder of Mr. Wu’s claims. Following the verdict, both Mr. Wu and Hua’ao Trust appealed. The Shanghai Financial Court ruled to dismiss the appeals and uphold the original judgment.
Expert Commentary:
Channel‑type trust business is a form of shadow banking in China, distinctly characterized by Chinese features. At the current stage of China’s financial development, it has effectively helped bridge certain gaps in financing demand; however, it has also given rise to issues such as investor protection and systemic financial risks. Consequently, there has long been debate among stakeholders regarding the appropriate legal and regulatory stance to adopt—ranging from whether such activities should be permitted at all, to the extent of such permission, and to how the rights and obligations of the parties involved should be defined.
This case is the first nationwide instance in which a trust company was held liable for corresponding compensation in the context of conduit‑type business, directly addressing the aforementioned issues and setting a precedent for the adjudication of similar cases in the future. The court classified conduit‑type business as a form of transaction‑management trust, afofficeed its legality, and held that the rights and obligations among the parties should be determined in accordance with the trust documents. In practice, such trust agreements typically stipulate that the settlor assumes responsibility for risk management of the trust assets and bears any resulting losses, while the trustee provides only necessary administrative assistance or services and does not undertake active management duties. The court’s judicial recognition of this contractual arrangement fully reflects a judicial philosophy that respects the parties’ autonomy and market self‑regulation. On the other hand, given the financial nature and public‑policy dimensions of conduit‑type trust business, the court, beyond the terms of the trust agreement, also gave due consideration to the underlying principles of financial regulation. It concluded that, although no explicit statutory provision exists, trust companies have an obligation, from the standpoint of prudent management, to scrutinize the sources of trust funds; moreover, they may not, on the basis of a mere absence of a proactive duty to investigate, arbitrarily issue false certificates at the client’s request.
In this case, the Shanghai Financial Court fully leveraged its professional expertise, comprehensively balanced the requirements of private autonomy and public regulation, and appropriately delineated the legality and the rights-and-obligations framework of conduit‑type transactions. By striking a balance between investor protection and financial market development, it has set an important benchmark.

04 Determination of the Nature of the Close-out Netting Clause in the ISDA Agreement — Case of Dispute over Financial Derivatives Transactions between the Appellant, Zhangjiakou United Petrochemical Co., Ltd., and the Respondent, Standard Chartered Bank (China) Limited
Basic facts of the case:
On September 15, 2011, Standard Chartered Bank (China) Limited (hereinafter referred to as “Standard Chartered Bank”) entered into the ISDA 2002 Master Agreement and its annexes (hereinafter referred to as the “Master Agreement”) with Zhangjiakou United Petrochemical Co., Ltd. (hereinafter referred to as “Zhangjiakou Petrochemical Company”), pursuant to which the parties agreed to conduct over-the-counter derivative transactions in accordance with the terms of the Master Agreement. Should either party terminate the agreement early, such termination shall constitute an event of default, and the terminating party shall pay the other party a termination payment. This payment represents a reasonable pre‑estimate of losses rather than liquidated damages, and its purpose is to compensate for the unrealized value of the transaction and to safeguard against the risk of future losses.
On March 7, 2014, the two parties entered into a “Brent Crude Oil–Buy Performance Swap” and the corresponding “Trade Conofficeation,” agreeing to conduct swap transactions on Brent crude oil. On the same day, Standard Chartered Bank provided Zhangjiakou Petrochemical Company with an explanation regarding the risk of losses arising from Brent crude oil prices falling below the strike price; Zhangjiakou Petrochemical Company subsequently conofficeed its participation in the disputed transaction. Following the execution of the relevant agreements, Standard Chartered Bank and Zhangjiakou Petrochemical Company duly performed four tranches of the swap transactions as stipulated.
On November 11, 2014, Zhangjiakou Petrochemical Company issued a letter titled “Notice of Termination of the Brent Crude Oil–Buy Performance Swap,” requesting the early termination and dissolution of the swap transaction, denying the validity of any transactions entered into after November 10, 2014, and stating that it would no longer assume liability for losses incurred thereafter. On November 27, Standard Chartered Bank sent Zhangjiakou Petrochemical Company a “Conofficeation of Early Termination,” designating December 2, 2014, as the early termination date for all outstanding transactions under the master agreement. Subsequently, Standard Chartered Bank issued a notice demanding that Zhangjiakou Petrochemical Company pay the early termination amount together with accrued interest due on the maturity date. Failing to obtain satisfaction through its claims, Standard Chartered Bank brought suit in court, seeking payment from Zhangjiakou Petrochemical Company of the outstanding early termination amount of USD 1,328,560.97, plus interest, under the swap transaction.
The People’s Court of Pudong New Area, Shanghai, in its first-instance judgment, ordered Zhangjiakou Petrochemical Company to pay Standard Chartered Bank the outstanding early termination amount of USD 1,305,777.97 under the swap transaction, together with interest, and dismissed the bank’s other claims. Following the verdict, Zhangjiakou Petrochemical Company filed an appeal. During the second-instance proceedings, Standard Chartered Bank voluntarily withdrew its claim for interest. The Shanghai Financial Court, in its second-instance judgment, ruled that Zhangjiakou Petrochemical Company shall pay Standard Chartered Bank the outstanding early termination amount of USD 1,305,777.97 under the swap transaction, and dismissed the bank’s remaining claims.
Expert Commentary:
The close-out netting mechanism is a fundamental term in financial derivatives contracts and plays a crucial role in ensuring the smooth centralized clearing of over-the-counter (OTC) transactions. For financial derivatives trading, close-out netting serves three key purposes: mitigating counterparty risk, significantly reducing systemic risk in financial markets, and enhancing capital efficiency. Although close-out netting has long been practiced in China’s market, the lack of explicit statutory provisions governing this mechanism has made the legal validity of its contractual terms one of the most pressing concerns for market participants. In this case, the court, fully respecting the intrinsic characteristics of financial derivatives trading and prevailing international practices, held that where a transaction agreement expressly incorporates the relevant provisions of the ISDA Master Agreement, the parties may be deemed to have reasonably anticipated the liabilities for default set forth in that agreement, thereby allowing default losses to be calculated pursuant to the close-out netting clause. This ruling clarifies the judiciary’s recognition of the nature and legal effect of early‑termination netting provisions. The aforementioned judicial standard not only provides valuable guidance for adjudicating similar cases and offers a useful reference for legally afofficeing the effectiveness and enforceability of the close-out netting regime for financial derivatives, but also contributes to the further market‑oriented and internationalized development of Shanghai as an international financial center—respecting best international practices and established market norms—while fostering innovation in China’s financial derivatives market, stabilizing market expectations, and strengthening soft power through an improved judicial business environment.
05 Principles for Determining the Validity of Earn-out Clauses in Limited Partnerships of Fund-Raising Entities — Case of Other Contract Disputes between Chang’an Wealth Asset Management Co., Ltd. and Great Wall Film & Television Culture Enterprise Group Co., Ltd., Zhao Mouyong, and Chen Moumei
Basic Facts of the Case
Chang’an Wealth Asset Management Co., Ltd. (hereinafter referred to as “Chang’an Wealth”) serves as the Class A property entrustor and limited partner of Zhuji Tiankong Chang’an Equity Investment Partnership (Limited Partnership) (hereinafter referred to as the “Fund”). Great Wall Film & TV Culture Enterprise Group Co., Ltd. (hereinafter referred to as “Great Wall Film & TV Group”) is the Class B property entrustor and limited partner of the Fund. On October 25, 2016, Chang’an Wealth entered into an “Unconditional Assumption and Deficiency Payment Agreement” with Great Wall Film & TV Group, under which Great Wall Film & TV Group undertook the obligation to unconditionally assume the Fund’s shares held by Chang’an Wealth upon the occurrence of specified events set forth in the agreement. On the same day, Chang’an Wealth also executed two separate Guarantee Agreements with Mr. Zhao Mouyong and Ms. Chen Moumei, respectively, whereby Mr. Zhao and Ms. Chen each provided joint and several guarantees for all obligations assumed by Great Wall Film & TV Group under the Unconditional Assumption and Deficiency Payment Agreement. The agreement stipulates that, during the Fund’s term, if, within thirty months from the date the initial capital contribution from Class A investors is actually received, the listed company—controlled in fact by Great Wall Film & TV Group—fails to obtain approval from the China Securities Regulatory Commission or other competent authorities for its acquisition of the target company—which is wholly owned by the Fund—or if, within such thirty-month period, the listed company has still not completed the acquisition, or if, for other reasons, the Fund fails to effect the full transfer of its equity interest in the target company, then the conditions for assumption shall be triggered. According to the thirty-month time frame specified in the Unconditional Assumption and Deficiency Payment Agreement, the listed company was required to complete the acquisition of the target company no later than June 29, 2019. As of the date Chang’an Wealth filed this lawsuit, the acquisition process had yet to commence. Furthermore, the Fund’s partnership agreement provides that any valid application for the transfer of partnership interests must be unanimously approved by all partners representing the aggregate voting rights. The agreement also allows, by mutual consent, for amendments to the agreement or supplementary provisions addressing matters not expressly covered, through the execution of a supplemental agreement. In addition, the agreement designates annexes as integral parts thereof, having the same legal force as the main text. Moreover, the partnership agreement stipulates that, should the annualized rate of return on Class A assets fall below the expected minimum investment yield, the specific obligations set forth in the Unconditional Assumption and Deficiency Payment Agreement and the Guarantee Agreements—including the duty to make up any shortfall and the obligation to provide security—shall be fulfilled by the relevant obligors. Accordingly, Chang’an Wealth brings suit seeking payment of the purchase price for the Fund’s shares and compensation for losses arising from Great Wall Film & TV Group’s breach of contract; meanwhile, Mr. Zhao Mouyong and Ms. Chen Moumei are jointly and severally liable as guarantors for Great Wall Film & TV Group’s aforementioned obligations.
The Shanghai Financial Court, in its first-instance judgment, ordered Great Wall Film & Television Group to pay Chang’an Wealth Co., Ltd. the fund‑share acquisition price of RMB 106,156,917.50 and to compensate for losses arising from breach of contract (calculated at a daily interest rate of 0.05% on the fund‑share acquisition price, accruing from February 2, 2019, until the date of actual payment). Zhao Mouyong and Chen Meimou were held jointly and severally liable as guarantors for the aforementioned obligations of Great Wall Film & Television Group. Following the pronouncement of the judgment, none of the parties filed an appeal, and the first-instance judgment has thus become final and effective.
Expert Commentary:
This case concerns the internal transfer of partnership interests in a limited partnership fund. First, it addresses whether partnership interests may be transferred internally. Under the Partnership Enterprise Law, internal transfers within a partnership are permitted; such transfers require notification to the other partners, while external transfers necessitate the unanimous consent of all partners. In this case, the two limited partners transferred their respective interests pursuant to a prior agreement, and all partners were duly notified. Moreover, the relevant pre‑agreed terms were incorporated into the partnership agreement and have been effectively acknowledged by all partners. Accordingly, the transfer is lawful and valid.
Second, whether the conditions for transfer agreed upon in advance by the two partners are valid. In this case, the two partners stipulated that, should the specific acquisition terms fail to materialize or circumstances arise that harm the transferring partner’s interests, the transferring partner may require the other party to acquire its partnership interest. This effectively employs a “gambling‑on‑performance” arrangement to safeguard the investor’s rights. Current law does not prohibit such performance‑based covenants designed to protect investors’ interests. Moreover, both parties are partners in a private equity fund; therefore, the wagering agreement neither implicates the public interest nor harms the interests of other partners within the same fund. Consequently, the agreed‑upon transfer conditions are also valid.
Third, whether the pre‑agreed transfer conditions—specifically those involving unconditional assumption of the investment and a commitment to make up any shortfall—violate the prohibition against guaranteed minimum returns. In this case, the parties to the agreed transfer conditions are both limited partners and private‑equity fund investors, not the fund manager. The commitments between these two investors do not fall within the scope of the explicit prohibitions set forth in the Interim Measures for the Supervision and Administration of Private Investment Funds, which forbid fund managers from guaranteeing investors that their principal will be preserved or from promising a minimum rate of return; therefore, such arrangements do not contravene the relevant regulations.
Accordingly, the adjudication in this case not only fully complies with the provisions of the Partnership Enterprise Law, the Contract Law, and other relevant statutes, but also aligns with the spirit and normative framework of the Civil Code.
06 Determination of the Validity of External Related-Party Guarantees by a Listed Company — Case of Contract Dispute between the Appellant, Hunan Tianrun Digital Entertainment Culture Media Co., Ltd., and the Respondent, Hengwang Management Consulting (Shenzhen) Co., Ltd., et al.
Basic Facts of the Case
On October 29, 2018, Hengwang Management Consulting (Shenzhen) Co., Ltd. (hereinafter referred to as Hengwang Company) entered into a Commercial Factoring Agreement with Guangzhou Nanhua Shenke Information Technology Co., Ltd. (hereinafter referred to as Nanhua Shenke Company), Hunan Tianrun Digital Entertainment Culture Media Co., Ltd. (hereinafter referred to as Tianrun Company), and Lai Moufeng. The agreement provided that Nanhua Shenke Company would apply for financing from Hengwang Company through the assignment of its accounts‑receivable claims, and that Hengwang Company would furnish Nanhua Shenke Company with a “recourse‑based revolving‑line concealed domestic factoring service.” Tianrun Company and Lai Moufeng agreed to provide joint and several guarantees for Nanhua Shenke Company’s repayment obligations. Subsequently, each of them issued a Guarantee Letter to Hengwang Company. Following the execution of the aforementioned contract, Hengwang Company disbursed RMB 55 million in factoring financing to Nanhua Shenke Company. Thereafter, due to Nanhua Shenke Company’s failure to repay the factoring proceeds, Hengwang Company brought suit, seeking a judgment ordering Nanhua Shenke Company to repay the principal and interest totaling RMB 56.55 million, together with default interest and attorney’s fees, and further requesting that Tianrun Company and Lai Moufeng be held jointly and severally liable for the aforementioned debt.
In response, Tianrun Company argued that, as a listed company on the A‑share market, it is subject to Article 16 of the Company Law, which stipulates that any guarantee provided by the company to its shareholders or de facto controllers must be approved by a resolution of the shareholders’ meeting or general shareholders’ meeting. Lai Moufeng is the de facto controller of both Tianrun Company and Nanhua Shenke Company; therefore, Tianrun’s provision of a guarantee to another company controlled by Lai Moufeng constitutes an affiliated guarantee. Since such a guarantee was entered into without the requisite approval of the shareholders’ meeting, the act amounts to an overstepping of authority by the legal representative. As a professional financial institution, Hengwang Company was fully aware of these facts yet failed to verify the shareholders’ meeting resolution and did not notice that the listed company had not disclosed this guarantee. Consequently, Hengwang Company cannot be deemed a bona fide party, and the guarantee is thus invalid.
Hengwang Company asserts that the Guarantee Letter issued by Tianrun Company was executed by its legal representative and that the company seal is authentic. At the time of execution, Tianrun Company provided Hengwang Company with a Board Resolution, which stated that all members of the board unanimously approved the relevant guarantee matters, and was duly signed and conofficeed by all five members of Tianrun’s board of directors. Furthermore, no affiliated relationship exists between Tianrun Company and Nanhua Shenke Company, and therefore the guarantee does not constitute an affiliated‑party guarantee. In accepting the guarantee, Hengwang Company reviewed the Board Resolution and fulfilled its requisite duty of care; accordingly, the guarantee in this case is lawful and valid.
In the first-instance judgment, the People’s Court of Jiading District, Shanghai, ruled that Nanhua Shenke Company shall return to Hengwang Company the principal of the financing amounting to RMB 55 million, and pay interest for the use of funds in the sum of RMB 1,542,465.75, together with default damages for late payment, attorney’s fees, and litigation‑preservation insurance premiums totaling RMB 45,040. Tianrun Company and Lai Moufeng were held jointly and severally liable as guarantors for Nanhua Shenke Company’s aforementioned payment obligations. Upon fulfilling their guarantee obligations, Tianrun Company and Lai Moufeng are entitled to seek recourse against Nanhua Shenke Company. Following the judgment, Tianrun Company filed an appeal. In the second-instance ruling, the Shanghai Financial Court held that Tianrun Company shall bear liability for half of the portion of Nanhua Shenke Company’s aforementioned payment obligations that remains unpaid; after assuming such liability, Tianrun Company may seek reimbursement from Nanhua Shenke Company.
Expert Commentary:
Whether a company may independently provide external guarantees is a corporate‑law issue that touches both the limits of a company’s legal capacity and its freedom to conduct business. Article 16, Paragraph 2 of China’s Company Law stipulates: “If a company provides a guarantee for its shareholders or de facto controllers, such action must be approved by a resolution of the shareholders’ meeting or the general shareholders’ meeting.” Meanwhile, Article 148 provides: “Directors and senior management shall not engage in any of the following acts: … (3) In violation of the company’s articles of association and without the consent of the shareholders’ meeting, the general shareholders’ meeting, or the board of directors, lending company funds to others or providing guarantees using company assets for third parties…” The normative purpose of these provisions—whether they are intended primarily to prevent conflicts of interest between directors and senior managers and the company, or to impose necessary restrictions on a company’s legal capacity while also safeguarding creditors’ interests—remains unclear in practice. By contrast, Taiwan’s Company Act expressly provides that, except where the law or the articles of association expressly authorize guarantee‑related activities, a company may neither act as a guarantor nor furnish mortgages, pledges, or other forms of security for others. Any person responsible who violates this provision shall bear personal liability for the guarantee; moreover, if the company suffers damage as a result, such person shall also be liable for compensation.
This case simultaneously involves such issues as the determination of the actual controller, the characterization of related-party guarantees, the public‑nature of listed companies, and the special limitations on their capacity to provide guarantees. It also raises the question of whether, in matters of external guarantees, priority should be given to the formal appearance of the guarantee contract or to the internal procedural formation of corporate intent. Drawing on his profound scholarly expertise, the judge, applying Article 50 of China’s Contract Law (now Article 504 of the Civil Code)—which sets out the criteria for assessing whether a creditor acted in good faith when encountering an overstepping act by a company’s legal representative—carefully disentangled the myriad complex issues at hand and rendered a judgment that, in accordance with the principle of “substantive reasonableness,” was both well‑reasoned and fully justified.
07 Qualification Review of Asset Management Plans as Bidders in Judicial Auctions — Case of Haitong Securities Co., Ltd. Applying for Enforcement in the Pledge‑Based Securities Repurchase Dispute Involving China Huali Holding Group Co., Ltd. and Ding Moshan
Basic facts of the case:
In the dispute over a pledge‑based securities repurchase between the plaintiff, Haitong Securities Co., Ltd., and the defendants, China Huali Holding Group Co., Ltd. and Ding Moshan, the civil mediation agreement No. (2019) Hu 74 Min Chu 2103 rendered by the Shanghai Financial Court has already attained legal effect. As neither China Huali Holding Group Co., Ltd. nor Ding Moshan fulfilled their obligations within the prescribed time limit, Haitong Securities Co., Ltd. filed an application with the Shanghai Financial Court for compulsory enforcement. During the enforcement proceedings, the Shanghai Financial Court lawfully initiated appraisal and auction procedures with respect to 27,236,814 unrestricted circulating shares of “Beijing Culture” (stock code: 000802) held by the judgment debtor, China Huali Holding Group Co., Ltd. In the course of the appraisal and auction process, a certain asset management company, as an intending bidder, submitted an application to the court, stating that, in its capacity as manager, it intended to participate in this auction on behalf of a specific asset management plan. Upon review, the court determined that although an asset management plan itself cannot qualify as a proper subject of civil legal relations, its manager may, in the manager’s own name, participate in the bidding; upon successful acquisition, the disposed shares may be transferred into the asset management plan’s dedicated securities account. Throughout this process, the court will rigorously scrutinize the source of funds used by the manager to participate in the bidding, and the manager shall bear the obligation to disclose such sources, ensuring that the funds employed in the bid originate from the relevant asset management plan.
With the consent of the Shanghai Financial Court, an intending bidder—a certain asset management company—participated in this judicial auction after depositing the required security. Ultimately, however, due to higher bids from other bidders, the shares subject to disposal were successfully acquired by another party.
Expert Commentary:
The enforcement in this case raises the issue of asset independence under “asset management plans.” Due to ongoing disagreements and the prevailing administrative framework, no definitive legal characterization has yet been established for asset management relationships. Nevertheless, both regulatory guidelines and market practice generally design, operate, and govern such relationships in accordance with trust principles; a small minority, however, are structured and administered as agency‑based arrangements.
Where the arrangement is structured as a委托代理 (entrusted agency), the assets under the “asset management plan” remain, at all times, wholly owned by the settlor, and the trustee may only manage such assets in accordance with the terms of the entrustment and in the settlor’s name. By contrast, if the arrangement is operated as a trust, the rights to the assets under the “asset management plan” are transferred from the settlor to the trustee, thereby becoming independent property that the trustee manages, utilizes, and disposes of exclusively in its own name. Although the assets under the “asset management plan” are independent, they lack legal personality; moreover, this portion of the estate does not belong to the trustee and must be kept separate from the trustee’s own proprietary assets. The outcomes of their utilization and disposition shall nonetheless accrue to the “asset management plan” and ultimately be distributed to the settlor.
During the enforcement of this case, in light of the actual circumstances, the analysis, assessment, and disposition were conducted in accordance with trust principles, thereby complying with the relevant statutory provisions.
08 Liability for Compensation in Cases Where the Issuing Insurer Illegally Makes Externally-Filed Claims Payments under Co‑Insurance — Appeal in the Dispute over a Liability Insurance Contract between the Appellant, the Shanghai Branch of The People’s Insurance Company of China Co., Ltd., and the Respondent, the Shanghai Branch of Ping An Property & Casualty Insurance Company of China Co., Ltd.
Basic Facts of the Case
The Shanghai Branch of The People’s Insurance Company of China Property Insurance Co., Ltd. (hereinafter referred to as PICC Shanghai Branch), the Shanghai Branch of Ping An Property & Casualty Insurance Co., Ltd. (hereinafter referred to as Ping An Shanghai Branch), and a third party, the Shanghai Branch of China Pacific Property Insurance Co., Ltd. (hereinafter referred to as CPIC Shanghai Branch), entered into a Co‑Insurance Agreement, which stipulates: the co‑insured line of business is Shanghai Road Passenger Carrier Liability Insurance; PICC Shanghai Branch assumes 50% of the coverage as the primary insurer, while Ping An Shanghai Branch and CPIC Shanghai Branch each assume 25% as secondary insurers; upon closure of the case, the issuing insurer shall pay the insurance indemnity to the insured, and the other two parties shall, following such payment, remit their respective shares of the indemnity to the issuing insurer in accordance with their co‑insurance proportions.
In June 2013, a third party, Shanghai Staff Recreation and Vacation Service Company (hereinafter referred to as the Staff Vacation Company), took out road passenger carrier liability insurance with Ping An Shanghai Branch, with the insured vehicle being a large passenger bus bearing license plate沪B-EXXXX. At the same time, the co-insurance information section of the policy stipulated: “Ping An Shanghai Branch 25%, PICC Shanghai Branch 50%, Pacific Property Insurance Shanghai Branch 25%.” Subsequently, the insured vehicle was involved in a rollover accident, resulting in the on-the-spot deaths of three third-party individuals and injuries to numerous others.
Following the accident, Ping An Shanghai Branch, as the insurer that issued the policy, processed the claim and prepared a “Carrier Liability Insurance Claim Calculation,” which specified the amount of the preliminary indemnity payable to the families of the three deceased. In accordance with the Co‑Insurance Agreement and the aforementioned Carrier Liability Insurance Claim Calculation, PICC Shanghai Branch apportioned the preliminary indemnity on a pro‑rata basis and paid a total of RMB 1,487,264 to Ping An Shanghai Branch.
Subsequently, the families of the three deceased, having not received full compensation, filed liability insurance contract lawsuits against PICC Shanghai Branch, Ping An Shanghai Branch, and Pacific Property Insurance Shanghai Branch, with the Employee Vacation Company participating in the proceedings as a third party. The court’s findings revealed that, following the payment of an advance by Ping An Shanghai Branch to the Employee Vacation Company for the accident at issue, the latter used part of the proceeds to settle claims involving other injured parties. The court held that, when making the insurance indemnity directly to the insured—namely, the Employee Vacation Company—Ping An Shanghai Branch failed to verify whether it had already paid compensation to third parties, nor did it furnish evidence demonstrating that those third parties had received the full amount of their claims; accordingly, Ping An Shanghai Branch should continue to fulfill its indemnity obligations. As for the three co-insurers, they are joint insurers and, pursuant to the Co‑Insurance Agreement and the terms of the insurance policy, each bears responsibility for its respective share of the indemnity in proportion to its agreed-upon allocation. Based on this, the court ruled that PICC Shanghai Branch must pay the insurance proceeds in accordance with a 50% co‑insurance ratio. PICC Shanghai Branch complied with the judgment and discharged its payment obligation. Now, PICC Shanghai Branch has brought suit, seeking reimbursement from Ping An Shanghai Branch for the amount it has paid in excess.
The People’s Court of Jing’an District, Shanghai, rendered a first-instance judgment dismissing the claim brought by the Shanghai Branch of PICC. Following the pronouncement, the Shanghai Branch of PICC filed an appeal. The Shanghai Financial Court, in its second-instance ruling, overturned the first-instance judgment and ordered the Shanghai Branch of Ping An to compensate the Shanghai Branch of PICC RMB 681,342.40, together with interest.
Expert Commentary:
Liability insurance is a type of insurance that covers the insured’s legal liability to third parties. Its direct function is to protect the interests of injured third parties, while its indirect function is to alleviate the financial burden on the insured. According to Article 65 of China’s Insurance Law, where the insured’s liability to a third party has been determined, upon the insured’s request, the insurer shall pay the insurance indemnity directly to that third party; if the insured fails to make such a request, the third party may, with respect to the portion of the claim to which it is entitled, directly seek payment of the insurance indemnity from the insurer. Furthermore, if the insured has not paid the third party, the insurer may not make any payment of insurance indemnity to the insured.
From a legal perspective, to ensure the realization of third-party interests in liability insurance, the following four principles should be emphasized: (1) The insurer’s obligation to pay indemnity to the insured is contingent upon the insured first having compensated the third party; (2) The law prohibits the insured from disposing of (including waiving) its right to claim insurance benefits against the insurer. Any such improper disposition shall have no effect as against the third party to the extent of the creditor’s claim; (3) The injured third party enjoys priority in satisfying its claim against the insurer’s insurance benefits, even in the event of the insured’s bankruptcy; (4) The injured third party may bring a direct action against the insurer only if the insured’s liability to the third party has been definitively established by a final judgment, a settlement, or an admission.
In this case, the three insurers maintain an internal‑external relationship under the co‑insurance contract with the insured, while, among themselves, they stand in a mutual agency relationship for the purposes of external claims settlement. The second‑instance judgment, grounded in a proper delineation of the internal‑external relationships as established by the facts, and guided by the principle of prioritizing the protection of third‑party interests in liability insurance, appropriately applied the theory of secondary allocation of civil liability—based on the fiduciary duties owed among agents—to uphold the co‑insurers’ right of choice. This reflects the judge’s profound legal expertise and sophisticated judicial skill.
09 The Exercise of a Futures Company’s Right to Forced Liquidation and the Allocation of Losses Arising Therefrom — Guangda Futures Co., Ltd. v. Bao Mouming Dispute over Forced Liquidation in Futures Trading
Basic facts of the case:
On June 21, 2018, Everbright Futures Co., Ltd. (hereinafter referred to as Everbright Futures) entered into a Natural Person Futures Brokerage Agreement with Mr. Bao Mouming, under which Mr. Bao entrusted Everbright Futures to execute futures transactions in accordance with his trading instructions. The agreement further stipulated that, upon market close, if the settlement‑calculated risk ratio exceeded 100%, Everbright Futures would issue a margin call notice and a forced liquidation notice to Mr. Bao. Mr. Bao was required to deposit sufficient additional margin within the time frame specified in such notices; otherwise, Everbright Futures would have the right to forcibly liquidate all or part of the unsettled contracts in Mr. Bao’s futures account without prior notice. (The risk ratio is calculated as follows: Risk Ratio = Client Margin for Open Positions ÷ Client Equity × 100%.) Both parties conofficeed that the aforementioned risk ratio refers specifically to the “Company Risk Ratio.”
Bao Mouming held 171 contracts of the ni1910 futures contract. At the end-of-day settlement on August 29, 2019, his account’s office‑level risk ratio stood at 104.69%, while the exchange‑level risk ratio was 83.75%. That evening, Bao deposited RMB 300,000; following the deposit and at the open of the day session on August 30, both his office‑level and exchange‑level risk ratios remained above 100%, though the exchange‑level ratio had not yet reached 100%. At 14:41 on August 30, the exchange‑level risk ratio for Bao’s account was 100.21%; Guangda Futures notified him to post additional margin. Around 14:56, Guangda Futures conducted a telephone conversation with Bao regarding the margin call, during which Bao requested to observe night‑session market conditions before taking further action. By the end-of-day settlement that day, his office‑level risk ratio had risen to 134.08%, and the exchange‑level risk ratio to 111.73%. After the close of the day session on August 30, Guangda Futures repeatedly urged Bao to deposit additional margin, warning that failure to do so would result in forced liquidation. At 21:00:20 on August 30, Guangda Futures executed forced liquidation of the 121 ni1910 contracts held in Bao’s account. However, because the contract remained at its daily upper limit throughout the night session and during the day session on September 2, no trades were executed. By the end-of-day settlement on September 2, Bao’s account showed a office‑level risk ratio of 753.78%, an exchange‑level risk ratio of 394.84%, and client equity of RMB 650,906.45. That evening, with Bao’s consent, Guangda Futures forcibly liquidated all 171 outstanding ni1910 contracts in his account via pending orders, ultimately executing the liquidation at a price of RMB 148,850. The trade settlement statement for September 3 indicated that Bao’s account had available funds of −RMB 1,439,790.85, a liquidation profit/loss of −RMB 2,089,620, and client equity of −RMB 1,439,790.85. This shortfall of RMB 1,439,790.85 was covered by Guangda Futures using its own funds. Guangda Futures has now filed a lawsuit against Bao, seeking repayment of the advance payment.
The Shanghai Financial Court rendered a first-instance judgment: Bao Mouming is ordered to repay Guangda Futures RMB 1,439,790.85 together with the corresponding interest. Following the pronouncement of the judgment, neither party filed an appeal, and the first-instance ruling has thus become final.
Expert Commentary:
Forced liquidation is a crucial risk‑management tool in the futures market and a foundational institutional mechanism. Disputes arising from forced liquidation currently constitute one of the principal categories of litigation in the futures sector. Although the Supreme People’s Court, through relevant judicial interpretations, has clarified the conditions under which forced liquidation may be applied, the complex and ever‑changing nature of futures‑market operations means that numerous issues related to forced liquidation remain unresolved in judicial practice. In this case, the parties do not dispute that the conditions for the futures company to exercise its right of forced liquidation have been met; their disagreement centers on whether the futures company acted promptly and on who should bear the losses resulting from the “short‑covering” effect caused by such liquidation. In addressing these questions, the court adopted a systematic analytical approach, comprehensively examining the nature of forced liquidation, the functions of the futures margin system, and the causes underlying short‑covering losses, thereby afofficeing that forced liquidation serves as a fundamental institutional safeguard for the stable and secure operation of the futures market—a mechanism widely employed in mature markets. Furthermore, when a futures company takes necessary measures to prevent further losses to its clients, it is also fulfilling its obligations to ensure the orderly conduct of trading and settlement, as well as its duties as a member‑office to maintain clearing and settlement security. Accordingly, once the futures company has duly performed its notification obligations and granted the client a reasonable period to take appropriate action, and the client fails to do so, the company’s implementation of forced liquidation in compliance with applicable rules is entirely justified. Moreover, where market conditions render liquidation impossible or impracticable, any resulting short‑covering losses must be borne by the client, consistent with both reasonableness and regulatory requirements. This adjudicative standard not only broadens the scope of circumstances in which forced liquidation may be applied and provides significant guidance for the adjudication of similar cases, but also offers valuable judicial insights for the ongoing refinement of the futures market’s foundational institutional framework.
10 A legal relationship of funds settlement contract exists between credit card acquiring institutions and issuing banks, pursuant to which they bear the corresponding contractual obligations—Case of Other Ownership Disputes between the Appellant, Kayou Payment Service Co., Ltd., and the Respondent, the Pacific Credit Card Center of the Bank of Communications Co., Ltd.
Basic facts of the case:
The Pacific Credit Card Center of Bank of Communications Co., Ltd. (hereinafter referred to as the Bank of Communications Credit Card Center) is the issuing institution for a certain credit card, while Kayou Payment Service Co., Ltd. (hereinafter referred to as Kayou Company) is an institution approved to conduct bankcard acquiring services. Both are member institutions of China UnionPay and have agreed to be bound by all business rules established by China UnionPay.
According to the “China UnionPay Credit Card Repayment Business Launch Guidelines” issued by China UnionPay, credit card repayment is an inter‑industry UnionPay transaction in which a cardholder transfers funds from a debit card to a credit card. The Merchant Category Code (MCC) for credit card repayment transactions in the F18 field is 9498, and the unified fee‑collection standards are as follows: the debit card issuer charges RMB 1.5 per transaction; the credit card center pays RMB 3 per transaction; China UnionPay collects RMB 0.3 per transaction; and the acquiring institution charges RMB 1.2 per transaction.
According to the “Notice on the Issuance of the Implementation Plan for Adjusting UnionPay Card Swipe Fees” issued by China UnionPay, the domestic swipe fees for UnionPay cards are as follows: for debit cards (including prepaid cards), the issuing bank service fee is 0.35% of the transaction amount, with a per‑transaction cap of RMB 13; for credit cards (including quasi‑credit cards), the fee is 0.45% of the transaction amount.
From January to March 2018, Kayou Company provided acquiring services for credit cards issued by the Bank of Communications’ Credit Card Center. During this period, a total of 315,610 transactions amounting to RMB 2,119,974,958.42 were processed, all assigned Merchant Category Code (MCC) 9498 and attributed to merchants such as NT Company. Based on the transaction data supplied by Kayou Company, China UnionPay identified these transactions as credit card repayment services according to the MCC and settled the corresponding fees at the standard rate of RMB 1.5 per transaction, remitting RMB 473,405.50 to the Bank of Communications’ Credit Card Center.
Subsequently, during its operational review, the Bank of Communications’ Credit Card Center discovered that KaYou Company had illegally used Merchant Category Code (MCC) 9498 to process credit card transactions. Accordingly, the Center issued a formal letter demanding that KaYou Company reimburse it for handling fee losses totaling RMB 9,066,481.81. In its reply, KaYou Company apologized, attributing the issue to a system vulnerability; however, it failed to compensate the Bank of Communications’ Credit Card Center for the losses, thereby giving rise to litigation.
In the first instance, the People’s Court of Jiading District, Shanghai, ruled that Kayou Company shall compensate the Bank of Communications Credit Card Center for losses in the amount of RMB 9,066,481.81, together with corresponding interest. Following the judgment, Kayou Company filed an appeal. In the second instance, the Shanghai Financial Court dismissed the appeal and upheld the original ruling.
Expert Commentary:
Payment is a crucial function of the modern financial system. In recent years, China’s payment infrastructure has expanded rapidly, and credit card payments have become increasingly widespread. However, the corresponding legal framework has lagged behind, leaving the legal relationships involved in credit card transactions still not fully clarified. In a typical credit card transaction, on the surface it appears that the cardholder and the merchant are transacting directly; yet behind the scenes, the issuing bank and the acquiring institution also play pivotal roles. Specifically, the issuing bank enters into a credit card agreement with the cardholder, issuing the card to the latter, while the acquiring institution signs a bankcard acceptance agreement with the merchant. After the merchant accepts the bankcard and completes the transaction with the cardholder, the acquiring institution provides settlement services for the transaction proceeds. Nevertheless, what exactly is the legal relationship between the issuing bank and the acquiring institution? Some argue that both are member institutions of China UnionPay, thereby forming a multilateral contractual relationship with China UnionPay. Others contend that the two entities maintain a principal‑agent relationship, with the issuing bank entrusting the acquiring institution to collect merchants’ transaction data.
This case holds that, although no written contract was executed between the card‑issuing bank and the acquiring institution, in light of the regulatory standards for acquiring‑institution operations and the credit‑card transaction rules promulgated by the People’s Bank of China and China UnionPay, and taking into account the actual transactional facts between the two parties, the provisions of Article 10 of the former Contract Law on the form of contracts were applied. Accordingly, the court determined that a legal contractual relationship governing fund settlement in credit‑card transactions existed between them. This ruling demonstrates judicial ingenuity, skillfully applying existing contract‑law principles to address the novel issues arising from emerging payment methods, and accurately captures the legal essence of credit‑card transactions. On this basis, the case further clarifies the respective liability boundaries: the card‑issuing bank is not required to conduct a secondary review of the merchant category code. Consequently, if an incorrect merchant category code—set and transmitted by the acquiring institution—results in fee losses for the card‑issuing bank, the acquiring institution shall bear the obligation to compensate the issuing bank.
This case has clarified the legal relationships among the parties involved in credit card transactions and appropriately delineated the responsibilities of issuing banks and acquiring institutions. It sets an important precedent for handling similar cases, contributing to the long-term, sound development of China’s bankcard acquiring business and the broader payments industry. Moreover, it strikes a balanced approach between the interests of financial institutions and financial consumers, thereby achieving an organic integration of legal and social outcomes.

A court in Yunnan has issued a “protection order”: electronic data may be used as evidence of domestic violence.
On the fifth anniversary of the implementation of the Anti-Domestic Violence Law of the People’s Republic of China (hereinafter referred to as the “Anti-Domestic Violence Law”), the Yunnan Provincial Regulations on Preventing and Addressing Domestic Violence (hereinafter referred to as the “Regulations”) officially came into force on March 1, 2021. With the enactment of these Regulations, Yunnan has become the ninth province nationwide to introduce and implement local regulations on domestic violence.
While further refining higher-level legislation, this regulation closely aligns with the realities of domestic violence prevention and response in Yunnan, introducing four innovative “highlight” measures that, with their strong practical applicability, will help advance efforts to combat domestic violence in greater depth.
The Regulations comprise six chapters and 50 articles, focusing on regulating 12 key aspects of domestic violence prevention and response in Yunnan: clarifying the responsibilities of women’s and children’s agencies and relevant functional departments; improving the mandatory reporting system for domestic violence; implementing a first‑response accountability system; supplementing and refining the warning‑notice mechanism; strengthening the personal safety protection order system; detailing the temporary shelter system and relief measures; ensuring adequate funding for domestic violence prevention efforts; establishing a grid‑based service and management framework; instituting a follow-up visit and review system; setting up a domestic violence monitoring and information‑sharing mechanism; enhancing the multi‑agency coordination mechanism; and specifying the scope of legal application to persons who are not family members.
On the eve of the Spring Festival in the Year of the Ox, the People’s Court of Jinning District, Kunming City, issued its first “Personal Safety Protection Order.” In stark contrast to the numerical figure of this “Civil Ruling No. 1 on Personal Safety Protection,” is the number of domestic violence cases handled by the court among divorce filings.
As a robust response to the characteristics of domestic violence, the Regulations explicitly define domestic violence as any act of physical or psychological abuse perpetrated among family members through means such as beating, binding, maiming, restricting personal freedom, or recurrent verbal abuse, intimidation, humiliation, defamation, and the dissemination of private information. At the same time, the Regulations stipulate that combating domestic violence is a shared responsibility of the entire society and every household, and prohibit all forms of domestic violence.
The Regulations stipulate that when a party has suffered domestic violence or faces an imminent risk of such violence, they may, in accordance with the law, apply to the people’s court for a personal safety protection order, which the court is obligated to accept. Moreover, for the first time, electronic data such as text messages and instant‑messaging records, as well as audiovisual materials, are included among the evidentiary materials that may be submitted in support of such an application. This represents a pioneering provision nationwide.

The full text of the Yunnan Province Regulations on Preventing Domestic Violence is as follows:

Yunnan Province Regulations on the Prevention and Control of Domestic Violence
(Adopted at the 21st Meeting of the Standing Committee of the 13th Yunnan Provincial People’s Congress on November 25, 2020)
Chapter 1 General Provisions
Article 1: In order to prevent and stop domestic violence, protect the lawful rights and interests of family members, uphold equal, harmonious, and civilized family relationships, promote family harmony and social stability, and foster and practice the core socialist values, this Regulation is hereby formulated in accordance with the Anti-Domestic Violence Law of the People’s Republic of China and other relevant laws and regulations, taking into account the actual conditions of this province.
Article 2 This Regulation applies to activities related to the prevention, handling, and assistance concerning domestic violence within the administrative territory of this province.
Article 3: For the purposes of these Regulations, “domestic violence” refers to acts of physical and psychological abuse perpetrated among family members through means such as beating, binding, maiming, restricting personal freedom, as well as frequent verbal abuse, intimidation, humiliation, defamation, and the dissemination of private information.
Article 4: Combating domestic violence is a shared responsibility of the entire society and every family, and all forms of domestic violence are prohibited.
Any organization or individual has the right to dissuade, stop, and report acts of domestic violence.
Article 5: Work to prevent and address domestic violence shall adhere to the principle of prioritizing prevention, combined with education, rehabilitation, and punishment.
Work to prevent and address domestic violence shall respect the genuine wishes of victims, protect the privacy of all parties involved, and prohibit the disclosure of information pertaining to whistleblowers and reporters in domestic violence cases.
Minors, the elderly, persons with disabilities, women who are pregnant or breastfeeding, and individuals suffering from serious illnesses shall be afforded special protection when subjected to domestic violence.
Article 6: People’s governments at or above the county level shall strengthen leadership over efforts to prevent and address domestic violence, integrate such work into the development of socialist spiritual civilization and grassroots social governance, establish and improve a coordination mechanism for addressing domestic violence, conduct risk assessments of domestic violence, promote inter‑departmental cooperation in this area, and ensure that the necessary funding is included in the fiscal budgets of the respective levels.
Township people’s governments and subdistrict offices shall incorporate domestic violence prevention and response into their grid-based service management system, designate personnel responsible for such work, and effectively carry out prevention, intervention, and assistance measures within their jurisdictions. They shall also provide guidance to residents’ committees, villagers’ committees, and social work service agencies in implementing domestic violence prevention and response efforts.
Article 7: The institutions of the people’s governments at or above the county level responsible for women’s and children’s affairs shall organize, coordinate, guide, and supervise the relevant departments in carrying out work to prevent and address domestic violence, and shall perform the following duties:
(1) Organize and carry out publicity, implementation, and oversight and inspection of laws and regulations on domestic violence;
(2) Responsible for organizing and implementing the coordination mechanism for domestic violence prevention work under the people’s government at the same level, and for studying and resolving major issues in this area.
(3) Establish and improve a multi‑agency collaborative mechanism for the prevention, response, and assistance related to domestic violence;
(4) Establish and improve a monitoring and information-sharing system for preventing domestic violence;
(5) Organize and carry out other tasks related to the prevention and response to domestic violence.
Article 8: The departments of education, public security, civil affairs, judicial administration, health and wellness, and radio and television, as well as the people’s courts and the people’s procuratorates, shall, in accordance with their respective duties, work together to effectively prevent and address domestic violence.
The Women’s Federation, trade unions, the Communist Youth League, the Disabled Persons’ Federation, social organizations, residents’ committees, villagers’ committees, and enterprises and public institutions shall, in accordance with relevant laws and regulations and this Regulation, carry out work to prevent and address domestic violence.
Article 9: People’s governments at all levels and their relevant departments, as well as the All-China Women’s Federation, trade unions, the Communist Youth League, and the China Disabled Persons’ Federation, may, by means such as procuring services in accordance with the law and engaging in project cooperation, support social work service agencies and other social organizations, enterprises and public institutions, and individuals in participating in efforts to prevent and address domestic violence.
Units and individuals are encouraged to participate in efforts to prevent and address domestic violence through donations, volunteer service, and other means.
Chapter 2: Prevention of Domestic Violence
Article 10: People’s governments at all levels shall establish and improve a system for public education and awareness-raising on domestic violence, incorporate such work into their plans for legal education and publicity, and organize its implementation.
On nationally designated holidays for women, children, the elderly, persons with disabilities, and other groups, public education and awareness campaigns on family virtues and the prevention of domestic violence shall be conducted.
Article 11. People’s Courts, People’s Procuratorates, public security organs, and judicial administrative departments shall strengthen the collection, organization, and dissemination of domestic violence cases, and improve the system for interpreting the law through case analysis.
People’s Courts and People’s Procuratorates, in light of the situation regarding domestic violence prevention and control, may submit judicial recommendations or procuratorial recommendations to relevant departments and organizations, and shall ensure that the matters recommended are duly implemented.
Judges, prosecutors, people’s police officers, lawyers, and other legal service providers shall, in light of specific domestic violence cases, explain the law and rationale to the parties involved and to the public, thereby promoting public awareness of laws against domestic violence.
Article 12: The Women’s Federation, trade unions, the Communist Youth League, and the Disabled Persons’ Federation shall make full use of public service platforms such as rights‑protection hotlines, grassroots rights‑protection stations, and online channels to carry out publicity and education on family virtues and the prevention of domestic violence.
Article 13: Marriage registration authorities shall conduct public education on family virtues and the prevention of domestic violence for parties seeking marriage registration, and provide counseling services related to marriage and family matters.
Article 14: Broadcasting, television, newspapers, the internet, and other media outlets shall publicize laws and regulations on domestic violence, publish and broadcast public service advertisements against domestic violence, and, in conjunction with current social issues and typical cases, carry out educational campaigns promoting family virtues and combating domestic violence.
Encourage the integration of local ethnic minorities’ fine traditional customs and the use of ethnic languages and scripts in carrying out public education on family virtues and the prevention of domestic violence.
Article 15: Schools and kindergartens shall, in accordance with the characteristics of students at different age stages, conduct publicity and education on family virtues and on preventing domestic violence, thereby enhancing students’ awareness of domestic violence; they shall also guide parents to adopt sound educational values and employ scientific methods in family education.
Article 16: Resident committees and village committees are encouraged to incorporate content related to family virtues and the prevention of domestic violence into residents’ covenants and village rules, thereby guiding residents and villagers in building civilized families.
Article 17: The education, public security, civil affairs, judicial administration, and health departments of people’s governments at or above the county level, as well as the people’s courts, people’s procuratorates, women’s federations, trade unions, the Communist Youth League, and federations of persons with disabilities, shall incorporate laws, regulations, and related knowledge on domestic violence prevention into their professional training programs. They shall, in accordance with the law, carry out the collection and statistical analysis of data on domestic violence, and annually submit such statistical data to the agency responsible for women’s and children’s affairs under the people’s government at the same level.
Article 18: The people’s governments of townships and towns, as well as subdistrict offices, shall organize residents’ committees, villagers’ committees, branch people’s courts, public security police stations, judicial offices, and grassroots women’s federations to promptly identify and resolve family conflicts and disputes, designate priority targets for intervention, and prevent the occurrence of domestic violence.
Grid workers shall conduct public awareness campaigns on domestic violence through home visits, routine patrols, and other means; upon identifying potential risks of domestic violence, they shall promptly coordinate to resolve such issues, and report any matters that cannot be resolved without delay.
Article 19: People’s mediation organizations shall, in accordance with the law, mediate family disputes and conflicts, and prevent and reduce the occurrence of domestic violence. If, during the mediation process, they discover suspected acts of injury, abuse, abandonment, sexual assault, illegal detention, or other unlawful or criminal conduct, they shall promptly report such cases to the local public security authorities.
Residents’ committees, villagers’ committees, and enterprises and public institutions are encouraged and supported to establish mediation organizations that reflect the distinctive characteristics of local ethnic minorities, and to conduct mediation of domestic violence cases in the respective ethnic languages and scripts.
Article 20: Social work service agencies and other social organizations shall, by providing services such as mental health counseling, family relationship guidance, and education on the prevention of domestic violence, participate in the identification, reporting, and mediation of family disputes and conflicts, and assist relevant departments and institutions in carrying out domestic violence prevention efforts.
Article 21: When an employer discovers that any of its employees has engaged in domestic violence, it shall provide criticism and education, and diligently mediate and resolve family disputes and conflicts among its employees. If necessary, the employer may coordinate with the residents’ committee or villagers’ committee in the employee’s place of residence to jointly implement measures aimed at preventing and reducing the occurrence of domestic violence.
Article 22: Family members shall observe social ethics, carry forward family virtues, cultivate personal integrity, foster a sound family ethos, and create a family environment characterized by mutual assistance, mutual care, and harmonious coexistence.
Parents or other guardians of minors shall, in accordance with the law, fulfill their duties of guardianship and education, conduct family education in a scientific manner, and refrain from committing domestic violence.
Chapter 3: Handling of Domestic Violence
Article 23: The institutions responsible for women’s and children’s affairs under the people’s governments at or above the county level shall organize the education, public security, civil affairs, judicial administration, and health departments, in coordination with the people’s courts, the people’s procuratorates, and organizations such as the All-China Women’s Federation, trade unions, the Communist Youth League, and the China Disabled Persons’ Federation, to establish and improve a coordinated mechanism for preventing and addressing domestic violence.
A first‑response accountability system is in place for handling domestic violence cases. When a case involves the responsibilities of multiple agencies, the agency that first receives the complaint, report, or request for assistance shall coordinate with the other relevant agencies to address the matter, ensuring proper intake, follow-up, and referral in accordance with their respective duties.
Article 24: Victims of domestic violence, together with their legal representatives and close relatives, may file complaints, report incidents, or seek assistance with the perpetrator, or with the victim’s workplace, residents’ committee, villagers’ committee, All-China Women’s Federation, trade union, Communist Youth League, Disabled Persons’ Federation, or other relevant organizations. Any organization receiving a complaint, report, or request for assistance regarding domestic violence shall undertake the following measures:
(1) Deter and stop domestic violence; criticize and educate the perpetrator, and maintain proper records.
(2) Assist with filing police reports, seeking medical care, obtaining injury assessments, and accessing shelter and assistance, and promptly refer victims to the relevant departments or agencies;
(3) Provide services such as mediation of family conflicts and disputes, marital counseling, psychological counseling, legal advice, and legal aid.
Victims of domestic violence, as well as their legal representatives and close relatives, may also file a report with the public security authorities or bring a lawsuit before the people’s court in accordance with the law.
Article 25: Schools, kindergartens, infant and toddler care service institutions, medical institutions, residents’ committees, villagers’ committees, social work service agencies, assistance and management institutions, welfare institutions, and their staff members, upon discovering that any of the following persons have suffered or are suspected of having suffered domestic violence, shall promptly report to the public security organs and provide the victim with necessary protection and assistance:
(1) Persons with no civil capacity;
(2) Persons with limited civil capacity;
(3) Persons who are unable to file a report due to old age, disability, serious illness, coercion, intimidation, or other similar reasons.
Article 26: Public security organs shall establish and improve a mechanism for handling domestic violence cases. Upon receiving an alarm regarding domestic violence, they shall promptly dispatch police officers, prepare an incident report, and carry out the following tasks:
(1) Immediately stop any ongoing domestic violence, restrain the perpetrator, promptly conduct investigations and collect evidence, ascertain the basic facts, prepare interrogation records, and secure the evidence.
(2) Based on the circumstances of domestic violence and the victim’s wishes, assist the victim in seeking medical treatment, undergoing forensic injury assessment, and other related matters;
(3) Where persons with no civil capacity or limited civil capacity have sustained serious bodily injuries as a result of domestic violence, face threats to their personal safety, or are in other dangerous situations such as being left without care, the relevant authorities shall notify and assist the civil affairs departments in arranging for their placement in temporary shelters, assistance and management institutions, or welfare institutions.
(4) Conduct timely risk assessments of domestic violence and handle such cases in accordance with the law;
(5) Inform the victim of their rights, including the right to apply for a personal safety protection order, legal aid, and temporary shelter.
In cases where a report is filed after the fact, the public security organ shall promptly initiate an investigation and handle the matter in accordance with the provisions of the preceding paragraph.
Article 27: Where domestic violence is relatively minor and does not warrant administrative punishment under the law, the public security organ shall issue a warning or provide admonishment to the perpetrator. A written warning shall be issued in cases of domestic violence falling under any of the following circumstances:
(1) Where the victim’s forgiveness has not been obtained;
(2) Committing domestic violence against minors, the elderly, persons with disabilities, women who are pregnant or breastfeeding, or individuals suffering from serious illnesses;
(3) Those who have previously been subject to admonishment or education by the public security authorities for committing domestic violence;
(4) Other circumstances where a warning shall be issued as prescribed by laws and regulations.
Article 28: In cases of domestic violence subject to a warning, the public security organ that receives the report shall issue a written warning within twenty-four hours from the time the report is accepted. If the facts of domestic violence are clear and the perpetrator refuses to accept admonishment or education, the public security organ shall issue a written warning on the spot.
The warning letter shall include the perpetrator’s identifying information, a factual account of the domestic violence, a prohibition against the perpetrator committing further acts of domestic violence, and the consequences of any subsequent violations; the specific format shall be uniformly prescribed by the public security organs of the provincial people’s government.
Public security organs shall enter the warning letter and relevant archival information into the law enforcement case-handling information system.
Article 29: Public security organs shall deliver the warning letter to both the perpetrator and the victim, read its contents aloud to the perpetrator on the spot, and require the perpetrator to sign the document. If the perpetrator refuses to sign, such refusal shall not affect the validity of the warning letter, and the public security organ shall record the fact in the official file.
Following the issuance of a warning letter by the public security organ, the residents’ committee, villagers’ committee, or grassroots women’s federation in the domicile or habitual residence of the perpetrator and the victim shall be notified.
Article 30: Residents’ committees, villagers’ committees, public security police stations, and grassroots Women’s Federations shall conduct regular visits and follow-up inspections of perpetrators and victims who have received warning letters, supervise the perpetrator to refrain from further domestic violence, and maintain detailed records of such visits and follow-ups. During these visits and follow-ups, community police officers shall collaborate with residents’ committees, villagers’ committees, and grassroots Women’s Federations to facilitate conflict resolution.
When residents’ committees, villagers’ committees, or grassroots women’s federations discover that an offender has violated the warning notice and again perpetrated domestic violence, they shall promptly report the matter to the public security organs, which shall handle it in accordance with the law.
Article 31 The people’s governments of prefectures (cities) and counties (cities, districts) shall establish temporary shelters, either independently or by relying on assistance and management institutions, to provide temporary living assistance to victims of domestic violence.
Article 32: Where a victim of domestic violence faces threats to personal safety or finds themselves in temporary hardship, such as lacking a place to live, due to domestic violence, they may submit a request for temporary shelter to the civil affairs department, the people’s government of the township or town, the subdistrict office, or a temporary shelter facility.
Civil affairs departments, people’s governments of townships and towns, and subdistrict offices shall promptly arrange for victims to be accommodated in temporary shelters.
Residents’ committees and villagers’ committees may provide emergency shelter and assistance to victims of domestic violence.
Article 33: Temporary shelters shall, in accordance with the law, promptly admit victims of domestic violence and carry out the following tasks:
(1) Provide categorized and zoned assistance based on gender and age, safeguard the safety and privacy of victims, and offer temporary living support such as food and accommodation;
(2) Coordinate with medical institutions, legal aid organizations, social work services, and other relevant entities to provide victims with medical care, legal assistance, psychological counseling, and other support services.
(3) For victims who lack or have limited civil capacity, designated personnel shall be assigned to provide care and ensure that they receive assistance appropriate to their age, intellectual level, and psychological needs.
(4) Other assistance services that, in accordance with the law, shall be provided to victims.
Article 34: Legal aid agencies shall, in accordance with the law, provide legal assistance to victims of domestic violence.
People’s courts shall, in accordance with the law, defer, reduce, or exempt litigation fees for victims of domestic violence.
Forensic appraisal institutions shall, in accordance with the law, conduct forensic assessments of injuries resulting from domestic violence, issue appraisal opinions promptly, and, in compliance with the law, grant reductions or exemptions from forensic appraisal fees.
Legal service providers are encouraged to reduce or waive legal service fees for victims of domestic violence who do not meet the eligibility criteria for legal aid.
Article 35: Medical institutions shall provide guidance and training to relevant medical personnel on medical interventions for domestic violence, offer diagnosis, treatment, and emergency care to victims of domestic violence, maintain accurate medical records, and preserve relevant evidence. When a victim of domestic violence requests a medical certificate, the medical institution shall issue it.
Article 36 Where any of the following circumstances exists, the Women’s Federation, trade unions, the Communist Youth League, the Disabled Persons’ Federation, residents’ committees, and villagers’ committees shall provide psychological counseling to victims and perpetrators of domestic violence:
(1) Where domestic violence has resulted in serious harm to the victim;
(2) Where the perpetrator has repeatedly perpetrated domestic violence over a prolonged period;
(3) The victim is a minor, an elderly person, a person with a disability, a pregnant or breastfeeding woman, or a patient suffering from a serious illness;
(4) Minors, elderly persons, persons with disabilities, women who are pregnant or breastfeeding, and individuals suffering from serious illnesses, although they have not themselves directly experienced domestic violence, may nonetheless suffer psychological harm as a result of witnessing such violence;
(5) Other individuals who, as a result of domestic violence, require psychological counseling.
Article 37: Social work service agencies and other social organizations may provide victims of domestic violence and perpetrators with services such as legal consultation, psychological counseling, psychological rehabilitation, and mediation of marital and family relationships.
Chapter Four: Personal Safety Protection Order
Article 38: Where a party has suffered domestic violence or faces an imminent risk of domestic violence, they may, in accordance with the law, apply to the people’s court for a personal safety protection order, and the people’s court shall accept such application.
If the party concerned is a person with no civil capacity or limited civil capacity, or is unable to apply for a personal safety protection order on their own due to old age, disability, serious illness, coercion, intimidation, or other reasons, their close relatives, public security organs, women’s federations, residents’ committees, villagers’ committees, or assistance and management institutions may file the application on their behalf.
An application for a personal safety protection order shall be submitted in writing; if it is genuinely difficult to submit a written application, an oral application may be made, and the people’s court shall record it in the minutes.
Article 39: A personal safety protection order shall be issued only when the following conditions are met:
(1) There is a clearly identified respondent;
(2) There is a specific request;
(3) There are circumstances involving having suffered domestic violence or facing an imminent risk of domestic violence.
Article 40 The following materials may be submitted as evidence in support of an application for a personal safety protection order:
(1) Police dispatch records, warning letters, injury assessment reports, and medical treatment records;
(2) Witness testimony and the perpetrator’s written assurance;
(3) Electronic data and audiovisual materials, including documents, images, mobile phone text messages, emails, instant messaging records, and the like;
(4) Other evidence that may be used to support an application for a personal safety protection order.
Article 41: Upon accepting an application, the people’s court shall issue a personal safety protection order or reject the application within seventy-two hours; in cases of emergency, it shall do so within twenty-four hours.
The validity period of a personal safety protection order shall not exceed six months, commencing from the date it is issued. Prior to its expiration, the people’s court may, upon application by the applicant, revoke, modify, or extend the order.
Article 42: A personal safety protection order may include the following measures:
(1) The respondent is prohibited from committing domestic violence;
(2) The respondent is prohibited from harassing, stalking, or contacting the applicant and their relevant close relatives.
(3) Order the respondent to vacate the applicant’s residence;
(4) The respondent is prohibited from engaging in any activities at the applicant’s residence, workplace, school, or other places the applicant frequents that may adversely affect the applicant’s life, work, or studies.
(5) Other measures to protect the personal safety of the applicant.
Article 43: After a people’s court issues a personal safety protection order, it shall serve the order on the applicant, the respondent, the public security organ, as well as relevant organizations such as the residents’ committee, the villagers’ committee, and the respondent’s employer.
Upon the request of the people’s court for assistance in enforcement, a personal safety protection order may be served on relevant entities, including women’s federations, federations for persons with disabilities, schools, kindergartens, and assistance and management institutions, at the residence of the parties or at the place where domestic violence occurred.
Article 44: A personal safety protection order shall be enforced by the people’s court, and public security organs, residents’ committees, villagers’ committees, and other relevant entities shall provide assistance in its enforcement.
If the respondent violates the personal safety protection order, the applicant may report the matter to the people’s court or file a criminal complaint with the public security organ.
Resident committees and village committees shall, through methods such as on-site inspections, follow-up visits, and reporting, supervise compliance with the order. If they discover that the respondent has violated the personal safety protection order, they shall promptly report to the people’s court or file a report with the public security authorities.
Upon receiving a report that the respondent has violated a personal safety protection order, the public security organ shall promptly dispatch police to respond and notify the people’s court of the respondent’s violation.
Chapter 5: Legal Liability
Article 45: Where an offender commits domestic violence that constitutes a violation of public order administration, administrative penalties shall be imposed in accordance with the law; where such conduct constitutes a crime, criminal liability shall be pursued in accordance with the law.
Article 46: If schools, kindergartens, infant and toddler care service institutions, medical institutions, residents’ committees, village committees, social work service agencies, assistance and management institutions, welfare institutions, or their staff fail to report to the public security organs as required by Article 25 of these Regulations, thereby causing serious consequences, the competent authority at the next higher level or the institution itself shall impose disciplinary sanctions, in accordance with law, on the directly responsible persons in charge and other persons directly liable.
Article 47: If the respondent violates a personal safety protection order but such conduct does not yet constitute a crime, the people’s court shall issue a warning and, depending on the severity of the circumstances, may impose a fine of no more than RMB 1,000 or detention for no more than 15 days; if the conduct constitutes a crime, criminal liability shall be pursued in accordance with the law.
Article 48: State functionaries entrusted with the duty of preventing and addressing domestic violence who neglect their duties, abuse their authority, or engage in favoritism and corruption shall be subject to disciplinary sanctions in accordance with the law; if their conduct constitutes a crime, they shall be held criminally liable in accordance with the law.
Chapter VI Supplementary Provisions
Article 49: Violence perpetrated between persons who, though not family members, live together in a relationship of guardianship, support, foster care, cohabitation, or who have previously been married, shall be governed by the provisions of this Regulation.
Article 50 This Regulation shall come into force on March 1, 2021.

Strengthening Online Protection of Children’s Personal Information! The nation’s first civil public-interest lawsuit on online protection for minors has concluded.
On March 11, the People’s Procuratorate of Yuhang District, Hangzhou City, Zhejiang Province, concluded its civil public-interest lawsuit against a well-known domestic short-video company (hereinafter referred to as “the Company”) for infringing upon children’s personal information, following the issuance of a mediation agreement by the Hangzhou Internet Court. Prior to this, the procuratorial organ had put forward claims including ceasing the infringement, issuing a public apology, mitigating adverse effects, and compensating for losses; the Company raised no objections. The Company has now undertaken comprehensive rectification measures to address the identified issues.
It is reported that this case is the first nationwide civil public-interest lawsuit brought by the procuratorial organs concerning “online protection of minors” since the Civil Code came into effect and the Law on the Protection of Minors was revised.
In recent years, against the backdrop of the internet economy—where “attention is currency” and “traffic reigns supreme”—minors, particularly children, have been increasingly vulnerable to the leakage of their personal information and to online harassment and fraud, owing to their young age, limited life experience, and relatively weak self‑protection awareness. In response, since January 2020, the Zhejiang Provincial People’s Procuratorate, in accordance with directives from the Supreme People’s Procuratorate, has launched a special supervisory campaign on online protection for minors. It has comprehensively reviewed 565 cases of illegal and criminal activities involving minors reported from across the province, among which a significant proportion concerned the protection of minors’ personal information. At the same time, the procuratorial organs have identified shortcomings in the protection of such data and instances of unlawful acquisition and use of minors’ personal information by relevant network operators and internet enterprises, revealing that these entities have failed to fully discharge their corporate social responsibilities.
This case is a typical example of such instances. In recent years, several related criminal and unlawful cases in Yuhang District, Hangzhou, have revealed that, during the development and operation of its mobile app, a certain company failed to conspicuously and clearly inform children’s guardians and obtain their valid, explicit consent for the registration of child accounts, nor did it collect or store children’s personal information. Furthermore, without obtaining renewed, valid, explicit consent from the children’s guardians, the company directly pushed short videos containing children’s personal information to users with corresponding viewing preferences, while also failing to implement technical measures to provide dedicated protection for children’s data.
Under the direct guidance of the Supreme People’s Procuratorate, the Zhejiang Provincial People’s Procuratorate established a special task force composed of juvenile prosecution officers from procuratorial organs at the provincial, municipal, and district levels. The task force conducted a comprehensive review and analysis of the issues identified in a certain company’s mobile application, and carried out on-site visits to the cyberspace administration, public security organs, the people’s courts, as well as internet law experts and technical specialists.
In accordance with the jurisdictional rules of the Internet Courts, the Zhejiang Provincial People’s Procuratorate designated the Yuhang District People’s Procuratorate of Hangzhou to handle this case. Following a pre-litigation public notice, on December 2, 2020, a civil public interest lawsuit was filed with the Hangzhou Internet Court, seeking a judgment ordering a certain company to immediately cease its infringing conduct of exploiting its app to unlawfully process children’s personal information, to issue a public apology and mitigate the adverse effects, and to compensate for damages by remitting the funds to a relevant child‑protection public‑interest organization for use exclusively in public‑interest initiatives aimed at safeguarding children’s personal information.
During the litigation, the procuratorial organ actively urged a certain company to promptly implement corrective measures. The company cooperated fully, formulating 34 specific remedial measures across four key areas—namely, the child user registration process, the collection of children’s personal information, the storage, use, and sharing of such information, and proactive measures to safeguard children’s online security—and establishing a detailed timetable for their implementation. The two parties subsequently reached a settlement agreement in accordance with the law.
On February 7, the Hangzhou Internet Court held a public hearing in this case. During the proceedings, a certain company expressed its gratitude to the procuratorial organ for duly fulfilling its public-interest litigation duties, actively promoting online protection of children’s personal information, and helping enterprises operate in compliance with the law. Under the court’s guidance, the Yuhang District People’s Procuratorate of Hangzhou and the company further conofficeed the settlement agreement reached earlier, thereby formalizing a mediation agreement. On February 9, in accordance with the statutory procedures for public-interest litigation, the court issued a public notice.
It is reported that this case has focused on implementing the provision in the Regulations of the Cyberspace Administration of China on the Protection of Children’s Personal Information, which stipulates: “When network operators collect, use, transfer, or disclose children’s personal information, they shall notify the children’s guardians in a prominent and clear manner and obtain the consent of the children’s guardians.”
According to reports, as a result of this litigation, the company has revised and refined several technical measures, including: formulating separate “Rules on the Protection of Children’s Personal Information” and a “User Agreement”; developing a real-name authentication process for child users; adding a consistency‑verification step for real‑name authentication of users under 14; implementing proactive protective measures for users on the platform who are highly suspected of being minors; establishing a dedicated pool for safeguarding children’s information; and creating an independent algorithm for recommending content involving minors. “These technological innovations and their application serve as valuable models and provide guidance for other internet enterprises, which is of great significance for ensuring compliance with legal and regulatory requirements on the protection of personal information, particularly that of children,” the prosecuting officer handling the case stated.
“The handling of this case represents an important exploration by the procuratorial organs in proactively and prudently initiating civil public-interest litigation to protect minors online, laying a solid foundation for the implementation of the Civil Code and the revised Law on the Protection of Minors, and strengthening online protection for minors. It also helps promote source‑level governance within the internet industry and establish long‑term mechanisms,” said Shi Weizhong, Director of the Ninth Procuratorial Office of the Supreme People’s Procuratorate. He added that, going forward, the procuratorial organs will continue to intensify their efforts in safeguarding minors online, exercising legal supervision through administrative and civil public-interest litigation, as well as prosecutorial recommendations on social governance, to urge and facilitate network operators, internet enterprises, and regulatory authorities in fulfilling their responsibilities for protecting minors, thereby dedicating themselves to ensuring the safe and healthy growth of young people.

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