JC Master Legal News Issue 1028

Key Takeaways for This Issue

SZSE: Facilitating the Implementation of the First Batch of Pilot Projects for Portfolio Credit Protection Contracts
Under the unified guidance of the China Securities Regulatory Commission, the Shenzhen Stock Exchange convened, on August 4, a symposium on “Exchange‑Market Credit Protection Instruments Further Supporting the Development of the Private Economy.” The meeting provided explanations and interpretations of policies, including the use of synthetic credit protection instruments and China Securities Depository & Clearing Corporation’s decision to appropriately relax the eligibility criteria for bond registration under credit protection schemes, while also soliciting market feedback and encouraging broad participation from all stakeholders.
Mining investment is gaining momentum, and China’s domestic iron ore supply capacity is set to increase significantly.
Investment in domestic iron ore mining has entered an “acceleration phase.” According to the Ministry of Industry and Information Technology’s recently released report on the first-half performance of the steel industry, cumulative investment in the ferrous metal mining and beneficiation sector rose 76.1% year-on-year during the period. With strong policy support, the pace of domestic iron ore project development is expected to quicken, and domestic iron ore production is projected to increase significantly over the next two to three years, substantially boosting the country’s iron ore supply capacity.
A national first! First-instance judgment in a liability dispute involving market manipulation on the New Third Board.
According to the Shanghai Financial Court, on the morning of August 5, the court issued its first-instance judgment and publicly pronounced it in a case brought by plaintiff investors against defendant Company A and its de facto controller, Mr. Shao, concerning liability for manipulating the securities trading market. This case is the first of its kind nationwide involving liability disputes over market manipulation in the New Third Board market, as well as the first civil compensation case addressing transaction‑based market manipulation. The case raises a number of novel legal issues, including the determination of causation and the rules for calculating damages in civil claims arising from market manipulation, and thus holds both forward‑looking significance and typical value.
Export Tax Rebates: A Decade of Rapid Acceleration
In accordance with the arrangements made at the State Council Executive Meeting, the State Taxation Administration has issued a notice requiring that, from June 20, 2022, to June 30, 2023, export tax refunds (exemptions) be processed more swiftly for Category I and Category II enterprises with good credit ratings, reducing the average processing time to within three working days. Over the past decade, this significant acceleration in export tax refund procedures has played a pivotal role in helping China maintain its position as the world’s largest goods trading nation for five consecutive years.

Finance & Capital Markets
The “Collection of Papers on High-Quality Development in China’s Securities Industry (2022)” Has Been Published and Distributed.
On August 4, with the strong support of its member institutions, the China Securities Association published and released the “Collection of Papers on High-Quality Development in the Chinese Securities Industry (2022),” compiled to advance high-quality development of the capital market and the securities industry during the 14th Five-Year Plan period and to foster the exchange of research findings within the sector.
Since 2013, the China Securities Association has annually published one volume of “Innovation and Development: A Collection of Papers on the Chinese Securities Industry.” As of 2021, nine volumes have been released. The content has evolved from a focus in 2013 on exploring innovation and development within the industry to encompass comprehensive research across multiple domains, including deepening capital market reform, improving the capital market’s foundational institutional framework, strengthening industry cultural development, and advancing the integrated development of financial technology. To date, the series has featured a total of 1,270 articles, amounting to 18.158 million characters, thereby providing crucial scholarly support for advancing capital market reform and the growth of the securities industry.
To fully reflect the distinctive features of current research on high-quality development and to provide a platform for showcasing and exchanging findings in this field, the original publication “Innovation and Development: A Collection of Papers on China’s Securities Industry” has been officially renamed this year as “A Collection of Papers on High-Quality Development in China’s Securities Industry.” The 2022 volume carefully selects and includes 144 research contributions from across the industry, focusing on the following key areas: first, leveraging Party building to advance the integrated development of Party work and business operations within securities offices; second, optimizing the industry’s development ecosystem and cultivating a distinctive Chinese‑style corporate culture; third, implementing the new development philosophy to support the real economy and national strategic priorities; fourth, strengthening the capital market’s foundational institutional framework and undertaking comprehensive reforms led by the registration‑based system; fifth, drawing on the experience of mature overseas markets to promote high‑quality business development among securities institutions; sixth, proactively preventing and defusing risks in priority sectors while adopting a risk‑averse mindset to enhance risk‑management capabilities; and seventh, deepening the integration of financial technology to drive the digital transformation and intelligent upgrading of the securities industry. Most of these studies reflect the insights, perspectives, and practical experiences of frontline securities professionals, underscoring their significant practical relevance and applicability.
In recent years, in line with the requirements for high-quality development, the China Securities Association has actively organized the industry to conduct research and exchanges. Each year, it commissions studies on strategic, forward-looking, foundational, and targeted priority topics; since the 18th National Congress of the Communist Party of China, the total number of such ongoing research projects has reached 673. Beginning in 2019, the Association has annually convened senior executives of securities offices to discuss the high-quality development of the securities industry and its cultural building, sharing their insights and practical experiences through coverage in mainstream media. Meanwhile, the Association’s internal publications, “China Securities” and “Transmission,” have established thematic research agendas centered on key issues critical to advancing high-quality development, publishing the latest high‑quality research findings from within the industry.
The China Securities Association stated that, going forward, it will continue to fulfill the important responsibilities entrusted by the new Securities Law to organize industry research, leverage its role as a self-regulatory platform for collaborative development, governance, and resource sharing, and promote the open access and widespread dissemination of high-quality research findings, thereby contributing its expertise and efforts to the overarching goal of building a capital market that is standardized, transparent, open, dynamic, and resilient.
SZSE: Facilitating the Implementation of the First Batch of Pilot Projects for Portfolio Credit Protection Contracts
Under the coordinated guidance of the China Securities Regulatory Commission, the Shenzhen Stock Exchange convened, on August 4, a symposium titled “Exchanges’ Market‑Based Credit Protection Instruments Further Supporting the Development of the Private Sector.” The meeting provided briefings and interpretations on policies such as structured credit protection instruments and China Securities Depository & Clearing Corporation’s appropriate relaxation of eligibility criteria for the inclusion of credit‑protected bonds, while also soliciting market feedback and encouraging broad participation. Nearly 90 representatives from the China Securities Regulatory Commission, the Shanghai and Shenzhen stock exchanges, China Securities Depository & Clearing Corporation, Central Securities Depository & Clearing Corporation, and 26 securities offices exchanged views, put forward recommendations, and formulated implementation plans on topics including effectively leveraging new policies, actively engaging in structured credit protection instrument business, and vigorously advancing the special support program for private‑enterprise bond financing.
Participants noted that structured credit protection instruments, as an important category within the broader suite of credit‑protection products, feature regular bilateral quoting and standardized contract terms, thereby providing investors and issuing institutions with a fairer, more transparent pricing mechanism and greater transaction‑execution efficiency, which helps further enhance the liquidity of these instruments. Meanwhile, the relaxation of eligibility criteria for including credit‑protected bonds in repo‑eligible collateral pools not only offers securities offices and other institutions additional policy tools and incentives for designing such instruments, but also facilitates investors’ participation in pledge‑based repos and their liquidity‑management activities, potentially unlocking the value of existing assets and boosting the overall effectiveness of credit‑protection instruments in supporting the private sector.
Since 2022, under the coordinated guidance of the China Securities Regulatory Commission, the exchange‑traded market has continuously pursued innovation in credit protection instruments, addressing key pain points and challenges in its development, striving to enhance market activity, and establishing a long‑term mechanism for using these instruments to support the growth of the private sector. First, the exchanges have convened a series of meetings, including symposiums on leveraging credit protection tools to facilitate bond financing for private enterprises and seminars for buyer institutions, thereby systematically exploring policy measures to improve the quality and effectiveness of such instruments in serving the private economy and building broad market consensus. Second, the exchanges have vigorously implemented a special support program for private‑enterprise bond financing, with China Securities Finance Corporation assisting private‑sector bond issuance by co‑creating credit protection instruments together with market participants. To date, nine such programs have been successfully launched, with arrangements in place for the rollout of additional initiatives. Third, to further foster liquidity in the credit derivatives market and reduce investors’ risk‑hedging costs, the exchanges are studying the introduction of portfolio‑based credit protection contracts. On July 29, the Shenzhen Stock Exchange released the “SZSE Major Issuer CDX Portfolio” and the “Greater Bay Area Major Issuer CDX Portfolio,” and is actively coordinating with market participants to carry out the initial pilot implementation. Fourth, in coordination with China Securities Depository & Clearing Corporation’s relaxation of eligibility criteria for credit‑protected bonds, the exchanges are encouraging market participants to make full use of these supportive policies. By leveraging the complementary strengths of pledge‑based repo transactions and credit protection products, they are effectively enhancing the market appeal of private‑enterprise bonds and science‑and‑technology innovation bonds, thereby providing stronger support for the development of the private sector.
At the conference, a relevant official from the CSRC’s Bond Department emphasized that the Commission attaches great importance to the ongoing refinement of mechanisms supporting bond financing for private enterprises. It actively encourages all market participants to leverage credit protection instruments to bolster the development of the private sector and will appropriately recognize and commend securities offices and other institutions that create such instruments to provide credit enhancement for private enterprises. This effort aims to further stimulate market confidence, foster collaborative momentum, and cultivate a favorable financing environment for the growth of the private economy.
The Shanghai and Shenzhen Stock Exchanges stated that, under the unified leadership of the China Securities Regulatory Commission, they will continue to steadfastly implement the policy decisions on upholding the “two unwavering commitments,” rigorously enforce the spirit of the joint notice issued by the three ministries, and encourage and support market institutions in effectively leveraging relevant policies. They will work collaboratively to ensure the sustained and effective implementation of the special support program for corporate bond financing by private enterprises. At the same time, based on market needs, they will further explore and develop innovative credit protection instruments, continuously enhancing the quality and effectiveness of these tools in serving the development of the private sector and contributing to the healthy, high‑quality growth of private enterprises.

Shanghai Banking and Insurance Regulatory Bureau: Strengthen Financial Relief Services and Effectively Mitigate Risks in Key Areas.
Recently, the Shanghai Banking and Insurance Regulatory Bureau convened its 2022 mid-year work promotion meeting. The meeting concluded that, amid profound changes in the external environment and mounting pressures on domestic economic growth, the financial sector is confronting numerous complex risks and uncertainties. Shanghai’s banking and insurance institutions were urged to adhere to the overarching principle of seeking progress while maintaining stability, mobilizing all resources, and diligently implementing all tasks for the second half of the year. These priorities include: intensifying financial support measures to alleviate difficulties; proactively aligning with major strategic initiatives; effectively addressing risks in key areas; accelerating financial reforms; and strengthening the development of a culture of integrity and clean finance across the industry.
 The meeting called for strengthening relief and support measures for small, medium, and micro enterprises with promising prospects, focusing on addressing the urgent, difficult, and pressing needs of new urban residents in areas such as entrepreneurship and employment, housing, education, healthcare, and elderly care. It also emphasized expanding the scale, scope, and quality of seamless loan renewals, increasing the issuance of credit loans, actively identifying new lending customers, raising the proportion of first-time borrowers, and further reducing fees and offering preferential terms.
With regard to addressing risks in key areas, the meeting emphasized the need to strengthen liquidity risk management and intensify efforts to dispose of non‑performing assets. It reafofficeed the principle of “housing is for living, not for speculation,” ensuring stable and orderly real estate financing while effectively meeting both rigid and improvement‑type housing demand, and stepping up financial support for the long‑term rental housing market and the construction of affordable housing. The meeting also endorsed Shanghai’s efforts to ensure timely delivery of pre-sold residential projects.
The meeting emphasized that, in accelerating financial reform, corporate entities should continue to integrate Party leadership with corporate governance, explore ways to improve corporate governance mechanisms, deepen their roots in local communities, and strive to build “citizen banks,” “community banks,” and “people‑centric banks.”
The meeting revealed that priority efforts under the “Year of Specialized Governance for Consumer Protection” will be vigorously advanced. A top‑level initiative will be implemented, linking consumer protection performance to the key performance assessments of bank and insurance institution leaders. Mechanisms for tracing issues back to their root causes and driving corrective actions will be refined, with comprehensive systems established for reviewing products and services, conducting internal evaluations, managing suitability, ensuring information disclosure, handling complaints, and promoting financial literacy and public education. Furthermore, great emphasis will be placed on petition handling and maintaining social stability, with targeted campaigns undertaken to address recurring complaints and resolve long‑standing petition cases.
The meeting noted that, since the beginning of this year, the Shanghai Banking and Insurance Regulatory Bureau has earnestly implemented the decisions and arrangements of the CPC Central Committee and the State Council, and, in accordance with the requirements of the China Banking and Insurance Regulatory Commission, has guided banking and insurance institutions within its jurisdiction to respond calmly to various risks and challenges. By coordinating and advancing the key tasks set forth at the regulatory work conference earlier this year, the Bureau has provided robust financial support for winning the battle to safeguard Shanghai, as evidenced by: overcoming difficulties to ensure the stable operation of Shanghai’s financial sector; making every effort to support steady economic development; and steadfastly promoting industry reform and risk mitigation.
Data show that as of the end of June, the outstanding balance of manufacturing loans within the jurisdiction of the Shanghai Banking and Insurance Regulatory Bureau stood at RMB 1.23 trillion. Meanwhile, Chinese-funded banks in the region have cumulatively extended loan renewals totaling over RMB 500 billion, and insurance companies operating in Shanghai have expanded COVID‑19 coverage to more than 2,700 insurance products, reaching over 5 million policyholders.
In the first half of the year, the Shanghai Banking and Insurance Regulatory Bureau actively advanced the disposal of non‑performing assets, with the banking sector under its jurisdiction disposing of RMB 29.7 billion in such assets. At the same time, it took lawful measures to crack down on illegal insurance‑policy cancellation rings and collaborated with public security authorities to solve several criminal cases.

Commercial & Corporate
304 listed companies are expected to see their net profits double year over year, concentrated in three major industries.
Eleven companies are expected to report first-half net profits exceeding RMB 10 billion.
From the perspective of net profit attributable to shareholders, data from Tonghuashun show that among the 1,694 listed companies that have disclosed interim performance forecasts, 11 are expected to report a maximum net profit exceeding RMB 10 billion in the first half of this year. Among them, PetroChina, CNOOC, and COSCO Shipping Holdings forecast maximum net profits of RMB 85.036 billion, RMB 72.5 billion, and RMB 64.716 billion, respectively, currently ranking first through third. In addition, eight other listed companies—including China Shenhua, Shaanxi Coal, Yankuang Energy, Jiuan Medical, and China National Coal Group—also anticipate maximum net profits attributable to shareholders exceeding RMB 10 billion for the first half of the year.
In response, Liu Cunxin, assistant fund manager at Rongzhi Investment under PaiPaiNet, stated: “Energy companies have posted robust net profits, largely due to geopolitical factors in the first half of this year that disrupted energy supplies. Coupled with the global economic recovery, which boosted energy demand, these dynamics have created supply‑demand imbalances, driving international energy prices higher and bolstering the financial performance of relevant offices.”
In terms of year-on-year growth in net profit attributable to shareholders, among the 1,694 listed companies that have disclosed interim performance forecasts, 304 expect their first-half net profit growth rate to reach or exceed 100%. Notably, Jiuan Medical, Tianqi Lithium, and Shenglu Communication each project a maximum first-half net profit growth rate exceeding 10,000%, at 28,196.60%, 13,420.21%, and 10,529.92%, respectively.
In its earnings forecast, Jiuan Medical stated that it expects to report net profit attributable to shareholders of RMB 15.1 billion to RMB 15.5 billion for the first half of the year, representing a year-on-year increase of 27,466.36% to 28,196.6%. This robust growth is primarily driven by a substantial surge in U.S. demand for COVID‑19 antigen test kits during the first half, which has significantly boosted the company’s performance.
Among the 304 individual stocks whose year-to-date net profit growth rate reached or exceeded 100%, three prominent characteristics stand out: First, their stock prices have been relatively strong. Since July and through the close of August 5, 218 of these 304 stocks posted cumulative gains that outpaced the Shanghai Composite Index (which fell 5.05% over the same period), accounting for more than 70%. Notably, seven stocks—including Yueyang Xingchang, Dalian Heavy Industry, and HuaDa Jiutian—each recorded cumulative gains exceeding 50% during this timeframe.
Second, institutional investors are heavily concentrated in certain stocks. As of the end of the first quarter of 2022, the top ten circulating shareholders of 132 companies included social security funds, pension funds, insurance capital, securities offices, and QFIIs, accounting for 43.42% of the total. Among these, companies such as StarPower Semiconductor, Yanzin Puzi, and Weixin Kang were jointly held by two or more institutions.
Third, the stock has repeatedly earned favorable ratings from rating agencies. Over the past 30 days, 154 individual stocks have received positive ratings such as “Buy” or “Add,” accounting for more than 50% of all stocks covered. Among them, 14 stocks—including BYD, Perfect World, and NAURA—have each garnered 10 or more positive ratings.
Profit growth is expected to more than double, with companies concentrated primarily in three major industries.
Among the 304 companies whose first-half net profit growth rate reached or exceeded 100%, there are offices spanning 29 SW‑classified first‑tier industries. Notably, the basic chemicals, power equipment, and electronics sectors account for the largest number of listed companies—138 in total, representing over 40% of the sample—and emerged as the three strongest performers in the first half of the year.
Wu Qihong, Chief Researcher at Guangzhou Wanlong Securities Consulting Co., Ltd., stated: “The basic chemicals sector posted strong first-half results, primarily driven by rising product prices. Additionally, certain chemical products have entered the upstream segments of the new‑energy value chain, benefiting from robust demand spurred by the booming electric‑vehicle, wind‑power, photovoltaic, and energy‑storage industries. From an investment perspective, key areas to watch include phosphate chemicals, fluorochemicals, and titanium dioxide. Against the backdrop of carbon neutrality, power‑equipment and new‑energy sectors are poised for an extended period of strong growth; coupled with supply constraints, overseas orders have surged. Investors should pay particular attention to emerging technologies such as HJT cells and perovskite solar cells.”
Zhou Quqing, Managing Director of Guangzhou Guobang Asset Management Co., Ltd., stated: “Performance in the electronics sector remains relatively divergent. Demand is robust in downstream segments such as semiconductors for new energy and smart‑car chips, with investment opportunities concentrated in high‑growth niche areas.”
Wang Chunxiu, fund manager at Dongtuo Investment, said: “The basic chemicals sector is enjoying strong momentum, largely driven by rising prices for oil, coal, and natural gas.”
Which sectors offer the greatest opportunities for earnings growth in the second half of the year? Zhou Quanqing believes that the new-energy industry still has substantial room for profit expansion, and certain niche segments—such as energy storage—that are in the early stages of development warrant thorough exploration.
Wu Qihong stated, “Stabilizing growth remains the priority in the second half of the year. Judging from recent upstream indicators such as domestic excavator sales and cement inventory‑to‑capacity ratios, the infrastructure sector is already showing signs of accelerating; this area warrants close attention. The defense‑industrial sector also holds substantial room for expansion. In the second half, state‑owned enterprise reform is expected to gain momentum, and with valuations currently at relatively low levels, it merits consideration as well. Moreover, related industrial chains—including aerospace, satellite internet, and large aircraft—deserve continued scrutiny.”

Mining investment is gaining momentum, and China’s domestic iron ore supply capacity is set to increase significantly.
Investment in domestic iron ore mining has entered an “acceleration phase.” According to the Ministry of Industry and Information Technology’s website, which recently released data on the steel industry’s performance for the first half of the year, cumulative investment in the ferrous metal mining and beneficiation sector rose 76.1% year-on-year during that period.
Industry insiders note that mining investment is growing rapidly. With strong policy support, the pace of domestic iron‑ore project development is expected to accelerate, and domestic iron‑ore production is projected to rise significantly over the next two to three years, markedly boosting the country’s capacity to supply iron ore.
In the first half of the year, the investment growth rate of 76.1% in the ferrous metal mining and beneficiation industry increased by 74.6 percentage points compared with the same period last year.
“This year-over-year growth rate is quite high. The rapid expansion in mining investment is linked to the ‘Cornerstone Program.’ The government now places great emphasis on developing domestic iron‑ore projects and provides supportive policies,” said Xu Xiangchun, Director of Information at Shanghai Steel Union.
Mine development projects typically have long construction cycles, but with policy support, the pace of construction is expected to accelerate. As a number of projects commence, domestic iron ore production is projected to rise significantly over the next two to three years, substantially enhancing China’s indigenous iron ore supply capacity.
In March this year, the National Development and Reform Commission convened a meeting to designate the lead agency for the “Cornerstone Plan.” That same month, the domestic iron ore production‑increase coordination mechanism was officially launched, and subsequently, relevant national ministries and commissions held multiple joint meetings to accelerate the development of domestic iron ore resources.
Driven by a series of policy measures, the potential for increased domestic iron ore production has begun to materialize. According to data from the China Metallurgical Mines Association, in the first half of the year, the country’s cumulative output of iron concentrate reached 140 million tonnes, up 3.8% year on year. In June alone, iron concentrate production totaled 24.45 million tonnes, a 5.3% year-on-year increase.
At the fourth session of the Sixth Members’ Congress of the China Iron and Steel Association, Executive Chairman He Wenbo highlighted key priorities for the second half of the year, emphasizing the need to implement the “Cornerstone Plan” and strengthen resource security. He called for leveraging the role of the steel industry’s Resource Security Task Force, closely coordinating with relevant authorities and the iron ore production‑increase coordination mechanism, and continuing regular surveys of domestic iron ore project progress to facilitate the development and construction of such projects.
According to incomplete statistics, from March to July, Hebei Province approved nearly 50 iron‑ore projects, including the 300,000‑ton‑per‑year iron‑concentrate beneficiation plant project of Xinglong County Zhaolong Mining Co., Ltd., the 5 million‑ton‑per‑year iron‑ore processing project of Tangshan Guoda Mining Co., Ltd., and the 1.8 million‑ton‑per‑year integrated iron‑ore beneficiation and comprehensive utilization project of Qinhuangdao Juxinlei Iron‑Ore Beneficiation Co., Ltd., among others.
Another set of figures released by the Ministry of Industry and Information Technology in its report on the steel industry’s performance for the first half of the year has also drawn attention. In the first six months, national crude steel output totaled 527 million tonnes, down 36.45 million tonnes, or 6.5% year on year. In 2021, national crude steel production fell by nearly 30 million tonnes compared with the previous year, signaling a further intensification of production cuts.
Industry insiders believe that the decline in crude steel output is positive for the raw materials side. Hualing Steel stated that, recently, several provinces have begun implementing measures to cut crude steel production in 2022, which will put downward pressure on iron ore demand and prices.
According to the latest data released by the China Iron and Steel Association, the price of imported iron ore stood at $114.35 per tonne, down 0.55% from the previous reporting day. The data also show that, as of the close on August 3, the main iron ore futures contract had fallen more than 15% from its year-to-date peak.
Everbright Futures stated that, on the supply side, China’s iron ore imports in the second half of the year are expected to total 567 million tonnes, up 26 million tonnes quarter-on-quarter and 1.9 million tonnes year-on-year. On the demand side, driven by low steel mill margins, increased maintenance shutdowns, and production‑cutting policies, domestic hot metal output is forecast to decline in the second half. Meanwhile, overseas demand is expected to moderate, with global hot metal production projected at 220 million tonnes in the second half—down 6.8 million tonnes year-on-year.
 The institution stated that, as supply and demand fundamentals gradually ease, iron ore prices are expected to remain under downward pressure in the second half of the year, with the price center of gravity likely to shift lower.

Aluminum foil prices and volumes are both rising, and sodium-ion batteries are opening up new opportunities for the industry.
“This year, the company’s battery‑aluminum‑foil order volume has been steadily increasing, with demand outstripping supply. In July, there were numerous last‑minute order additions, bringing total orders to over 11,000 tonnes. Due to insufficient time to reconfigure production lines, cumulative shipments of battery aluminum foil stood at 9,500 tonnes as of the end of July, with the remaining orders deferred to next month.” Recently, Chen Weixin, secretary of the board at Dingsheng New Materials, stated that since August, customer orders for battery aluminum foil have continued to grow, now reaching 13,000 tonnes.
Aluminum foil is a rolled aluminum product with a thickness of less than 0.2 millimeters. Battery aluminum foil refers to the aluminum current collector used in the positive electrode of lithium batteries; it serves both as an electrical current collector and as a substrate for the positive electrode material. In recent years, battery aluminum foil has emerged as the fastest-growing segment within the broader foil‑product category. According to Huang Wei, Deputy General Manager and Board Secretary of Wanshun New Materials, since the second half of last year, demand for battery aluminum foil has surged, resulting in a market characterized by supply falling short of demand.
Chen Weixin stated that the battery aluminum foil market has shifted from a tight balance in the first quarter to a state of shortage. Several institutions believe that supply falls short of demand, which will continue to drive up processing fees. Looking ahead, leading companies are expected to further expand production capacity and shipments, with economies of scale boosting industry profitability. The imminent commercial deployment of sodium-ion batteries will create a new growth driver for battery aluminum foil. Institutions forecast that global demand for battery aluminum foil will reach 740,000 tons by 2025, with a compound annual growth rate of 37%.
Battery aluminum foil processing fees continue to rise.
Domestically, aluminum foil prices are typically set using a “aluminum price plus processing fee” model. The processing fee is generally determined through periodic negotiations between buyers and sellers and constitutes the primary source of profit for aluminum foil producers. Fluctuations in the processing fee directly reflect industry conditions and the balance of supply and demand in the market.
According to industry insiders, since the second half of last year, processing fees for battery aluminum foil have risen cumulatively by RMB 2,000 to RMB 4,000 per ton. Last year, the average processing fee stood at approximately RMB 15,000 per ton. In the second half of last year, demand in the battery aluminum foil market expanded rapidly, prompting several leading companies to raise their average processing fees to above RMB 16,000 per ton in the fourth quarter. In the first quarter of this year, as supply and demand tightened toward a balanced state, some offices further increased their processing fees to RMB 17,000 per ton.
According to data from Shanghai Nonferrous Network, as of the end of July, the processing fee for 15-micron lithium‑battery aluminum foil stood at RMB 18,000 per ton, while the fee for 12-micron foil had reached RMB 20,000 per ton. Qu Jianhui, a senior analyst specializing in aluminum foil at Shanghai Nonferrous Network, noted that there is still room for further increases in battery‑aluminum‑foil processing fees going forward. With rising production costs—particularly labor and energy—and limited prospects for a significant short-term improvement in yield rates, scrap‑related expenses continue to account for the bulk of costs. Moreover, robust downstream demand remains the primary driver behind the upward trend in processing fees.
According to industry insiders, the sharp surge in demand for battery aluminum foil stems from a supply‑demand mismatch. On the one hand, sales of new‑energy vehicles and the installed capacity of power batteries are expanding rapidly; on the other hand, battery aluminum foil products face a relatively long commercialization cycle and significant technical barriers, resulting in slow ramp‑up of production lines and extended time to reach full capacity. For new entrants, challenges such as R&D, certification, and achieving high yield rates must all be overcome.
Huang Wei stated that expanding battery aluminum foil production capacity follows a certain cycle, typically taking about three to five years. First, establishing new production facilities requires at least two years; for newcomers to the industry, factoring in process development and optimization can extend this timeline to more than three years. Second, once production commences, the products must undergo trial use and certification by downstream battery manufacturers, a process that generally takes around six months to one year.
Listed companies are ramping up production of battery aluminum foil.
Benefiting from rising processing fees and steadily expanding production capacity, listed companies in the battery aluminum foil sector saw a significant improvement in profitability during the first half of this year.
Dingsheng New Materials expects to report net profit attributable to shareholders of RMB 510 million to RMB 610 million for the first half of the year, representing a year-on-year increase of 235.40% to 301.16%. The company stated that downstream demand for power‑battery aluminum foil remains robust, and it has accelerated the conversion of its conventional production lines to produce such foil, resulting in substantial year-on-year growth in both output and sales and further strengthening its market share. In addition, demand in the traditional packaging aluminum foil segment continues to be strong.
Wanshun New Materials expects to report net profit attributable to shareholders of RMB 115 million to RMB 125 million for the first half of the year, representing a year-on-year increase of 531.54% to 586.45%. The company stated that robust demand in downstream aluminum foil markets, coupled with the ramp-up of production capacity at its subsidiary Anhui Zhongji’s Phase I project—boasting an annual output of 40,000 tons of high-precision electronic aluminum foil—has significantly boosted the profitability of its aluminum processing business.
In addition, listed companies such as Dongyangguang and Mingtai Aluminum all posted year-on-year earnings growth in the first half of the year.
Going forward, leading companies will further accelerate the development and ramp-up of production capacity. As shipments broadly increase, economies of scale are likely to drive a substantial improvement in industry profitability.
Chen Weixin stated that Dingsheng New Materials is expected to ship 120,000 tons of battery aluminum foil in 2022. In terms of production capacity, the company’s annual battery aluminum foil capacity is projected to reach 150,000 tons by the fourth quarter.
In addition to steadily increasing shipment volumes, Dingsheng New Materials plans to further expand its production capacity. The company recently announced that it intends to raise up to RMB 2.7 billion through a private placement; the net proceeds, after deducting issuance expenses, will be allocated to a project to produce 800,000 tons per year of battery foil and associated billets, as well as to replenish working capital. According to Guojin Securities, upon completion, this project is expected to add 600,000 tons of billet capacity and 200,000 tons of finished battery foil capacity.
Huang Wei stated that Wanshun New Materials’ Anhui Zhongji production base primarily focuses on battery aluminum foil. Of the 72,000-ton high-precision electronic aluminum foil project currently under construction, the first phase—40,000 tons—began production at the end of last year, while the second phase—32,000 tons—was launched at year-end and is scheduled to come online next year. In addition, the company is establishing a 100,000-ton-per-year power‑and‑energy‑storage battery foil project at Anhui Zhongji; once fully completed, the facility will achieve a total aluminum foil capacity of 255,000 tons.
Mingtai Aluminum’s Yiruixin Materials project, with an annual capacity of 700,000 tons of green, next-generation aluminum alloy materials, encompasses specialized products such as power‑battery-grade aluminum and aluminum foil billets. According to a company official, the project is progressing smoothly and is expected to contribute approximately 50,000 tons of finished‑product capacity this year.
On July 27, Tianshan Aluminum stated on its investor relations platform that, in line with its development strategy, the company has entered the battery aluminum foil sector. It has launched a first-phase 200,000-ton-per-year power‑battery foil production project in Jiangyin, Jiangsu, and is concurrently developing a 300,000-ton aluminum foil billet project in Shihezi, Xinjiang. The products will primarily be used as current collectors for lithium‑ion battery cathodes and as both positive and negative electrode materials for sodium‑ion batteries.
Sodium-ion batteries are emerging as a new growth opportunity for aluminum foil.
At present, large-scale mass production of sodium-ion batteries is drawing ever closer. Industry experts generally agree that, with the formal commercialization of sodium-ion batteries, demand for aluminum foil used in battery manufacturing will expand further.
Unlike lithium-ion batteries, sodium does not readily form alloys with aluminum; therefore, in sodium-ion batteries, both the positive and negative current collectors can be made entirely of aluminum foil instead of copper foil, reducing costs by nearly 70%. This means that sodium-ion batteries will create a new growth driver for aluminum foil demand.
Chen Weixin stated that, based on a 1 GWh lithium-ion battery, the aluminum foil requirement is between 330 and 350 tons. Looking ahead, compared with lithium-ion batteries, sodium-ion batteries will require at least double the amount of aluminum foil, with demand rising to 600–700 tons per GWh.
According to EVTank’s estimates, under a 100% penetration rate for sodium-ion batteries, the market size could reach 369.5 GWh by 2026. Given that sodium-ion batteries require approximately 800 tons of aluminum foil per GWh, aluminum foil consumption for this sector is expected to total 295,600 tons in 2025.
Zhejiang Securities believes that the supply shortage of battery aluminum foil will persist at least through 2023. From 2022 to 2023, the overall supply-demand balance for battery foil is expected to remain tight. Global battery foil production is forecast to reach 320,000 tonnes in 2022 and 483,000 tonnes in 2023. On the demand side, consumption is projected at 331,000 tonnes in 2022 and 488,000 tonnes in 2023. Consequently, a demand gap of 11,500 tonnes is anticipated in 2022, with a smaller gap of 4,800 tonnes in 2023, keeping the market in a state of near‑tight balance. Only after 2024, as battery aluminum foil supply expands significantly, is the current supply‑demand imbalance expected to ease.
The trend toward thinner and lighter battery aluminum foil is also a major development direction. Currently, the mainstream thickness of power‑battery aluminum foil ranges from approximately 12 to 15 microns. Chen Weixin noted that advancing toward thinner foil requires careful consideration of properties such as elongation and high tensile strength, posing significant technical challenges. The company is actively building up its technological capabilities in this area; in the power‑battery sector, its 12‑micron foil boasts industry‑leading performance, and it is the only domestic manufacturer to have achieved mass production of 10‑micron foil. In the consumer‑electronics battery segment, the company is the sole domestic producer to have scaled up production of both 9‑micron and 8‑micron foils.

Taxation
Announcement of the State Taxation Administration on the Entry into Force of the Multilateral Convention to Implement Tax Treaty Measures to Prevent Base Erosion and Profit Shifting in China and on the Commencement of Its Application to Certain Tax Treaties
The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (hereinafter referred to as the “Convention”), drafted under the leadership of the Organisation for Economic Co-operation and Development at the behest of the Group of Twenty, aims to comprehensively revise existing bilateral tax treaties and implement the recommendations set forth in the Action Plan on Base Erosion and Profit Shifting (BEPS) related to tax treaties. As of June 30, 2022, 97 countries or regions, including China, had signed the Convention. The following is an announcement regarding the entry into force of the Convention for China and its application to certain tax treaties:
I. Status of the Convention’s Entry into Force in China
With the approval of the State Council, on May 25, 2022, China deposited its instrument of ratification of the Convention with the Secretary-General of the Organisation for Economic Co-operation and Development, the depositary of the Convention. Pursuant to Article 34(2) of the Convention, which governs entry into force, the Convention will enter into force for China on September 1, 2022.
II. Status of the Application of the Convention to Certain Tax Treaties of China
As of June 30, 2022, in accordance with the status of ratification procedures for the Convention by the contracting parties to the relevant tax treaties, the Convention shall apply to the 47 tax treaties that China has concluded (see the annex for details), with the effective date determined pursuant to Article 35 of the Convention (Entry into Force).
The text of the Convention, together with a list of the reservations and notifications made by China to the Convention, has been published on the website of the State Taxation Administration.

Export Tax Rebates: A Decade of Rapid Acceleration
Ten Years of Accelerating Export Tax Rebates
As an internationally accepted practice, export tax rebates help enhance the competitiveness of domestic goods in the global market and are adopted by countries around the world. China is no exception.
Over the past decade, China’s foreign trade has grown rapidly and stood out as a key driver of economic development. The total value of goods trade imports and exports increased from RMB 24.4 trillion in 2012 to RMB 39.1 trillion in 2021, making a substantial contribution to the country’s sustained and stable economic growth. This progress has been closely linked to the Chinese tax authorities’ efforts to continually accelerate export‑tax rebate processing, enabling foreign‑trade enterprises to secure timely and adequate financial support. Statistical data show that, alongside steady growth in overall foreign trade, export‑tax rebate payments have also risen steadily—from RMB 1.04 trillion in 2012 to RMB 1.67 trillion in 2021—providing tangible fiscal relief that helps reduce costs and gives foreign‑trade offices a competitive edge.
“What left a particularly strong impression on me was that, ten years ago, processing an export tax rebate took at least half a month—sometimes even a full month. In recent years, the process has grown much faster, and the time we have to wait has steadily shortened,” said Zhu Xiaohuai, Chief Financial Officer of Shanghai Zhenhua Heavy Industries (Group) Co., Ltd., as he reflected on how long it has taken his company to obtain export tax rebates in recent years.
In 2014, global economic growth remained sluggish, and China’s foreign trade faced challenging conditions. That year, the State Taxation Administration issued the “National Tax Authorities’ Export Rebate (Exemption) Management Work Standards (Version 1.0),” which was scheduled to take effect on February 1, 2015, with the goal of ensuring that taxpayers’ export rebate applications are reviewed and approved within 20 working days.
In 2016, amid a sluggish global economic recovery, the year was widely regarded as the most challenging for international trade. To mitigate the impact of the international environment on foreign trade, the State Taxation Administration, building on its export tax rebate (exemption) enterprise classification system, further streamlined export tax rebate management. Under this framework, tax authorities were required to process export tax rebate (exemption) procedures within 5, 10, 15, and 20 working days for Category I, II, III, and IV exporters, respectively. At the time, this measure drew praise from foreign‑trade enterprises, who remarked that the turnaround was “noticeably faster.”
Since 2020, the confluence of once-in-a-century changes and a century‑spanning pandemic has significantly heightened the risks and challenges confronting foreign trade enterprises. In response to these challenges, “acceleration” has emerged as the key strategy for tax authorities in supporting the steady development of foreign trade.
In February 2020, the State Taxation Administration announced that it would reduce the average processing time for standard export tax rebate applications by 20% compared with the 2019 benchmark of 10 working days, ensuring that the average processing time is kept within 8 working days, and further shorten the processing deadlines for A‑level taxpayers.
In February 2021, the State Taxation Administration announced that the average processing time for routine export tax rebate applications had been accelerated to within seven working days. By the end of 2021, this average processing time had been further reduced to within six working days.
Annual changes yield profound transformations over a decade. The streamlined processing of export tax rebates has provided strong impetus to China’s foreign trade, enabling it to thrive despite headwinds.
— In 2013, the tax authorities processed export tax rebates totaling RMB 1.05 trillion, while China’s total goods trade volume reached RMB 25.83 trillion, making the country the world’s largest trading nation in goods.
— In 2016, global trade faced unprecedented challenges; nevertheless, the tax authorities processed export tax rebates totaling RMB 1.22 trillion, and China’s total value of goods imports and exports reached RMB 24.33 trillion, providing strong support for the country’s steady economic growth that year.
—The global pandemic of 2020 placed immense pressure on foreign trade. Throughout the year, tax authorities processed export tax refunds totaling RMB 1.45 trillion, and China’s total value of goods imports and exports reached RMB 32.2 trillion, making it the only major economy worldwide to achieve positive trade growth that year.
— In 2021, tax authorities nationwide processed export tax refunds totaling RMB 1.67 trillion, while China’s total value of goods trade imports and exports reached RMB 39.1 trillion, hitting yet another record high.
— In the first half of 2022, export tax rebates totaled nearly RMB 1.1 trillion, up 21.2% year on year. Meanwhile, China’s total value of goods trade imports and exports reached RMB 19.8 trillion, an increase of 9.4% compared with the same period last year, signaling the continued recovery of the Chinese economy.
Observe the “form” of data changes and discern the “momentum” of economic development. Concrete sets of data demonstrate that the accelerated processing of export tax rebates and the timely implementation of tax reductions are coalescing into a powerful impetus for the growth of foreign trade.
Behind the Dramatic Acceleration of Export Tax Rebates
Data show that in 2021, China had 567,000 enterprises with actual import and export activities, 1.7 times the number in 2012. Over the past decade, the number of foreign‑trade enterprises has continued to grow, and the volume of export‑tax‑rebate applications has risen year after year. So why has the processing speed not slowed down—it has actually accelerated?
This is because the tax authorities have streamlined the export‑tax‑rebate process by reducing procedural steps, minimizing documentation requirements, implementing paperless operations, and offering contactless service channels, thereby ensuring that export‑tax‑rebate applications are processed efficiently, reliably, and swiftly.
— From cumbersome to streamlined, the number of required application documents is steadily decreasing.
“It’s become increasingly simple and faster—this is my biggest takeaway from handling export tax rebates,” said Liu Xiaotong, director and vice president of Guangdong Huizhou Difenni Acoustic Technology Co., Ltd., when reflecting on the changes in the export tax rebate process over the past decade.
2015 was a breakthrough year in export‑tax‑rebate administration. That year, the “National Tax Authorities’ Export Tax Rebate (Exemption) Management Standards (Version 1.0)” was officially put into effect, consolidating and refining the myriad export‑tax‑rebate provisions previously scattered across 665 documents into streamlined, optimized business processes. This resulted in unified, standardized procedures that are easier to implement. At the same time, approval authorities were delegated, fast‑track processing channels were established, and a tiered management system for export tax rebates was introduced. Under this framework, Category‑I enterprises with high compliance and strong credit ratings were granted “reimbursement first, review later,” enabling them to receive their rebate funds approximately two weeks earlier than before—significantly easing their cash‑flow pressures.
“Export tax rebates have never been this fast.” That was a phrase taxpayers often repeated in news reports at the time. Today, taxpayers have a fresh appreciation for what “fast” really means.
In 2022, the State Taxation Administration introduced three facilitative measures to streamline export tax rebates. First, it reduced documentation requirements by eliminating or adjusting numerous paper-based submissions previously needed for export tax rebate filings and certificate issuance. Second, it simplified procedures by removing the prior‑submission requirement for cases where foreign exchange cannot be collected; instead, enterprises are now required to retain relevant records for verification purposes. Third, it digitized six categories of export tax rebate certificates, including the Certificate of Agency Export Goods, replacing paper certificates with electronic ones. As a result, when handling subsequent tax‑related matters, enterprises no longer need to submit paper certificates; instead, tax authorities will verify the information contained in the electronic certificates.
— From paperless processes to “no-form-filling,” the system is becoming increasingly sophisticated.
Information technology is a powerful tool for accelerating the processing of export tax refunds. Over the past decade, tax authorities have steadily intensified their efforts to build out digital infrastructure and continuously refined and upgraded the export tax refund system. As a result, taxpayers can now complete export tax refund procedures in a paperless manner—often without even having to fill out forms—leading to shorter processing times and faster turnaround.
Ma Ning, a first‑level chief staff member in the Goods and Services Tax Division of the Jiangxi Provincial Tax Service Bureau, who has worked on export tax rebates for many years, remarked with emotion: “From relying primarily on paper documents back then to today’s fully online processing, the level of informationization in export tax rebates has changed dramatically.”
“Take the review of export tax rebate applications, for example: we’ve moved from manually sifting through piles of rebate documentation to full electronic processing and now to a paperless system. This not only significantly speeds up the processing but also allows us to devote more of our resources to strengthening risk management and control in the export tax rebate process,” said Ma Ning.
In 2018, the State Taxation Administration issued an announcement on measures to accelerate the export tax rebate process, proposing the full implementation of paperless tax rebate filing to significantly increase the speed of tax refunds.
In 2021, leveraging the new system rolled out by the State Taxation Administration, export tax rebates were further accelerated. The tax authorities integrated the Golden Tax Project Phase III system with the export tax rebate management system and developed an export tax rebate management module within the Phase III framework. This streamlined, consolidated system has enabled taxpayers to achieve “three increases” and “three reductions”: the three increases include expanding申报 channels to three—namely, the Electronic Tax Bureau, the standard‑version International Trade “Single Window,” and the offline export tax rebate filing tool; raising the proportion of data items eligible for “no‑fill‑in” to 70%; and adding five service items and six rebate‑reminder features. The three reductions involve cutting the number of rebate‑filing forms by one‑third, reducing the number of data fields required by one‑fifth, and streamlining the rebate‑filing procedures.
As part of this year’s “Doing Practical Things for Taxpayers and Payers and the Spring Breeze Action to Facilitate Tax Services,” which is being carried out for the ninth consecutive year, the tax authorities, in collaboration with the customs authorities, have further deepened data sharing and expanded the scope of the “no‑fill‑in” option for export tax rebate declarations.
— From “in-person processing” to “contactless service,” administrative procedures are becoming increasingly convenient.
Following the outbreak of the COVID‑19 pandemic in 2020, tax authorities proactively implemented epidemic‑prevention measures to minimize unnecessary contact and vigorously promoted “non‑contact” tax services. All export‑enterprise refund applications can now be filed online. This “file from home, file and receive refunds online” approach has enabled both taxpayers and tax authorities to experience significantly faster processing.
“Processing with missing documents” in the cloud is one of the measures adopted by tax authorities to promote “non-contact” tax services. In April this year, the State Taxation Administration and nine other departments jointly issued the “Notice on Further Strengthening Support for Export Tax Rebates and Promoting Stable Development of Foreign Trade,” which explicitly outlines the introduction of additional export‑tax‑rebate services such as “non-contact processing” and “processing with missing documents,” thereby reducing burdens and enhancing convenience for exporting enterprises.
What does the significant acceleration of export tax rebates mean?
What does the accelerated processing of export tax rebates mean for foreign‑trade enterprises? In particular, this latest measure—targeted at Category I and Category II enterprises—temporarily reduces the export tax rebate processing time to within three working days. What specific benefits will this bring to businesses?
Cash flow is the lifeblood of a business; receiving tax refunds more quickly means reducing capital tied up and accelerating cash repatriation, giving companies a competitive edge in the global marketplace.
Recently, after witnessing the swift processing of an RMB 18 million export tax rebate—credited to the company’s account in just two days—Lai Zhengfang, CFO of Jiangxi Hongbo New Materials Co., Ltd., remarked: “The significantly shortened approval turnaround time enables businesses to recover funds more quickly. With cash in hand, we can face the future with confidence!”
The swift processing and disbursement of export tax rebates have enabled an increasing number of enterprises to feel a lighter burden as they move forward, fueling the resumption of work and production while bolstering their confidence in investing in R&D and innovation.
Processing trade is a key pillar supporting the stable operation of Guangdong’s foreign trade; however, due to its “both ends abroad” nature—where both raw materials and finished products are sourced overseas—businesses have been hit more directly by the pandemic. Guangbao Electronics (Guangzhou) Co., Ltd., a processing‑trade enterprise located in Guangzhou’s Huangpu District, sees its finance and accounting head, Gao Binfeng, remark: “The accelerated processing of export tax rebates allows us to receive refunded funds promptly, ensuring the continued progress of R&D projects and the timely upgrading of production equipment, thereby helping us maintain our competitive edge in international trade.”
Fan Yong believes that implementing tax policies to stabilize foreign trade and accelerating export tax rebates to support market entities can effectively help exporting offices revitalize their capital, maintain stable production and sales, and expand into new markets despite headwinds. Over the past decade, China’s tax authorities have continuously shortened the processing time for export tax refunds, significantly reducing business operating costs and enhancing the international competitiveness of Chinese exporters.
A thousand sails race forward, carried by the gentle breeze; with oars officely gripped, they chase the waves across a vast expanse of sky and sea. Along the major arteries of maritime and land transport, iron dragons thunder along, ports thrive, and giant vessels cut through the swells. Each container reflects the vibrant vitality of foreign trade, sending a powerful signal: “China’s door of openness will only open wider—it will never close.” As we forge ahead, the tax authorities will join forces with market entities in foreign trade, fostering an ever-improving tax‑related business environment that continues to bring a “warm spring breeze” to the sector, helping China’s foreign trade achieve higher‑quality, more resilient growth.

The Hunan Provincial Tax Authority has, in accordance with the law, investigated and prosecuted a case involving a group that fraudulently obtained additional tax credit refunds by issuing false invoices.
Recently, the Inspection Bureau of the Hunan Provincial Tax Service, based on leads derived from tax‑related big data analysis, guided the Inspection Bureau of the Loudi Municipal Tax Service to join forces with the public security economic investigation authorities in lawfully investigating and cracking a case involving a group that fraudulently obtained VAT credit refunds by issuing false invoices.
Upon investigation, it was found that the criminal gang registered multiple shell companies to obtain special VAT invoices for offsetting input tax credits, while simultaneously issuing false special VAT invoices to external parties. The tax inspection authorities have verified these activities and recovered the input‑tax credit refunds fraudulently obtained by downstream enterprises through the acceptance of such fictitious invoices. They are now conducting thorough investigations into other entities suspected of using false invoicing to illicitly claim input‑tax credit refunds. At present, the public security economic investigation department has apprehended six suspects and placed three others on the wanted list.
An official from the Inspection Bureau of the Hunan Provincial Tax Service stated that cracking down on fraudulent claims for additional tax credit refunds will be a top priority in ongoing, routine enforcement efforts. The focus will be on organized, cross‑regional schemes and illegal activities such as issuing false invoices to inflate input tax credits for the purpose of fraudulently obtaining refunds. With a zero‑tolerance stance, these offenses will be resolutely suppressed, creating an overwhelming deterrent against such misconduct and ensuring the effective and accurate implementation of the additional tax credit refund policy.

Litigation & Arbitration
A national first! First-instance judgment in a liability dispute involving market manipulation on the New Third Board.
On the morning of August 5, the Shanghai Financial Court delivered its first-instance judgment and publicly pronounced the verdict in the case brought by plaintiff investors against defendant Company A and its de facto controller, Mr. Shao, concerning liability for manipulating the securities trading market.
The actual controller manipulated and drove up the company’s stock price, while the plaintiff incurred substantial losses in the private placement.
Defendant Company A is a company listed on the New Third Board. Effective August 3, 2015, Company A’s stock trading method on the New Third Board was changed from negotiated transfer to market-making transfer.
On November 20, 2017, Defendant Company A issued an announcement titled “Notice Regarding Receipt of a Notice of Investigation from the China Securities Regulatory Commission Concerning the Controlling Shareholder and Actual Controller,” stating that, on suspicion of manipulating the securities market, the China Securities Regulatory Commission had decided to initiate an investigation into the actual controller of Company A.
On September 7, 2020, the China Securities Regulatory Commission issued Administrative Penalty Decision No. [2020]61, finding that the de facto controller, Shao, and third-party individual Zuo, among others, engaged in stock price manipulation of Company A between August 7, 2015, and September 30, 2015. During this period, the New Third Board market’s market‑making index declined from 1,515.4 points to 1,322.15 points, a drop of 12.75%, while Company A’s share price rose from RMB 20.26 per share to RMB 30.79 per share (with an intraday high of RMB 36.50 per share), an increase of 51.97%. During the manipulation period, Shao, through securities accounts under his control, repeatedly placed buy orders, actively executed trades with market makers, and engaged in substantial buying and selling of Company A’s shares, thereby compelling market makers to continuously raise their two‑way quote midpoints and driving up transaction prices. The volume of these transactions accounted for 54.03% of the market’s total trading volume during the same period. Such trading activities not only affected the stock’s trading volume but also exerted a significant influence on its price dynamics.
The Administrative Penalty Decision also found that, starting on September 14, 2015—when A Company held its private‑placement financing matchmaking meeting on September 17, 2015—Shao and others engaged in after‑hours price‑manipulation activities over eight consecutive trading days. Taking into account the facts, nature, circumstances, and societal harm caused by the violations, the China Securities Regulatory Commission imposed a fine of RMB 1.5 million on Shao and issued corresponding penalties to other non‑parties involved in the case.
On September 17, 2015, the plaintiff attended an equity‑raising investment‑financing matchmaking event organized by Company A as a prospective investor in the private placement. Following multiple rounds of negotiations conducted both online and offline, in November 2015 the plaintiff entered into a Stock Subscription Agreement with Company A, purchasing 1.5 million shares issued by the company at a price of RMB 20 per share, for a total investment of RMB 30 million.
Following the plaintiff’s participation in the targeted share issuance, A Company’s stock was suspended from trading on two occasions between October 8, 2015, and November 13, 2018. During this period, the company’s application for an initial public offering of A‑shares and listing was accepted by the China Securities Regulatory Commission, but it subsequently withdrew that application on August 20, 2018. In August 2017, the method of transferring A Company’s shares was changed from market‑making to negotiated transfer. On November 14, 2018, following the resumption of trading, the stock price fell to RMB 2.4 per share on its first day of trading. As of September 17, 2020—the date on which the Administrative Penalty Decision was publicly announced—A Company’s stock was trading at RMB 5 per share.
The plaintiff, having incurred substantial losses from participating in A Company’s private placement investment, brought a lawsuit before the Shanghai Financial Court against A Company and its de facto controller, Mr. Shao, seeking civil liability for market manipulation in securities trading. The plaintiff requests that the two defendants be jointly ordered to compensate for economic losses in the amount of RMB 22,598,795.28.
Shao was found liable for damages after artificially inflating the stock price, thereby influencing the plaintiff’s decision to participate in the investment pricing.
During the trial, the plaintiff and defendant engaged in a heated debate over whether a causal link exists between the plaintiff’s investment losses and the alleged manipulation of the securities market, how the investment losses should be determined, and whether Company A should bear joint liability for compensation. With respect to the determination of losses, in order to fully solicit expert opinions, the court twice commissioned specialized institutions to assess the extent of the losses and conduct retrospective valuations of the equity interests.
The Shanghai Financial Court, after trial, held that, pursuant to Article 77 of the 2014 Securities Law of the People’s Republic of China, any person who engages in market manipulation and thereby causes losses to investors shall bear liability for compensation in accordance with the law. This case involves claims brought by investors in a private placement on the New Third Board market and exhibits certain specific characteristics; the relevant determinations encompass the following aspects:
First, the presumption of causation does not apply to securities tort claims brought by investors in private placements on the New Third Board market.
In securities tort cases, the presumption of causation—established under the fraud‑on‑the‑market theory to protect the legitimate rights and interests of unidentified investors—does not apply to investors in targeted share offerings on the New Third Board. The plaintiff participated in the investment by entering into a subscription agreement “face to face” and therefore bears the burden of proving a causal link between the defendant’s market‑manipulation activities and the losses it suffered. In this case, the plaintiff relied on specific facts—such as the close connection between its private‑placement investment and the manipulative conduct—to demonstrate that Mr. Shao’s market‑manipulation practices, by inducing investors, were one of the key factors underlying the plaintiff’s ultimate decision to invest. Moreover, Mr. Shao’s actions to drive up the stock price affected the pricing at which the plaintiff entered the investment. On this basis, the court held that a causal relationship had been established.
Second, the calculation of losses in civil liability for manipulating the securities trading market differs from that in cases of civil liability for false statements in securities.
With respect to loss assessment, the differential loss suffered by investors as a result of securities misrepresentation torts encompasses both the losses incurred when investors purchased shares at artificially inflated prices after the wrongful conduct was perpetrated, and the losses arising from subsequent declines in share prices following the disclosure of the false statements. In cases of trading‑based market manipulation, the impact on investor losses is concentrated during the period of the manipulative conduct and in the immediate aftermath; after a certain dissipation period, the effects of the manipulation are absorbed by the market. Taking full account of the distinctive characteristics of trading‑based market manipulation, the court has adopted the net‑loss‑differential approach as its analytical framework, calculating the plaintiff’s investment‑related loss by comparing the actual purchase price of the plaintiff’s shares in Company A with a fair benchmark price.
Third, in calculating damages for securities‑related torts in the New Third Board market, due consideration should be given to expert opinions, with reference to scientifically sound valuation methodologies commonly employed when investing in companies within the relevant industries.
Ultimately, the court accepted the “Equity Value Retrospective Valuation Attestation Report” issued by the asset valuation office. The valuation was conducted in accordance with relevant industry standards and employed both the asset‑based approach and the market approach. Taking into account A Company’s profitability for the year, industry prospects, management capabilities, competitive advantages, and other comprehensive factors, the report concluded by adopting the results of the market approach. In applying the market method, the report compared A Company with comparable A‑share companies in the same industry, adjusted for differences in financial and non‑financial metrics, and used an option‑pricing model to calculate the discount rate between companies listed on the New Third Board and those listed on the A‑share market. On this basis, the report arrived at a fair equity value of RMB 17.88 per share. The court found the valuation’s logic to be sound, its analysis thorough, and its conclusions professionally credible, and accordingly adopted it.
In sum, the Shanghai Financial Court ultimately determined that the plaintiff’s investment loss amounted to RMB 3.18 million, and accordingly ordered the defendant, Mr. Shao, to bear liability for compensation. As Company A was not a participant in the market manipulation, it was not held liable as a joint tortfeasor.

The Research Base of the Bankruptcy Trial Research Center of the Second Civil Adjudication Division of the Supreme People’s Court (Nanjing) was officially inaugurated at the Nanjing Intermediate People’s Court.
On August 1, the Research Base of the Bankruptcy Trial Research Center (Nanjing) of the Second Civil Adjudication Division of the Supreme People’s Court was officially inaugurated at the Nanjing Intermediate People’s Court in Jiangsu Province. Liu Guixiang, a full-time vice-ministerial member of the Judicial Committee of the Supreme People’s Court, and Xia Daohu, President of the Jiangsu Provincial Higher People’s Court, jointly unveiled the plaque marking the establishment of the research base.
Liu Guixiang pointed out that establishing the second national bankruptcy adjudication research base at Nanjing is both an important initiative to strategically plan and elevate the professionalization of bankruptcy adjudication to a high standard, and an intrinsic requirement for fully leveraging the functions of bankruptcy adjudication in support of supply-side structural reform. First, it is essential to raise the political awareness and strategic positioning of bankruptcy adjudication, consciously integrating it into the broader effort to serve and safeguard economic and social development, enhancing its targeted effectiveness in addressing difficult and complex situations, and providing more precise and efficient institutional support for optimizing a law-based business environment and promoting sound economic growth. Second, we must strengthen a systemic approach to bankruptcy adjudication, coordinate the concerted efforts of all stakeholders, continuously consolidate the achievements of the government‑court coordination mechanism, and, in accordance with the law, advance the improvement of government public service functions related to bankruptcy proceedings, thereby forging a unified force for risk mitigation. Third, we need to deepen our understanding of the underlying principles governing bankruptcy adjudication, adhere to market‑oriented and rule‑of‑law principles, accurately identify distressed enterprises entering bankruptcy proceedings, adopt tailored measures based on their specific circumstances, and appropriately apply bankruptcy liquidation, reorganization, and composition procedures to enhance the quality and efficiency of bankruptcy adjudication. Fourth, we should improve the mechanisms governing bankruptcy adjudication, using professionalization as a key driver, intensify research on new developments and emerging issues in bankruptcy practice, pioneer pilot initiatives, and boldly explore innovative approaches, thus providing practical models and reference points for the establishment and refinement of relevant institutional frameworks. Fifth, we must ensure that the research base plays a leading role as a hub for outreach and synergy, a platform for research and exchange, and a window for publicity and demonstration. Focusing on challenging and complex issues such as the reorganization of large enterprises, substantive consolidation bankruptcy involving affiliated entities, the reorganization of listed companies, pre‑reorganization processes, and cross‑border bankruptcy, we will conduct in-depth studies, systematically summarize and refine judicial experience, facilitate the translation of research findings into practical applications, and promote the deep integration of bankruptcy law theory with bankruptcy adjudication practice.
Following the unveiling ceremony, a symposium was held on the theme “Jointly Enhancing the Efficiency of Bankruptcy Adjudication and Co‑creating an Optimal Rule‑of‑Law Business Environment.” The event brought together deputies to the National People’s Congress and the Nanjing Municipal People’s Congress, colleagues from the higher and intermediate people’s courts of Shanghai, Jiangsu, Zhejiang, Anhui, Fujian, Chongqing, Shandong, Henan, and other provinces and municipalities, representatives of Nanjing’s administrative agencies, as well as representatives of administrators and restructured enterprises.

Promoting the separation of simple and complex cases and optimizing resource allocation, Chongqing is strengthening the application of small-claims procedures.
To further advance the streamlined case‑handling system, optimize the allocation of judicial resources, and fully leverage the convenience and efficiency of the small‑claims procedure, the Chongqing Higher People’s Court recently issued the “Opinions on Strengthening the Application of the Small‑Claims Procedure,” setting forth 21 implementation measures that more clearly define the eligibility criteria, procedural framework, adjudicative bodies, and mechanisms for procedural conversion under this regime.
　The “Opinions” stipulate that, for simple civil cases involving monetary payments where the facts are clear, the rights and obligations are well-defined, and the dispute is minor, if the amount in controversy does not exceed 50 percent of the previous year’s average annual wage of employed persons in Chongqing, such cases shall be heard under the small-claims procedure and shall be subject to a final judgment at first instance. Cases involving personal relationships or property‑rights conofficeation, foreign‑related cases, cases requiring appraisal or expert assessment, or cases in which the parties object to the results of pre‑litigation appraisal or assessment, as well as cases where the whereabouts of one party are unknown, cases in which a counterclaim is filed, and other circumstances deemed unsuitable, shall not be subject to the small‑claims procedure.
　The “Opinions” stipulate that cases subject to the small-claims procedure shall be adjudicated in accordance with a streamlined approach characterized by priority scheduling, simplified procedures, expedited trial, and formalized written documents. Pre‑filing mediation must be conducted, and once a case is filed, the principle of “mediation first, with a combination of mediation and judgment” shall be upheld. Grassroots people’s courts are required to establish a mechanism for the rapid screening and allocation of simple cases, and to form specialized small-claims adjudication teams—covering such common civil matters as property service contracts, private lending, labor disputes, sales contracts, product liability disputes, and traffic accident liability disputes—while ensuring swift and professional adjudication. For cases governed by the small-claims procedure, online litigation should be prioritized, with electronic processes applied throughout service of process, trial proceedings, and document preparation.

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