JC Master Legal News Issue 982

Key Takeaways for This Issue
The central bank is piloting the removal of credit ratings from the issuance process of debt financing instruments.
　Recently, the People’s Bank of China and four other departments jointly issued a document calling for a reduction in regulatory requirements for external credit ratings, with plans to adjust, as appropriate and when the time is right, the rating thresholds governing the types of bonds that various funds may invest in. The policy also seeks to lessen reliance on external ratings in bond‑pledge repurchase transactions and to return control over rating‑related requirements to the market.
The credit rating industry is set to implement major new regulations—strengthening the accountability of market “gatekeepers.”
The credit rating industry is set to be subject to new regulations. Recently, the People’s Bank of China, in conjunction with the National Development and Reform Commission, the Ministry of Finance, the China Banking and Insurance Regulatory Commission, and the China Securities Regulatory Commission, jointly issued the “Notice on Promoting the Healthy Development of the Bond Market Credit Rating Industry,” which will take effect on August 6, 2022.
Notice of the State Administration for Market Regulation and the State Taxation Administration on Further Improving the Simplified Cancellation Registration Procedure to Facilitate the Market Exit of Small, Medium, and Micro Enterprises

　In recent years, the State Administration for Market Regulation and the State Taxation Administration have actively piloted reforms to streamline business deregistration, significantly facilitating the exit of market entities that have not yet commenced operations or have no outstanding claims or debts. To implement the State Council’s directives and the requirements set forth in the Government Work Report, simplified deregistration procedures have been introduced for small, medium, and micro enterprises as well as individual business households, further deepening commercial system reform, unblocking channels for market entity exit, and enhancing the dynamism of market participants.

China plans to enshrine the “three-child policy” in law.
The draft amendment to the Population and Family Planning Law is set to be submitted to the Standing Committee of the 13th National People’s Congress for deliberation. On the 13th, Zang Tiewei, spokesperson for the Legislative Affairs Commission of the NPC Standing Committee, outlined the key provisions of the draft, including the state’s advocacy of marriage and childbearing at an appropriate age, as well as healthy pregnancies and childrearing, and the implementation of a policy allowing each couple to have up to three children.

Finance & Capital Markets
The China Securities Industry Association has imposed self-regulatory measures on 19 offline investors.
The China Securities Industry Association imposed self-regulatory measures on 19 offline investors. Date: August 15, 2021, 12:38 p.m.
On Friday evening, the Securities Association of China (SAC) stated that, in order to implement the requirements set forth in the CSRC’s “Guiding Opinions on Urging Securities Offices to Fulfill Their Duties and Return to Their Core Functions in Underwriting and Investment Banking Activities under the Registration-Based System,” and to further strengthen self-regulatory oversight of offline investors and safeguard the orderly issuance of new shares, the Association, in collaboration with the Shanghai Stock Exchange, recently conducted joint on-site inspections of 19 offline institutional investors based on leads indicating unusually high price‑consistency among certain STAR Market projects.
During inspections and case reviews, it was found that the relevant offline investors primarily exhibited issues such as inadequate internal control systems, insufficient pricing rationale, failure to strictly adhere to pricing decision‑making procedures, and improper retention of working papers. In accordance with relevant provisions, including the “Administrative Measures for Offline Investors in Initial Public Offerings on the STAR Market” and the “Provisional Measures for the Registration Management of Initial Public Offerings on the STAR Market,” the Association has imposed appropriate self‑regulatory measures on the aforementioned 19 investors based on the severity of their violations. Specifically, one insurance company had its offline investor qualification suspended for one month; one asset management subsidiary of a securities office, four fund management companies, and four private fund managers had their registration of new allocation targets suspended for one month; and one asset management subsidiary of a securities office, six fund management companies, and two private fund managers received written warnings.
Going forward, the Association will continue to uphold the principles of “establishing sound systems, non‑interference, and zero tolerance,” implement the requirements set forth in the Guiding Opinions, strengthen inspection and oversight, enhance behavioral supervision, and refine self‑regulatory rules. It will further reinforce regulatory coordination with the Shanghai and Shenzhen Stock Exchanges and other relevant authorities, impose stricter penalties for violations by offline investors, foster a healthy ecosystem for offline investors, and effectively safeguard the orderly market‑based pricing of securities offerings.
In mid-2019, China launched the STAR Market in Shanghai, which is technology-focused, and introduced a U.S.-style, registration-based initial public offering (IPO) system to this market.
The central bank is piloting the removal of credit ratings from the issuance process of debt financing instruments.
Recently, the People’s Bank of China and four other departments jointly issued a document calling for a reduction in regulatory requirements for external credit ratings, with plans to adjust, as appropriate and when the time is right, the rating thresholds governing the types of bonds that various funds may invest in. The policy also seeks to lessen reliance on external ratings in bond‑pledge repurchase transactions and to return control over rating‑related requirements to the market.
The People’s Bank of China has unveiled another substantive measure to advance reform of the credit rating industry. In a statement issued yesterday, the central bank announced that, in order to further enhance market entities’ autonomy in utilizing external ratings and to promote market‑oriented reforms in the credit rating sector, it has decided to pilot the removal of the requirement for credit ratings at the issuance stage of non‑financial corporate debt financing instruments (hereinafter referred to as “debt financing instruments”).
“In recent years, China’s credit rating industry has experienced rapid growth; however, it still faces issues such as inflated ratings and insufficient differentiation—reflecting a tendency to prioritize market share over rating quality—which has prevented the risk‑alerting and investment‑pricing functions of credit ratings from being fully realized,” said Mingming, deputy director of the CITIC Securities Research Institute.
In terms of optimizing the credit rating industry ecosystem, the People’s Bank of China and four other departments recently issued a joint document calling for a reduction in regulatory requirements for external ratings, the timely adjustment—when appropriate—of regulatory thresholds for bond grades eligible for various types of investment funds, a lessening of reliance on external ratings in bond‑pledge repurchase transactions, and the return of decision‑making authority over rating‑related requirements to the market.
On December 11, 2020, the People’s Bank of China convened a symposium on the development of the credit rating industry, at which it explicitly pointed out that issues such as inflated ratings, insufficient differentiation among issuers, and weak early‑warning capabilities have constrained the high‑quality development of China’s bond market.
Li Yong, chief fixed-income analyst at Dongwu Securities, believes that, amid several default incidents, market attention has turned to issues such as inflated ratings and insufficient rating differentiation. As a result, rating agencies have often struggled to effectively disclose credit risks. With regulators easing rating‑related requirements, external ratings are shifting toward a more market‑driven approach, leading to more rational risk pricing and financing costs that vary according to the issuer’s creditworthiness. Consequently, the broader corporate bond market is becoming increasingly mature.
In March this year, the Traders Association issued the “Notice on Arrangements for Abolishing Mandatory Credit Ratings for Debt Financing Instruments,” removing the mandatory rating requirement at both the filing and issuance stages, conducting research to reduce reliance on external ratings, formulating a plan to eliminate mandatory ratings for debt financing instruments, and revising and promulgating implementation guidelines for products such as short-term financing bills and medium-term notes.
Mingming believes that the central bank’s latest announcement is both a reafofficeation and an enhancement of its previous policies. Whether it involves abolishing credit ratings altogether or gradually phasing out mandatory rating requirements, such measures are likely to have implications for the corporate bond market in 2021 and beyond.
“For the corporate bond market, newly issued bonds face the risk of tighter credit ratings or even a lack of ratings, while existing bonds are under pressure from potential downgrades, creating downside risks for bond prices. It is now widely acknowledged that some issuers’ ratings have been artificially inflated, and the gradual process of these ratings returning to more realistic levels could disrupt the credit market’s repricing,” Mingming said.

The Traders Association has issued a notice to standardize underwriting pricing for debt financing instruments.
On August 11, the National Association of Financial Market Institutional Investors of China (hereinafter referred to as the “Association”) issued the “Notice on Further Strengthening the Standardization of Underwriting Quotations for Debt Financing Instruments” (hereinafter referred to as the “Notice”), which establishes a filing mechanism for underwriting fees on debt financing instruments. The Association will conduct quality‑supervision inspections on cases where underwriting fees are significantly below industry‑wide fair levels, thereby guiding the market toward orderly and compliant competition. At the same time, the Association has launched targeted post‑issuance reviews and oversight to effectively safeguard investors’ rights and interests.
At present, both China’s real economy and its financial markets have entered a stage of high-quality development, calling for all market participants to further enhance the quality and compliance of their business practices. However, certain underwriting institutions continue to engage in unhealthy, low‑price competition in an effort to capture market share—sometimes even conducting business below cost. Such practices not only disrupt market order but also undermine professional standards, turning high‑tech, high‑value underwriting into a mere “channel business” aimed at gaining market share. This not only undermines the foundations of the bond market’s sound development but also hinders the deepening of financial market reforms.
To this end, the Notice first stipulates that lead underwriters shall, in accordance with underwriting and issuance standards and the Self‑Regulatory Covenant, establish and refine internal management systems for underwriting fee pricing, comprehensively assess project costs, and determine their quotations on a reasonable basis. Second, lead underwriters are required to submit quarterly “ex post” reports to the Traders Association on the underwriting fees charged for debt financing instruments. Third, the Traders Association will verify the accuracy of the information reported by each institution regarding underwriting fees. Fourth, for cases where underwriting fees are significantly below market‑fair levels, the Traders Association will take appropriate measures, such as recommending the preparation of special explanatory statements and conducting on‑site inspections, to urge lead underwriters to strengthen their professional quality‑management practices.
In addition to standardizing underwriting pricing, and in order to further ensure the market’s compliant and orderly operation and to urge all parties to diligently carry out ongoing‑issue management, the Traders Association conducted a series of targeted inspections and supervisory initiatives during the first half of 2021, continuously guiding the market to enhance its compliance standards throughout the life cycle of securities and effectively safeguarding investors’ rights and interests.
In the first half of 2021, the Traders Association conducted special inspections on the use of funds raised by urban construction enterprises and on the disclosure of information related to the gratuitous transfer of assets involving enterprises in key regions and key industries. The inspections revealed that the compliance rate for the use of funds raised by urban construction enterprises was 99.53%, while the compliance rate for the disclosure of information on gratuitous asset transfers stood at 98.44%. All enterprises identified as potentially non-compliant during the inspections proactively and promptly rectified the relevant issues within the inspection period. In accordance with applicable self-regulatory rules, the Traders Association has either imposed self-regulatory measures on the non-compliant entities or referred them to the Self-Regulatory Disciplinary Office for further handling.
Going forward, the Traders Association will vigorously advance the implementation of all measures outlined in the Notice, supervise lead underwriters in properly filing underwriting fee rates, strengthen self-regulatory oversight of practices that undermine market competition, and intensify inspections and monitoring to ensure that all market participants conduct their business in compliance with established standards. The Association will guide the market toward standardized, orderly, fair, and legitimate competition, thereby fostering sustained, healthy, and high-quality market development and continuously enhancing its capacity and level of service to the real economy.
The China Banking and Insurance Regulatory Commission is conducting a crackdown on irregularities in the internet insurance sector.
In response to the frequent occurrence of irregularities in areas such as internet insurance product management, sales practices, claims handling, and information security, the China Banking and Insurance Regulatory Commission recently issued a notice announcing the launch of a nationwide special rectification campaign. The campaign will focus on addressing pressing issues including misleading sales practices, compulsory bundling, inflated fees, unauthorized operations, and the leakage of customer information.
According to reports, in recent years, the internet insurance sector has entered a period of rapid growth. However, alongside this swift expansion, numerous irregularities have emerged: certain online platforms are suspected of engaging in insurance activities without proper authorization, while some insurers face pressing issues such as significant pricing risks in their internet‑based products, inadequate offline service capabilities, and a high volume of complaints and disputes—challenges that urgently require regulatory oversight and corrective measures.
This special campaign to address irregularities in the internet insurance sector is led by the Non-Bank Financial Institutions Inspection Bureau of the China Banking and Insurance Regulatory Commission, with participation from the Consumer Protection Bureau, the Property Insurance Department, the Life Insurance Department, the Intermediary Department, and other relevant units, under unified organization and coordinated implementation.
The Shanghai and Shenzhen Stock Exchanges have issued reference documents on the protection of investors’ rights in corporate bond investments.
On August 13, the Shanghai and Shenzhen stock exchanges each released reference texts on the protection of corporate bond investors’ rights. These measures, issued under the guidance of the China Securities Regulatory Commission, represent a further step by the two exchanges to implement the provisions of the Securities Law that strengthen investor‑rights protection, consolidate the institutional framework for safeguarding investor interests, improve the end‑to‑end credit risk‑management system, enhance the quality of offering prospectuses, and reinforce market‑based self‑regulatory mechanisms.
Specifically, the Shanghai Stock Exchange has issued “Shanghai Stock Exchange Guidelines on the Review of Corporate Bond Issuance and Listing, No. 1: Preparation of the Offering Circular for Publicly Issued Corporate Bonds (Reference Text)” and “Shanghai Stock Exchange Guidelines on the Review of Corporate Bond Issuance and Listing, No. 2: Protection of Investor Rights (Reference Text)” (hereinafter collectively referred to as the “Reference Texts”). Meanwhile, the Shenzhen Stock Exchange has released “Guidelines on the Review of Corporate Bond Issuance and Listing, No. 2: Protection of Investor Rights (Reference Text)” (hereinafter referred to as the “Investor Protection Guidelines”).
The SSE’s “Reference Text” primarily covers four key areas: First, it enriches investor‑protection covenants and strengthens market discipline by comprehensively incorporating contractual provisions such as commitments regarding the issuer’s sources of debt‑service funds, financial covenants, restrictions on conduct, ongoing credit‑worthiness maintenance obligations, and cross‑protection clauses. Second, it refines the mechanisms for implementing these covenants to enhance their effectiveness and enforceability, making it easier for investors to assert their rights in accordance with pre‑agreed terms and procedures following a credit‑risk event. Third, it establishes a multi‑tiered redress framework to facilitate the orderly resolution of risks; for bond defaults, it introduces grace periods and diversifies the types of default liabilities, encouraging issuers to tailor default remedies to specific circumstances and providing flexibility for all parties to engage in equitable, negotiated resolutions. Fourth, it standardizes the preparation of offering prospectuses to improve the quality of information disclosure.
The Shenzhen Stock Exchange’s “Investor Protection Guide” features three key characteristics: first, it establishes a scientific and comprehensive framework to enhance the standardization of its provisions, further clarifying four key areas—special issuance terms, credit enhancement mechanisms, investor protection clauses, and default‑related matters and dispute‑resolution mechanisms.
Second, the framework focuses on the concerns of market participants and emphasizes the targeted nature of its provisions. With respect to special issuance terms, it refines the mechanisms for adjusting coupon rates and clarifies the procedures for modifying the put‑option exercise period, along with the associated information‑disclosure requirements. In terms of credit enhancement, it systematically reviews and improves the allocation of rights and obligations among parties under traditional bond‑guarantee arrangements such as suretyships and pledge‑based security, while also incorporating innovative credit‑enhancement mechanisms like debt assumption and third‑party acquisition commitments. Regarding investor‑protection clauses, it specifically establishes issuer‑provided commitments to safeguard debt repayment, financial covenants, behavioral restrictions, ongoing credit‑worthiness maintenance, and cross‑protection provisions, thereby strengthening ex‑ante constraints on issuers. Finally, in the area of default events and dispute‑resolution mechanisms, it delineates six distinct categories of default and outlines six corresponding modes of liability, thus preventing situations where unclear contractual provisions render it difficult for investors to seek redress.
Third, it balances the rights and interests of all parties involved while preserving flexibility in the provisions. By setting clear limits on issuers’ conduct, it mitigates the risk of bond defaults, thereby both officely establishing a baseline for compliant behavior and effectively safeguarding investors’ interests.

Commercial & Corporate
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Strong production and sales drive a substantial increase in steelmakers’ profits in the first half of the year.
As of the evening of August 13, 27 A-share steel companies had released their performance forecasts for the first half of 2021, all projecting positive results. Meanwhile, five steel offices have published their 2021 interim reports, with net profits posting substantial year-on-year growth across the board.
Significant improvement in performance
In the first half of the year, steel prices and per-ton steel profits remained at high levels, driving substantial earnings growth among relevant listed companies.
The semi-annual report shows that Jiugang Hongxing posted operating revenue of approximately RMB 26.288 billion, up 66.1% year over year; net profit attributable to shareholders of the listed company reached RMB 1.946 billion, compared with a loss of RMB 82.8836 million in the same period last year. In the first half of 2021, the company produced 5.1609 million tonnes of steel and sold 5.0944 million tonnes. The company noted that during the reporting period, commodity prices rose across the board, driving steel prices to record highs.
Some steel companies are extending their industrial chains and leveraging the industry’s peak season to ramp up production.
In the first half of 2021, Guangda Special Materials reported operating revenue of approximately RMB 1.506 billion, up 86.81% year over year, and net profit attributable to shareholders of the listed company of about RMB 150 million, an increase of 68.04% compared with the same period last year. The company stated that, during the reporting period, it benefited from the surge in wind‑power project installations and the gradual ramp-up of production capacity for large wind‑turbine castings, resulting in strong sales and robust production. The company continued to optimize its product mix and further extend its reach into downstream segments of the industrial chain. Notably, sales of large wind‑turbine castings increased significantly year over year.
Some steel enterprises, in response to environmental protection requirements, are stepping up production of high‑quality specialty steels and vigorously implementing energy‑saving and emission‑reduction measures as well as environmental remediation initiatives.
In the first half of the year, Shagang Co., Ltd. reported operating revenue of RMB 9.283 billion, up 43.31% year over year; total profit reached RMB 1.410 billion, a year-on-year increase of 132.72%; and net profit attributable to owners of the parent company stood at RMB 546 million, up 116.45% from the same period last year. The company noted that during the reporting period, steel prices remained broadly elevated, while the costs of raw materials such as iron ore and coking coal also rose in tandem. Amid mounting environmental‑regulation pressures, the company aligned its operations closely with industry policies, steadfastly pursued the development of high‑quality specialty steels, and placed “safety, environmental protection, quality, and efficiency” at the core of its strategy. It vigorously advanced energy conservation, emissions reduction, and environmental remediation efforts; focused on cultivating premium specialty steel products to capture market share; and worked to reduce production costs and enhance competitiveness. Overall, the company’s production and business activities maintained a robust performance. In addition, the company strengthened market analysis and assessment, conducting multi‑level field visits that resulted in the acquisition of 92 new customers in the first half of the year, with expanded cooperation volumes among several key accounts.
Crude steel output reduction
According to a research report by Everbright Securities, since late June, several localities have successively set targets to keep 2021 crude steel output unchanged year-on-year. On July 22, Shandong issued a policy mandating a year-on-year reduction of 3.44 million tons in the province’s crude steel output for 2021. On August 9, Hebei introduced a policy requiring a year-on-year cut of 21.71 million tons in the province’s crude steel production in 2021.
The aforementioned research report indicates that, from January to June 2021, the crude steel output of key enterprises under the China Iron and Steel Association totaled 442 million tons—accounting for 78.5% of the nation’s total steel production—up 11.36% year on year. Meanwhile, non‑key steelmakers produced 121 million tons of crude steel, a year‑on‑year increase of 18.86%. The substantial growth in output among non‑key producers during the first half of the year suggests an even sharper production cut in the second half; these offices primarily manufacture construction‑grade steel products. Notably, at present, hot‑rolled coil—the benchmark product for industrial steel—remains more profitable than rebar—the standard for construction steel. Against the backdrop of anticipated production reductions, plate‑steel producers are likely to maintain their relative profitability advantage.
Wang Guoqing of the Lange Steel Research Center noted that the reduction in crude steel output has entered the implementation phase. In the first half of August, the daily crude steel production of key steelmakers tracked by the China Iron and Steel Association declined month-on-month, with the year-on-year drop widening compared to late July. Demand for iron ore remains weak, prompting continued price adjustments. Recently, Hebei Province issued another plan to cut crude steel output, further dampening expectations for iron‑ore demand and leaving the medium- to long-term downward trend intact. As the peak demand season approaches, the pace of production cuts at steel mills may slow in the short term; after a deep correction, iron‑ore prices could halt their decline and stabilize.
Steel prices fluctuated within a narrow range.
Lange Steel Network notes that steel supply has contracted markedly, while the recovery in peak-season demand remains unconofficeed, with trading volumes failing to pick up significantly. Meanwhile, iron ore prices have undergone a sharp correction, and under the combined influence of multiple factors, steel prices have been fluctuating within a narrow range.
On the social inventory front, as of August 13, steel inventories in 29 key cities nationwide totaled 13.285 million tonnes, down 131,000 tonnes from the previous week, a decline of 1%. In major regional areas, mill‑level inventories of construction steel stood at 6.406 million tonnes, a 1.5% decrease from the prior week. Notably, Fujian recorded an increase despite the trend, while Shandong saw a 13.7% drop and the Northwest region a 7.1% decline; the remaining regions all posted relatively modest declines. Meanwhile, blast furnace operating rates at major national steelmakers stood at 80.7%, below the level of the same period last year.
In the first ten days of August, the daily crude steel output of key steel enterprises stood at 2.044 million tonnes, down 63,000 tonnes from the previous ten-day period and 4.4% year on year—slightly below the level recorded in the same period of 2019. Meanwhile, steel inventories at these key enterprises totaled 14.622 million tonnes, up 808,000 tonnes from the prior ten-day period and 4.5% higher than a year earlier.
Regarding the steel market’s outlook, Wang Guoqing noted that we are currently in the transition between the off-season and peak season, with supply tightening and social steel inventories declining for consecutive weeks. Meanwhile, iron ore prices have fallen sharply, further weakening cost support, while market sentiment has turned cautious and indecisive, leaving upward momentum insufficient.
The credit rating industry is set to implement major new regulations—strengthening the accountability of market “gatekeepers.”
The credit rating industry is set to be subject to new regulations. Recently, the People’s Bank of China, in conjunction with the National Development and Reform Commission, the Ministry of Finance, the China Banking and Insurance Regulatory Commission, and the China Securities Regulatory Commission, jointly issued the “Notice on Promoting the Healthy Development of the Bond Market Credit Rating Industry,” which will take effect on August 6, 2022.
This follows the Traders Association’s decision in March of this year to abolish the mandatory credit rating requirement for debt financing instruments, marking another major regulatory measure for the credit rating industry. Why is oversight of the rating sector being strengthened at this juncture? What changes can the industry expect? Economic Daily reporters interviewed industry insiders and academic experts.
Rectifying the chaos in credit rating practices
Credit rating is a fundamental institutional pillar of the bond market. In recent years, China’s rating industry has made significant progress in harmonizing standards, strengthening regulation, and opening up to the international market; however, challenges remain, including inflated ratings, insufficient rating differentiation, and weak ex‑ante early‑warning capabilities, which constrain the high‑quality development of China’s bond market.
“The phenomenon of inflated ratings is particularly pronounced,” said Li Xin, head of the credit rating department at China Chengxin Credit Rating. He noted that the rating industry has grown rapidly alongside the development of the bond market and has now reached a certain scale, yet it has also revealed numerous problems.
In the credit rating system, AAA is the highest rating. Data show that in 2020, issuers with high‑grade ratings accounted for 82% of total bond defaults. According to statistics from China Chengxin Credit Rating, domestic rating agencies’ rating distribution is concentrated around AA+, with nearly 90% of rated entities at AA or above, and AAA‑rated issuers making up approximately 20%.
By contrast, in developed bond markets such as those of the United States and Japan, AAA‑rated issuers account for no more than 5%. Looking at rating revisions, over the past five years, the average number of upgrades for domestic bond issuers has been 3.6 times the number of downgrades. These figures all indicate that bond ratings are inflated, and that credit ratings—key reference points for investors—have failed to deliver their intended early‑warning function.
In recent years, defaults on AAA‑rated bonds have become increasingly frequent, prompting market skepticism about the accuracy of credit rating agencies’ assessments. Li Xin cited examples illustrating that companies at the same rating level can exhibit vastly different creditworthiness. For instance, PetroChina was assigned an AAA rating, yet Huachen Automotive, which defaulted last year, also held an AAA corporate credit rating. This underscores that sovereign and corporate ratings no longer reliably reflect a borrower’s credit condition, with rating differentiation falling far short of what is needed.
“Insufficient early‑warning signals and substantial post‑default downgrades” also highlight the inadequacy of rating agencies’ accuracy and forward‑looking capabilities. Last year, Yongmei Holding, which drew intense market attention and subsequently defaulted, was assigned the highest possible credit rating of AAA prior to its default; following the default, its rating was swiftly revised down to BB.
Li Xin argues that the issuer‑level ratings no longer accurately reflect credit conditions; when high‑rated bonds default, this not only intensifies market volatility but also sows the seeds of systemic risk.
Returning to the industry’s roots
Against this backdrop, the “Notice on Promoting the Healthy Development of the Bond Market Credit Rating Industry” was made available for public comment starting March 28 this year and was recently issued.
The Notice outlines five key regulatory priorities: first, to strengthen the development of rating methodologies and enhance both the quality and differentiating power of ratings; second, to improve the corporate governance and internal control frameworks of credit rating agencies and safeguard their independence; third, to bolster information disclosure and reinforce market‑based oversight mechanisms; fourth, to optimize the rating ecosystem and foster a fair and impartial market environment; and fifth, to tighten supervision and regulation of credit rating agencies and impose stricter penalties.
Wu Yuhui, a professor of finance at the School of Management of Xiamen University, stated that the Notice introduces several new regulatory approaches to address longstanding issues in the bond market and the credit rating industry, such as establishing a rating‑quality verification mechanism centered on default rates to ensure appropriate differentiation among ratings; drawing on practices from accounting offices to enhance the independence of rating agencies; expanding the scope and effectiveness of the investor‑funded model; and easing regulatory requirements for external ratings.
Since the Notice was jointly issued by the five principal regulatory authorities in the credit rating industry, Wu Yuhui believes it can be expected to play a pivotal role in shaping the sector’s development. Going forward, the proliferation of AAA ratings is likely to be effectively curbed, and the credit rating industry will regain its credibility, enabling it to pursue sustained, healthier growth.
In fact, since the draft for public comment was released in March, the Notice has already played a guiding role in shaping the behavior of market participants. So far this year, the number of issuers whose credit ratings and outlooks have been upgraded has dropped sharply, while the number of downgrades has increased markedly.
Li Xin believes that the Notice comprehensively regulates various aspects, including the internal development of rating agencies and the external rating ecosystem, while placing particular emphasis on overseeing the issue of rating quality—currently the most pressing concern in the industry. This approach will help gradually improve the accuracy of rating outcomes, enabling rating agencies to better fulfill their roles in identifying risks and providing reference for bond pricing. Moreover, it is bound to have a significant impact on the existing competitive landscape of the rating market, with those agencies that deliver high‑quality ratings and effectively meet investor needs poised to stand out.
Improve relevant systems.
For a long time, credit rating agencies have been hailed as the “gatekeepers” of the bond market. However, Li Xin argues that their gatekeeping role has yet to be fully realized for three main reasons: first, China’s rating industry is relatively young; compared with the century-long development of international rating agencies, it lacks sufficient historical data and accumulated expertise, and its talent pool exhibits high turnover; second, the rating industry sits at the downstream end of the financial value chain, leaving it with limited influence; and third, rating agencies have placed excessive emphasis on short-term financial gains, neglecting reputation management and brand building. Moreover, under the issuer‑pay model, a natural conflict of interest exists between rating agencies and issuers, making it exceedingly difficult for agencies to maintain independence.
The Notice explicitly encourages the adoption of investor‑paid credit ratings, leveraging the cross‑validation benefits of dual‑rating, multi‑rating, and alternative rating approaches. Li Xin believes that the influence and guiding role of investor‑paid ratings have yet to be fully realized. Based on the practical experience of domestic investor‑paid agencies, China Bond Rating Co., Ltd. has maintained an average early‑warning period of 29 months for defaulting issuers over the past decade, with no defaults among entities rated AA or higher; moreover, such high‑grade issuers account for only 17% of the total, broadly reflecting the risk profile of bond issuers in China’s market. Although investor‑paid agencies offer strong differentiation and high‑quality ratings, this model lacks a corresponding policy framework and institutional arrangements, limiting its widespread adoption and its ability to directly inform bond‑risk pricing. The newly introduced supportive policies and mechanisms address these shortcomings, thereby fostering the sound and orderly development of the credit rating industry.
Going forward, further refining the credit rating system remains one of the key priorities for advancing the high-quality development of the bond market. In its recent articulation of the main policy directions for the next phase, the People’s Bank of China stated that it will uphold a balanced approach to risk prevention and growth promotion, and continue to drive the high-quality development of the bond market. This includes strengthening the rule of law in the bond market, reinforcing the responsibilities of intermediary institutions, ensuring compliance with information disclosure requirements for corporate credit bonds, and improving the credit rating system.
Wu Yuhui stated that, in order to improve the credit rating system, some of the regulatory objectives outlined in the Notice must be effectively implemented, which will require the introduction of more detailed supporting measures. Furthermore, greater institutional safeguards are needed to promote and expand the investor‑funded model.
The Notice stipulates that, in mechanisms such as bond valuation and pricing, the development of bond index products, and pledge‑repo transactions, investor‑paid credit ratings may be used as a reference; alternatively, they may be adopted as an internal control benchmark. Wu Yuhui noted that, in practice, this raises a series of questions, including “under what circumstances should they be referenced, and how should they be applied?”
Moreover, the sustainability of the investor‑pay model is also a concern. Wu Yuhui notes that U.S. rating agencies transitioned from an investor‑pay model to an issuer‑pay model, with financial unsustainability being a key factor. Accordingly, a prudent approach should be adopted to strengthen the financial resilience of the investor‑pay model, thereby safeguarding its objectivity and independence and ensuring its long-term sustainability.
Wu Yuhui suggests that the information asymmetry faced by credit rating agencies should also be addressed. He advocates supporting closer collaboration and data sharing among credit rating agencies, industrial and commercial authorities, tax authorities, and financial institutions, thereby enhancing the ability to forecast issuers’ default risks.
On strengthening accountability for credit rating agencies, Wu Yuhui argues that, while ensuring robust responsibility, it is equally important to safeguard the agencies’ corresponding rights. For instance, the status of rating agencies and their ratings should be appropriately elevated, including by urging issuers to adopt more rational and standardized procedures when selecting rating agencies and requiring them to better cooperate with these agencies in gathering internal information. Only in this way can the industry foster a virtuous cycle and enable rating agencies to fully fulfill their role as “gatekeepers” of the bond market.
Central and local authorities are stepping up efforts across the board, and decarbonization pathways for key industries are becoming clearer.
“Taking Stock” to Prepare for the National Carbon Market: Pilot Programs for Carbon Emission Environmental Impact Assessments Pave the Way
Central and local authorities are stepping up efforts across the board, and decarbonization pathways for key industries are becoming clearer.
As China strives to peak carbon emissions and achieve carbon neutrality, clear pathways for decarbonization are emerging across key sectors including steel, building materials, nonferrous metals, and petrochemicals. According to reports from the Economic Information Daily, the country will accelerate the development of a “1+N” policy framework for peaking carbon emissions and achieving carbon neutrality. Relevant government departments and industry associations are conducting comprehensive assessments of carbon emissions and mitigation potential in priority industries, laying the groundwork for their inclusion in the national carbon market. Meanwhile, pilot programs for environmental impact assessments of carbon‑intensive projects have been launched, and an increasing number of regions are integrating carbon emissions into their environmental review processes.
A recent meeting of the Political Bureau of the CPC Central Committee called for coordinated and orderly efforts to achieve carbon peaking and carbon neutrality, and urged the swift release of an action plan for reaching carbon peaking by 2030. China’s Special Envoy on Climate Change, Xie Zhenhua, stated recently that China will roll out a “1+N” policy framework for carbon peaking and carbon neutrality, encompassing measures and policies at the national level as well as in localities, sectors, and industries. This policy framework will adopt accelerated transformation and innovation measures across ten key areas, including optimizing the energy structure, promoting the upgrading and rationalization of industries, and introducing supporting economic policies and reform initiatives.
Key industries such as steel, building materials, nonferrous metals, petrochemicals, and chemicals will face stricter emissions constraints. According to a reporter from the Economic Information Daily, relevant government departments and industry associations are urgently conducting surveys to assess these sectors—particularly major emitters—regarding their fossil‑fuel and electricity consumption, their emission‑reduction potential and implementation pathways, and the economic and sectoral impacts of such measures. These efforts are aimed at preparing carbon‑peak roadmaps for these industries and paving the way for their participation in the national carbon‑emissions trading market.
According to Jia Mingxing, Vice President and Secretary-General of the China Nonferrous Metals Industry Association, the nonferrous metals sector has provided extensive foundational data to relevant departments within national ministries and commissions and has repeatedly put forward concrete plans for achieving the industry’s “dual carbon” goals. Raw-material industries such as nonferrous metals and steel are actively preparing for the launch of the carbon market.
Shen Bin, President of the China Iron and Steel Association, stated that in the second half of the year, the association will conduct thorough research on carbon emissions and their characteristics within the steel industry, as well as studies on the life-cycle carbon footprint of steel products. It will also draft and release the “Roadmap and Action Plan for Peaking Carbon Emissions in the Steel Industry,” while simultaneously mobilizing resources to develop a plan for allocating carbon‑market allowances and a corresponding operational testing framework, thereby laying the groundwork for the steel sector to participate in carbon‑emissions‑rights trading.
Work to integrate industries such as building materials and petrochemicals into the national carbon market is also progressing. Relevant industry associations are organizing activities including the development of quota allocation plans, the calculation of benchmark values, and operational testing of the carbon market, as well as capacity-building initiatives to facilitate participation in the national carbon market.
However, formulating a “carbon‑reduction” roadmap is no easy task. According to Sun Chuanwang, a professor at the China Center for Energy Economics of Xiamen University’s School of Economics, the greatest challenge in mechanism design lies in balancing efficiency and equity in market‑based trading—something that hinges on accurately forecasting future carbon prices, trading volumes, and the overall impact on emissions reductions. At this stage, expanding participation across sectors is particularly difficult because it requires a thorough assessment of both intra‑sectoral and inter‑sectoral dynamics: namely, the scale and methodology of initial quota allocation, as well as how newly entering industries can coordinate with the power sector in terms of mitigation costs.
“Using market-based mechanisms to reduce carbon emissions is the most effective approach, but sustaining such efforts is far from straightforward. It requires solid foundational work to ensure that trading is fair, impartial, and efficient,” said Jia Mingxing.
The recently launched pilot program for environmental impact assessments of carbon emissions is undoubtedly a pioneering effort. In its recently issued “Notice on Conducting Pilot Environmental Impact Assessments of Carbon Emissions for Key-Industry Construction Projects,” the Ministry of Ecology and Environment stipulates that seven regions—Hebei, Jilin, Zhejiang, Shandong, Guangdong, Chongqing, and Shaanxi—will undertake this pilot, covering key sectors such as power generation, iron and steel, building materials, nonferrous metals, petrochemicals, and chemicals. By the end of December 2021, the pilot areas are expected to have essentially established working mechanisms for conducting carbon‑emission EIAs for construction projects in these priority industries. By the end of June 2022, they aim to have a clear understanding of the carbon‑emission levels and reduction potentials within these key sectors.
Liu Xiangdong, deputy director of the Department of Economic Research at the China Center for International Economic and Technical Exchanges, stated that the Ministry of Ecology and Environment’s launch of pilot programs for carbon‑emission environmental impact assessments will help to accurately assess the carbon‑emission baseline across key industries and sectors, facilitate the hierarchical breakdown of “carbon peaking” and “carbon neutrality” targets within these sectors, and enable the formulation of targeted measures, thereby providing a scientific basis for informed decision‑making in advancing further emissions reductions.
According to information released by the Ministry of Ecology and Environment, the seven pilot regions differ slightly in their sectoral focus. Specifically, Hebei Province is piloting in the steel industry, Guangdong Province in petrochemicals, Shaanxi Province in coal‑chemicals, Jilin Province in both power and chemical industries, Shandong Province in steel and chemicals, while Zhejiang Province and Chongqing Municipality are conducting pilots across all six sectors: power, steel, building materials, nonferrous metals, petrochemicals, and chemicals.
In addition to the pilot provinces and cities, more regions are actively integrating carbon emissions into their environmental impact assessment processes. For example, the Hainan Provincial Department of Ecology and Environment recently issued the “Notice on Piloting Carbon Emission Environmental Impact Assessment,” stipulating that new “high‑energy‑consumption and high‑emission” projects must conduct a carbon assessment concurrently with their environmental impact assessment. The notice also encourages existing such projects to undertake baseline carbon assessments to clarify their current emission levels and proactively set targets for total carbon‑emission control and reduction. The scope covers key sectors including power generation, building materials, petrochemicals, chemicals, papermaking, pharmaceuticals, and oil and gas extraction.
Dong Zhanfeng, deputy director of the Institute of Management and Policy at the Environmental Planning Institute of the Ministry of Ecology and Environment, believes that establishing pilot programs for environmental impact assessment in more regions will help progressively assess the carbon‑emission levels and reduction potentials of key industries, clarify the production processes, facility scales, resource and energy consumption, and comprehensive utilization patterns of their major emission‑intensive stages, and thereby enable the formulation of targeted, refined carbon‑reduction measures across areas such as energy use, raw material selection, process optimization, energy‑saving and carbon‑reduction technologies, and transportation modes. Moreover, these initiatives can play a guiding role in segmenting the carbon‑trading market and in defining the market positioning and pricing of different carbon‑trading products.

Taxation TAXATATION
Notice of the State Administration for Market Regulation and the State Taxation Administration on Further Improving the Simplified Cancellation Registration Procedure to Facilitate the Market Exit of Small, Medium, and Micro Enterprises

To the Market Supervision Administrations (Departments, Commissions) of all provinces, autonomous regions, municipalities directly under the central government, and the Xinjiang Production and Construction Corps; to the tax bureaus of all provinces, autonomous regions, municipalities directly under the central government, and cities separately listed in the national plan; and to the Commissioner’s Offices of the State Taxation Administration stationed in various localities:
In recent years, the State Administration for Market Regulation and the State Taxation Administration have actively implemented pilot reforms to streamline enterprise deregistration, significantly facilitating the exit of market entities that have not yet commenced operations or have no outstanding claims or debts. To implement the State Council’s directives and the requirements set forth in the Government Work Report, we will introduce simplified deregistration procedures for small, medium, and micro enterprises as well as individual business households, further deepen commercial system reform, ensure smoother channels for market entity exit, and enhance the vitality of market participants. The relevant matters are hereby notified as follows:
I. Expanding the Scope of Application for Simplified Deregistration Procedures
Building upon the “Guiding Opinions on Comprehensively Promoting the Reform of Simplified Enterprise Deregistration” (No. 253 [2016] of the State Administration for Industry and Commerce, hereinafter referred to as the “Guiding Opinions”) and the “Notice on Strengthening Information Sharing and Joint Supervision” (No. 11 [2018] of the State Administration for Industry and Commerce), the scope of application for simplified deregistration has been extended to market entities that have either not incurred any creditor‑debtor relationships or have fully settled all such obligations (excluding listed joint-stock companies; the same shall apply hereinafter). When applying for simplified deregistration, market entities must not have any outstanding debts or liabilities, including unpaid liquidation expenses, employee wages, social insurance contributions, statutory severance payments, or taxes due (including late payment penalties and fines). All investors shall provide a written commitment assuming legal liability for the veracity of the foregoing statements.
After obtaining, through information sharing, the preliminary information on applications for simplified deregistration forwarded by the market regulatory authorities, the tax authorities shall, in accordance with the prescribed procedures and requirements, query the tax information system to verify the relevant tax-related matters. For taxpayers whose tax information system indicates any of the following circumstances, the tax authorities shall not raise objections: first, taxpayers who have never engaged in any tax‑related matters; second, taxpayers who have engaged in tax‑related matters but have never obtained or used any invoices (including those issued on their behalf), have no outstanding tax liabilities, and have no other unresolved issues; and third, taxpayers who, at the time of the inquiry, have already completed all tax‑clearance procedures, such as canceling and surrendering invoices and settling all taxes due.
II. Implementing Simplified Deregistration for Individual Business Households
Following the implementation of the “two‑certificate integration” reform for business licenses and tax registration certificates, individually operated businesses that have completed establishment registration may apply for deregistration through a simplified procedure without submitting a commitment letter or publishing any public notice. Upon filing a simplified deregistration application, the market regulation authority shall, within one working day, transmit the relevant information pertaining to the individual business’s proposed simplified deregistration—via the provincial unified credit information sharing and exchange platform, the government affairs information platform, or inter‑departmental data interfaces (collectively referred to as the information sharing and exchange platform)—to the tax authorities and other relevant departments at the same level. The tax authorities and other competent departments shall, within ten calendar days (the same applies hereinafter), provide feedback on whether they consent to the simplified deregistration. If no objections are raised by the tax authorities and other departments, the market regulation authority shall promptly process the simplified deregistration. The circumstances under which the tax authorities do not raise objections shall be consistent with the provisions set forth in Article 1 of this Notice.
III. Shortening the Public Notice Period for Simplified Deregistration
The public notice period for simplified deregistration has been shortened from 45 days to 20 days. Upon expiration of the notice period, market entities may directly apply to the market regulatory authority for simplified deregistration. Market entities must submit their application within 20 days from the date the notice period expires; they may, depending on the specific circumstances, request a reasonable extension, not exceeding 30 days in total. After the notice is published, market entities shall refrain from engaging in any production or business activities unrelated to the deregistration process.
IV. Establishing a Fault-Tolerant Mechanism for Simplified Deregistration Procedures
When a market entity applies for simplified deregistration, if, upon review by the market regulatory authority, circumstances arise such as being listed on the List of Abnormal Business Operations, having equity (investment interests) subject to freezing, pledge, or chattel mortgage, or having an unregistered non‑legal‑person branch that has not yet undergone deregistration, the simplified deregistration announcement need not be withdrawn. Once the abnormal status is resolved, the entity may reapply for simplified deregistration in accordance with the prescribed procedures. With respect to applications where the text or format of the commitment letter does not comply with the requirements, the market regulatory authority shall accept the simplified deregistration application after the entity has made the necessary corrections, without requiring a new public notice.
V. Optimizing the Functions and Processes of the Deregistration Platform
Market entities are permitted to file simplified deregistration through the deregistration platform, with eligible entities able to complete the entire process online. After submitting the required information, the platform automatically generates a “Commitment Letter of All Investors.” Except in special cases involving government agencies, public institutions, foreign investors, and others, all investors must undergo real-name authentication and affix their electronic signatures. Market entities may return their business licenses by mail; in the event of loss, they may publish a free notice of license cancellation on the National Enterprise Credit Information Publicity System.
Market regulation and tax authorities at all levels shall, in accordance with the simplified deregistration technical plan, carry out system development and upgrades. At the same time, they should strengthen inter‑departmental coordinated supervision: if a market entity conceals true facts or engages in fraudulent practices during the simplified deregistration process, the market regulation authority may, in accordance with the law, revoke the deregistration and, upon restoring the entity’s legal status, place it on the list of seriously unlawful and untrustworthy entities, publicly disclosing this information through the National Enterprise Credit Information Publicity System, thereby preventing market entities from abusing the simplified deregistration procedure to evade legal liabilities. In advancing this reform, local market regulation and tax authorities should diligently collect and report any new circumstances or issues encountered in the course of simplified deregistration to the State Administration for Market Regulation and the State Taxation Administration.

Gansu: Bold Exploration and Innovative Breakthroughs to Ensure Effective Implementation of Tax Collection and Administration Reform

　“The ‘happiness bill’ delivered by the tax authorities clearly and straightforwardly outlines the tax preferential policies our company has been able to benefit from in recent years. Just the corporate income tax policy of ‘three years exempt, three years at half rate’ has already resulted in tax reductions and exemptions totaling over 2.5 million yuan—truly hard cash!” said Wang Jian, the financial director of Beijing Jingcheng New Energy (Tongwei) Wind Power Generation Co., Ltd., pointing to a copy of the “happiness bill.”
Delivering “happy tax‑and‑fee bills” to taxpayers and payers through both online and offline channels is a concrete measure adopted by the Dingxi Municipal Tax Authority to ensure that tax and fee preferential policies are swiftly and directly accessible, and it also serves as a microcosm of ongoing efforts to further improve the tax‑related business environment.
It is reported that since the issuance and implementation of the “Opinions on Further Deepening Tax Collection and Administration Reform” (hereinafter referred to as the “Opinions”), the tax authorities in Dingxi City have focused on the goals and tasks set forth in the document, grounded themselves in the realities of tax collection and administration, worked to address shortcomings and strengthen weak areas, and continuously advanced innovation in tax administration concepts, systems, models, and technologies. They have boldly explored ways to achieve greater integration in tax management, digitalization in tax governance, greater convenience in tax and fee services, and intelligent tax supervision, striving to break new ground and earning widespread acclaim from taxpayers and payers alike.
The “Opinions” explicitly emphasize adhering to a systems‑based approach, comprehensively advancing the digital upgrading and intelligent transformation of tax collection and administration, and holistically enhancing the effectiveness of tax governance. In terms of implementation, the Dingxi Tax Service has maintained coordinated efforts across provincial, municipal, and county tax authorities, innovatively introducing a “1+8+N” tax administration reform framework—comprising one overarching plan, eight operational guidelines, and N supporting administrative measures—under the principle of “tax governance through data and risk‑based tax control.” This framework synergistically drives the transformation and upgrading of tax‑and‑fee collection concepts, business processes, job‑responsibility systems, and technological platforms, with a focus on building a modern tax‑and‑fee administration system that aligns with the evolution of tax governance from “invoice‑centric tax management” to “data‑driven tax governance” in the era of smart taxation. In developing smart taxation, the Dingxi tax authorities have proactively aligned with the “Digital Dingxi” initiative. Within the municipal government’s “‘No Need to Visit—Instant Access’ Platform for Precise Delivery and Filing of Business‑Benefiting Policies,” they have established a “Tax Benefits Window” featuring four dedicated sections: “A Happy Tax‑Cut and Fee‑Reduction Statement,” “Tax Risk Health Check Report,” “Tax Home for Large Enterprises,” and “Tax‑Cut and Fee‑Reduction Policies for Businesses.” Leveraging the city‑wide database of market entities and employing big‑data capabilities, this platform swiftly matches relevant enterprises by industry, enabling the precise delivery of the latest tax policies and continuously elevating the level of refined services supported by smart taxation.
“It truly feels like a weight has been lifted. The tax authorities conducted a ‘health check’ for us, helping to identify and address potential tax‑related risks. Not only did this eliminate our tax‑related vulnerabilities, but it also helped us overcome our initial resistance to the tax authority’s risk‑management approach. This kind of service is exactly what taxpayers like us need!” said Zhao Hongjuan, Finance Manager at Gansu Youjia Real Estate Development Co., Ltd., with satisfaction, after the tax‑risk assessment report had successfully mitigated all identified risks. She added that, under the guidance of the tax authorities, her company would further refine its internal controls for managing tax risks.
It is understood that the Dingxi Tax Authority has actively implemented an integrated administrative enforcement model encompassing “management, law enforcement, and service,” emphasizing “early identification of tax risks, timely delivery of risk‑assessment reports, and prompt remediation of identified issues.” The authority has systematically reviewed 10 categories comprising 19 specific processes and behaviors—such as information reporting, tax filing, and invoice usage—that are prone to tax‑related risks, conducted comprehensive risk analyses across all tax types and throughout the entire taxpayer‑service process, and developed and disseminated “Tax Risk Assessment Reports” containing eight key items. This approach transforms what was once a rigid, impersonal response to tax risks into a proactive effort to help enterprises promptly detect potential tax‑related vulnerabilities, accurately track risk trends, and strengthen internal control mechanisms, thereby delivering a more user‑friendly and personalized experience in tax administration.
Since the beginning of this year, Dingxi Tax Authorities have focused on enhancing taxpayers’ sense of gain, happiness, and security by launching the “Doing Practical Things for Taxpayers and Payers” initiative and the Spring Breeze Action for Convenient Tax Services. They have worked to build a comprehensive service brand—“One Core, Two Wings, Four Pillars”—that ensures taxpayers are informed promptly, enjoy benefits without delay, receive tax and fee reductions directly, and see their financial well-being improve naturally. As a result, the quality of tax and fee‑related services has continued to improve. To date, the authorities have fully implemented a list of 214 “non-contact” tax‑handling services; 185 procedures can now be processed entirely online; more than 95% of preferential measures no longer require filing; and 428 tax and fee incentives are available with immediate access. Furthermore, all 634 key projects across the city have been covered by dedicated “project stewards,” and over 5,200 personalized “tax‑and‑fee‑reduction happiness statements” have been delivered. The overall satisfaction rate in government service evaluations stands at 100%.

Direct benefits, swift access; intelligent, convenient services; precise, tailored regulation—this is how market entities view the tax administration’s “delegation, regulation, and service” reform.
According to statistics, in the first half of the year, China saw a cumulative total of 6.243 million newly established tax‑related market entities, up 27.3% from 2020 and 22.8% from 2019, reflecting enhanced economic vitality and steady, improving performance. Market entities are the primary participants in economic activity—so how do they perceive the tax‑related business environment? And what changes have resulted from the tax administration reform aimed at streamlining regulation and improving services?
“Online guidance is incredibly convenient—it saves our finance staff from having to trek to the tax service hall on scorching summer days, and we truly appreciate how much easier tax filing has become!” exclaimed a tax officer at a catering company in Beijing’s Dongcheng District, praising the State Taxation Administration’s “Online Guidance” platform.
It turns out that, in order to provide round-the-clock, end-to-end tax services—both online and offline—the Tax Service Hall of the Dongcheng District Tax Bureau in Beijing recently assembled a team of seasoned professionals to form an online guidance unit. Through one‑on‑one virtual Q&A sessions, this team offers tailored procedural guidance and in-depth advisory support to taxpayers encountering complex issues during online filing, striving to ensure they need not make a single in-person visit.
The practices of the Dongcheng District Taxation Bureau in Beijing are a microcosm of the nationwide tax system’s ongoing efforts to advance the “delegation, regulation, and service” reform and invigorate market entities. Starting June 1 this year, the integrated filing of property and behavioral taxes was rolled out across the country—both a concrete measure under the tax authorities’ “Doing Practical Things for Taxpayers and Payers” initiative and the Spring Breeze Action to Facilitate Tax Services, and a telling illustration of the continued deepening of the tax sector’s “delegation, regulation, and service” reform.
Since the 18th National Congress of the Communist Party of China, the national tax system, guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, has thoroughly implemented the decisions and arrangements of the CPC Central Committee and the State Council. By reducing burdens and lowering costs, it has unleashed vitality through “delegation”; by harnessing big data to enhance efficiency, it has promoted fairness in “regulation”; and by improving services to increase convenience, it has boosted efficiency in “service.” As a result, tangible benefits from tax reform have been continuously realized, the functions of taxation have been fully leveraged, and efforts have been focused on fostering and stimulating the dynamism of market entities.
Direct benefits, quick access—empowering businesses to move forward with agility.
“Since the COVID‑19 outbreak last year, the tax authorities have gone to great lengths to help us overcome our difficulties—providing tax and fee reductions totaling over 8.5 million yuan and even assisting us in obtaining an extension for paying our taxes,” said Wu Chengkui, general manager of Hegang Zhengnan Coal Chemical Co., Ltd. in Heilongjiang Province, reflecting on the changes brought about by the “delegation, regulation, and service” reform.
Wu Chengkui’s remarks echo the sentiments of many market entities amid the pandemic. To ensure that tax and fee relief measures reach businesses as swiftly and efficiently as possible, in 2020 the tax authorities proactively implemented a range of preferential tax policies to help enterprises weather the crisis, delivering over RMB 2.5 trillion in tax and fee reductions for the year. They also granted deferred tax payments totaling RMB 29.2 billion to 3.99 million taxpayers, effectively easing their financial pressures.
In August, the factory premises within the Bio-Industry Park of the Chuxiong Development Zone in Yunnan Province were alive with the steady rumble of machinery. Thanks to favorable tax and fee policies, Jinqi Pharmaceutical Co., Ltd. has continued to strengthen its scientific and technological R&D efforts and has filed numerous patent applications. Company Chairman Zhang Yunsheng told reporters that, during this year’s annual corporate income tax final settlement, the company benefited from a total of RMB 2.84 million in corporate income tax reductions and exemptions as a high-tech enterprise, along with an additional RMB 1.64 million in enhanced deductions for R&D expenses. Looking ahead, the company plans to further increase its investment in research and innovation, leveraging tax incentives to drive even greater progress in its development.
Innovation is the primary driving force behind development. In recent years, various tax and fee preferential policies supporting scientific and technological innovation have been effectively implemented, with the state using tangible fiscal measures—tax cuts and fee reductions—to incentivize corporate innovation and promote industrial upgrading. According to tax data, during the 13th Five-Year Plan period, the annual average growth rate of tax exemptions and reductions under China’s policies encouraging scientific and technological innovation was 28.5%, with cumulative tax relief totaling RMB 2.54 trillion over the five-year span.
“Thanks to the meticulous services provided by the High-tech Zone Tax Bureau of Shijiazhuang, we have fully benefited from all of the state’s tax preferential policies, freeing up more working capital to invest in product R&D and innovation, which has significantly enhanced our market competitiveness,” said Chen Liangzhi, Finance Manager at Hebei Keruida Instrument Technology Co., Ltd. In 2020, the company invested over RMB 20 million in R&D, while benefiting from RMB 4.5 million in tax reductions and exemptions for high-tech enterprises, an additional R&D expense deduction of RMB 3.23 million, and a VAT immediate refund of RMB 3.7 million on software products. The company also achieved more than ten significant research and development breakthroughs. With the support of these favorable tax policies, Hebei Keruida Instrument Technology Co., Ltd. was recognized as a “Specialized, Fine, Distinctive, and Innovative” SME in Hebei Province, earning designation as an outstanding high-tech enterprise and obtaining dual software certification. Its products are now exported to over 40 countries and regions.
Zhang Yingwu, Party Secretary and Director of the Shijiazhuang Municipal Tax Service Bureau, stated: “We will fully and faithfully implement tax preferential policies such as the additional deduction for R&D expenses and the corporate income tax incentives for high-tech enterprises, actively guide and support enterprises in technological innovation and in increasing investment to expand production, thereby bolstering their R&D capabilities and driving high-quality development.”
The confidence of enterprises to operate with a lighter burden stems not only from the support of tax and fee reduction policies, but also from a series of facilitative measures introduced by the tax authorities—such as streamlining approval processes and reducing documentation requirements—which have effectively lowered institutional transaction costs. According to statistics, during the 13th Five-Year Plan period, the number of tax-related administrative approval items was cut by 93%, and the volume of documents taxpayers are required to submit was reduced by 50%.
In Fujian Province, the electronic tax bureau has been integrated with the Fujian Provincial Online Service Hall. To start a business, companies need only undergo one online identity verification and complete a single form; the tax authorities can then share information from market regulation agencies, banks, and other sources to review relevant tax-related matters entirely online. “One-time verification and a single form—saving time, effort, and worry!” Yu Kejie, a post‑90s entrepreneur planning to provide solar‑power generation technical services in Youxi County, Sanming City, told reporters that after uploading his documents through the dedicated service section of the Fujian Provincial Online Service Hall, he completed multiple steps—including market regulation, taxation, banking, social security, and medical insurance—in less than a day, saving both time and labor.
Intelligent and convenient services, helping enterprises enhance quality and boost efficiency.
“The processing of business procedures for newly established enterprises has been accelerated—within about an hour, I was able to collect my invoices,” Yang Hong, general manager of Jiangxi Jinxian County Tuoxian Decoration Engineering Co., Ltd., which was recently set up, told reporters. Behind this faster tax‑related service lies the tax authorities’ commitment to providing meticulous, taxpayer‑ and payer‑centric support.
Since the 18th National Congress of the Communist Party of China, the tax authorities have continuously launched the “Spring Breeze Action for Convenient Tax Services,” now in its eighth year. To date, they have introduced 147 innovative service measures across 39 categories, while local tax agencies have further refined and rolled out more than 40,000 supporting measures, thereby establishing a distinctive tax‑focused service brand. This year, the State Taxation Administration has once again unveiled 100 convenience‑oriented measures in 10 categories, further streamlining tax filing and payment procedures and steadily delivering the benefits of reform.
In Guangzhou, the tax authorities have leveraged the “Guangzhou Tax Enterprise Account” platform to launch the “Guangzhou Tax Credit Code.” Taxpayers can generate a QR code containing key information on their corporate tax credit with a single click and share it with upstream and downstream businesses, thereby fostering trust and reducing communication costs in business operations.
In Yiwu, Zhejiang, the tax authorities, leveraging the Smart Tax Service Center, conduct in-depth analysis of citywide tax‑related big data, employing intelligent analytics and integrated data sharing. They have pioneered the “Smart Tax Service Index,” which uses granular metrics to track changes and pinpoint weak links in taxpayer services, enabling them to identify effective solutions through algorithms and enhance service quality via the index.
In Zhengzhou, which has endured the arduous challenges of both floodwaters and the COVID‑19 pandemic since July, approximately 83,700 taxpayer households have been located in closed-off or controlled‑access zones. The online tax service data processing center established by the Zhengzhou Municipal Tax Service Bureau has played a vital role. Despite the original site being rendered unusable due to flood damage, the bureau promptly set up a temporary environment, urgently relocating staff and the invoice‑storage facility to the Vehicle Acquisition Tax Collection Hall on Sixth Avenue in the Economic Development Zone, thereby ensuring uninterrupted “non‑contact” tax services across the city. Since Zhengzhou implemented closed‑off and controlled‑access management on August 4, the center has processed a total of 12,008 transactions and mailed over 30,000 invoices, effectively maintaining efficient and smooth tax administration and contributing the tax sector’s efforts to the city’s epidemic prevention and control.
Zhang Tao, Secretary of the Party Committee and Director of the Zhengzhou Municipal Tax Service Bureau, stated: “In the face of major disasters, our tax authorities must fulfill our duties with utmost dedication and effort. Taking digital tax administration as our key initiative, we will launch a coordinated package of measures—including the ‘Spring Breeze Action for Convenient Tax Services’ and the ‘Ten Thousand People Assist Ten Thousand Enterprises’ campaign—fully implement all tax preferential policies, help disaster‑stricken enterprises overcome their difficulties, and provide robust support to ensure their continued growth.”
While delivering robust online services, the tax authorities continue to pursue a dual‑track approach, combining traditional in‑person services with smart, innovative solutions, and steadily enhancing offline service offerings to better meet the needs of vulnerable groups and address the specific requirements of particular matters.
In Kaifeng, Henan Province, the tax service hall has established a “Taxpayer’s Home,” opened a green channel for special groups to pay their taxes, and organized young volunteers to carry out a “Social Security Payment Assistance at Home” initiative, thereby safeguarding the rights and interests of elderly individuals, persons with disabilities, and other vulnerable groups. “I never would have imagined that someone like me, who isn’t comfortable using a smartphone, could still receive in‑home assistance from tax officials—thank you so much,” said Wang Mingyuan, an elderly resident of Xiangfu District in Kaifeng, as he beamed after tax officials helped him complete his social security premium payment.
Precise regulatory classification helps enterprises enhance credit and reduce burdens.
The tax authorities adhere to the principle of combining deregulation with effective oversight. While enhancing tax and fee services, they are building a new tax‑regulation framework that leverages “data‑driven synergy, targeted focus on key areas, and robust enforcement” as its core pillars. This framework employs “dual random inspections with public disclosure” and “Internet plus regulation” as its primary tools, supplements them with focused, high‑priority oversight, and is underpinned by a “credit‑plus‑risk” regulatory approach. These efforts are driving a shift from “tax administration based on invoices” to “data‑driven, category‑specific, precision regulation,” thereby fostering a tax‑related business environment that is fairer, more transparent, and more predictable.
In the Jinyi Area of the Zhejiang Pilot Free Trade Zone, the tax authorities, in collaboration with public security agencies, have been continuously exploring the use of tax‑related big data to implement precision‑based supervision. They have established a joint tax‑police working group and, based on risk‑alert indicators and models derived from tax‑big‑data analysis, have assigned green, yellow, or red codes to 13,000 export‑oriented enterprises, thereby implementing dynamic, tiered early‑warning management. This approach has proven highly effective in deterring potential risks while ensuring that the strictest standards for preventing tax evasion are upheld without unduly disrupting businesses’ normal operations.
The State Taxation Administration has also innovated its administrative enforcement approaches, launching on April 1 the first batch of a list of tax-related matters subject to “no penalty for first-time violations,” thereby ensuring that tax enforcement is both office and empathetic. This initiative has effectively fostered mutual understanding between tax authorities and taxpayers, continuously enhancing taxpayer and payer compliance and public satisfaction.
“The ‘first-time violation, no penalty’ policy has given our company a chance to correct its mistake, making us feel that the tax authorities are enforcing the law with greater empathy. Going forward, we will be sure to file and pay taxes on time,” said Zhang Lingxiong, the financial officer of Qinghai Minhe Yuanping Nursery Stock Planting Co., Ltd. He explained that, due to recent changes in the company’s tax‑filing personnel, the employees’ individual income taxes had not been reported as required. Upon discovering the issue, Mr. Zhang promptly informed the tax authorities and acknowledged the oversight. Following verification by the Minhe County Tax Bureau, the company’s late filing was its first instance this year, and it had corrected the error promptly and voluntarily, without causing any adverse consequences; therefore, administrative penalties were waived.
In addition to issuing a list of tax-related matters subject to “no penalty for first-time violations,” the tax authorities have, since 2020, implemented a taxpayer credit‑repair mechanism to encourage and guide taxpayers in strengthening their awareness of lawful and honest tax compliance and proactively rectifying behaviors that undermine tax integrity. By actively building a modern taxpayer credit management system, these measures help enterprises enhance their creditworthiness, reduce their burdens, and achieve high‑quality development.
“At a critical moment, it was credit rehabilitation that pulled us through!” exclaimed He Qu, head of Qubin Trading Co., Ltd. in Xiushui County, Jiangxi Province. With guidance from the tax authorities, He promptly filed the missing financial statements and submitted an application for credit restoration, resulting in the company’s credit rating being upgraded to Grade B. “Not only did we secure a loan, but we also landed new customers.” Like Qubin Trading Co., Ltd., an increasing number of enterprises are reaping the benefits of honest tax compliance.
Han Guorong, Director-General of the Taxpayer Services Department of the State Taxation Administration, stated that, with the continued implementation of the CPC Central Committee and the State Council’s “Opinions on Further Deepening Tax Collection and Administration Reform” and the thorough rollout of the 100 taxpayer‑friendly measures under the “Doing Practical Things for Taxpayers and Payers and Launching the Spring Breeze Campaign for Convenient Tax Services,” hundreds of millions of market entities will continue to reap the benefits of the upgraded and accelerated tax administration reforms—namely, greater deregulation, improved regulation, and enhanced service—and see their vitality steadily unleashed, thereby driving China’s high‑quality economic development.

Litigation & Arbitration
China plans to enshrine the “three-child policy” in law.
The draft amendment to the Population and Family Planning Law is set to be submitted to the Standing Committee of the 13th National People’s Congress for deliberation. On the 13th, Zang Tiewei, spokesperson for the Legislative Affairs Commission of the NPC Standing Committee, outlined the key provisions of the draft, including the state’s advocacy of marriage and childbearing at an appropriate age, as well as healthy pregnancies and childrearing, and the implementation of a policy allowing each couple to have up to three children.

On that day, the Legislative Affairs Commission of the Standing Committee of the National People’s Congress held a press conference to brief the media on the draft laws scheduled for deliberation at the 30th session of the 13th NPC Standing Committee. The session is set to take place from August 17 to 20.
Zang Tiewei stated that the draft amendment to the Population and Family Planning Law is grounded in optimizing fertility policies and promoting the long-term balanced development of the population, with revisions focused on implementing the three-child policy, abolishing restrictive measures such as the social upbringing fee, and introducing complementary measures to actively support childbearing.
With regard to optimizing the birth policy, the main provisions of the draft amendment include: first, the state shall adopt comprehensive measures to promote an appropriate fertility level, optimize the population structure, and foster long-term balanced population development; second, the state encourages marriage and childbearing at an appropriate age, as well as healthy pregnancies and childrearing, and implements a policy allowing each couple to have three children; third, the social upbringing fee is abolished, and any provisions inconsistent with the three-child policy are deleted.
The draft amendment also proposes a range of proactive measures to support childbirth: the state will adopt supportive policies to alleviate the financial burdens of families related to childbearing, childcare, and education. Medical and health institutions are required to provide perinatal and maternal–child health services, and to strengthen support and guidance for infant and young child care. Efforts will be made to establish an inclusive childcare service system, enhancing the accessibility and equity of such services for families with infants and young children, and to standardize childcare services. Localities that meet the necessary conditions will be encouraged to explore the introduction of parental leave. In residential communities, facilities for infant and young child activities, along with supporting services, will be developed, and mother-and-baby facilities will be provided in public and workplace settings in accordance with relevant regulations.
In May this year, the Decision on Optimizing Fertility Policies to Promote Long-Term Population Balance, adopted at a meeting of the Political Bureau of the CPC Central Committee, proposed implementing a policy allowing couples to have up to three children, along with supporting measures. To ensure the effective implementation of the CPC Central Committee’s decisions and arrangements, the National Health Commission and the National Development and Reform Commission have drafted an amendment to the Population and Family Planning Law, which has been submitted by the State Council to the Standing Committee of the National People’s Congress for deliberation.
It is understood that the Population and Family Planning Law was adopted at the 25th Meeting of the Standing Committee of the Ninth National People’s Congress in December 2001 and came into force on September 1, 2002. When the universal two-child policy was implemented in 2015, the Standing Committee of the National People’s Congress made the first amendment to the law.
“Since the enactment of the Population and Family Planning Law, it has played a vital role in implementing the fundamental national policy on family planning and in promoting the coordinated development of population with the economy, society, resources, and the environment,” said Zang Tiewei.
National Health Commission: All prevention and control measures must be implemented rigorously and stringently.
“As of now, the number of locally transmitted conofficeed cases nationwide has been rising for 19 consecutive days, placing China in a complex situation characterized by multiple outbreaks occurring simultaneously at numerous locations within a short period.” At the State Council Joint Prevention and Control Mechanism press conference on the 13th, National Health Commission spokesperson Mi Feng stated that, in light of the current epidemic situation, it is imperative to rigorously and stringently implement all prevention and control measures, ensure accountability at all levels, strengthen efforts to prevent imported cases, enforce closed-loop management for high-risk individuals, and carry out disinfection of high-risk environments and items. Additionally, coordination among regions for screening at-risk populations and enhanced epidemic prevention and control in key venues must be intensified, with centralized isolation of priority groups being implemented decisively and thoroughly to swiftly curb the spread of the virus.
“The risk of a large-scale outbreak at the national level remains low,” said He Qinghua, First‑Level Inspector with the Disease Control Bureau of the National Health Commission. As of 24:00 on the 12th, local outbreaks had been reported in 48 cities across 18 provinces; among them, 36 cities have gone more than five days without reporting any new cases. With the exception of Yangzhou, Wuhan, and Zhangjiajie, the remaining areas have recorded only sporadic cases. Based on this situation, the overall national epidemic risk is generally under control.
In response, the National Health Commission will continue to guide local authorities in carrying out the following four key tasks: Areas where outbreaks have occurred must rigorously implement all routine prevention and control measures, strengthen epidemiological investigations and source tracing, conduct nucleic acid testing, enforce centralized isolation, and tighten community-level management to prevent further spread; relevant provinces should intensify screening of populations at risk of exposure; localities should be guided to comprehensively identify and address防控 vulnerabilities at high-risk sites such as port cities, airports, seaports, designated hospitals, and centralized quarantine facilities; and public awareness campaigns should be stepped up, vaccination efforts accelerated, and the public encouraged to take personal protective measures.
“As the first line of defense in epidemic prevention and control, community-level measures are crucial for containing the outbreak,” said Gao Guangming, Deputy Director-General of the Primary Healthcare Department of the National Health Commission. He emphasized that community-based防控 efforts must be implemented thoroughly, meticulously, and with precision, ensuring coordinated and mass‑based prevention and control. The overarching lessons can be summarized as five areas of full implementation: effective organizational mobilization, stringent community lockdowns, comprehensive support services, standardized centralized isolation, and rigorous health monitoring.
Regarding the highly contagious Delta variant, Gao Guangming stated that epidemic prevention and control measures must emphasize speed, accelerating both the pace and efficiency of all interventions to ensure high‑quality containment. It is imperative to fortify community‑level defenses before the virus has a chance to spread.
Mi Feng cautioned that individuals must strictly adhere to epidemic prevention requirements and actively cooperate with control measures. Through joint efforts, we can contain the scope of the outbreak, shorten its duration, and restore normal production and daily life as soon as possible.
The Legislative Affairs Commission of the National People’s Congress: The draft Personal Information Protection Law (third deliberation draft) is slated for six major revisions.
 On August 13, the Legislative Affairs Commission of the Standing Committee of the National People’s Congress held a press conference, during which spokesperson Zang Tiewei briefed the media on legislative developments and answered questions from reporters.
Regarding the draft Personal Information Protection Law (third‑reading draft), Zang Tiewei stated that, in light of views from various quarters, the third‑reading draft submitted for consideration at this Standing Committee meeting proposes the following key amendments:
First, the Constitution of the People’s Republic of China stipulates that the state respects and protects human rights, that citizens’ personal dignity shall not be infringed upon, and that citizens’ freedom of communication and the confidentiality of their communications are protected by law. The enactment and implementation of this law are of great significance for safeguarding citizens’ personal dignity and other rights and interests. Accordingly, it is proposed to add a provision in Article 1 of the draft stating that this law is enacted “in accordance with the Constitution.”
Second, further refine the rules governing the processing of personal information, with particular emphasis on establishing targeted regulations to address practices such as excessive collection of personal data by applications (apps) and “big data price discrimination.”
Third, personal information of minors under the age of fourteen is classified as sensitive personal information, and personal information processors are required to establish specific rules for its processing.
Fourth, the rules governing the cross-border transfer of personal information shall be refined, stipulating that the provision of personal information to foreign countries in accordance with international treaties or agreements to which China is a party, as well as the protection of personal information transferred abroad, shall not fall below China’s domestic protection standards.
Fifth, provisions on the right to data portability are added, and the rules on the protection of personal information of deceased persons are refined.
Sixth, clear requirements are set forth for improving the mechanisms for handling complaints and reports related to personal information protection, as well as for referring cases involving unlawful processing of personal information that may constitute criminal offenses.
The 98th Chairpersons’ Meeting of the Standing Committee of the 13th National People’s Congress has decided to convene the 30th Session of the Standing Committee of the 13th National People’s Congress in Beijing from August 17 to 20. The draft Personal Information Protection Law (third deliberation draft) will be reviewed at the session.
When responding to media inquiries, Zang Tiewei stated that, at present, all sectors of society are closely watching new technologies and applications such as user profiling and algorithmic recommendation, and have voiced strong concerns about issues like information harassment and “big data price discrimination” in related products and services. The draft Personal Information Protection Law, grounded in safeguarding the legitimate rights and interests of the general public in cyberspace, introduces targeted regulations on automated decision-making based on personal information:
First, the concept of automated decision-making is defined as activities in which programs automatically analyze and assess an individual’s behavioral patterns, interests, or economic, health, and credit status, and then make decisions accordingly.
Second, automated decision-making must comply with the general rules governing the processing of personal information, including adherence to the principles of lawfulness, fairness, necessity, and good faith; the principles of purpose limitation and data minimization; the principle of openness and transparency; the principle of data quality; and the principle of accountability. Automated decision-making—including user profiling and algorithmic recommendation—must obtain the individual’s consent only after providing adequate notice of the relevant matters pertaining to the processing of personal information, and no product or service may be denied on the grounds that the individual has not given consent.
Third, under the aforementioned rules, the draft introduces specific provisions governing automated decision-making, requiring personal information processors to ensure the transparency of such decisions and the fairness and impartiality of their outcomes. It prohibits the use of automated decision-making to impose unreasonable differential treatment on individuals with respect to transaction terms, including pricing, and mandates that a personal information protection impact assessment be conducted in advance.
Fourth, individuals shall be granted full rights: when personal information processors use automated decision-making to deliver information or conduct commercial marketing to individuals, they must simultaneously provide an option not tailored to the individual’s specific characteristics, or offer a means for the individual to opt out. Moreover, when decisions are made that have a significant impact on an individual’s rights and interests, the individual has the right to request an explanation and the right to refuse having such decisions rendered solely through automated processing.

Notice of the People’s Procuratorate of Haidian District, Beijing, Filing a Civil Public Interest Litigation Against Tencent Computer Systems Co., Ltd. of Shenzhen
In the course of performing its duties, this court has found that the “Youth Mode” feature of WeChat, operated by Shenzhen Tencent Computer Systems Co., Ltd., fails to comply with relevant provisions of the Law of the People’s Republic of China on the Protection of Minors, thereby infringing upon the legitimate rights and interests of minors and involving public interest. Pursuant to Article 55 of the Civil Procedure Law of the People’s Republic of China, organs and relevant organizations prescribed by law may bring civil public-interest litigation; where such organs or organizations initiate proceedings, the People’s Procuratorate may lend its support. In accordance with Paragraph 2 of Article 55 of the Civil Procedure Law of the People’s Republic of China and Paragraph 1 of Article 13 of the Interpretation by the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues Concerning the Application of Law in Public‑Interest Litigation Cases, this notice is hereby issued, inviting any organs or social organizations intending to file a civil public‑interest lawsuit to submit written feedback on the relevant circumstances to this court within thirty days of the issuance of this notice.

Canadian drug trafficker’s second-instance verdict in a Chinese drug-smuggling case: Death sentence upheld.
On August 10, 2021, the Higher People’s Court of Liaoning Province rendered a public second-instance judgment in the appeal case involving Robert Lloyd Schellenberg, a Canadian national, charged with drug smuggling. The court ruled to dismiss the appeal, uphold the original sentence, and, in accordance with the law, submitted the case to the Supreme People’s Court for approval.
The Intermediate People’s Court of Dalian, Liaoning Province, found that the defendant, Robert Lloyd Schellenberg, participated in organized international drug trafficking and, in collusion with others, smuggled 222.035 kilograms of methamphetamine, thereby constituting the crime of drug smuggling. In light of the facts, nature, circumstances, and degree of harm to society posed by the defendant’s offense, the court sentenced Robert Lloyd Schellenberg to death for the crime of drug smuggling and ordered the confiscation of all his personal property, in accordance with the law.
Following the pronouncement of the verdict, the original defendant, Robert Lloyd Schellenberg, filed an appeal. The Liaoning Provincial Higher People’s Court duly constituted a collegiate bench and conducted an open trial. Finding that the facts established in the first instance were clear, the evidence was solid and sufficient, the conviction was accurate, the sentence was appropriate, and the trial procedures were lawful, the court rendered the aforementioned ruling.

The Supreme People’s Court and the Supreme People’s Procuratorate have issued the “Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases of Harboring and Shielding.”
On the 9th, the Supreme People’s Court and the Supreme People’s Procuratorate issued the “Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases of Harboring or Covering Up,” hereinafter referred to as the “Interpretation,” which comprises nine articles and shall take effect as of August 11, 2021.
The Interpretation provides detailed, enumerative specifications of the constituent elements of the crimes of harboring and shielding. It clarifies that, during the period when a person accused of a crime is released on bail pending trial, if a guarantor assists that person in fleeing or, knowing the whereabouts and contact information of the fugitive, refuses to disclose such information to the judicial authorities, the guarantor shall be convicted and punished for the crime of harboring. Furthermore, the Interpretation stipulates that anyone who, knowing that another person has engaged in espionage, terrorism, or extremist criminal activities, knowingly provides false testimony to shield that person when the judicial authorities are investigating the relevant circumstances or collecting evidence, shall be subject to enhanced punishment for the crime of shielding.
As a key provision, the Interpretation explicitly defines “serious circumstances” in cases of harboring or shielding criminals, enumerating five specific scenarios across two categories. First, with respect to the nature of the crime being harbored or shielded and the severity of the offense, four situations are specified: (1) where the person harbored or shielded may be sentenced to life imprisonment or a heavier penalty; (2) where the person harbored or shielded has committed a crime endangering national security, a terrorist or extremist offense, or is an organizer or leader of a triad‑type criminal organization and may face a sentence of ten years’ imprisonment or more; (3) where the person harbored or shielded is a principal offender in a criminal syndicate and may be sentenced to ten years’ imprisonment or more; and (4) where the person harbored or shielded commits another intentional crime during the period of such harboring or shielding, and the new offense carries a potential sentence of five years’ imprisonment or more. Second, regarding the act of harboring or shielding itself, the Interpretation stipulates that “repeatedly harboring or shielding criminals, or harboring or shielding multiple offenders” constitutes serious circumstances.
The Interpretation also sets forth, from three perspectives, the criteria for determining “knowledge” in cases of harboring or shielding a criminal, clarifying that such determination must be made by taking into account the objective facts of the case, the perpetrator’s cognitive capacity, the circumstances under which the perpetrator came into contact with the person being harbored or shielded, as well as the statements of both the perpetrator and the offender—considering both subjective and objective factors.
In addition, the Interpretation sets forth provisions regarding the distinction between criminal and non-criminal conduct, as well as the issue of single versus multiple offenses in cases of harboring or shielding criminals. It clarifies that where, in order to assist the same offender in evading criminal punishment, a person commits acts of harboring or shielding, and simultaneously engages in money laundering, conceals or disguises proceeds of crime and their gains, aids in the destruction of evidence, or fabricates false testimony, such conduct shall be prosecuted under the statute prescribing the heavier penalty, with enhanced punishment applied, and multiple‑offense cumulative sentencing shall not be imposed.

 
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