JC Master Legal News Issue 994

Key Takeaways for This Issue
The Beijing Stock Exchange will open on November 15, drawing attention to the incentive policies offered by many localities for companies listed or delisted on the exchange.
On November 12, the official website of the Beijing Stock Exchange announced: “At present, all preparations for the exchange’s opening are complete, and it is scheduled to commence trading on November 15, 2021.” As is well known, corporate listings play a crucial role in boosting local economic development; accordingly, local governments have long been implementing relevant policies to promote and incentivize such listings.

With the release of favorable policy documents, several API‑related stocks hit their daily upper limits, and some companies have already embarked on an integrated‑operations strategy.

On November 9, the National Development and Reform Commission and the Ministry of Industry and Information Technology issued the “Notice on Implementing Measures to Promote High-Quality Development of the Active Pharmaceutical Ingredient (API) Industry” (hereinafter referred to as the “Notice”), which sets out the goal of, by 2025, developing a portfolio of high‑value‑added, fast‑growing product lines, achieving breakthroughs in a range of green and low‑carbon technologies and equipment, fostering a group of internationally competitive leading enterprises, and establishing several industry clusters and production bases with global influence.

The tax incentives for R&D expenses have been upgraded, providing stronger impetus for innovation.
　A few days ago, the State Taxation Administration released the latest data on tax and fee reductions: in the first three quarters of this year, nationwide tax and fee cuts totaled 910.1 billion yuan, with 788.9 billion yuan in new tax reductions and 121.2 billion yuan in new fee reductions. These impressive results signify a steady easing of the burden on businesses and a boost to the vitality of market entities.
Supreme People’s Court: Clarifies the “Benchmark” for Identifying False Litigation and Strictly Pursues Criminal Liability for Such Cases
In order to prevent the court from enforcing execution against its real estate, the judgment debtor, a certain company, fraudulently assumed the identities of 63 individuals and, in the capacity of third-party purchasers, filed objections to the enforcement proceedings with the court. Following verification of this fraudulent litigation, the court imposed the maximum statutory penalty on the company, fining it RMB 1 million per case for a total of RMB 63 million, and referred relevant criminal leads and pertinent materials to the investigative authorities.

Finance & Capital Markets
Harness the role of public mutual funds as professional institutional investors to support the steady and sound development of the Beijing Stock Exchange.
Deepening the reform of the New Third Board and establishing the Beijing Stock Exchange (hereinafter referred to as the BSE) are important measures for implementing the national innovation-driven development strategy and comprehensively advancing capital market reform. These initiatives will enhance the coverage and alignment of the multi-tiered capital market system with the real economy, while also expanding investment opportunities for public mutual funds. Stocks listed and traded on the BSE fall within the statutory investment scope of public mutual funds, enabling them to invest in BSE‑listed shares in accordance with applicable laws, regulations, and the provisions of their fund contracts. To support industry institutions in developing and designing new fund products focused on the BSE, the China Securities Regulatory Commission recently approved the registration of eight BSE‑themed public mutual funds. These BSE‑themed funds adopt a two-year periodic open-ended structure, with at least 80% of their non‑cash assets allocated to BSE‑listed stocks, thereby bringing additional long-term capital to the exchange.
Fund managers should steadfastly uphold the principle of putting investors’ interests first, proactively assume their responsibilities and mission as professional market investors and as vehicles for inclusive finance, attach great importance to investment-related work on the Beijing Stock Exchange, officely embrace the principles of long-term investing, value investing, and rational investing, continuously enhance their investment research capabilities and compliance‑risk management standards, and effectively fulfill their role as institutional investors in areas such as pricing new share offerings on the Beijing Stock Exchange and secondary‑market trading, thereby contributing to the exchange’s stable and sound development.
Going forward, the China Securities Regulatory Commission will, in line with the overarching principle of seeking progress while maintaining stability, continue to support and guide the public fund industry in expanding its supply of high-quality products, further enhancing its capabilities in value discovery and investment professionalism, and better serving residents’ wealth management needs as well as the financial requirements of the real economy.

The crackdown on virtual‑currency “mining” has transitioned to routine regulatory oversight, with the National Development and Reform Commission stepping in to lay out the next phase of work.
Recently, the National Development and Reform Commission convened a special video conference on the governance of cryptocurrency “mining,” briefing participants on monitoring and enforcement efforts and outlining plans for the next phase of work. The meeting stressed that all provinces, autonomous regions, and municipalities must resolutely implement the relevant directives on curbing cryptocurrency mining, earnestly assume local responsibilities, establish robust regulatory frameworks, strengthen monitoring, and carry out comprehensive clean-up and rectification of cryptocurrency‑mining activities within their jurisdictions. Furthermore, any such activities conducted in data centers owned by state‑owned entities will be rigorously investigated and strictly sanctioned.
In fact, China has largely completed its crackdown on virtual‑currency trading and mining, and the regulatory framework has transitioned to routine oversight. Relevant departments and local authorities are continuing to implement related measures.
Since May, China’s regulatory authorities have taken decisive action to overhaul the cryptocurrency ecosystem and guide the industry toward orderly development. The People’s Bank of China, the National Development and Reform Commission, and other agencies, along with local governments in regions such as Inner Mongolia and Sichuan, have implemented a range of measures to crack down hard on virtual‑currency trading and mining, undertaking extensive efforts across multiple fronts, including rectification and exit, public awareness campaigns, and institutional reforms.
On September 24, regulatory authorities once again took strong measures. The National Development and Reform Commission and ten other departments jointly issued the “Notice on Rectifying Virtual Currency ‘Mining’ Activities,” calling for “strengthening oversight across the entire upstream and downstream value chain of virtual‑currency mining” to further prevent the resurgence of such activities within China. On the same day, the People’s Bank of China and nine other agencies also introduced policies to crack down on “virtual‑currency speculation.”
“Regulators’ continued interventions are driven by concerns such as preventing localized systemic risks, safeguarding investor interests, and maintaining orderly market conditions,” said Zhou Maohua, a macro researcher in the Financial Markets Department of China Everbright Bank, in an interview with reporters. He noted that virtual currencies are often exploited for illicit activities like money laundering, illegal fundraising, and tax evasion. Meanwhile, “mining” of virtual currencies—led by Bitcoin—poses significant energy‑intensive challenges and runs counter to the dual‑carbon strategy, drawing widespread criticism over the years.
Reporters have noted that, since the issuance of the “September 24 New Regulations” aimed at cracking down on virtual currencies, local authorities have ordered renewed, in-depth inspections, launched special enforcement campaigns, and instituted routine monitoring of electricity usage to ensure that all mining equipment is dismantled and removed, while rigorously rooting out any remaining illicit operations. According to incomplete statistics, since October, numerous provinces and cities—including Zhejiang, Jiangsu, Inner Mongolia, and Dongguan—have disclosed measures they have taken to address cryptocurrency “mining.”
Specifically, Zhejiang and Jiangsu have conducted comprehensive investigations. In Zhejiang, monitoring identified 184 IP addresses across 77 entities within the province suspected of using public resources for cryptocurrency mining. In Jiangsu, monitoring revealed a total of 4,502 internet IP addresses engaged in mining, consuming 260,000 kWh per day. Meanwhile, Inner Mongolia and Dongguan disclosed enforcement actions against mining equipment: the Development and Reform Commission of Bayannur City in Inner Mongolia seized 10,100 cryptocurrency‑mining rigs, while Dongguan uncovered enterprises exploiting computer and graphics‑card recycling operations to carry out virtual‑currency mining, with over 260 mining machines confiscated at two locations.
In addition, Beijing’s “Implementation Plan for Further Strengthening Energy Conservation” also underscores the need to identify and phase out virtual‑currency “mining” activities. Earlier, in early September, Gansu and Hebei provinces likewise launched targeted crackdowns on virtual‑currency mining and trading, instituting ongoing regulatory oversight.
From the perspective of mining companies, in response to domestic regulatory policies, numerous mining-related entities—including Bitmain, Spark Pool, BeePool, Easy Miner, and the GPU‑based mining rig management software NBMINER—have either suspended services for mainland Chinese users or shut down entirely.
Song Jingyi, an attorney at Beijing Jingshi Law Office, told reporters that cryptocurrency “mining” consumes vast amounts of computing power, operates continuously day and night, and requires substantial energy—making unauthorized connections to electrical circuits for illicit mining potentially constitute theft. Moreover, the lack of traceability and information asymmetry inherent in cryptocurrency mining create opportunities for criminals, with large sums of money flowing into the crypto market and a growing array of mining‑related crimes, including schemes to defraud investors and abscond with funds.

The “long-tail logic” of the Beijing Stock Exchange deserves attention.
On November 15, the Beijing Stock Exchange (hereinafter referred to as the “BSE”) will officially open for trading, with an initial cohort of 81 listed companies. In accordance with the important instructions of General Secretary Xi Jinping, the BSE has been meticulously prepared, advancing steadily and confidently, and marking a significant milestone in the development of Beijing’s financial district. Deepening the reform of the New Third Board and establishing the BSE represent a crucial step in perfecting China’s multi-tiered capital market system, optimizing the structure and layout of the capital market, and further meeting the financing needs of innovative small and medium-sized enterprises seeking to go public.
Establishing the Beijing Stock Exchange on the foundation of the Select Tier of the New Third Board represents a groundbreaking institutional innovation. Following the BSE’s launch, the Select Tier will be phased out, leaving only the Base Tier and the Innovation Tier. To list on the BSE, companies must first qualify for the Innovation Tier; meanwhile, listed companies in the Base Tier may advance to the Innovation Tier once they meet the requisite criteria. In this way, the New Third Board not only provides market‑based, differentiated services to small and medium‑sized enterprises across multiple tiers but also establishes a pyramidal, stepwise structure within a single market framework. This institutional design draws on the tiered model of the U.S. Nasdaq while closely aligning with the actual needs of Chinese SMEs—considering their size, stage of development, and innovation priorities—thereby highlighting distinctly local characteristics.
In January 2013, building on the Zhongguancun pilot program for share transfer agency services, the National Equities Exchange and Quotations System for Small and Medium-sized Enterprises was launched. In December of the same year, the State Council issued the “Decision on Relevant Issues Concerning the National Equities Exchange and Quotations System for Small and Medium-sized Enterprises,” thereby accelerating the market’s growth and development. Since 2016, the New Third Board has progressed through two phases—first establishing the Innovation and Basic tiers, and later introducing the Select, Innovation, and Basic tiers—with its tiered structure continuously refined. To meet the growing demand for institutional support among SMEs, further deepening capital market reform has become imperative.
General Secretary Xi Jinping personally oversaw the deepening reform of the New Third Board and the establishment of the Beijing Stock Exchange, underscoring the CPC Central Committee’s high regard for the development ecosystem of small and medium-sized enterprises and sending a strong signal to steer high-quality economic growth and advance supply-side structural reform in the capital market.
For a long time, leveraging institutional innovation to foster the innovative development of small and medium-sized enterprises (SMEs) and establishing effective mechanisms that facilitate their access to financing and help them pool high-quality resources has remained a critical challenge urgently in need of resolution. Striking a balance between easing SMEs’ access to finance and effectively managing financial risks is a global conundrum. In China, the establishment of the New Third Board market has placed SMEs’ financing needs at the forefront, while strengthening institutional innovation in the capital markets, yielding positive results. To date, the New Third Board has attracted a large number of rapidly growing SMEs with strong industry‑specific innovation capabilities; cumulative fundraising by listed companies has reached RMB 551.279 billion, and market activity continues to pick up. As of November 9, a total of 112 New Third Board‑listed companies have been admitted to the Shanghai and Shenzhen stock exchanges this year.
At the same time, the New Third Board must further expand its capacity to serve small and medium-sized enterprises. Whether it is the trading mechanism, the refinancing framework, or the exit channels, as well as mechanisms supporting mergers and acquisitions, technological innovation, and industrial collaboration, all require continuous refinement in light of the latest developments. Within the New Third Board’s institutional framework, the Beijing Stock Exchange, along with the Innovation Layer and the Basic Layer, also face numerous challenges in better fulfilling their mission of fostering the innovative growth of SMEs. Improving the tiered structure, providing tailored services at different stages of corporate development, and establishing a market mechanism that allows for both entry and exit while ensuring survival of the fittest—thereby aligning market risk management with effective price discovery—are essential steps toward optimizing the capital market’s institutional framework.
In response to the practical needs of China’s economic development, the reform of the New Third Board and the establishment of the Beijing Stock Exchange aim to bring as many promising, innovation‑driven, and competitively strong small and medium‑sized enterprises into the market, enabling them to thrive through market‑based selection and survival of the fittest. By establishing the Beijing Stock Exchange on the foundation of the New Third Board’s Select Tier, while simultaneously refining the institutional frameworks of the Innovation Tier and the Basic Tier, this approach not only meets the financing and growth needs of SMEs at all levels but also creates a seamless pathway for companies at different stages of development and of varying scales to advance, thereby unleashing the dynamism of enterprises in innovation, creation, and entrepreneurship.
The “long-tail theory” provides a useful framework for understanding the relationship between the Beijing Stock Exchange and the Innovation and Basic tiers within the New Third Board system. Originally conceived to describe business and economic models in the internet era, the theory posits that while mass demand tends to cluster at the top—what is referred to as the “head”—individualized, niche demands form a long “tail.” For example, a large brick-and-mortar bookstore typically stocks around 100,000 titles to satisfy mainstream, high‑volume demand; yet, one quarter of Amazon’s online sales come from books ranked beyond the top 100,000. This illustrates that, although individual tail‑end demands are relatively small, their cumulative scale can be substantial.
The comprehensive institutional framework of the Beijing Stock Exchange, together with the Innovation and Basic tiers, is designed to address the long-tail needs of the corporate base and provide differentiated, broad‑based services to a wide range of small and medium-sized enterprises. Within the entire New Third Board market, the Beijing Stock Exchange serves as the “leading force,” while the Innovation and Basic tiers form the foundation—essentially constituting the long‑tail segment. Moreover, even enterprises that are preparing to enter the Basic tier can be regarded as part of this long‑tail. In my view, this institutional design represents a pragmatic choice for a modern capital market with Chinese characteristics and an innovative arrangement. Only by continuously deepening our understanding of the role and significance of SMEs and by refining policies and measures across resource allocation, institutional provision, and equal opportunity can we establish a multi‑tiered capital market system that is well suited to China’s specific circumstances.
Since its establishment in 2013, the New Third Board market has now entered its ninth year, during which it has accumulated invaluable institutional and practical experience. The launch of the Beijing Stock Exchange represents a major step forward in deepening the capital market’s alignment with the needs of small and medium-sized enterprises. First, it enables more companies to access capital market services on an equal footing, enhancing the market’s inclusiveness. Second, the Beijing Stock Exchange’s listing and issuance criteria are more flexible than those of the STAR Market and the ChiNext, further facilitating direct financing for SMEs. We are confident that, as the Beijing Stock Exchange begins trading, a new phase of complementary and coordinated development among China’s multi-tiered capital markets will soon unfold. This will expand the scope of the capital market in supporting the high-quality development of the real economy and meeting investors’ diversified investment needs, while accelerating the momentum toward integrated growth across large, medium, and small enterprises.

The Beijing Stock Exchange will open on November 15, drawing attention to the incentive policies offered by many localities for companies listed or delisted on the exchange.
On November 12, the Beijing Stock Exchange’s official website announced: “At present, all preparations for the exchange’s opening are complete, and it is scheduled to commence trading on November 15, 2021.” As is well known, corporate listings play a crucial role in boosting local economic development; accordingly, local governments have long implemented supportive policies and incentive measures. With the Beijing Stock Exchange poised to open, reporters have compiled an overview of the various mechanisms and incentives that regions have put in place to encourage companies to list on the exchange—whether through a formal IPO or by listing on the New Third Board.
Chengdu: Companies listed on the Beijing Stock Exchange, as well as those that relocate their headquarters to Chengdu, will each receive a reward of up to RMB 3.5 million.
In October, the Chengdu Municipal Local Financial Supervision and Administration Bureau released the “Several Support Policies of Chengdu for Enterprises Listing on the Beijing Stock Exchange (Draft for Comments)” (hereinafter referred to as the “Support Policies”). The Support Policies are divided into three components: listing‑related rewards, financing support, and comprehensive assistance for prospective listed companies. Among the listing‑related incentives, the most notable is a reward of RMB 3.5 million: enterprises that complete an initial public offering on the Beijing Stock Exchange will receive a reward equal to 1% of their net proceeds from the offering (after deducting issuance expenses), capped at RMB 3.5 million. Additionally, newly relocated Beijing Stock Exchange‑listed companies based in Chengdu will be granted a one‑time reward of RMB 3.5 million.
In the financing support section, it is stipulated that venture capital management offices investing in eligible companies listed on the New Third Board will receive a reward equal to 1% of the actual investment amount received, with a maximum annual reward of RMB 5 million per office. Under the comprehensive support for reserve enterprises, companies awarded the national “Little Giant” title for specialized, refined, distinctive, and innovative enterprises will receive a one-time reward of RMB 200,000, thereby encouraging such enterprises to actively pursue listing on the New Third Board or the Beijing Stock Exchange.
Beijing: The Chaoyang District Cultural and Creative Industry Pilot Zone offers a reward of RMB 1 million to enterprises listed on the New Third Board.
In April 2021, the Beijing Municipal People’s Government issued the “Several Measures to Further Enhance the Quality of Listed Companies in Beijing.” The measures stipulate that policies providing subsidies for companies seeking to list or be quoted on stock exchanges in Beijing will continue to be implemented, while also promoting targeted incentives such as rewards for high‑end talent, subsidies for R&D expenses, support for technology‑focused credit, and science‑and‑technology grants, thereby enriching the pool of potential listing candidates. Furthermore, the measures encourage stock exchanges and the National Equities Exchange and Quotations System for Small and Medium‑Sized Enterprises to carry out capacity‑building programs for companies planning to go public or be listed. Individual districts in Beijing have also introduced corresponding specific measures; for example, on October 31, 2019, the Management Committee of the Cultural and Creative Industries Experimental Zone in Chaoyang District, Beijing, released the “50 Policies” for the National Cultural Industries Innovation Experimental Zone, which provides that, upon meeting certain criteria and based on expert scoring, enterprises successfully listed on the New Third Board may receive a reward totaling no more than RMB 1 million.
Yingtai Bio, located in Changping District, Beijing, is the first company nationwide to pass both the guidance and acceptance review by the Securities Regulatory Commission and the listing committee of the New Third Board, and also among the first batch to receive approval from the CSRC for a public offering on the Select Tier of the New Third Board. In February 2021, the Changping District Government issued the “Measures to Support Enterprises in Listing and Publicly Trading (Trial)” (Document No. 5 [2021] of the General Office of the Changping District Government). These measures stipulate that a pool of key enterprises—characterized by prominent core businesses, strong competitiveness, and robust profitability—should be dynamically identified and established as a reserve of potential listing candidates for Changping District. Enterprises included in this pool will be subject to “classified management, phased cultivation, tiered prioritization, and targeted support,” with tailored one‑on‑one assistance and end-to-end guidance, along with streamlined service processes and enhanced service quality. In October 2021, the Financial Office of the Changping District Government also organized a specialized training session for key companies planning to list on the Beijing Stock Exchange, inviting experts from the exchange to provide a detailed explanation of the background, main contents, significance, and strategic framework of the New Third Board reform.
Tianjin: Enterprises listed on the Basic Tier, Innovation Tier, and Select Tier can earn rewards at every stage.
According to the “Administrative Measures for Special Funds Supporting Enterprise Listings in Tianjin Municipality,” issued by the Tianjin Municipal Finance Bureau in October 2020, the municipal finance will provide a one-time subsidy of RMB 1 million to enterprises that successfully list on the Basic Tier of the National Equities Exchange and Quotations for Small and Medium-sized Enterprises (hereinafter referred to as the New Third Board); a one-time subsidy of RMB 1.2 million to enterprises that successfully list on the Innovation Tier of the New Third Board; and a one-time subsidy of RMB 200,000 to enterprises that, after being nurtured on the Basic Tier, successfully transfer to the Innovation Tier. Furthermore, for Innovation‑Tier listed companies that subsequently transfer to the Select Tier, issue shares publicly, and list there, the same level of support shall apply as for companies listing on the Shanghai Stock Exchange or the Shenzhen Stock Exchange.
Shanghai: The Lingang New Area of the Free Trade Zone will award RMB 1 million to companies that enter the Select Tier.
On March 24, 2021, the Office of the Administrative Committee of the Lingang New Area of the China (Shanghai) Pilot Free Trade Zone issued the “Implementation Opinions on Leveraging the Capital Market to Promote High-Quality Development of Enterprises in the Lingang New Area.” The document stipulates that enterprises which, following shareholding reform, enter the Select Tier of the National Equities Exchange and Quotations for Small and Medium-sized Enterprises will receive a one-time reward of RMB 1 million; furthermore, enterprises that successfully transfer from the Select Tier to list on a domestic stock exchange will be granted a one-time reward of RMB 4.7 million. On July 14, 2021, the People’s Government of Pudong New Area promulgated the “14th Five-Year Plan for the Development of the Jinqiao Area of the Free Trade Zone.” The plan projects that, by 2025, an additional 10 enterprises will be listed on the STAR Market, the New Third Board, or overseas markets, while fostering and cultivating a group of benchmark companies characterized by robust innovation and strong growth potential.
Chongqing: Awards of RMB 600,000 to key enterprises being nurtured for listing on the New Third Board.
In 2019, Chongqing Municipality issued the “Measures for Financial Rewards and Subsidies for Key Enterprises Nurtured for IPOs in Chongqing” (effective until December 31, 2022). The Measures stipulate that “for key enterprises slated to list on a domestic stock exchange, a reward of RMB 500,000 will be granted upon completion of shareholding reform; another RMB 500,000 will be awarded upon formal acceptance of the listing application; and a further RMB 1 million will be provided upon successful review.” For key enterprises listed on the National Equities Exchange and Quotations for Small and Medium-sized Enterprises, a reward of RMB 600,000 will be granted upon approval. On August 6, 2021, the Chongqing Municipal Bureau of Local Financial Regulation published the first batch of 2021 list of key enterprises earmarked for IPOs, which includes: Chongqing Zijian Electronics Co., Ltd., Dongyuan Renzhi Urban Operation Service Group Co., Ltd., Chongqing Zhongyuan Huiji Biotechnology Co., Ltd., Chongqing Tianjiao Ailife Service Co., Ltd., and Chongqing Guangren Iron Tower Manufacturing Co., Ltd.
Shenzhen: Enterprises listed on the Basic and Innovation tiers can receive cumulative rewards of up to RMB 800,000.
In February 2021, the Shenzhen Bureau of Industry and Information Technology issued the “2022 Application Guidelines for the Private and Small‑and‑Medium‑Sized Enterprise Innovation Development, Cultivation, and Support Program, Including Subsidies for Restructuring and Listing.” The guidelines stipulate that enterprises already successfully listed on the New Third Board will receive a reward of up to RMB 500,000; those advancing to the Innovation Layer of the New Third Board will receive an additional reward of up to RMB 300,000, on top of the listing incentive. The guidelines further specify that project entities that were included in the 2020 New Third Board Innovation Layer list, or that achieved a successful listing on the New Third Board between January 1, 2020, and December 31, 2020, are ineligible for the “New Third Board” listing reward if they have previously received restructuring‑stage funding, nor are they eligible for the Innovation‑Layer entry reward if they have already received guidance‑stage funding.
Weifang: Provides phased subsidies totaling RMB 14 million to companies listed on the Beijing Stock Exchange.
In October 2021, Weifang City issued the “Several Policies of Weifang City on Further Supporting Enterprises in Accelerating Their IPOs.” According to these policies, enterprises planning to list on the Shanghai Stock Exchange, the Shenzhen Stock Exchange, or the Beijing Stock Exchange will receive phased subsidies totaling RMB 14 million per company. Specifically, after passing the guidance and acceptance review by the Shandong Securities Regulatory Bureau, each company will receive RMB 4 million; upon approval by the China Securities Regulatory Commission’s Issuance Review Committee or the stock exchange’s Listing Committee, an additional RMB 6 million will be granted; and once the IPO is successfully completed, another RMB 4 million will be provided.
The policy also stipulates that, for enterprises seeking to list on the Basic Tier or Innovation Tier of the National Equities Exchange and Quotations System for Small and Medium-sized Enterprises, a subsidy will be granted—upon listing and after raising direct financing—equal to 5% of the actual amount of direct financing raised in the year of listing, with a maximum subsidy of RMB 1 million per enterprise.

Commercial & Corporate
The fossil fuel era is coming to an end, as COP26 reached an agreement to phase down coal use.
After two weeks of arduous negotiations, the United Nations Climate Change Conference, COP26, finally reached an agreement on Saturday, following a one-day extension of the session. For the first time, the conference identified fossil fuels as the primary driver of global warming. This means that, going forward, countries will need to strive to phase out the use of fossil fuels, marking the beginning of the end of the fossil‑fuel era.
The adoption of this climate‑negotiation agreement was marred by last‑minute complications. China, India, and other coal‑dependent nations proposed amendments to the text, replacing the original wording—“phase out” coal use—with “phase down” coal use. This subtle change bought developing countries both time and leeway.
Increased demand for high-quality raw materials
In the future, sectors such as energy, steel, and transportation will become key areas for emissions reduction. On Friday, the Metallurgical Industry Planning & Research Institute, a Chinese industry association, stated that as the world’s largest steel producer, China’s demand for steelmaking raw materials—such as iron ore and coking coal—will slow down and gradually shift toward the development of higher‑quality inputs, in order to fulfill its climate commitments.
At present, the ferrous metals sector accounts for roughly 15% of China’s total carbon emissions. Against the backdrop of peaking carbon emissions and achieving carbon neutrality, this poses significant challenges for industries such as coal and iron ore, with the road to meeting emission‑reduction targets still long and arduous.
Li Xinchuang, President of the China Metallurgical Industry Planning and Research Institute, forecasts that as China strengthens its environmental protection and low-carbon requirements, demand for high-quality iron ore will gradually rise. For instance, the supply of scrap steel— a substitute for iron ore—is expected to increase in the coming years.
Compared with iron ore, scrap steel generates far lower carbon emissions and is much cleaner. Li Shubin, executive vice president of the China Iron and Steel Scrap Application Association, forecasts that by 2025, China’s scrap steel utilization rate will rise from its current 22% to 30%. Meanwhile, Cui Peijiang, president of the China Coking Coal Industry Association, stated that coking coal consumption will decline over the medium to long term, and resource supply should remain relatively stable.
However, products produced using clean technologies will remain more costly for a considerable period, as green steel or aviation fuel, for instance, are functionally equivalent to their conventional counterparts—making it difficult to attract buyers. Consequently, the commercialization of green manufacturing is likely to be a protracted process that will require concerted efforts across the industry ecosystem.
Dr. Xiao Song, Siemens’ Global Executive Vice President and Chairman, President, and CEO of Siemens China, told a reporter from Caixin: “The energy sector is the largest source of carbon dioxide emissions in China’s national economy. Although China has made significant progress in promoting clean energy over the past decade and more, it still faces challenges in its decarbonization journey, including coal-fired power remaining the mainstay of electricity generation, mismatches between clean‑energy supply and demand, and low penetration rates of green technologies in the transmission and distribution networks.”
The price of green renewable energy remains to be reduced.
In a recently released “Siemens China Carbon Neutrality White Paper,” Siemens identifies key challenges in decarbonizing sectors such as energy, chemicals, and transportation, calling for further reforms of the energy and power systems from both policy and market perspectives. Specifically, it advocates shifting from a coal‑dominated, high‑carbon power generation mix to a low‑carbon energy structure centered on clean energy sources. On the technological front, measures such as hydrogen‑blending gas turbines can help reduce greenhouse gas emissions, while in the medium to long term, robust development of multi‑energy complementary systems, distributed energy networks, microgrids, and smart grids is essential.
In the transportation sector, amid challenges such as steadily rising passenger‑car demand, a low share of new‑energy vehicles, and immature new‑energy technologies, automakers worldwide have begun collaborating to explore hybrid‑power and vehicle‑lightweighting technologies aimed at reducing overall fuel consumption. They are also investigating clean‑fuel solutions—such as fuel cells and hydrogen energy—to drive a transition toward electrification, diversification, and greater environmental sustainability.
Recently, this trend has also extended to collaborations between multinational automakers and Chinese technology offices. Earlier this month, Japan’s Toyota Motor Corporation and Shanghai Re-Fire Technology, a leading Chinese fuel-cell developer, announced a partnership to jointly develop fuel-cell systems for commercial vehicles. Toyota plans to invest $13.5 billion over the next decade to expand its battery‑production capacity, while simultaneously ramping up development of hydrogen‑powered vehicles. Under Japan’s national goals, the country aims to achieve carbon neutrality by 2050.
Daimler Truck, which is set to go public in Frankfurt next month, is also exploring pathways for electrifying heavy-duty trucks. In a recent media interview, Daimler Truck CEO Martin Daum discussed the challenges of commercializing electric trucks, noting that battery‑electric trucks are significantly more expensive than their internal‑combustion‑engine counterparts.
“If the prices of green, renewable energy fall while the costs of road transport using carbon‑emitting vehicles rise, electric heavy‑duty trucks will gradually reach cost parity,” said Daum. He believes that, in any case, automakers must “move straight toward zero‑emission transportation.” Daimler Truck also plans to establish, by 2030, a network comprising 150 refueling stations and 5,000 heavy‑duty hydrogen fuel‑cell trucks.
In its 2021 Global Electric Vehicle Outlook, the International Energy Agency also characterized long-haul trucking as requiring “advanced technologies such as high-power charging and/or large‑scale batteries.” In China, automakers led by Geely are developing electric trucks, with Geely’s electric heavy-duty trucks expected to hit the market in 2024.

New infrastructure and digitalization will become powerful tools for State Grid’s carbon neutrality goals.
On November 13, the “2021 China Energy Development Summit Forum,” hosted by China Business News and organized by Zhongjing Weilai, was held in Beijing. Lu Gang, Director of the Institute of Energy Strategy and Planning at State Grid Energy Research Institute Co., Ltd., attended and participated in the roundtable discussion.
Lu Gang stated, “The ‘dual carbon’ goals represent a systemic transformation of the economy and society, with far‑reaching, all‑encompassing opportunities. They will drive innovation in energy‑use technologies, thereby spurring industrial development—much like how each historical wave of energy‑technology revolutions sparked an industrial revolution. I believe we are on the cusp of a period of explosive growth.”
At present, major global economies—including the United States, the European Union, Japan, and Germany—are all pursuing low-carbon economic development, leveraging the carbon economy to drive economic recovery and secure a leading position on the global stage in the years ahead.
In the energy sector, building a new type of power system centered on new energy sources is an inevitable trend. In this regard, Lu Gang stated that the emerging power system will enter a period of significant market opportunities and represents an industry with the potential to drive economic growth and generate new momentum.
In Lu Gang’s view, under a new‑type power system dominated by new energy sources, the structure of the industrial chain will undergo significant changes. “First, the industrial chain will be much longer than in the past; whereas it previously ended at oil and gas, today, with the development of hydrogen energy, CCUS, and a host of other products and technologies, upstream and downstream sectors—such as metals, mineral resources, industry, construction, and transportation—are becoming increasingly interconnected. Second, this integration will deepen further, whether it involves the convergence of generation and demand sides or the complementary use of multiple energy forms at the end‑user level; market opportunities arising from such integration are growing markedly. Finally, as an essential factor of production, energy will be increasingly intertwined with green finance, new infrastructure, and the digital energy economy, while emerging business models, formats, and technologies will continue to proliferate.”
Meanwhile, with the development of new energy sources, the power grid system is also facing new challenges.
Lu Gang stated that, on the one hand, the randomness and volatility of new energy sources pose challenges to system operation and power‑balance management. On the other hand, the expansion of new energy increases grid‑operation costs. It is projected that, during the 14th Five‑Year Plan period through 2030, in addition to declining generation costs, the associated system‑integration costs will rise sharply—by as much as two to three times.
As new energy continues to expand, the increasing share of renewable sources and the growing prevalence of power electronics are becoming increasingly pronounced, profoundly impacting the traditional technological and operational‑control foundations of the power system. Consequently, the entire power system is facing systemic challenges.
In response, Lu Gang stated that this impact is also all‑encompassing. It calls for the entire society to work together to establish a comprehensive supply‑security framework—extending beyond the generation side to include coal‑to‑power fuel supply, improvements in grid‑wide allocation efficiency, and proactive participation from demand‑side users. In essence, it involves an integrated “source–grid–load–storage” approach, requiring concerted efforts from the government and all stakeholders.
Lu Gang pointed out that, whether in terms of macro-level systemic security or future carbon‑related emissions‑reduction management, new infrastructure and digitalization hold significant application potential and will serve as powerful tools for State Grid Corporation to achieve carbon neutrality.
“Digitalization will become a major development trend for the energy sector. During the 14th Five-Year Plan period, smart energy is also a key priority for national policy. Under the new‑type power system, a critical challenge is how to seamlessly integrate ‘generation‑grid‑load‑storage’ across vast spatial and temporal scales, achieve multi‑energy complementarity, and interconnect electricity, heat, hydrogen, and carbon management. This requires unifying all these elements, links, and resources—something that hinges on information‑based approaches. Moreover, in the future, managing, verifying, and reporting carbon assets will go beyond mere measurement; the more pressing issue will be standardization, which will continue to rely on technologies such as blockchain and tamper‑proof chips to enable refined, granular oversight,” said Lu Gang.

Debt repayment, share buybacks, and guaranteed principal and interest payments: Property developers unveil three key strategies to “weather the winter safely.”
“Relying on others is not as good as relying on oneself; being rescued by others is not as effective as rescuing oneself.” As the real estate sector enters a harsh winter, most developers have adopted self‑rescue measures to weather the downturn. Recent initiatives reveal that, on the financing front, companies are engaging in intensive buybacks of U.S. dollar bonds, with executives personally stepping in to increase their shareholdings and “mediate” with rating agencies to bolster investor confidence; on the sales front, they are launching aggressive promotional campaigns, prioritizing cash collection, and striving to meet their revenue targets; and on the asset side, spinning off property management units for public listings and divesting high‑quality assets to alleviate liquidity pressures—each of these strategies has become part of developers’ self‑rescue playbook. With the depths of winter upon us, ensuring survival and achieving sustainable growth has become the top priority for every real estate office.
Redeem U.S. debt
In recent months, defaults on U.S. dollar‑denominated bonds have gradually escalated into a broader crisis across the real estate sector. According to incomplete statistics, since the beginning of this year, as many as nine Chinese‑issued U.S. dollar bonds have defaulted, including well‑known developers such as Fantasia, Huaxia Happiness, Tahoe Group, New World China Land, Panhai Holdings, and Bluetech Development. The total amount of delayed or unpaid principal and interest now exceeds US$28 billion. The fallout from these bond defaults has triggered a credit crunch and severe financing difficulties, drawing close attention from top government officials. On October 26, the National Development and Reform Commission and the State Administration of Foreign Exchange convened several major issuers in Beijing. Media reports indicate that the companies in attendance are among the largest borrowers in the U.S. dollar‑denominated real estate bond market; the meeting aimed to assess outstanding maturities, funding readiness for repayments, refinancing plans, and overall liquidity arrangements.
However, as U.S. dollar‑denominated bonds have turned into an industry “black swan,” a domino effect is now unfolding. Even some property developers that were previously on track to meet their obligations have been caught in the crossfire. For instance, on November 5, Shimao Group first found itself mired in rumors of negotiations with Lujiazui Trust over a debt extension, only to suffer a double whammy in the market—both its shares and bonds came under heavy selling pressure. In response, Xu Shitan, Vice Chairman of the Board and President of Shimao Group, urgently convened an investor briefing, stating, “We have no U.S. dollar‑denominated bonds maturing this year. The company will soon initiate share and bond buybacks, aiming to bolster market confidence.” That evening, Shimao Group issued an announcement conofficeing that it had redeemed notes totaling US$1.5 million in principal on the open market. With nerves on edge, the entire real estate sector has become acutely sensitive to even the slightest ripple. As property developers face an unprecedented test of their creditworthiness, many are proactively repurchasing U.S. dollar‑denominated bonds ahead of schedule to restore market confidence.
According to an incomplete tally by reporters, as of November 9, more than 20 property developers—including Rongrong Property, Xincheng Holdings, Jinhui Holdings, Jianye Real Estate, Sunac China, Ronsin China, Xiangsheng Holdings, Aoyuan Group, China Jinmao, and China Aoyuan—have repurchased their U.S. dollar‑denominated bonds.
According to data released on October 20 by CRIC, since the second half of this year, 18 property developers have repurchased U.S. dollar‑denominated bonds, with a total of 100 buybacks. The cumulative amount of overseas bonds and notes repurchased has reached US$1.56 billion, accounting for 4.07% of the original issuance size. Notably, China Liang Holdings alone carried out 25 redemptions of offshore bonds. CRIC believes that the intensive repurchase of U.S. dollar bonds by property developers is aimed, on the one hand, at debt restructuring and easing pressure from short‑term maturities, and, on the other hand, primarily at bolstering market confidence and maintaining stability.
Frequent increase in holdings
Not only have offshore U.S. dollar bonds declined, but the share prices of many property developers have also been on a steady downward trend. According to Wind Financial Terminal, from the end of 2019–2020 through the present in 2021, the total market capitalization of the real estate development sector on the Hong Kong stock market stood at RMB 3.027573 trillion, RMB 2.416346 trillion, and RMB 1.830838 trillion, respectively, showing a year-on-year decline. Compared with the end of 2019, prior to the outbreak of the pandemic, the overall market capitalization of the real estate development sector has now fallen by 39.53%.
To shore up their stock prices, many major shareholders of property developers have begun buying back shares against the market trend, aiming to bolster investor confidence. According to an incomplete tally by a Beijing News reporter, as of now, shareholders from companies including Country Garden, Shimao Group, R&F Properties, China South Construction, Yuzhou Group, Greentown China, and Shangkun Property have successively increased their stakes in an effort to support share prices and strengthen second‑tier market investors’ confidence. Among them, Lin Long’an, chairman of Yuzhou Group, has been the most active: in October alone, he boosted his holdings four times, purchasing a total of 11.222 million shares at a combined cost of HK$10.2831 million.
China Communications Construction Real Estate, a major shareholder of Greentown China, has also stepped in with a substantial move to support the stock. On October 25, it increased its stake in Greentown China by purchasing 4.9655 million shares at an average price of HK$10.96 per share, for a total investment of approximately HK$54.422 million.
With less than half of November gone, Yang Huiyan, Executive Director and Co-Chairwoman of Country Garden, has already made two substantial share‑buying moves in succession. On November 2, she purchased 5 million shares on the market at an average price of approximately HK$7.23 per share, for a total outlay of about HK$36.164 million. Then, on November 9, according to the latest equity disclosure filings with the Stock Exchange, she acquired another 10 million shares at an average price of roughly HK$7.35 per share, amounting to approximately HK$73.491 million. As a result, her shareholding rose from 60.83% to 60.88%.
In addition, Ling Ke, chairman of Gemdale, who has not increased his stake in the secondary market over the past decade, made his first move on September 16, purchasing an additional 100,000 shares of Gemdale Group to address the temporary volatility in the company’s stock price.
Guaranteed principal and interest
In addition to actively redeeming U.S. dollar bonds and major shareholders increasing their stakes to bolster investor confidence, property developers are also focusing on “guaranteeing principal and interest payments” as a self‑rescue measure to avert defaults.
At an investor conference on November 5, Xu Shitan stated: “For now, our priority is to uphold implicit guarantees and concentrate resources to ensure bond repayments; as for other matters, we’ll have to wait and see how the market evolves. If financing resumes smoothly going forward, we will still acquire land.” As a property developer that meets the “three red lines” criteria—classified as a “green‑tier” company—Shimao Group is also feeling pressure from both industry dynamics and cash‑flow constraints. “Our original sales target was RMB 330 billion, which would require roughly RMB 30 billion per month. But in recent months, we’ve been averaging around RMB 20 billion, so this year’s total is likely to be about RMB 290 billion,” Xu Shitan admitted, adding that meeting this year’s sales forecast will be challenging. Meanwhile, a representative from Kaisa Group noted that the company is currently prioritizing four key areas—ensuring timely project deliveries, safeguarding wealth and maintaining implicit guarantees, paying construction‑related invoices, and ensuring employee wages—and urged financial institutions to refrain from cutting off credit or calling in loans, while also extending maturities where appropriate.
From an industry perspective, on the one hand, overseas U.S. dollar bonds have run into obstacles, while the development loans and mortgage financing that property developers have long relied on remain unavailable, leading to severe liquidity pressures. On the other hand, amid tightened oversight of pre-sale fund escrow in various regions, even proceeds from property sales sometimes fail to be promptly consolidated at the group level.
“The previous high-leverage model is no longer sustainable,” a Vanke official stated bluntly at a symposium on Shenzhen’s real estate market. “Under the past fast‑turnover model, as soon as a project company collected prepayments, the group would siphon them off to fund further land acquisitions and expansion, with construction funds only flowing back later—this approach can no longer be sustained.” In the new market environment, navigating the final two months of 2021 has become a critical test for property developers, with most now viewing the situation as a matter of survival. An executive from a small-to-medium-sized developer that went public last year told our reporter: “We haven’t acquired any land in the second half of the year—keeping a very low profile. ‘Survival’ is our top priority. We have a U.S. dollar bond maturing in the first half of next year, and we’re already lining up the necessary funds; under no circumstances can we afford to default at this juncture.”

With the release of favorable policy documents, several API‑related stocks hit their daily upper limits, and some companies have already embarked on an integrated‑operations strategy.

On November 9, the National Development and Reform Commission and the Ministry of Industry and Information Technology issued the “Notice on Implementing Measures to Promote High-Quality Development of the API Industry” (hereinafter referred to as the “Notice”), which sets out plans to, by 2025, develop a portfolio of high-value-added, fast-growing products; achieve breakthroughs in a range of green and low-carbon technologies and equipment; cultivate a group of internationally competitive leading enterprises; and establish several industry clusters and production bases with global influence. In response to this favorable policy, on November 10, many stocks in the API sector rose, with several—including Tuoxin Pharmaceutical, Tianyu Shares, Benli Technology, and Aoxiang Pharmaceutical—reaching their daily upper limits.
China has become the world’s largest producer and exporter of active pharmaceutical ingredients (APIs). According to data from the Ministry of Industry and Information Technology in 2020, the country is home to more than 1,500 API manufacturers, covering areas such as vitamins, antibiotics, antipyretic‑analgesic drugs, anti‑infective agents, and corticosteroids. Public statistics indicate that China accounts for 9% of global API supply, while India holds 12%. In 2019, China’s API exports surpassed the 10‑million‑ton threshold, reaching 10.1185 million tons—a year-on-year increase of 8.83%—with export value totaling US$33.683 billion, up 12.1% from the previous year. China’s APIs are exported to 189 countries and regions, with the majority concentrated in three major markets—Asia, Europe, and North America—which together account for 89% of the nation’s total API export value.
Shi Lichen, head of the Beijing Dingshen Pharmaceutical Management Consulting Center, told a reporter from The Beijing News that China’s API industry remains dominated by bulk APIs, giving it a competitive edge in both production and exports. However, bulk APIs are characterized by low technological content, narrow profit margins, and greater environmental impacts. By contrast, India—a major player in the global API market—focuses primarily on high‑end APIs, with product lines covering areas such as anti‑infectives, cardiovasculars, the central nervous system, and respiratory therapeutics, which command significantly higher profit margins than bulk APIs. “Many multinational companies conduct API development in parallel with formulation research,” Shi Lichen noted. “Moreover, India permits drug patents to be enforced rigorously, which has spurred the growth of its API sector—particularly in specialty and innovative APIs—while ordinary APIs are largely sourced through imports.”
With the rollout of national centralized drug procurement, APIs have gained greater influence throughout the industry chain. Industry insiders have noted that as such procurement expands to a broader scope, companies that fail to retain control over their APIs will inevitably find themselves at a disadvantage. Previously, offices like Huahai Pharmaceutical and Qilu Pharmaceutical, which frequently won bids in these tenders, largely held strong positions on the API side of the value chain.
Shi Lichen pointed out that, if production can be localized at the API stage, formulation‑manufacturing costs can be reduced; only through integrated API–formulation operations can companies gain a competitive edge.
At the industry level, some companies have already embarked on an integrated approach spanning APIs and finished dosage forms. Among them, Aoxiang Pharmaceutical has established an industrial structure that covers both APIs and pharmaceutical intermediates, while offering CDMO services and formulation manufacturing, adhering to a strategy of coordinated development across intermediates, APIs, and finished products. Haizheng Pharmaceutical has also positioned itself in both the API and formulation sectors, operating China’s largest production base for antibiotics and specialty APIs. Meanwhile, Zhejiang Medicine boasts industry-leading production capacity in vitamins A and E and enjoys an integrated advantage that spans from APIs to finished dosage forms.

Taxation TAXATATION
The tax incentives for R&D expenses have been upgraded, providing stronger impetus for innovation.
A few days ago, the State Taxation Administration released the latest data on tax and fee reductions: in the first three quarters of this year, nationwide tax and fee cuts totaled 910.1 billion yuan, with 788.9 billion yuan in new tax reductions and 121.2 billion yuan in new fee reductions. These impressive results signify a continued easing of the burden on businesses and a boost to the vitality of market entities.
As a key component of this year’s tax and fee reduction policies, the impact of the enhanced R&D expense deduction can be described as “beyond expectations”: data show that enterprises across the country have already benefited from an advance deduction totaling 1.3 trillion yuan, with tax reductions and exemptions amounting to 333.3 billion yuan—representing 77.6% of last year’s total for the annual final tax settlement.
The additional deduction for R&D expenses, simply put, means that, on top of the actual amount of R&D expenditures incurred by an enterprise, a certain percentage is added and treated as a deductible expense when calculating taxable income. Effective January 1 of this year, the deduction rate for manufacturing enterprises has been increased to 100%, which means that for every RMB 1 million in R&D spending, a manufacturing office can deduct RMB 2 million before computing its taxable income.
In recent years, the policy of allowing an additional tax deduction for R&D expenses has become an effective tool for the state to support scientific and technological innovation. With steadily increasing tax incentives, it has played a significant role in encouraging enterprises to boost their R&D investment. This year, the policy has been further upgraded, enabling companies to reap its benefits earlier and at a more substantial level.
Why is the policy of additional tax deductions for R&D expenses so effective? What are the key highlights of this year’s “upgraded” version of the policy? Ma La Finance interviewed relevant experts.
Increased ratios, expanded scope, and early access—effectively revitalizing corporate cash flow.
“The company’s annual R&D expenditures are substantial, typically exceeding RMB 1 billion. For us, the most significant tax‑related benefit this year has been the enhanced deduction policy for R&D expenses,” said Huang Xiaoli, CFO of Shanghai United Automotive Electronics Co., Ltd. In the first three quarters, the company claimed an R&D expense deduction totaling RMB 690 million, resulting in tax benefits exceeding RMB 100 million. Moreover, as a high‑tech enterprise, the company is eligible to pay corporate income tax at a reduced rate of 15%. We estimate that the total corporate income tax relief for the full year will surpass RMB 450 million. These favorable policies translate into tangible financial gains, enabling the company to allocate more resources to R&D and innovation, while also providing greater scope for incentivizing our R&D personnel.
In March this year, the fiscal and tax authorities clarified that, during the October provisional tax filing, enterprises would be allowed to claim the enhanced R&D expense deduction for the first half of the year. In September, the policy was further strengthened, enabling enterprises to voluntarily opt to avail themselves of the enhanced R&D expense deduction for the first three quarters in advance. This “upgrade” to the R&D expense deduction policy has significantly bolstered the confidence of numerous market entities to ramp up their R&D efforts.
“In the past, companies could only claim the additional deduction for R&D expenses during their annual tax reconciliation; they were ineligible to do so when making quarterly advance payments. Under the new policy, companies can now take advantage of this deduction as early as October, which helps them better manage cash flow and ease financial pressures,” said Wang Xiaoxue, Director of Tax at Beijing Xiaomi Mobile Software Co., Ltd. “This allows us to allocate more resources to R&D, further strengthening our independent innovation capabilities. This year, we will continue to ramp up our investment in technological R&D, vigorously implement our Young Engineers Program, cultivate a high‑caliber R&D team, and develop even more cutting‑edge, industry‑leading products.”
According to the latest data released by the State Taxation Administration, in terms of the amount of additional tax deductions for R&D expenses, 82.1% of enterprises benefiting from the policy reported deductions exceeding RMB 1 million. At the enterprise‑level average, offices receiving the preferential treatment invested an average of RMB 4.565 million in R&D, up 13.3% year on year on a comparable basis, underscoring that the policy has effectively boosted corporate innovation and strengthened R&D spending.
“For manufacturing enterprises, this year brings an additional double benefit: they can not only take advantage of the accelerated R&D expense deduction policy ahead of schedule, but the deduction rate has also been increased from 75% to 100%,” said Liu Baozhu, First‑Level Inspector with the Income Tax Department of the State Taxation Administration.
Data show that the dual policy benefits have reached 186,000 manufacturing enterprises, with additional tax deductions totaling RMB 903.6 billion and tax reductions amounting to RMB 225.9 billion, accounting for 57.7% and 67.8% of the total number of beneficiaries and the total tax relief, respectively. Notably, the increase in the additional deduction rate has resulted in an extra RMB 57.1 billion in tax relief for manufacturing offices.
According to data released by the State Taxation Administration, private enterprises have benefited significantly. Among the enterprises that have taken early advantage of the policy on additional deductions for R&D expenses, 302,000 private offices recorded additional deduction amounts totaling RMB 953.6 billion, with tax reductions and exemptions amounting to RMB 238.4 billion—accounting for 93.5% of the total number of entities benefiting and 71.5% of the total tax reductions and exemptions.
“With the expansion of the scope and the increase in the proportion, the policy of additional tax deductions for R&D expenses continues to deliver strong results, playing a significant role in comprehensively enhancing China’s capacity for scientific and technological innovation. It helps cultivate the ‘soil’ necessary for the growth of innovation-driven entities, strengthening the foundations and momentum for high-quality development. We expect the policy’s effectiveness to remain evident over the medium to long term,” said Jiang Zhen, an associate researcher at the Institute of Financial Strategy of the Chinese Academy of Social Sciences.
Accounting is more convenient, the measurement framework has been further refined, and policies are closely aligned with the principles of innovation-driven development.
“In recent years, we’ve benefited from two increases in the additional deduction rate for R&D expenses. As this rate has risen, the amount of R&D expense deductions our company claims has grown year after year,” said Lu Shuhua, Chief Financial Officer of CRRC Changchun Railway Vehicles Co., Ltd.
Jiang Zhen believes that the policy of allowing an additional deduction for R&D expenses is closely aligned with the principles governing scientific and technological innovation, accurately capturing the intrinsic link between tax policy and high-quality development, thereby enhancing the policy’s effectiveness. On the one hand, by targeting the R&D activities of all types of market entities and adhering to the dynamics of technological innovation, the policy extends preferential treatment equally to any entity engaging in R&D, thus better upholding the principle of social equity. On the other hand, the policy adopts a low‑threshold, broadly inclusive implementation approach, effectively reducing the tax burden on R&D‑intensive enterprises, further improving the business environment for innovation, and lowering institutional transaction costs. This, in turn, helps channel various production factors into the field of scientific and technological innovation, fostering greater innovative vitality.
This year, the policy on additional tax deductions for R&D expenses has been advanced in timing, expanded in scope, made easier to calculate, and refined in its measurement criteria. According to reports, the tax authorities have undertaken substantial efforts to streamline project forms and optimize reporting guidelines.
Wang Sujiang, a second-level researcher at the Corporate Income Tax Division of the Beijing Municipal Tax Service, explained that, for example, the newly introduced auxiliary ledger format has been streamlined from the previous “four auxiliary ledgers plus one summary table” to “one auxiliary ledger plus one summary table,” helping enterprises better manage the allocation and accounting of R&D expenses and reducing their reporting burden.
The new policy has replaced the previous practice of calculating the cap for “other related expenses” separately for each R&D project with a unified approach that applies to all R&D projects collectively. “Under this revised cap‑calculation method, the limit can be reallocated across projects, which offers greater benefits and simpler calculations for companies like ours that invest heavily in R&D,” said Zhai Haihong, CFO of Beijing Daqing Biotechnology Co., Ltd.
Jiang Zhen believes that market entities should proactively plan and fully leverage the policy of additional tax deductions for R&D expenses, steadfastly pursue a path of independent innovation with Chinese characteristics, and contribute to building China into a global science and technology powerhouse. Meanwhile, fiscal and tax authorities should actively expand the policy framework, aligning it with the full‑cycle growth dynamics of scientific and technological innovation, better balance risk and return across the startup, growth, and maturity stages, and continuously foster the expansion of specialized industrial chains in the field of technological innovation.

Tax cuts give businesses even greater momentum to innovate.

Since the beginning of this year, a series of preferential policies on additional tax deductions for corporate R&D expenses have been rolled out, continuously delivering tax benefits. In March, the state introduced measures to raise the additional deduction rate for R&D expenses of manufacturing enterprises from 75% to 100%, allowing companies to claim the first-half‑year benefit during the October tax filing period. In September, the policy was further strengthened: the scope of early eligibility was expanded to cover the first three quarters, and additional measures—such as introducing a new 2021 version of the auxiliary ledger for R&D expenditures—were implemented to simplify compliance for taxpayers. These tax reductions have bolstered businesses’ momentum for innovation.
What is the policy of additional deduction for R&D expenses? According to the introduction, the additional deduction for R&D expenses allows enterprises to claim, when calculating their taxable income, an extra deduction—beyond the actual amount of R&D expenditures—equal to a specified percentage of those expenses. This policy is an important tax incentive designed to promote technological advancement among enterprises.
According to the latest data from the State Taxation Administration, as of the end of October, enterprises nationwide had already benefited from additional tax deductions totaling 1.3 trillion yuan, with tax reductions and exemptions amounting to 333.3 billion yuan. The total amount of additional deductions claimed accounted for 77.6% of last year’s full-year final tax settlement, indicating that businesses are reaping the policy benefits earlier and to a greater extent. The policy’s impact has exceeded expectations, effectively boosting technological innovation and ensuring the steady operation of the industrial economy.
Wang Xiaoxue, Director of Taxation at Beijing Xiaomi Mobile Software Co., Ltd., stated that the new tax and fee preferential policies allow companies to file their R&D expense super‑deduction claims for the first three quarters of this year as early as October, thereby improving cash flow and effectively easing financial pressures. “By taking advantage of the advance R&D expense pre‑payment super‑deduction, we can allocate more funds to R&D and strengthen our independent innovation capabilities,” Wang Xiaoxue said.
The dual benefits of an increased super‑deduction rate and an expanded scope for early application are providing strong momentum to manufacturing enterprises. According to Liu Baozhu, First‑Level Inspector with the Income Tax Department of the State Taxation Administration, manufacturing offices can not only avail themselves of the R&D expense super‑deduction policy ahead of schedule but also see the super‑deduction rate raised from 75% to 100%. These twin incentives have benefited 186,000 manufacturing enterprises, with total super‑deduction amounts reaching RMB 903.6 billion and tax reductions totaling RMB 225.9 billion—accounting for 57.7% and 67.8%, respectively, of all enterprises benefiting from such measures and the overall tax relief. Notably, the higher super‑deduction rate alone has enabled manufacturing offices to secure an additional RMB 57.1 billion in tax reductions, underscoring the continued effectiveness of this policy in supporting the sector’s development.
In addition to the continued strengthening of tax incentives, to further facilitate taxpayers, the tax authorities have introduced measures such as adding a new 2021‑version template for R&D expense supporting records and revising and optimizing the method for calculating the cap on “other related expenses.” These steps have substantially streamlined the information required in corporate accounting and reporting forms, refined expense‑calculation methodologies, and reduced the administrative burden on businesses. As a result, the number of supporting schedules that companies need to complete to benefit from these policies has been cut by 75%, reporting time has been significantly shortened, and the overall workload for finance teams has been markedly reduced.
“Previously, filing for the additional deduction of R&D expenses involved filling out the auxiliary ledger for R&D expenditures, which was quite challenging,” said Feng Qian, a finance professional at Chongqing Fuzhike Technology Development Co., Ltd. She added that the new policy has introduced a simpler format for the auxiliary ledger, allowing companies to choose between the old version, the new version, or even customize it to suit their specific needs—significantly easing the administrative burden on businesses.
Furthermore, in practice, given the complexity and extended timelines of certain R&D activities, coupled with the distinct characteristics and high degree of specialization across different sectors, some enterprises must compile a substantial amount of supporting documentation when calculating eligible expenses. To ensure the timely and effective implementation of these policies, tax authorities have intensified their efforts through targeted guidance and close interagency collaboration, thereby enabling businesses to promptly and fully benefit from the policy incentives.
Jiang Zhen, an associate researcher at the Institute of Financial Strategy of the Chinese Academy of Social Sciences, stated that the implementation of the policy on additional tax deductions for R&D expenses has fostered a favorable tax environment that incentivizes innovation, helping to improve the conditions for scientific and technological advancement and strengthen the capacity for high-quality development. The policy’s effects are expected to become even more pronounced over the medium to long term.
 
The tax-related business environment continues to improve, helping foreign-invested enterprises achieve stronger growth.
On the banks of the Huangpu River, the fourth China International Import Expo (hereinafter referred to as the “CIIE”) has arrived as scheduled.
According to the China International Import Expo Bureau, 58 countries and three international organizations will participate in the national pavilions at this year’s CIIE, while nearly 3,000 exhibitors from 127 countries and regions will showcase their offerings at the business exhibition, all coming together to honor the rendezvous in the East and share in China’s opportunities.
The convening of the China International Import Expo underscores China’s unwavering commitment to further opening up and fostering an open world economy, while also serving as a window into how foreign-invested enterprises are deepening their roots in the Chinese market and pursuing high-quality development.
At present, China is the largest trading partner of more than 120 countries and regions, and the number of foreign-invested enterprises operating in China has exceeded one million. The robust growth of foreign offices in China owes much to the country’s vast market of 1.4 billion consumers, as well as to the continuous improvement of the tax and business environment and the meticulous implementation of tax policies—measures that provide solid support for the development of foreign enterprises in China.
Speaking of the support provided by tax policies, Liang Yinmei, a finance professional at a Sino-Japanese joint‑venture automotive lighting systems company in Foshan, said that the tax authorities consistently anticipate taxpayers’ needs and address their pressing concerns. They have proactively resolved our complex issues related to export tax rebates and other matters, bolstering our confidence as a foreign‑invested enterprise to grow and thrive.
In Chongqing, the tax authorities have implemented a comprehensive package of tax measures, fully leveraging the critical role of international taxation in stabilizing foreign investment and providing robust support for attracting high-quality foreign investment to the city.
According to the Chongqing Municipal Tax Service of the State Taxation Administration, from January to September this year, with the implementation of the policy exempting withholding income tax on direct reinvestment of distributed profits by foreign investors, the amount of investment in China increased by RMB 3.88 billion year on year, and the deferred withholding income tax liabilities rose by nearly RMB 390 million, a year-on-year increase of 207.3%.
In Henan Province, the Zhengzhou Municipal Tax Service Bureau has implemented concrete, robust measures and delivered high-quality tax services, ensuring more precise policy implementation and bolstering the confidence and momentum of foreign-invested enterprises.
Zhang Tao, Party Secretary and Director of the Zhengzhou Municipal Tax Service Bureau of the State Taxation Administration, stated that the tax authorities will fully leverage the functions of taxation, establish an efficient and seamless communication mechanism between government and enterprises, and, relying on digital tax administration, continue to streamline tax filing and payment procedures. This effort will foster a business environment characterized by lighter tax burdens and faster tax services, ensuring that foreign-invested enterprises can operate with confidence and achieve steady growth in Zhengzhou.
In Dalian, since the implementation of the tax deferral preferential policy in 2018, the tax authorities have proactively carried out publicity and guidance, identified key entry points for policy delivery, ensured effective enforcement, and further optimized the tax-related business environment.
“Good policies have yielded positive results,” said the head of the International Tax Administration Division of the Dalian Municipal Tax Service Bureau. Since its implementation in 2018, the deferred‑taxation preferential policy has seen a steady increase each year in both the number of enterprises benefiting and the total amount of investment involved. An increasing number of foreign investors have repeatedly reinvested their distributed profits to take advantage of this tax deferral, while the range of industries represented among the investee companies has also expanded gradually. By lowering corporate investment costs and enhancing market competitiveness, this policy has enabled numerous foreign investors in Dalian to plan further expansion and accelerate the growth and development of their enterprises.
Li Xuhong, Director of the Institute for Fiscal and Taxation Policy and Application at the National Accounting Institute in Beijing, stated in an interview with People’s Daily Online that the continuously improving tax‑related business environment is a key component of China’s high‑level opening‑up policy and holds great significance for the high‑quality development of foreign‑invested enterprises operating in China.
“In recent years, the tax authorities have earnestly deepened the ‘delegation, regulation, and service’ reform, launched the ‘Spring Breeze Action for Convenient Tax Services,’ expanded the application of tax‑related big data, streamlined and optimized tax‑filing procedures, and provided highly targeted services to help taxpayers resolve complex tax issues. By implementing treaty benefits, they have bolstered business confidence, steadily enhanced the sense of satisfaction among all market entities—including foreign‑invested enterprises—and contributed to the ongoing improvement of the tax‑related business environment, thereby encouraging more foreign‑invested offices to enter China,” said Li Xuhong.

Sichuan: Tax Policies Bolster Confidence Among Small and Micro Manufacturing Enterprises
Recently, the State Council Executive Meeting announced measures to temporarily defer tax payments for small and medium-sized manufacturing enterprises and other eligible businesses, further bolstering efforts to help companies overcome difficulties. As a high-tech private enterprise that has grown locally in Fushun County, Sichuan—Zigong Jiangyang Magnetic Materials Co., Ltd.—has keenly felt the tangible benefits brought by the tax and fee reductions implemented in recent years.
November marked the first tax‑payment deferral period for the phased measures, but how have these policies been implemented in Sichuan? Deng Qingrong, head of Jiangyang Magnetic Materials, shared a detailed breakdown of this year’s tax‑benefit gains.
Jiangyang Magnetic Materials has been engaged in the production and research of permanent‑magnet ferrites for nearly 40 years. In recent years, the company has continuously advanced its technology and upgraded its equipment, and it has now become a high‑tech enterprise with an annual production capacity of 20,000 tons of high‑performance rare‑earth permanent‑magnet ferrite magnetic tiles.
“Every year, after October, the company’s cash flow becomes tight—this year is particularly severe. We’re facing hefty expenses for upstream procurement, fourth-quarter employee salaries and year-end bonuses, accumulated interest on loans from previous quarters, and taxes due in the fourth quarter, while sales proceeds are also failing to come in promptly,” said Deng Qingrong.
“Since the second quarter of this year, our company has been under significant financial strain. In the price‑increase transmission chain, small and micro enterprises like ours are the most vulnerable link,” said Deng Qingrong. “The operations of coal‑power and heating companies have been hit, which in turn has driven up production costs for manufacturing offices. To cope with year‑end cash‑flow pressures in the past, we resorted to short‑term loans, but that only added further financial burdens.”
“Recently, we’ve seen the government introduce policies that grant full tax deferral on taxes owed by small and micro manufacturing enterprises with annual sales below RMB 20 million, and a 50% deferral for medium-sized manufacturing offices with annual sales between RMB 20 million and RMB 400 million—this has really cheered us up,” said Deng Qingrong, as he tallied the financial benefits of the tax deferral. “Our company’s projected sales this year are around RMB 180 million. From October to December, our VAT liability will be approximately RMB 1.5 million, and our fourth-quarter corporate income tax is estimated at RMB 700,000. Since our annual sales exceed RMB 20 million, we qualify for a 50% deferral on these taxes, amounting to roughly RMB 1.1 million in deferred payments—effectively a cost‑free loan of over RMB 1 million. This policy is a major boon, helping SMEs like ours navigate the funding crunch at year‑end.”
“This year, what has impressed me most is the state’s support for our high-tech enterprises: the additional deduction rate for manufacturing R&D expenses has been raised from 75% to 100%, and during this year’s October tax filing period, companies were even allowed to enjoy an extra quarter of benefits on top of the first-half-year R&D expense deductions. In the first three quarters of this year, our company’s eligible R&D expenses totaled 7.25 million yuan, resulting in tax reductions and exemptions exceeding 1.08 million yuan. The effective implementation of these tax incentives not only translates into tangible financial gains but also further bolsters our confidence in driving growth through R&D,” said Deng Qingrong.
Since the beginning of this year, a series of tax and fee preferential policies introduced by the state have demonstrated its commitment to supporting the real economy, particularly manufacturing and high‑tech enterprises. Guided by taxpayers’ needs, the Sichuan tax authorities have leveraged big data to ensure the effective implementation of these policies, significantly enhancing the precision of their delivery, bridging the “last mile” in policy execution, and providing robust support for the broader economic and social agenda as well as the growth of market entities, thereby further bolstering the development of the real economy.
Litigation & Arbitration
Supreme People’s Court: Clarifies the “Benchmark” for Identifying False Litigation and Strictly Pursues Criminal Liability for Such Cases
In order to prevent the court from enforcing execution against its real estate, the judgment debtor, a certain company, fraudulently assumed the identities of 63 individuals and, in the capacity of third-party purchasers, filed objections to the enforcement proceedings with the court. Following verification of this fraudulent litigation, the court imposed the maximum statutory penalty on the company, fining it RMB 1 million per case for a total of RMB 63 million, and referred relevant criminal leads and pertinent materials to the investigative authorities.
This case is one of the typical examples of combating fraudulent litigation recently released by the Supreme People’s Court. Fraudulent litigation represents the most concentrated manifestation of a lack of integrity in the litigation sphere; it not only gravely infringes upon the legitimate rights and interests of the parties involved and third parties but also violates the principle of good faith and honesty in civil proceedings, disrupting the normal order of litigation. According to reports, from 2017 to 2020, courts nationwide investigated and handled 12,300 cases of fraudulent litigation and concluded 2,079 criminal cases involving such conduct. In addition to enforcement objections, the typical cases published this time by the Supreme People’s Court also cover common tactics of false civil litigation, including private lending disputes, forging divorce agreements to evade enforcement, and fabricating labor‑related claims to fraudulently obtain demolition compensation.
The “Opinions of the Supreme People’s Court on Deepening Efforts to Rectify False Litigation” (hereinafter referred to as the “Opinions”) were recently issued, setting clear criteria for identifying false litigation and mandating focused crackdowns on high‑incidence areas such as actions challenging enforcement, private lending, and housing sales contracts. The document also calls for stringent criminal accountability for false litigation, safeguarding judicial fairness and authority, and fostering a culture of social integrity.
False litigation is highly concealed, making its identification of paramount importance. The “Opinions” outline eight characteristic indicators to guide the detection of such cases: the facts and grounds on which the plaintiff bases the lawsuit are implausible; the amount in controversy bears no reasonable relationship to the plaintiff’s financial situation; there exists a familial or other related interest between the parties, with the outcome potentially affecting third‑party interests; no genuine civil rights dispute exists between the parties, and there is no substantive adversarial debate during the proceedings; the parties’ admissions are inconsistent with common sense; despite being heavily indebted, the parties transfer assets at conspicuously unreasonable low prices, acquire assets at conspicuously unreasonable high prices, or waive their property rights; evidence supporting the established facts is insufficient, yet the parties promptly and voluntarily reach a settlement agreement, requesting the people’s court to issue a mediation statement; or, although the parties were personally present at the relevant events, they are unable to provide a complete and accurate account of the facts, or their statements are internally contradictory.
Private lending has long been a high‑risk area for fraudulent litigation. According to reports, in 2020, a total of 1,772 cases involving fictitious private‑lending disputes were investigated and adjudicated, accounting for 53.09% of all civil fraud‑litigation cases uncovered that year. In response, the “Opinions” mandate rigorous scrutiny of unlawful practices—such as fabricating loans through circular fund transfers or artificially inflating principal—and strictly enforce the judicial cap on interest rates in private lending. “The ‘Opinions’ identify ten categories of cases prone to fraudulent litigation, including private‑lending disputes, actions challenging enforcement, labor disputes, and property‑division disputes arising from divorce, thereby helping to focus on key areas and enhance the effectiveness of remedial measures,” said Zheng Xuelin, Chief Judge of the First Civil Division of the Supreme People’s Court.
“The Supreme People’s Court will also issue a series of judicial interpretations and policies to further crack down on fraudulent litigation, tightening institutional safeguards, narrowing the space for such misconduct, and addressing both the symptoms and root causes of fraudulent litigation,” said He Xiaorong, Vice President of the Supreme People’s Court.

There are issues in the work of preventing telecom fraud! The Ministry of Industry and Information Technology and the Ministry of Public Security have held talks with two companies.
Recently, the Cybersecurity Administration of the Ministry of Industry and Information Technology and the Criminal Investigation Bureau of the Ministry of Public Security jointly held talks with the responsible persons of two mobile virtual network operator companies—Guangzhou Boyuan Information Service Co., Ltd. and Share Communication Group Co., Ltd. They briefed the companies on persistent issues in their efforts to prevent and address telecom and online fraud, including a sustained high number of implicated phone numbers and user complaints, lax implementation of the real-name registration system for telephone services, and unauthorized issuance of industry‑specific SIM cards. The authorities placed both companies under supervised management, urging them to elevate their political awareness, strictly fulfill their cybersecurity responsibilities, and adopt concrete, effective measures to rectify these problems within a specified timeframe. During this period, basic telecommunications operators were instructed to suspend the allocation of new numbering resources and the activation of new subscribers for the two companies. The heads of the two companies pledged to earnestly implement regulatory requirements, conduct comprehensive risk assessments, and rigorously carry out corrective actions. Moving forward, the Ministry of Industry and Information Technology and the Ministry of Public Security will resolutely implement the decisions and arrangements of the CPC Central Committee and the State Council, uphold the people‑centered development philosophy, address the new circumstances and challenges facing current work, strengthen the accountability chain of telecom and internet enterprises, enhance source‑level and integrated governance, improve inter‑departmental coordination, promote the refinement of long‑term institutional safeguards, consolidate and deepen the achievements of earlier efforts, and effectively safeguard the property security and legitimate rights and interests of the general public.

The Ministry of Justice has strictly regulated the business and enterprise‑establishment activities of the spouses, children, and their spouses of judicial administrative officers.
To implement the CPC Central Committee’s decisions and arrangements on regulating the business activities and enterprise‑ownership practices of leading cadres’ spouses, children, and their spouses, and in accordance with the work plan of the National Leading Group for the Education and Rectification of Political and Legal Personnel, the Ministry of Justice recently issued a notice and formulated a list of prohibited business activities and enterprise‑ownership ventures. The Ministry has instructed judicial administrative organs at all levels to treat the regulation of such activities as an important political task for comprehensively strengthening Party governance and police discipline, and as a key component in advancing the education and rectification campaign within the judicial administration workforce, ensuring its rigorous implementation. The aim is to forge a loyal, clean, and responsible elite force in the judicial administration sector.
The scope of the business‑prohibition primarily covers activities falling within the purview of the units to which judicial administrative officers belong, as well as commercial and enterprise‑related activities that could compromise the officers’ impartial performance of their duties. The specific prohibitions applicable to spouses, children, and their spouses of cadres at or above the department‑level within the judicial administration system shall be implemented in accordance with relevant regulations issued by the Organization Department of the CPC Central Committee, the Ministry of Justice, and the local Party committees’ organization departments. At all levels, spouses, children, and their spouses of members of leading bodies below the department level in judicial administrative organs, prisons, and drug rehabilitation centers are prohibited from engaging in commercial or enterprise‑related activities within the jurisdiction of their respective units or within the business areas under the authority of leading cadres. Judicial administrative officers may not, by virtue of their official position or influence, confer any advantages or preferential treatment on the businesses or enterprises operated by their spouses, children, or their spouses. Furthermore, the spouses, children, and their spouses of judicial administrative officers must refrain from undertaking any commercial or enterprise‑related activities that could impair the officers’ impartial performance of their duties, nor may they enter into direct economic relationships with the officers’ employing units or other entities under their jurisdiction.
The Ministry of Justice requires that judicial administrative organs at all levels earnestly raise their political awareness, strengthen the “Four Consciousnesses,” officely uphold the “Four Confidences,” and ensure the “Two Upholds.” They must resolutely implement the decisions and arrangements of the CPC Central Committee, fully recognize the importance of standardizing relevant work, attach great importance to this task, and regard regulating the business activities and enterprise‑establishment practices of spouses, children, and their spouses of political and legal officers as a key priority, ensuring thorough and meticulous implementation. The justice departments (bureaus) of provinces, autonomous regions, and municipalities directly under the central government may, based on the list of prohibited occupations, formulate specific lists tailored to local conditions.
The Supreme People’s Procuratorate has issued the “Measures of the People’s Procuratorates on Detention Hearings.”
The Supreme People’s Procuratorate has issued
Measures of the People’s Procuratorate on Detention Hearings
Standardize Detention Hearings in Accordance with the Law
Strengthen the review of detention measures.
To thoroughly implement Xi Jinping’s thought on the rule of law, further advance the criminal justice policy of “fewer arrests, cautious prosecution, and prudent detention,” and ensure that the People’s Procuratorates conduct detention review in a lawful and standardized manner, the Supreme People’s Procuratorate recently issued the Measures for Detention Hearings of the People’s Procuratorates (hereinafter referred to as the “Measures”).
The Measures, in accordance with the Criminal Procedure Law, the Rules of the People’s Procuratorates on Criminal Procedure, and the Regulations of the People’s Procuratorates on Hearings for Case Review, among other relevant provisions, and drawing on practical experience in case handling, stipulate that, when lawfully handling three categories of cases—review of arrest applications, review of extensions to the period of investigative detention, and review of the necessity of continued detention—the People’s Procuratorate may convene hearings to solicit the views of all parties, standardize the conduct of hearing‑based review proceedings, and render, in accordance with the law, accurate decisions on whether to apply coercive measures of detention.
The Measures stipulate that, for the three categories of cases mentioned above—where it is necessary to hear the views of all parties in person in order to render a review decision in accordance with the law and with accuracy—such as cases requiring verification and assessment of whether a criminal suspect or defendant poses a social danger, cases of significant public impact, and cases involving the public interest where a hearing‑based review would help achieve an effective outcome—the authorities may conduct a detention hearing.
The Measures comprise 18 articles. While clearly defining the types and scope of cases subject to detention hearings, they also, in light of practical needs in investigation and case handling, impose strict limitations on the participants in such hearings, establish the fundamental principle that detention hearings shall be held in private, and provide detailed provisions governing the specific procedures for hearing‑based review.
The head of the First Procuratorial Office of the Supreme People’s Procuratorate stated that custodial coercive measures, as procedural safeguards that restrict a citizen’s fundamental right to personal liberty, must be applied with the utmost caution. Going forward, the Supreme People’s Procuratorate will, in accordance with the requirements of the education and rectification campaign for political and legal personnel and the Party history study‑education initiative—specifically the “Procuratorial Work for the People: Doing Practical Things” practice activity—and in conjunction with the ongoing special campaign to review the necessity of detention, guide and promote people’s procuratorates at all levels to actively conduct detention hearings. Taking this as an opportunity, it will continue to refine the institutional framework governing custodial coercive measures, thereby better achieving the organic integration of punishing crime and protecting human rights and fostering a sound rule-of-law environment conducive to high‑quality economic and social development.

The “zero-tolerance” signal continues to be sent, with the first representative‑class action case achieving comprehensive accountability across administrative, civil, and criminal spheres, thereby punishing the principal offenders.
On November 12, China’s first representative litigation case—the Kangmei Pharmaceutical case—received its first-instance verdict. The China Securities Regulatory Commission stated that this case is a landmark, pioneering milestone in the history of the capital market, and holds profound significance for advancing the deepening reform and sound development of China’s capital market while effectively safeguarding the legitimate rights and interests of investors.
“The Kangmei Pharmaceutical special representative litigation represents a landmark milestone in the rule-of-law development of China’s capital market, ushering in an era of “severe accountability for violations.” Professor Zheng Yu of the School of International Finance and Law at East China University of Political Science and Law told a reporter from the Securities Daily that, under a litigation framework featuring “implied participation and explicit opt-out,” the special representative action not only safeguards the interests of investors harmed by fraud through civil liability but also, more importantly, serves as a powerful deterrent, instilling in market participants the understanding that “do not reach out—any attempt to do so will be met with severe consequences.” This has significant implications for curbing illegal practices such as false disclosures and market manipulation.”
Professor Ye Lin of the Law School at Renmin University of China stated that the first-instance judgment in the Kangmei Pharmaceutical special representative lawsuit has provided a crucial test of the system’s actual operational performance. At present, the mechanism appears to be fairly well‑established, offering both courts and investors an efficient, low‑cost solution. The case carries significant guiding and exemplary value, and it is expected that, in the period ahead, special representative lawsuits will become an important avenue for handling securities fraud cases.
Achieving the goal of “punishing the principal offenders”
A responsible official from the relevant department of the China Securities Regulatory Commission stated that all parties concerned have resolutely implemented the CPC Central Committee and the State Council’s principle of “zero tolerance” toward illegal and criminal activities in the capital market. By adopting a multi‑pronged approach, they have established a comprehensive accountability framework spanning civil, administrative, and criminal channels, ensuring that those who manipulated Kangmei Pharmaceutical behind the scenes bear severe consequences and thereby achieving the goal of punishing the principal offenders.
In May 2020, Kangmei Pharmaceutical was subjected to administrative penalties by the China Securities Regulatory Commission for fabricating financial statements totaling approximately RMB 30 billion over three consecutive years from 2016 to 2018. On February 18, 2021, the CSRC imposed administrative sanctions and market bans on Zhengzhong Zhujiang Accounting Office, which conducted the company’s financial audits, as well as on the relevant persons held accountable.
In this ruling, the Guangzhou Intermediate People’s Court ordered Kangmei Pharmaceutical to compensate securities investors for losses totaling RMB 2.459 billion. The former chairman and general manager, Ma Xing田, along with five directly responsible individuals, as well as Zhongzhong Zhujiang Accounting Office and its directly responsible personnel, were held jointly and severally liable for the full amount of compensation. Additionally, 13 other relevant parties were assigned joint and several liability in proportions of 20%, 10%, and 5%, depending on their respective degrees of fault.
“In this special representative lawsuit involving Kangmei Pharmaceutical, the court, after comprehensively considering the case’s underlying facts and the subjective fault of the relevant defendants in their false‑statement conduct, ruled that Ma Xingtian and his wife, along with Qiu Xiwei and three other former senior executives, organized, planned, and carried out financial fraud—actions deemed intentional—and thus bear 100% joint and several liability for damages under the law. This outcome helps strengthen penalties and deterrence against those who commit illegal and unethical acts in the capital market,” said an official from the relevant department of the China Securities Regulatory Commission. The substantial civil compensation ensures that the principal offenders are held fully accountable.
In terms of criminal liability, the judicial authorities have simultaneously pursued the criminal responsibility of the former major shareholder and the actual controller. Following the conclusion of the investigation, the Foshan People’s Procuratorate filed a public prosecution with the Foshan Intermediate People’s Court on October 27, charging Ma Xing田 with relevant criminal securities offenses. On the same day, the Foshan Intermediate People’s Court accepted the case for filing and, in accordance with the law, consolidated it with the previously pending cases involving Kangmei Pharmaceutical and Ma Xing田’s unit bribery, thereby ensuring that all responsible parties are held criminally accountable.
Ye Lin stated that, based on the first-instance judgment in the Kangmei Pharmaceutical case, the listed company was ordered to pay damages exceeding RMB 2 billion. At the same time, the company’s actual controller and the principal individuals responsible for the false statements—including the then‑secretary of the board and key financial personnel—as well as the accounting office and its directly liable staff, were also held jointly and severally liable for compensation. Going forward, the company’s actual controller, secretary of the board, chief financial officer, and other key senior executives will need to remain highly vigilant. This development is expected to further encourage listed companies to enhance their internal governance standards.
Zheng Yu stated that, following this case, greater prudence in accepting director appointments could help improve the corporate governance framework of Chinese listed companies, enabling directors to assume their roles with greater independence and autonomy, rather than serving as “shadow directors” for the actual controllers.
Furthermore, Zheng Yu argues that, from the perspective of “pursuing and punishing the principal wrongdoer,” the current regime of joint and several liability distinguishes between primary and secondary defendants. For instance, a listed company serves as the primary defendant, while the actual controller is designated as the secondary defendant. The rationale behind this approach is that “fraudulent conduct is an act undertaken by the listed company as an independent legal entity”; however, the resulting consequences may include a reduction in the company’s assets during the compensation process, thereby adversely affecting the interests of shareholders who are not plaintiffs. Consequently, whether future efforts to hold the principal wrongdoer accountable could, in both legal theory and institutional design, adopt a direct “principal‑wrongdoer”‑focused approach—i.e., imposing liability from the standpoint of the underlying tortious act—and whether it would be appropriate for the listed company, as the secondary defendant, to bear joint and several liability remains a topic worthy of discussion.
Investor compensation will have to wait for the reorganization plan.
At present, Kangmei Pharmaceutical is undergoing bankruptcy reorganization. “Once the judgment takes effect and the creditors’ claims are finalized, the Investor Protection Center may, on behalf of injured investors, file claims in the reorganization proceedings and exercise creditors’ rights, thereby seeking to secure the greatest possible benefits for investors under the reorganization plan,” Zheng Yu stated. He further noted that, during the reorganization process, if the company successfully attracts strategic investors, there are multiple potential avenues for compensating investors—ranging from proportional cash payouts to a combination of partial cash payments and debt‑to‑equity swaps—though the specific modalities will ultimately be determined by the reorganization plan approved by the court.
On November 2, Kangmei Pharmaceutical issued an announcement disclosing progress in the recruitment of restructuring investors. As of the end of October, Guangzhou Pharmaceutical Group Co., Ltd., acting on behalf of Guangdong Shennongshi Enterprise Management Partnership (Limited Partnership), had submitted a “Restructuring Investment Proposal” to the company’s restructuring administrator.
Zheng Yu believes that the market should gain a fuller understanding of the significance of representative litigation for the fair and healthy development of the securities market—not merely as a matter of individual rights protection, but as a means of achieving overall market fairness. Accordingly, from the perspective of how a particular case judgment impacts the market as a whole, the judgment’s deterrent effect far outweighs the importance of the final amount awarded. This case holds great significance for the development of China’s securities market, because the “point‑to‑area” approach embodied in representative litigation can effectively serve as a powerful social deterrent against securities‑related misconduct.
Three Key Differences Between “Special” and “Ordinary” Representative Litigation
Because both ordinary representative actions and special representative actions involve a large number of investors, they are often collectively referred to as class actions. However, in practice, the securities class action with Chinese characteristics specifically refers to the special representative action.
From the perspective of initiating the proceedings, it is first necessary for the court to issue a public notice regarding the registration of rights in a typical representative action. Following the court’s commencement of the ordinary representative action procedure, the insurance institution must publish a statement accepting investors’ mandates and obtain special authorization from at least 50 investors before submitting an application to the court to convert the case into a special representative action. Only then can the special representative action be formally initiated. In other words, a special representative action must arise through a transformation from an ordinary representative action.
Ye Lin argues that the most salient feature of the special representative litigation is that the insurance institution is vested with a special representative authority: upon obtaining special authorization from 50 or more investors, it may initiate a special representative action under a “default‑in, opt‑out” framework. By contrast, ordinary representative litigation is typically brought either by an attorney or by the investors themselves.
Regarding the differences between ordinary representative litigation and special representative litigation, a responsible official from the relevant department of the China Securities Regulatory Commission has summarized them into three key points: First, the litigation representatives differ—investors serve as representatives in ordinary representative litigation, whereas insurance institutions act as representatives in special representative litigation. Second, the principles governing participation in the litigation differ: compared with the “explicit opt-in” regime in ordinary representative litigation, special representative litigation adopts an “implicit opt-in” approach, thereby broadening the scope of investor protection and enhancing its deterrent effect on unlawful conduct. Third, the outcomes of the two types of litigation differ: while special representative litigation can resolve disputes in a single proceeding, it also means that the liable parties may face substantial compensation liabilities in the short term, increasing their risk of bankruptcy and introducing greater uncertainty regarding the recovery of damages.
The China Securities Regulatory Commission stated that, in the next phase, building on a comprehensive review of the experience gained from the first-ever case, it will work to refine the representative litigation system and mechanisms, support investor protection institutions in further optimizing their processes for case assessment, decision-making, and implementation, and, in accordance with the law, promote the regular and systematic conduct of special representative litigation.

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