JC Master Legal News Issue 975

Key Takeaways for This Issue
Remarks by Vice Chairman Yan Qingmin at the Capital Markets Fujian Coordination Conference
On June 25, the “Innovation-Driven Development and Capital Empowerment” Capital Markets Fujian Coordination Conference was held. The conference commended the China Securities Regulatory Commission for, under the sound leadership of the CPC Central Committee and the State Council and the unified command and coordination of the Financial Stability and Development Committee of the State Council, staying officely focused on the overarching goal of building a capital market that is standardized, transparent, open, dynamic, and resilient. It also noted the Commission’s adherence to the general principle of seeking progress while maintaining stability, its coordinated efforts to contain the pandemic, deepen reform, guard against risks, and support economic and social development, all of which have yielded positive results.
The New Third Board and the Construction of a Multi-tiered Capital Market System — Remarks by Chairman Xu Ming at the Capital Markets Fujian Coordination Conference
Depending on differences in enterprise size, type, and needs, as well as variations in investor classification and risk preferences, both major and leading economies have, sooner or later, established multi‑tiered capital market systems characterized by complementary functions. As the world’s most populous country, the second largest economy, and the third largest in terms of land area, China boasts an enormous economic scale, uneven development, and robust, diversified investment and financing demands; thus, it is imperative to build and develop a multi‑tiered capital market.
The tax authorities’ heads of China and the Netherlands held talks and reached five major outcomes, helping to foster a market‑oriented, law‑based, and internationally competitive business environment.
To further deepen tax-related exchanges and cooperation between China and the Netherlands, Wang Jun, Director of the State Taxation Administration of China, and Pieter Smink, Commissioner of the Dutch Tax and Customs Administration, held a video conference on June 24. Both sides commended the achievements made over the past 15 years since the signing of the Memorandum of Understanding on Tax Cooperation between China and the Netherlands, and engaged in in-depth discussions on such topics as deepening tax administration reform, supporting pandemic prevention and control as well as economic and social development, and advancing the digitalization of tax collection and administration.
Administrative Measures for the Management of Funds for Lottery Market Regulation
In order to standardize the management and use of funds for lottery market regulation, enhance the efficiency of fund utilization, and promote the sustained and sound development of the national lottery sector, these Measures are hereby formulated in accordance with the Budget Law of the People’s Republic of China and its Implementing Regulations, as well as the Regulations on Lottery Administration and their Implementing Rules, among other relevant provisions.

Finance & Capital Markets

Remarks by Vice Chairman Yan Qingmin at the Capital Markets Fujian Coordination Conference
Respected Secretary Yin Li, Governor Wang Ning, Vice Governor Guo Ningning, old friends from the financial sector, distinguished guests, and dear friends:
Good afternoon, everyone! It is my great pleasure to attend the Fujian Capital Markets Matchmaking Conference on “Innovative Development and Capital Empowerment.” On behalf of Chairman Yi Huiman, I would like to extend, on behalf of the China Securities Regulatory Commission, our warm congratulations on the successful convening of this event. We also wish to express our heartfelt gratitude to the Fujian Provincial Party Committee and the Provincial Government for their longstanding care and support for the capital markets.
In recent years, under the sound leadership of the CPC Central Committee and the State Council, and with the unified command and coordination of the Financial Stability and Development Committee of the State Council, the China Securities Regulatory Commission has remained officely focused on the overarching goal of building a capital market that is standardized, transparent, open, dynamic, and resilient. Adhering to the general principle of seeking progress while maintaining stability, it has coordinated efforts to contain the pandemic, deepen reform, guard against risks, and support economic and social development, achieving positive results. Overall, the capital market is undergoing increasingly profound structural changes: its resilience, vitality, and attractiveness have markedly strengthened; the market ecosystem continues to improve; and the scale, depth, and breadth of services supporting the real economy are steadily expanding. Meanwhile, the range of financial products has grown richer, providing comprehensive, end-to-end, and diversified services to enterprises at all stages—seed, start-up, and mature. In 2020, a total of 394 companies launched their initial public offerings, raising RMB 467 billion—marking a ten-year high—and raising an additional RMB 947.6 billion through secondary offerings. M&A and restructuring transactions totaled RMB 1.66 trillion, while the exchange‑traded bond market raised a combined RMB 8.48 trillion. Venture capital funds deployed RMB 887.7 billion in committed capital, an increase of nearly 40 percent.
The Fifth Plenary Session of the 19th CPC Central Committee, the Central Economic Work Conference, and this year’s Two Sessions have all laid out a series of major strategic plans for the capital market. At this critical juncture, the Fujian Provincial Party Committee and Provincial Government, in response to emerging trends in capital market reform and development, convened a capital‑market matchmaking conference themed “Innovation‑Driven Development and Capital Empowerment,” which holds special and significant importance for advancing the high‑quality development of Fujian’s capital market and its broader economy and society. In recent years, Fujian’s capital market has achieved substantial progress: first, the scale of direct financing has grown markedly. Since 2019, Fujian enterprises have raised RMB 572.3 billion through multi‑tiered capital markets, with nearly RMB 100 billion coming from initial public offerings and subsequent financings. Second, the pace of corporate listings has accelerated. Since 2019, the number of listed companies in Fujian has steadily increased, placing the province seventh nationwide; notably, one company has become the highest‑valued listed office on the ChiNext board. Third, the quality of listed companies continues to improve. Among Fujian’s 159 listed offices, total share capital and total market capitalization rank seventh and eighth nationally, respectively. In the first quarter of this year, the average earnings per share and return on equity of Fujian‑listed companies exceeded the national averages by 41% and 37%, respectively. Fourth, private equity funds have expanded rapidly. By the end of 2020, Fujian was home to 592 private fund managers, overseeing assets totaling RMB 258.1 billion. In 2020, venture capital funds invested RMB 17.7 billion in Fujian, a year‑on‑year increase of 54%.
Distinguished guests, dear friends!
General Secretary Xi Jinping holds deep affection for and attaches great importance to Fujian, entrusting the province with the significant mission of achieving all-round, high-quality development that surpasses previous levels. In March this year, during his inspection and guidance in Fujian, General Secretary Xi put forward four new requirements, emphasizing the need to “strive to write a Fujian chapter in the comprehensive building of a modern socialist country.” The capital market is an essential component of the modern economic system and will play an even greater role in the journey toward building a modern socialist country. The China Securities Regulatory Commission has earnestly implemented the spirit of General Secretary Xi Jinping’s series of instructions and directives, as well as the decisions and arrangements of the CPC Central Committee and the State Council, further leveraging the functions of a multi-tiered capital market to support Fujian’s high-quality economic and social development. Specifically, this entails focusing on five key areas.
First, we will intensify support for scientific and technological innovation, emphasizing the strategic role of innovation capital. We will provide financing to technology‑driven enterprises in high‑end equipment manufacturing, information technology, new energy, new materials, biopharmaceuticals, and energy conservation and environmental protection, helping them raise funds through listings on the STAR Market, the ChiNext Board, and the Select Tier of the New Third Board. We will also foster the development of private equity funds, encouraging them to invest in small, early‑stage, and technology‑focused ventures in Fujian, thereby further optimizing the allocation of scientific and technological resources, boosting the dynamism of innovation actors, and leveraging the catalytic effects of government‑backed venture‑capital guidance funds and technology‑transfer funds. Moreover, we will harness the industry‑leading role of listed companies to facilitate the integration of science, technology, and capital, fostering innovation and building industrial and supply chains that are more innovative, higher in value added, and safer and more reliable.
Second, we will focus on leveraging the multi-tiered capital market to support enterprise growth and expansion. We will intensify efforts to nurture companies poised for IPOs, helping high-quality Fujian‑based enterprises seize the opportunities presented by the registration‑based reform of the capital markets to scale up and strengthen. We will harness the New Third Board’s role in serving small, specialized, sophisticated, and niche enterprises, guiding SMEs to list and grow on the platform, and facilitating the transition of eligible companies from the Select Tier to the main board. In addition, we will support the sound development of Fujian Province’s regional equity market, providing broader, inclusive financial services to micro, small, and medium-sized enterprises and cultivating and channeling a greater pool of high‑quality pre‑IPO candidates.
Third, we will focus on enhancing the quality of listed companies and helping them become stronger and more competitive. We will provide guidance and support to Fujian in further implementing the measures to improve the quality of listed offices, encourage them to fully leverage the new refinancing policies, and promote high‑quality mergers and restructurings. We will also incentivize listed companies with distinct industrial advantages to integrate industry resources, thereby accelerating the development of their respective sectors. In addition, we will support listed companies in issuing bonds to broaden their access to direct financing channels.
Fourth, we will vigorously promote the development of securities and futures operating institutions and continuously enhance their service capabilities. We will encourage Fujian-based securities and futures offices to strengthen their capital base and operational efficiency through multiple channels, fostering specialized and differentiated growth. We will guide licensed securities companies to increase their resource allocation in Fujian, actively align with key provincial projects, leading enterprises, and innovation-and‑entrepreneurship ventures, and support the issuance of infrastructure‑related public REITs. We will also deepen international exchanges and cooperation, and facilitate the establishment of wholly owned or joint‑venture securities and futures institutions in Fujian by eligible overseas operators.
Fifth, we will focus on preventing and defusing risks in the capital market and fostering a sound financial ecosystem. In close coordination with relevant departments of Fujian Province and governments at all levels, we will strengthen guidance on risk resolution for listed companies in Fujian, continuously enhance risk assessments in key areas such as bond defaults, stock pledge financing, private equity funds, and local trading venues, and adopt a comprehensive approach that addresses both symptoms and root causes—simultaneously working to reduce existing risks and curb new ones—so as to proactively and prudently prevent and resolve risks. We will also reinforce investor protection, strengthen regulatory oversight of all types of market participants in accordance with the law, severely crack down on all illegal and non-compliant activities, and promote the healthy development of Fujian’s capital market.
Cradling the clouds and rivers, cleansing the sky of azure, Fujian’s mountains and waters shine with renewed splendor. Endowed with the overlapping advantages of special economic zones, free trade pilot zones, the core area of the Maritime Silk Road, ecological civilization pilot zones, and comprehensive experimental zones, Fujian also boasts a strategic location that seamlessly links its mountainous and coastal regions, a pioneering private sector, and a rich cultural heritage as the hometown of overseas Chinese. As it embarks on a new stage of development, Fujian’s capital market holds immense potential for high‑quality growth. We hope that all types of market players and industry representatives attending this conference will seize this opportunity to significantly enhance the quality and effectiveness of financial services, thereby jointly driving Fujian’s high‑quality economic and social development.
Finally, I wish this conference every success! Thank you all!
Commercial & Corporate

The New Third Board and the Construction of a Multi-tiered Capital Market System — Remarks by Chairman Xu Ming at the Capital Markets Fujian Coordination Conference
Respected Secretary Yin Li, Governor Wang Ning, Secretary Luo Dongchuan, Vice Governor Guo Ningning, distinguished leaders, honored guests, ladies and gentlemen:
Hello everyone! It is a great honor to attend this grand event. First, on behalf of the National Equities Exchange and Quotations Company, I would like to express our heartfelt gratitude to the Fujian Provincial Party Committee, the Fujian Provincial Government, and all sectors of society for their longstanding care and support for the reform and development of the New Third Board. This forum, themed “Innovation-Driven Development and Capital Empowerment,” is highly relevant to current realities. The development of the capital market is closely linked to capital formation, which in turn underpins innovation and entrepreneurship, economic growth, and job creation. Taking this opportunity, I would like to share three observations on the topic of “The New Third Board and the Construction of a Multi‑Tiered Capital Market System.” I welcome any constructive criticism or corrections.
I. It is highly necessary to establish and develop a multi-tiered capital market.
Depending on differences in enterprise size, type, and needs, as well as variations in investor classification and risk preferences, both major and leading economies have, sooner or later, established multi‑tiered capital market systems characterized by complementary functions. As the world’s most populous country, the second largest economy, and the third largest in terms of land area, China boasts an enormous economic scale, uneven development, and robust, diversified investment and financing demands; thus, it is imperative to build and develop a multi‑tiered capital market.
From a financing perspective, China is witnessing a steady surge in innovation and entrepreneurship, with the number of active enterprises continuously expanding—now exceeding 40 million—and a substantial overall demand for direct financing. These offices exhibit diverse industries, varied business models, and rich operational formats, necessitating differentiated services from the capital markets. Even within the same enterprise, the financing instruments and standards applicable at different stages of its life cycle differ markedly. For small and medium-sized enterprises, whose organizational structures remain incomplete and whose performance is subject to uncertainty, markets with lower entry barriers and reduced regulatory burdens are more suitable. By contrast, mature large and medium-sized enterprises, with well‑established organizational frameworks and significant funding needs, are better served by markets characterized by stringent准入 criteria and rigorous oversight. All of these requirements can be met through a multi‑tiered capital market system.
From an investment perspective, Chinese households’ investable assets continue to grow, now exceeding RMB 241 trillion. With robust demand for wealth management and asset allocation, there is an urgent need for the capital market to offer diversified investment products that meet investors’ portfolio‑management needs. China’s capital market currently has 186 million registered accounts, encompassing both professional institutional investors and a large base of retail investors, each with markedly different levels of expertise, risk tolerance, and risk preferences. This calls for the capital market to provide a broad array of investment channels and products across varying risk levels, maturities, and expected returns.
From the perspective of market organization, it is necessary to match investors with differing risk preferences and risk tolerances to issuers whose risk profiles correspond to those preferences. By segmenting the market, a tiered approach to risk management can be implemented. Among various financial markets, equities exhibit markedly distinct risk characteristics; therefore, vertical stratification of the equity market is both necessary and feasible. In practice, this manifests primarily as differentiated arrangements regarding listing/admission criteria, issuance methods, trading mechanisms, information disclosure, and investor suitability requirements.
II. Remarkable Achievements in Building China’s Multi-tiered Capital Market System
After 30 years of continuous enrichment and refinement, China has gradually established a multi-tiered market system comprising private equity and venture capital, regional equity markets, the New Third Board, and the Shanghai and Shenzhen stock exchanges. This framework has played a vital role in facilitating financing, reducing costs for the real economy, and enhancing the efficiency of resource allocation, yielding significant achievements.
First, the exchange’s market‑segment framework has become increasingly sophisticated. In support of national economic development, the exchanges have successively established the Main Board, the SME Board, the ChiNext Board, and the STAR Market, creating a multi‑tiered market structure. In April this year, the Shenzhen Stock Exchange merged its Main Board and SME Board, resulting in a streamlined segment system with clearer positioning. The Main Board primarily accommodates pillar enterprises, industry leaders, and large‑scale companies; the ChiNext Board focuses on supporting “three innovations and four new” offices; and the STAR Market is dedicated to serving hard‑tech companies. Over the past three decades, the stock markets have raised more than RMB 15 trillion for real‑economy enterprises. Listed companies have become the backbone of the national economy, the vanguard of industrial upgrading, and a reliable indicator of economic performance.
Second, the New Third Board has established a tiered market structure. In 2013, it expanded from a small-scale regional pilot program to nationwide coverage, becoming an important component of China’s multi-tiered capital market system. To meet the diverse needs of enterprises and implement risk‑based tiered management, the market was divided into two tiers—Base Tier and Innovation Tier—in 2016, with the Select Tier added in July 2020. Each tier is tailored to support the standardization, nurturing, and upgrading of small and medium-sized enterprises. Over the eight-plus years since its inception, the New Third Board has played a pivotal role in broadening capital market access and fostering “small, specialized, distinctive, and sophisticated” companies. As of the end of May 2021, it had served a cumulative total of 13,400 enterprises, with 7,519 listed companies, including 52 on the Select Tier, 1,033 on the Innovation Tier, and 6,434 on the Base Tier. The modern service sector and advanced manufacturing account for 71.3% of these listings.
Third, regional equity markets, private equity, and venture capital have developed in a standardized manner, becoming an important component of the multi-tiered capital market. To explore and expand equity financing channels for small and micro enterprises, localities have successively established a number of regional equity markets, primarily providing non‑public offerings and transfer services to such enterprises within their respective provincial administrative regions. By the end of 2020, 34 regional equity markets had been set up nationwide, essentially forming a “one market per province” structure, with a total of 34,700 listed companies. In addition, private equity and venture capital have played an increasingly significant role in fostering the formation of innovation‑driven capital, supporting technological innovation, and facilitating industrial transformation and upgrading. As of the end of 2020, the assets under management of private equity and venture capital funds reached RMB 11.6 trillion, placing China among the world’s leaders in this sector.
The multi-tiered capital market is not limited to the establishment of trading venues or market segments; in practice, it also manifests itself in differentiated institutional arrangements that are stratified and categorized, such as a multi-tiered issuance market, diversified trading mechanisms, and a tiered investor suitability framework. China’s capital market has undertaken extensive exploration and experimentation in these areas, yielding positive results.
III. We must further strengthen the New Third Board and promote the coordinated development of a multi-tiered capital market.
After 30 years of exploration and development, China’s capital market system has become increasingly comprehensive, with its coverage and depth continuing to expand. Nevertheless, there remain areas that can be improved. First, small and medium-sized enterprises, science-and‑technology‑innovation offices, as well as companies operating in new industries, business forms, and models, exhibit distinct characteristics that render traditional evaluation frameworks inadequate; the inclusiveness and adaptability of the multi‑tiered market still require further enhancement. Second, at present, the differentiated development among the various tiers of China’s capital market remains insufficient, and their distinctive features are not yet sufficiently pronounced, falling short of the expectations of all sectors of society; the complementary functions of these tiers need to be further strengthened. Third, seamless connectivity between different levels—enabling both upward access and downward mobility—is essential for fostering a healthy capital market ecosystem. Mechanisms for interconnection among the multi‑tiered markets, as well as the degree of linkage between on‑exchange and over‑the‑counter markets, still require further improvement. While vigorously developing nationwide trading markets, the development paths and models of regional equity markets also warrant continued exploration and innovation.
The new Securities Law, implemented in March 2020, takes full account of China’s recent explorations and practices in its multi-tiered capital market. It establishes a dedicated chapter on “Securities Trading Venues,” categorizing such venues into stock exchanges, other nationwide securities trading venues approved by the State Council, and regional equity markets. As the only “other nationwide securities trading venue approved by the State Council” currently in existence, the New Third Board enjoys the same functions and legal status as stock exchanges. Serving as an intermediary link that bridges the upper and lower tiers of the multi-tiered capital market, the sound development of the New Third Board is of great significance for building a more inclusive and adaptable capital market and for establishing a market system characterized by complementary functions and organic interconnections. Going forward, we will align ourselves with the new stage of development, implement the new development philosophy, and integrate into the new development paradigm. Closely focusing on major national strategic priorities and the core tasks of the New Third Board, we will coordinate and advance the construction of its six key systems—policy, institutional, risk‑control, service, technological, and organizational—so as to enable the New Third Board to play its due role in the broader context of capital market reform and development.
First, we will refine the policy framework. We will continue to strengthen the legal and regulatory framework for the New Third Board, sharpen its market positioning, optimize market‑incentive policies, improve investor suitability management, remove barriers that have long hindered the entry of various types of long-term capital, and enhance the administrative environment for small and medium‑sized enterprises seeking listing. Second, we will bolster the institutional framework. We will further innovate and improve foundational systems across key stages—market access, issuance, trading, mergers and acquisitions, and investor protection—enhancing flexibility, inclusiveness, and adaptability, thereby strengthening market functions and boosting market vitality. Third, we will fortify the risk‑control system. We will consistently raise the quality of listed companies, reinforce day‑to‑day regulatory coordination, strengthen risk monitoring and prevention, promote deep integration between technology and business operations, and officely safeguard against systemic risks. Fourth, we will innovate the service ecosystem. We will expand the supply of market‑based investment and financing products, deepen the development of service hubs, and build a comprehensive service platform for the New Third Board covering investment and financing, information services, and localized support, thus elevating the overall quality of market services. Fifth, we will solidify the technological infrastructure. We will advance the construction of a digital, intelligent trading venue, enhance our independent R&D capabilities, and establish an online, automated, and intelligent platform system to ensure the safe and stable operation of the market and the efficient, orderly execution of all business activities. Sixth, we will strengthen the organizational structure. We will fully implement the strategy of building stronger offices and stronger cities, refine internal management systems and mechanisms, and cultivate a corporate culture characterized by unity and harmony, positivity and ambition, pragmatism and truth‑seeking, and a spirit of pioneering innovation.
Distinguished guests, dear friends!
Fujian is a major and leading province for the private sector, as well as a strong player in the capital markets; it ranks seventh nationwide in both the number of listed companies and total market capitalization. For many years, the reform and development of the New Third Board has enjoyed robust support from the Fujian Provincial Party Committee and the provincial government, with substantial policy incentives and a high level of awareness and participation among local entrepreneurs. As of the end of May, the New Third Board had cumulatively served 444 companies listed in Fujian, raising a total of RMB 12 billion through equity financing—both figures placing the province among the national leaders.
Going forward, we will take this cooperation agreement as an opportunity to further strengthen our coordination with governments at all levels, relevant departments, and other stakeholders across Fujian Province, working together to build and effectively serve the “Fujian Sector” of the New Third Board. Specifically: first, we will establish a Fujian-based New Third Board hub to enhance the platform’s localized service capabilities in the province; second, we will deepen collaboration with the Straits Equity Exchange Center and the Xiamen Cross-Strait Equity Exchange Center to jointly support small and medium-sized enterprises within Fujian; and third, we will launch more targeted market‑oriented services, with a particular focus on helping Taiwan‑invested offices, green‑and‑eco‑friendly enterprises, and specialized, refined, distinctive, and innovative SMEs—especially those with Fujian characteristics—to list on the New Third Board, conduct public offerings, and advance to the Select Tier.
Thank you, everyone!
Taxation TAXATATION

The tax authorities’ heads of China and the Netherlands reached five significant outcomes during their talks.
Helping to build a market-oriented, law-based, and internationally competitive business environment.
To further deepen tax-related exchanges and cooperation between China and the Netherlands, Wang Jun, Director of the State Taxation Administration of China, and Pieter Smink, Commissioner of the Dutch Tax and Customs Administration, held a video conference on June 24. Both sides commended the achievements made over the past 15 years since the signing of the Memorandum of Understanding on Tax Cooperation between China and the Netherlands, and engaged in in-depth discussions on such topics as deepening tax administration reform, supporting pandemic prevention and control as well as economic and social development, and advancing the digitalization of tax collection and administration.
At the meeting, Wang Jun provided an overview of the “Opinions on Further Deepening Tax Collection and Administration Reform,” as well as updates on the Chinese tax authorities’ progress in advancing big data development and application, and in implementing invoice digitization. He expressed the hope that the Chinese and Dutch tax authorities will continue to strengthen practical exchanges and cooperation within bilateral and multilateral frameworks, thereby contributing to the creation of a market‑oriented, law‑based, and internationally competitive business environment.
Peter Smink expressed his appreciation for China’s tax administration reforms and innovative initiatives, and outlined the progress of institutional reforms at the Dutch Tax Administration, its future vision, and the measures it has implemented to help businesses navigate the challenges posed by the pandemic. He stated that he will continue to promote exchanges and cooperation between the Chinese and Dutch tax authorities, further consolidating and strengthening the longstanding friendship between the two countries in the tax field.
In recent years, China and the Netherlands have defined a new positioning as an “open and pragmatic comprehensive partnership of cooperation.” Strengthening and deepening tax cooperation between the two countries will undoubtedly play a positive role in boosting bilateral economic and trade exchanges and elevating bilateral relations to a new level. Through this round of talks, the two sides achieved the following five important outcomes:
— Strengthening high-level meetings. Both sides are willing to continue enhancing high-level exchanges, sharing updates on their respective tax reform initiatives and tax administration practices, and encouraging their tax authorities to make greater contributions to the sustained, sound, and stable development of both economies.
— Renewal of the Memorandum of Cooperation. Both parties agreed to renew a new phase of the bilateral Memorandum of Cooperation, further expanding areas of collaboration, enriching the forms and content of cooperation, and jointly enhancing tax administration capabilities.
— Sharing experiences in tax administration reform. Both sides will promptly exchange updates on developments in tax administration reform, with a particular focus on best practices and lessons learned in the taxation of large enterprises, thereby continuously enhancing the quality of tax services and administration, fostering a market‑oriented, law‑based, and internationally competitive business environment, and providing stronger support for the development of enterprises in both countries.
— Deepening digital cooperation in tax administration. The two sides will exchange and discuss successful cases and best practices in key areas such as invoice digitization, further advance the development and application of tax‑related big data, promote the deep integration of modern information technology with tax administration, and continuously enhance the level of digitalization and intelligence in tax collection and management in both countries.
— Strengthening tax cooperation within multilateral frameworks. The two sides will engage in extensive tax cooperation under multilateral mechanisms, sharing experiences in tax administration and exchanging insights on reform and development, thereby contributing their respective national tax policies and expertise to the building of a growth‑friendly tax environment.
Announcement of the State Taxation Administration on Certain Policy and Administration Guidelines Regarding Enterprise Income Tax
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 carry out in depth the 2021 “Doing Practical Things for Taxpayers and Payers and the Spring Breeze Action for Convenient Tax Services,” and to advance the “delegation, regulation, and service” reform in the tax field so as to better serve market entities, in accordance with the Enterprise Income Tax Law of the People’s Republic of China and its Implementing Regulations (hereinafter referred to as the Tax Law) and other relevant provisions, the following announcements are hereby made regarding certain policy and administration guidelines pertaining to enterprise income tax:
I. Issues Regarding the Deduction of Expenses Related to Charitable Donations
Expenses incurred by enterprises in the course of donating non-monetary assets, including freight, insurance premiums, and labor costs, shall be deductible before tax as charitable donation expenses in accordance with applicable regulations if such amounts are reflected on the official donation receipts issued by state organs or public‑interest social organizations. If the aforementioned expenses are not included in the amounts recorded on such donation receipts, they shall be treated as ordinary business expenses and deducted before tax in accordance with the relevant provisions.
II. Tax Treatment of the Conversion of Convertible Bonds into Equity Investments
(1) Tax Treatment of the Purchasing Enterprise
1. During the holding period, interest income earned by a purchasing enterprise from convertible bonds at the agreed-upon interest rate shall be reported and subject to corporate income tax in accordance with the law.
2. When a purchaser converts its convertible bonds into shares and simultaneously converts any accrued but unpaid interest into shares, such accrued interest shall be treated as current-period interest income for tax purposes, even if it has not been recognized as revenue in the accounting records. Following the conversion, the cost of the equity investment shall be determined based on the bond’s purchase price, the accrued but unpaid interest, and any related taxes and fees paid.
(II) Tax Treatment of the Issuing Enterprise
1. Interest on convertible bonds issued by the issuing enterprise may be deducted before tax in accordance with applicable regulations.
2. When the issuing enterprise converts the convertible bonds held by the purchaser, together with any accrued but unpaid interest, into shares in accordance with the agreed terms, the accrued but unpaid interest shall be deemed to have been paid and may be deducted before tax as prescribed.
III. Treatment of Corporate Income Tax on Cross-Border Hybrid Investment Transactions
Foreign investors engaging in hybrid investment activities within China, if they meet the conditions set forth in Article 1 of the State Administration of Taxation’s Announcement on the Corporate Income Tax Treatment of Hybrid Investment Activities (No. 41, 2013), may apply the corporate income tax treatment prescribed in Paragraph 1 of Article 2 of that announcement; provided, however, that this exemption shall not apply where both of the following two circumstances are simultaneously satisfied:
(1) The foreign investor and the domestic investee are affiliated entities;
(2) The country (or region) of the foreign investor treats the investment income in question as equity‑based investment income and does not impose corporate income tax on it.
Where the circumstances set forth in both subparagraph (i) and subparagraph (ii) above are met, interest paid by a domestic investee to an overseas investor shall be treated as a dividend and shall not be deductible for tax purposes.
IV. Tax Treatment of Certain Assets Following the Transition from Assessed Corporate Income Tax Collection to Account-Based Collection
(1) Where an enterprise can provide the invoice for the acquisition of an asset, the amount stated on the invoice shall serve as the tax base; where such an invoice cannot be provided, the amount recorded in the contract (agreement) for the acquisition of the asset, the proof of payment, and the accounting records may be used as the tax base.
(2) For assets that were put into use during the period when the enterprise was subject to assessed taxation, once switched to account-based taxation, depreciation and amortization shall be calculated over the statutory depreciation and amortization periods, with the portion attributable to the years since the asset was placed in service deducted. The remaining balance shall then continue to be depreciated or amortized and deducted before tax.
V. Tax Treatment of Cultural Relics and Artistic Assets
Cultural relics and works of art purchased by enterprises for purposes of collection, exhibition, or preservation and enhancement of value shall be treated as investment assets for tax purposes. During the holding period, depreciation and amortization expenses accrued on such cultural relic and art‑related assets shall not be deductible for tax purposes.
VI. Issues Regarding the Timing of Recognizing Revenue from Government Fiscal Funds Received by Enterprises
When an enterprise sells goods or provides labor services at market prices, and the government’s fiscal authorities reimburse all or part of the proceeds based on a specified percentage of the quantity or value of such sales or services, revenue shall be recognized in accordance with the accrual basis of accounting.
Except as otherwise provided above, all government financial payments received by an enterprise—such as fiscal subsidies, grants, compensation, and tax refunds—shall be recognized as revenue at the time the corresponding income is actually received.
This announcement applies to the annual tax reconciliation and final settlement for 2021 and subsequent years.
This is hereby announced.
State Taxation Administration
June 22, 2021
Promoting Tax Modernization to Support High-Quality Development
As an integral part of the Party’s century-long struggle, the tax sector has carried forward its legacy from generation to generation, thriving and enduring, and has tirelessly written a glorious chapter of unwavering commitment to its original aspirations—serving the country and the people.
Over the past century, in its sustained efforts to unite and lead the people through revolution, construction, and reform, the Party has, in response to evolving circumstances and tasks, carefully assessed the situation and formulated a series of tax policies, measures, and propositions. These have exerted a profound impact on the advancement of political, economic, and social development, playing a vital role. Since the 18th National Congress of the Communist Party of China, the Party Central Committee with Comrade Xi Jinping at its core has attached great importance to tax work. General Secretary Xi Jinping has issued numerous important instructions and directives, emphasizing the need to harness the foundational, pillar‑building, and safeguarding roles of taxation in national governance, thereby charting the course forward and providing fundamental guidance for advancing tax reform and development. The Party Leadership Group of the State Taxation Administration has steadfastly upheld Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, thoroughly studied and implemented General Secretary Xi Jinping’s important expositions on tax work, and rigorously carried out the decisions and arrangements of the CPC Central Committee and the State Council. It has set forth the overarching goal of modernizing taxation in the new era—centered on “building a strong team and delivering excellent tax administration”—and has articulated and continuously refined the specific objectives of the “Six Major Systems.” Upholding a single, long-term blueprint, staying officely committed to its goals, persistently exploring new approaches and fostering innovation, and working diligently to ensure effective implementation, the Administration has propelled the cause of taxation forward with determination along the path of modernization.
The system of Party leadership is being continuously strengthened.
The Party’s banner flies high, guiding development.
Focusing on building a robust and effective system of Party leadership, we have earnestly implemented the overarching requirements for Party building in the new era, ensuring that Party leadership is integrated throughout the entire process of tax administration. We have consistently upheld a clear political stance, simultaneously launching education campaigns across the State Taxation Administration and the broader tax system to strengthen awareness of the tax authorities as political organs. We have resolutely and promptly acted upon the important instructions and directives issued by General Secretary Xi Jinping on tax work, establishing dedicated records to ensure rigorous follow-up and conducting annual “look-back” reviews to guarantee that every measure is fully implemented. We have established and refined a political‑ecology evaluation mechanism encompassing seven dimensions and 35 assessment criteria, striving to foster a sound political environment throughout the entire system. We have steadfastly prioritized the in-depth study and implementation of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, instituting and enforcing the Party Committee’s “first agenda item” system. At each Party Committee meeting, the spirit of General Secretary Xi Jinping’s recent important speeches, key instructions, and significant articles is first conveyed and studied, followed by thorough deliberation on concrete measures for implementation. Corresponding requirements have been set for Party Committees at all levels of tax bureaus, creating institutional arrangements across the entire system. We have consistently used Party building to guide tax reform and development, successively introducing more than 130 Party‑building rules and standards, and continuously refining and improving the tax‑specific “vertical integration and horizontal coordination for strong Party building” mechanism and institutional framework, thereby advancing high‑quality Party building within the tax system. We have remained committed to maintaining a strict tone, officely supporting the work of the Discipline Inspection and Supervision Group stationed at the State Taxation Administration, deepening pilot reforms of the discipline inspection and supervision system within the tax sector, exploring the establishment of an integrated, comprehensive oversight framework, and working to forge a new pattern of comprehensively strengthening Party governance in the tax system through a “six‑in‑one” approach.
The construction of the tax rule-of-law system continues to deepen.
Tax administration based on the law continues to deliver tangible results as it becomes increasingly refined.
Focusing on building a sound and comprehensive tax‑law governance system, we have thoroughly studied and implemented Xi Jinping’s Thought on the Rule of Law, and advanced tax‑law governance in depth. We have continued to uphold the principle of tax legality: among 18 tax categories, 12 have been codified into law, while legislative work on the remaining taxes and the revision of the Tax Collection and Administration Law are progressing in an orderly manner. We have deepened tax‑system reform and refined the fundamental tax framework: the value‑added tax reform was successfully rolled out in ten phases, laying the groundwork for a modern VAT system with Chinese characteristics; the personal income tax reform was smoothly implemented in three stages, culminating in the establishment of a personal income tax regime that combines comprehensive and classified approaches after 25 years of development; and a green‑taxation framework has taken shape, featuring “multi‑tax governance” through environmental, resource, and farmland‑occupation taxes, complemented by a “multi‑policy mix” of systematic tax incentives. We have continuously optimized tax‑enforcement practices, establishing a new dynamic regulatory mechanism based on “credit + risk”: low‑credit, low‑risk entities face minimal interference, while high‑credit, high‑risk entities are subject to tailored responses; emerging business models, new circumstances, and novel issues in economic activity are closely monitored; sectors and areas where tax evasion is particularly prevalent—areas of strong public concern—are rigorously investigated in accordance with the law; and fraudulent enterprises, sham exports, and false declarations are swiftly and decisively cracked down upon. Since August 2018, in joint operations with the Ministry of Public Security, the General Administration of Customs, and the People’s Bank of China, we have launched special campaigns to combat tax fraud and evasion, identifying and handling a total of 378,300 enterprises suspected of issuing false invoices or engaging in tax fraud, and prompting nearly 5,000 criminal suspects to turn themselves in.
The tax and fee service system is undergoing continuous upgrades.
The service philosophy is deeply put into practice through proactive action.
Centering on the development of a high-quality, convenient tax and fee service system, we have continuously enhanced the quality and efficiency of tax and fee services through “yearly incremental upgrades, integrated online–offline approaches, and coordinated internal–external efforts.” For eight consecutive years, we have launched the “Spring Breeze Action for Convenient Tax Services,” under which the State Taxation Administration has introduced a total of 418 innovative measures across 49 categories, while local tax authorities have further refined and rolled out more than 40,000 supporting measures, thereby establishing a distinctive tax‑focused service brand. We have steadily deepened the “delegation, regulation, and service” reform in the tax sector, reducing administrative approval items by 93% and cutting taxpayer filing requirements by 50%. Seizing the opportunities presented by pandemic response and economic recovery, we have vigorously promoted “non-contact” tax processing and payment, enabling nearly 90% of tax‑related matters and 99% of tax returns to be handled online. We have continued to strengthen inter‑departmental collaboration, expanding the scope of convenience and benefits for the public; in partnership with the China Banking and Insurance Regulatory Commission, we have advanced the “tax‑bank interaction” initiative, providing targeted support to creditworthy small and micro enterprises to alleviate their difficulties and bolster their growth. In the World Bank’s Doing Business assessments, China’s ranking for the paying taxes indicator has consistently improved, and third‑party survey scores measuring taxpayer and payer satisfaction have risen steadily. At the same time, we have fully leveraged the role of taxation, dedicating ourselves to winning the three critical battles, and providing robust support for national development strategies such as the coordinated development of the Beijing–Tianjin–Hebei region, the development of the Yangtze Economic Belt, the construction of the Guangdong–Hong Kong–Macao Greater Bay Area, and the integrated development of the Yangtze River Delta. By capitalizing on the advantages of tax‑related big data, we have continually optimized our tax analysis mechanisms, producing tens of thousands of analytical reports annually to inform decision‑making at all levels of Party and government leadership, and proactively serving the broader goals of economic and social development.
The tax and fee collection and administration system continues to be optimized.
Tax administration efficiency has steadily improved through reform and innovation.
Focusing on building a rigorous and standardized tax and fee collection and administration system, we have fully implemented the tasks of the tax administration reform, achieving notable results that exceeded expectations. Since the 18th National Congress of the Communist Party of China, the tax administration system has undergone three major transformations, with “three integrations” as their central theme. The first was “cooperation,” which involved earnestly implementing the “Plan for Deepening the Reform of the State Tax and Local Tax Collection and Administration Systems” issued in 2015 by the CPC Central Committee and the State Council. This reform emphasized deep integration of services, appropriate consolidation of enforcement, and high‑level aggregation of information, thereby comprehensively deepening cooperation between the state and local tax authorities. The second was “merger,” carried out in accordance with the “Plan for the Reform of the State Tax and Local Tax Collection and Administration Systems” issued in 2018 by the CPC Central Committee and the State Council. This phase successfully completed the merger of state and local tax agencies at the provincial level and below, smoothly transferred responsibilities for collecting social security contributions and non‑tax revenues as required, and laid the groundwork for an optimized, efficient, and unified tax and fee collection and administration system. The third was “integration,” implemented pursuant to the “Opinions on Further Deepening the Reform of Tax Collection and Administration” issued in March this year by the CPC Central Committee and the State Council. This stage has advanced precise law enforcement, refined services, targeted supervision, and collaborative governance, while accelerating the development of smart taxation, thus generating a synergistic effect and management outcomes that leverage integration to drive progress. At the same time, we have rigorously enforced tax and fee reduction policies, established and continuously improved the “Nine ‘One’s’—Short, Simple, Fast, and Excellent” working methodology, and ensured that policy benefits reach market entities directly. During the 13th Five-Year Plan period, nationwide cumulative tax and fee reductions exceeded RMB 7.6 trillion. Adhering to the principle of revenue generation, we have resolutely refrained from imposing excessive taxes and fees, consistently meeting budgetary revenue targets. From 2013 to 2020, the tax authorities collectively collected RMB 96.7 trillion in tax revenue (after deducting export tax rebates), with an average annual growth rate of 6.1%. Under the combined impact of macroeconomic policies such as tax and fee reductions and the “delegation, regulation, and service” reform, from the 18th National Congress through the end of last year, the country saw a cumulative total of 79.89 million newly registered tax‑related market entities—an average annual increase of nearly 10 million—making a positive contribution to promoting steady and sound economic development in China and enhancing its share of global economic growth.
The construction of the international tax system continues to advance.
Major countries’ tax authorities demonstrate their stature through open cooperation.
Focusing on building a global tax system based on cooperation and mutual benefit, China has proactively supported the country’s broader strategy of opening up to the world and demonstrated its wisdom in advancing reform of global tax governance. China took the initiative to establish the Belt and Road Tax Administration Cooperation Mechanism, the first quasi‑governmental multilateral international tax cooperation mechanism and platform launched by China. To date, the Council has grown to 36 members and 30 observers, and the Belt and Road Tax Academy has been set up in Beijing and Yangzhou, further institutionalizing and normalizing the cooperation framework. China has made every effort to support enterprises in both “going out” and “bringing in,” with its network of tax treaties now covering 111 countries and regions—ranking fourth globally. It has also updated and published investment‑related tax guides covering 104 jurisdictions, and has dispatched a total of 84 tax officials to Chinese embassies and consulates abroad, as well as to international organizations and relevant institutions, thereby extending coverage to major economies worldwide. In coordination with relevant authorities, China has actively participated in the formulation of international tax rules, including those on digital‑economy taxation and measures to prevent base erosion and profit shifting under the OECD framework, effectively safeguarding the interests of China and other developing countries.
Efforts to strengthen the team’s organizational system continue to intensify.
The tax authorities’ elite force forges ahead, pressing forward through challenges and overcoming obstacles.
Focusing on building an efficient and clean organizational system, we have devoted ourselves to forging a loyal, incorruptible, and responsible tax‑administration “iron army,” thereby providing robust organizational support for advancing tax modernization. Seizing the opportunity presented by the reform of the national and local tax collection and administration system, we have streamlined more than 30,000 tax bureaus, internal departments, branch offices, and public institutions at all levels, as required, while continuously optimizing institutional structures and clarifying functions and responsibilities. We have also deepened efforts to ensure that our cadre teams are aligned in mission, personnel, strength, and spirit. With the goal of consistently establishing and reinforcing sound personnel‑selection principles, we have upheld impartiality, pursued principled governance, built effective mechanisms, and prioritized long-term development. We have focused on cultivating and selecting outstanding cadres, steadily and prudently advanced the parallel system of civil‑service ranks and positions, and comprehensively addressed the issue of staff overstaffing arising from the merger of national and local tax agencies. In recent years, the results of the State Taxation Administration Party Committee’s “one report and two evaluations” process for cadre selection, conducted by the Organization Department of the CPC Central Committee, have consistently shown high satisfaction rates. We have continually explored and refined a mechanism‑based institutional framework for leading and managing teams, upgrading and improving it annually. This has led to the establishment of a tax‑performance management and digital‑personnel system that assigns tasks to specific posts and holds individuals accountable. We have also vigorously advanced the “1115” quality‑enhancement initiative, with the “leading‑goose effect” of cultivating top‑tier tax talent becoming increasingly evident. Meanwhile, initiatives such as large‑scale on‑the‑job training and professional skill competitions have been carried out in earnest, and the platform for learning to strengthen taxation has been accelerated in both construction and application. In addition, we have successively introduced a series of measures to alleviate burdens on the grassroots level, vigorously promoted the Chinese tax spirit of “loyalty and responsibility, respect for law and discipline, and strengthening the country through taxation,” and sustained efforts to invigorate the drive to work and start businesses while rallying positive energy for taking on responsibilities and delivering results.
We are keenly aware that, despite the progress made by the tax authorities in recent years, significant shortcomings and gaps remain when compared with the central government’s expectations, the aspirations of taxpayers and payers, and the advanced practices adopted across regions and departments. As we enter a new stage and embark on a new journey, the national tax system will rally even more closely around the Party Central Committee with Comrade Xi Jinping at its core, guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era. We will strengthen our “four consciousnesses,” officely uphold our “four confidences,” and ensure “two safeguards,” continuously drawing experience, wisdom, and spiritual strength from the Party’s century-long glorious history. We will strive to advance the modernization of taxation, devote ourselves wholeheartedly to supporting high-quality development, and better leverage the fundamental, pillar, and safeguarding roles of taxation in national governance, thus making new and greater contributions to the comprehensive building of a modern socialist country.

Litigation & Arbitration

Administrative Measures for the Management of Funds for Lottery Market Regulation
Chapter I General Provisions
Article 1: In order to standardize the management and use of funds for the regulation of the lottery market, enhance the efficiency of fund utilization, and promote the sustained and sound development of the national lottery sector, these Measures are formulated in accordance with the Budget Law of the People’s Republic of China and its Implementing Regulations, the Regulations on the Administration of Lotteries and their Implementing Rules, and other relevant provisions.
Article 2: The “Lottery Market Regulation Fund” referred to in these Measures is a fund allocated from the business expenses of lottery issuing institutions remitted to the central treasury, and is earmarked for coordinating the balanced development of the national lottery market across provinces, among institutions, and between different lottery products; for ensuring the security of issuance and sales operations and maintaining order in the lottery market; and for promoting the public‑benefit nature and social responsibility of lotteries. The Lottery Market Regulation Fund is incorporated into the budgetary management of business expense expenditures of lottery issuing institutions and is distributed and allocated through central government transfers to local governments.
Article 3: The funds for the regulation of the lottery market shall be managed by the Ministry of Finance, provincial-level fiscal departments, lottery issuing agencies, and lottery sales agencies, each in accordance with their respective responsibilities.
In accordance with budgetary management regulations, the Ministry of Finance determines the scope of use and allocation principles for lottery market‑regulation funds, reviews proposed fund‑allocation plans and issues budgets, and organizes and guides budget performance management. Provincial finance departments are responsible for the breakdown and issuance of budgets for lottery market‑regulation funds within their respective jurisdictions, as well as for fund oversight and budget performance management.
Lottery issuing agencies, in light of market conditions and the funding needs of sales outlets, shall formulate proposed fund allocation plans and performance targets for their respective systems and provide the underlying data for budgetary calculations. Lottery sales agencies and other entities responsible for fund utilization are tasked with articulating funding requirements and performance objectives, building project pipelines, and implementing specific budget execution in accordance with established performance goals.
Article 4: The allocation and use of funds for the regulation of the lottery market shall adhere to the following principles:
(1) Prioritize key areas. Based on the development status of the lottery sector in each region, the allocation and utilization of funds for lottery market regulation shall be appropriately tilted toward weaker product lines and underdeveloped regions.
(2) Coordinated and balanced approach. Guided by the overarching goal of ensuring the coordinated and sound development of the lottery market, and taking into account regulatory objectives and fiscal capacity, this approach systematically considers the differences among product categories, institutions, and regions, prioritizes accordingly, and makes optimal arrangements.
(3) Dedicated funds shall be used exclusively for their designated purposes. Funds must be utilized strictly in accordance with the prescribed uses set forth in the regulations governing lottery market‑regulation funds, and may not be diverted for any other purpose.
(4) Emphasize performance. Implement full‑cycle performance management for projects funded by lottery market regulation funds. The results of performance evaluations shall serve as a reference for the allocation and use of funds in the following year.

Chapter 2 Scope of Use
Article 5 The specific scope of use for lottery market regulation funds includes:
(1) Enhancing the capabilities of lottery sales outlets. This is primarily intended for upgrading and improving the image of lottery sales venues, procuring and maintaining equipment, and providing business training, among other purposes.
(2) Improving lottery business facilities. This primarily covers the upgrading and renovation of specialized facilities, including dedicated server rooms, disaster recovery data centers, lottery drawing venues, prize‑claiming service locations, dedicated lottery storage warehouses, and sales systems.
(3) Support the promotion of the public‑benefit nature and social responsibility of national lotteries.
(4) Regulating the lottery market order. This primarily includes investigating and prosecuting illegal lotteries, maintaining market order, and covering expenses incurred in commissioning third parties to carry out related tasks.
(5) Support business innovation. Primarily used for conducting pilot projects or fostering innovative development in lottery game products, sales channels, and operational processes, among other areas.
(6) Subsidies shall be provided to cover the costs and expenses necessary to maintain the basic operations of lottery sales outlets that have suspended sales due to nationwide force majeure events.
(7) Other expenditures related to lottery market regulation, as approved by the Ministry of Finance.
Article 6: Funds allocated for the regulation of the lottery market may not be used for personnel expenses, general administrative expenses, the purchase or upgrading of office equipment, or any projects that have not been approved, nor for any other purposes unrelated to the development of the lottery sector.

Chapter 3: Allocation of Funds and Issuance of Budgets
Article 7: Funds for the regulation of the lottery market shall be allocated using a factor-based approach, encompassing three categories: factors related to local lottery development, factors pertaining to priority support areas, and application‑related factors. The Ministry of Finance may, in light of actual conditions and relevant work, formulate and, as appropriate, adjust the sub‑factors under the categories of local lottery development and priority support areas.
Factors influencing the development of local lottery operations (weighted at 60%) primarily include the ratio of total population to the number of sales outlets, the average annual sales volume per outlet, the lottery sales coefficient, and the carryover balance of business expenses from the previous year, among other sub‑factors.
Key support‑area factors (weighted at 40%) primarily include the development coefficient for instant‑win lottery products and the state of local lottery market order, among other sub‑factors.
The application factor primarily refers to whether lottery sales agencies have submitted applications for lottery market‑regulation funds; this factor is derived from the reporting materials provided by the lottery issuing authorities. If both the welfare lottery and the sports lottery sales agencies in a given province submit applications, the coefficient for this factor is 1; if only one of these agencies submits an application, the coefficient is 0.5; and if neither agency submits an application, the coefficient is 0.
The Ministry of Finance reviews and scores the self-assessment results of lottery market regulation fund performance submitted by provincial-level fiscal authorities, applies a performance‑evaluation adjustment coefficient, and makes appropriate adjustments to the allocation of funds. When the Ministry of Finance conducts or commissions third-party institutions to carry out key performance evaluations, the results of such evaluations shall prevail. The formula for calculating the funds is as follows:
The funding subsidy ratio for a given province equals: (the lottery development factor of that province / the sum of lottery development factors of all relevant provinces × 60%) + (the key support‑area factor of that province / the sum of key support‑area factors of all relevant provinces × 40%).
The lottery market regulation fund to be allocated to a given province = [Annual budget total for lottery market regulation × the funding subsidy ratio of that province × the performance‑evaluation adjustment coefficient / Σ (funding subsidy ratios of relevant provinces × performance‑evaluation adjustment coefficients)] × the application factor for that province.
The performance evaluation adjustment factor shall be determined according to the following table:

Article 8: Lottery issuing agencies shall, based on the development plan for the lottery sector within their respective systems, the key priorities for annual lottery issuance and sales, the funding needs of lottery sales agencies, and the implementation status of market‑regulation funds for the previous year, formulate market‑regulation objectives or measures. On this basis, they shall submit a proposed allocation plan for next year’s market‑regulation funds to the Ministry of Finance no later than the end of July each year.
Article 9: The Ministry of Finance shall, taking into account the development of the lottery market, the proposals submitted by lottery issuing agencies for the allocation of funds for lottery market regulation, and the carryover balances of business expenses from the previous year, reasonably determine the total scale of expenditures for lottery market regulation in the following year. By October 31 each year, the Ministry of Finance shall issue in advance the budget for the next year; within 90 days after the National People’s Congress approves the central budget, it shall formally transmit to the provincial-level fiscal authorities the budget for that year’s lottery market regulation funds. When transmitting the transfer payment budget to the provincial-level fiscal authorities, the Ministry of Finance shall simultaneously communicate the corresponding regional performance targets.
Article 10: Upon receipt of the funding budget, the provincial finance department shall, within 30 days, appropriately allocate and disaggregate the budget and performance targets, and forward a copy to the local supervisory bureau of the Ministry of Finance.
Article 11: The provincial finance department, based on the amount of transfer payments for lottery market regulation funds, shall, taking into account the overall lottery market regulation objectives set for the year, the annual budget allocation for business expenses of lottery sales agencies, and other relevant factors, and in conjunction with the funding needs of lottery sales agencies and their project pipeline, allocate the lottery market regulation funds for its jurisdiction and issue budgetary indicators in accordance with applicable regulations on budget management.

Chapter 4: Performance Management and Supervision and Inspection
Article 12: Financial departments at all levels, lottery issuing agencies, lottery sales agencies, and other entities that utilize funds shall adhere to the principles of scientific standardization, goal orientation, integration promotion, and hierarchical management. In accordance with the requirements for the comprehensive implementation of budget performance management, they shall establish and improve a full-process budget performance management mechanism, set performance targets in a scientific and reasonable manner as prescribed, and conduct effective monitoring of performance implementation against these targets. If deviations between actual performance and the intended performance targets are identified, corrective measures shall be promptly taken.
Lottery issuing agencies shall supervise and guide lottery sales agencies in the proper management and effective utilization of lottery market‑regulation funds, promptly monitor and assess the implementation of relevant operations, and use the status of fund utilization as the basis for preparing the consolidated budget proposal for lottery market‑regulation funds for the following year.
Article 13: Upon completion of the annual budget execution, the provincial-level fiscal authorities shall organize lottery sales agencies and other entities responsible for fund utilization to conduct self-assessments of performance against the established performance targets. They may also select certain key projects for focused performance evaluations and strengthen the application of evaluation results.
Provincial fiscal departments and lottery sales agencies, as well as other entities responsible for the use of funds, are the principal entities accountable for and implementing performance self-assessment. They shall ensure that the results of such assessments are truthful, accurate, and objective, and are strictly prohibited from engaging in any form of falsification or deception.
Provincial fiscal authorities shall, in accordance with the requirements of the Ministry of Finance, submit the relevant materials for self-assessment of performance on time. The Ministry of Finance shall, as needed, organize or entrust third-party institutions to conduct key performance evaluations and strengthen the application of feedback derived from such evaluations.
Article 14. Lottery sales agencies and other entities utilizing funds shall, by the end of March each year, submit to the provincial-level fiscal authorities and the lottery issuing agency, in accordance with applicable regulations, a report on the use of lottery market‑regulation funds for the preceding year. The provincial-level fiscal authorities shall, by the end of April each year, forward a consolidated report to the Ministry of Finance. Such reports shall include:
(1) The organization and implementation of the project, the use of funds, and the status of any remaining balances;
(2) Social and economic benefits of the project;
(3) Experience in fund management, existing issues, and corresponding countermeasures;
(4) Other materials required to be submitted by the Ministry of Finance and lottery issuing agencies.
Article 15: Financial departments at all levels, lottery issuing agencies, lottery sales agencies, and other entities that utilize funds shall enhance the efficiency of fund utilization. Any carryover or surplus funds allocated for lottery market regulation shall be managed in accordance with the relevant provisions of the Ministry of Finance on the administration of carryover and surplus funds.
Article 16: Provincial finance departments, lottery issuing agencies, lottery sales agencies, and other entities that utilize funds shall establish and improve internal control systems, strengthen project review and application procedures, fund management and utilization, and subsequent oversight and performance evaluation, and allocate, use, and manage funds in accordance with laws and regulations. The local supervisory bureaus of the Ministry of Finance shall exercise oversight over such funds in accordance with their respective duties and the requirements of the Ministry of Finance.
Article 17: Payments from the lottery market regulation fund shall be made in accordance with the relevant provisions of the centralized treasury payment system. Where government procurement is involved, such payments shall be strictly implemented in compliance with the applicable laws and regulations governing government procurement, with enhanced management of procurement needs, lawful public disclosure of procurement information, promotion of equal participation by market entities in competition, and assurance of the standardization and transparency of government procurement activities.
Article 18: Once approved, the annual budget for lottery market regulation funds shall be strictly implemented; no funds may be withheld, diverted, or misappropriated, nor may the scope of expenditures be expanded or expenditure standards raised without authorization. During budget execution, if project changes or terminations occur and budget reallocation becomes necessary, the lottery sales agencies and other fund‑using entities shall submit a request for reallocation or modification to the provincial finance department. Such requests shall be processed in accordance with relevant regulations on departmental budgets and implemented only upon approval by the provincial finance department.
Article 19: Funds for the regulation of the lottery market shall be subject to supervision and inspection by the financial and auditing authorities.
Article 20: Financial departments at all levels, lottery issuing agencies, lottery sales agencies, and other entities that utilize funds, as well as their staff, shall be held accountable in accordance with relevant national regulations, including the Budget Law of the People’s Republic of China, the Civil Service Law of the People’s Republic of China, the Supervision Law of the People’s Republic of China, and the Regulations on Penalties and Disciplinary Measures for Fiscal Violations, for any violations of regulations in the allocation or management of funds, as well as for other unlawful or disciplinary breaches such as abuse of power, dereliction of duty, or engaging in favoritism and corruption. Where such acts constitute a crime, criminal liability shall be pursued in accordance with the law.

Chapter V Supplementary Provisions
Article 21: Provincial financial authorities may, in accordance with these Measures and taking into account local conditions, formulate specific implementation measures.
Article 22: These Measures shall enter into force as of the date of their promulgation, with a validity period of five years. The “Notice of the Ministry of Finance on the Issuance of the Interim Measures for the Administration of Lottery Market Regulation Funds” (Cai Zong [2016] No. 30) is hereby repealed concurrently.

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