JC Master Legal News Issue 1036

Key Takeaways for This Issue

Another company joins the new-energy industry chain as Oujing Technology lists on the Shenzhen Stock Exchange’s main board.
On September 30, Inner Mongolia Oujing Technology Co., Ltd., a leading company in the quartz crucible sub‑sector, was officially listed on the main board of the Shenzhen Stock Exchange, marking the imminent entry of the new‑energy photovoltaic and semiconductor industry chain into the A‑share market as the “first quartz crucible‑related stock.”
The floor for first-home mortgage rates may soon fall below 4.1%. Which cities meet the new policy’s threshold?
On September 29, the People’s Bank of China and the China Banking and Insurance Regulatory Commission issued a notice announcing a temporary adjustment to the differentiated housing credit policy. Eligible city governments may, at their discretion, maintain, lower, or eliminate the floor on interest rates for newly issued first-home loans in their jurisdictions through the end of 2022.
Three departments: Strengthen tax-deductible incentives to support technological innovation.
To support the innovative development of high-tech enterprises and promote equipment renewal and technological upgrading, the Ministry of Finance, the State Taxation Administration, and the Ministry of Science and Technology recently jointly issued an announcement to strengthen tax‑deduction incentives for scientific and technological innovation. According to the announcement, for equipment and instruments newly acquired by high‑tech enterprises between October 1, 2022, and December 31, 2022, a full one‑time deduction is permitted in the current year when calculating taxable income, along with a 100% additional pre‑tax deduction. For enterprises currently eligible for a 75% pre‑tax additional deduction on R&D expenses, the rate will be increased to 100% during the same period, from October 1, 2022, to December 31, 2022.
The Supreme People’s Court has released typical cases of financial crimes punished by the people’s courts in accordance with the law.
In recent years, the Supreme People’s Court has adjudicated and handled a series of major illegal fundraising cases, including Beijing’s “e‑Zubao,” Kunming’s “Pan‑Asia,” Jiangsu’s “Qianbao,” and Shanghai’s “Fuxing,” achieving positive political, legal, and social outcomes.
A young woman died after being bitten by a venomous snake she had purchased online—so who should be held responsible?
Recently, the Haidian District People’s Court of Beijing released the judgment in this case. The 37-page ruling provides a detailed analysis of the legal issues at stake, and the court ultimately held that the girl who purchased the snake bears 80% of the responsibility for her own damages, while the six defendants are jointly liable for compensating more than RMB 330,000 on a proportional basis.
Finance & Capital Markets
Another company joins the new-energy industry chain as Oujing Technology lists on the Shenzhen Stock Exchange’s main board.
In recent years, import substitution in the semiconductor sector and the rapid growth of the photovoltaic industry have significantly benefited upstream segments such as quartz crucibles, silicon‑material cleaning services, and cutting‑fluid treatment services, while also amplifying economies of scale across these industries. Against the backdrop of continued industry expansion, an increasing number of high‑quality companies have emerged as leaders. Among them, quartz crucibles—key components at the upstream end of both the new‑energy photovoltaic and semiconductor value chains—have seen their strategic importance rise in tandem with these trends. Domestic quartz crucible manufacturers have achieved steady technological breakthroughs and sustained development, contributing to cost reduction and efficiency gains in the photovoltaic sector and supporting import substitution in the semiconductor industry.
On September 30, Inner Mongolia Oujing Technology Co., Ltd. (referred to as “Oujing Technology”), a leading company in the quartz crucible sub‑sector, was officially listed on the main board of the Shenzhen Stock Exchange, marking the arrival of the first publicly traded stock in the quartz crucible segment of the new‑energy photovoltaic and semiconductor industries. According to publicly available information, since its establishment, Oujing Technology has focused primarily on providing supporting products and services for the monocrystalline silicon industry chain. Through years of industry experience, the company has built a distinct competitive edge in the production of high‑quality, large‑size quartz crucibles. Meanwhile, in recent years, China’s semiconductor industry has shown clear growth trends, with robust downstream demand laying the groundwork for capacity expansion upstream. As a key player in the upstream segments of both the photovoltaic and semiconductor sectors, Oujing Technology has witnessed a sharp surge in demand for its quartz crucible products. Today, the company’s operations span the entire value chain, including quartz crucible manufacturing, silicon material cleaning, and cutting‑fluid treatment, offering specialized, customized solutions to monocrystalline silicon producers and meeting the multifaceted needs of every stage in the semiconductor and photovoltaic monocrystalline silicon wafer manufacturing processes.
In recent years, driven by favorable industry conditions, the downstream monocrystalline silicon wafer sector—where Oujing Technology’s major customers operate—has seen a substantial expansion in production capacity, leading to an overall upward trend in the company’s core business revenue. According to data, from 2019 to 2021, Oujing Technology reported operating revenues of RMB 573.76 million, RMB 559.89 million, and RMB 848.40 million, respectively, with net profits of RMB 58.57 million, RMB 85.06 million, and RMB 133.43 million, respectively. Notably, during January–June 2022, the company recorded operating revenue of RMB 581.38 million, up 35.72% year over year, while net profit attributable to parent company shareholders reached RMB 92.09 million, a 23.65% increase compared with the same period last year. These strong performance metrics underscore a rapid growth trajectory, laying a solid market foundation for the company’s steady development. Furthermore, while maintaining its competitive edge in its current core businesses—quartz crucibles, silicon material cleaning, and cutting‑fluid treatment services—the company is expanding its market share in specialized silicon‑material processing and cleaning products, accelerating the industrial application of quartz crucibles and quartz‑based products, and intensifying efforts to promote these offerings in the marketplace, thereby ensuring the company’s sustained, rapid, and healthy growth.
While sustaining robust growth, Oujing Technology has remained committed to cultivating the monocrystalline silicon materials supply chain, establishing partnerships with numerous customers, including TCL Zhonghuan, Youyan Semiconductor, Huanrui, and Tianjin Huan’ou. Looking ahead, as downstream photovoltaic clients expand counter‑cyclically and the international semiconductor industry gradually shifts toward China, the company is poised to leverage its longstanding expertise in delivering complementary products and services to further consolidate its market position and capture additional market share. Meanwhile, the company has been recognized for four consecutive years as one of the “Top 100 Brands in Inner Mongolia” and, for two consecutive terms, has been named among the “Top Ten Enterprises in Quartz Materials within China’s Electronic Materials Industry” by the China Electronic Materials Industry Association, thereby building a strong brand advantage within the sector.
The technological development trends in large‑size silicon wafers present significant growth opportunities for domestic quartz crucible manufacturers. In recent years, Oujing Technology has established a distinct competitive edge in the production of high‑quality, large‑size quartz crucibles, with its process technologies leading among its domestic peers. Leveraging robust R&D capabilities and independent innovation, Oujing Technology has served as a key participating entity in drafting numerous industry standards, including “Quartz Crucibles for Monocrystalline Silicon Growth in Photovoltaics” and “Production Specifications for Quartz Crucibles Used in Monocrystalline Silicon Growth for Photovoltaics.” To date, the company holds a total of 96 patents, including five invention patents. In the quartz crucible sector, it possesses multiple core technology patents. Looking ahead, following its IPO, Oujing Technology plans to further strengthen its R&D team, refine its R&D framework, and comprehensively enhance its technical prowess, thereby bolstering its overall competitiveness within the industry.
Growing toward the sun and marching in pursuit of light, Oujing Technology will adhere to a dual‑driven strategy that leverages both the new‑energy and semiconductor industries. With quartz crucibles as its core, supported by silicon‑material cleaning and cutting‑fluid treatment as complementary pillars, and quartz‑material processing and manufacturing as its flagship, the company is committed to a comprehensive development model that integrates intelligent manufacturing as a valuable enabler. By focusing on niche markets and specialized sectors, it will pursue a path of professionalization, refinement, and scale, fostering independent yet synergistic growth across its key businesses and, when necessary, establishing a closed‑loop development framework that maximizes mutual complementarity. Through the expansion and deepening of its marketing network and distribution footprint, the company aims to consolidate and enhance its market share, striving to become a leading provider of integrated solutions for new‑energy‑industry‑related products and services.
Wanrun New Energy, the second most expensive IPO in A-share history, listed below its issue price, resulting in a loss of nearly RMB 25,000 per lottery share.
On September 29, Wanrun New Energy, the second most expensive IPO in A-share history, opened below its issue price on its debut day, trading at 249.99 yuan per share—a 16.64% drop. With an issue price of 299.88 yuan per share, investors who secured a single lottery allocation stood to lose as much as 24,945 yuan.
For Wanrun New Energy, each winning lottery ticket requires a payment of RMB 149,940. The issuance results show that the hit rate was 0.042%, with online investors renouncing shares worth RMB 459 million. Among this year’s newly listed stocks, Wanrun New Energy ranks fourth in terms of abandoned subscription amounts, trailing only NaXinWei (688052) at RMB 778 million, China Mobile (600941) at RMB 756 million, and Huabao New Energy (301327) at RMB 525 million.
Publicly available information indicates that Wanrun New Energy is a leading domestic producer of lithium iron phosphate cathode materials, ranking third in market share in the lithium iron phosphate industry in 2019 and 2020.
Pharmaceutical and biotech listed companies have issued 235 M&A announcements this year, with more than 70% being horizontal mergers, signaling a rise in industry consolidation.
Longshen Rongfa plans to acquire a 70% stake in Puan Pharmaceutical, while China Resources Sanjiu intends to purchase a 28% share in Kunyao Group… Since the beginning of this year, pharmaceutical companies have been announcing acquisition deals one after another, keeping M&A activity robust.
Using the date of the most recent announcement as the statistical benchmark, as of September 29, A-share–listed pharmaceutical and biotech companies had collectively issued 235 M&A announcements (excluding failed deals), with more than 70% of these announcements indicating a focus on horizontal mergers and acquisitions.
Pharmaceutical and biotech companies are busy with mergers and acquisitions.
“Domestic pharmaceutical and biotech companies are characterized by being numerous, small, and fragmented; horizontal mergers and acquisitions can help expand company scale and enhance operational efficiency,” said a securities analyst.
Taking Longshen Rongfa’s proposed acquisition of a 70% stake in Puan Pharmaceutical as an example, Longshen Rongfa plans to acquire, through cash payment, the 51% equity interest in Puan Pharmaceutical held by Gansu Agricultural Reclamation Group and the 19% equity interest held by Gansu Pharmaceutical Group, for a total transaction consideration of RMB 326 million. Upon completion of the transaction, Puan Pharmaceutical will become its controlled subsidiary.
Longshen Rongfa and Puan Pharmaceutical both engage in the research and development of pharmaceuticals, medical devices, and health‑care products, as well as the production and sale of traditional Chinese medicines, health foods, and active pharmaceutical ingredients. Puan Pharmaceutical’s flagship product, Xuanfei Zhisou Compound Syrup, is an exclusive formulation, a key item on the Gansu Province’s list of major drug‑development projects, and a leading TCM product in the province. In 2021, its sales revenue for this single product approached RMB 300 million, and it has been included in the National Medical Insurance Reimbursement List.
Du Meng, Chairman of the China Enterprise Capital Alliance, stated: “Longshen Rongfa’s acquisition of a 70% stake in Puan Pharmaceutical represents a quintessential horizontal merger and acquisition. The infusion of Puan Pharmaceutical’s assets will enrich the listed company’s product portfolio, expand its competitive edge in traditional Chinese medicine products, establish a tiered lineup of distinctive TCM offerings, and bolster its market competitiveness. At the same time, the listed company can leverage its platform advantages to realize synergies from this M&A transaction.”
China Resources Sanjiu’s acquisition proposal indicates that the company plans to acquire a 28% stake in Kunyao Group for RMB 2.902 billion. The company stated that, as both it and Kunyao Group are engaged in pharmaceutical manufacturing and sales, this transaction will broaden the listed company’s pharmaceutical industry footprint and enhance its overall competitiveness.
“This will be a merger-and-acquisition trend that pharmaceutical companies are likely to embrace in the future. Through M&A, offices can achieve more transparent, standardized, and efficient integration of resources, strengthen and expand their core or specialized business segments, and enhance their brand value, R&D capabilities, market scale, and overall competitive edge,” said Dong Dengxin, Director of the Institute of Finance and Securities at Wuhan University of Science and Technology.
Industry concentration will further increase.
In recent years, a steady stream of policies has been introduced in the pharmaceutical and biotechnology sectors, while healthcare reform initiatives have continued to gain momentum, jointly fueling a wave of M&A activity in China’s pharmaceutical and biotech industries.
“The pharmaceutical and biotechnology industries are characterized by long R&D cycles, substantial capital investment, and a high failure rate. For companies seeking to rapidly scale up and consolidate market share, mergers and acquisitions are often faster and more efficient than organic growth. By leveraging investment to buy time, offices can swiftly achieve their strategic objectives, diversify their product portfolios, create new sources of profit, and avoid the wasteful duplication of resources,” said Deng Zhidong, General Manager of Hainan Boao Medical Technology Co., Ltd.
As the “big fish eat the little fish” dynamic unfolds, the pharmaceutical industry’s level of market concentration is expected to continue rising.
Deng Zhidong stated, “Driven by factors such as the accelerating aging of the population, market demand in the healthcare and life sciences sectors continues to grow. China has been introducing a series of supportive policies to bolster biopharmaceutical companies, fostering the long-term healthy development of the pharmaceutical and health industries. Looking ahead, M&A activity in this sector is expected to remain robust.”
“However, some listed companies blindly follow trends, severely lacking sound M&A strategies and robust valuation methodologies, which exposes them to substantial acquisition risks. Others pursue mergers and acquisitions solely to capitalize on market hot topics and buzzwords, paying little heed to whether the deal price is overvalued or undervalued, let alone how they will integrate and leverage the acquired assets post‑transaction,” warned Dong Dengxin. He emphasized that pharmaceutical and biotech offices should ensure their M&A activities align with their strategic objectives, adopt a long-term perspective, and avoid reckless expansion.
Convertible bond market valuations are becoming more rational, while primary-market fundraising activity is picking up.
Since the issuance of the new regulations on convertible bonds, speculative trading in this market has been effectively curbed, leading to a more rational market environment and a steady, improving trend.
According to Wind Information, as of September 29, since the new regulations took effect, the bond‑convertible market’s average daily trading volume has steadily declined to RMB 62.1 billion. In August, total trading volume stood at RMB 1.73 trillion, down 27% from July; since the start of September, trading has fallen further below RMB 1 trillion, reaching RMB 942.1 billion.
“Following the implementation of the new regulations, daily trading volume in the convertible bond market has declined, speculative trading in individual issues has eased, and the market has gradually returned to rationality. As the convertible bond market continues to develop in a more standardized manner, coupled with the advantages of convertible bond financing—such as relatively lower issuance hurdles and faster approval processes—listed companies are likely to place greater emphasis on this form of financing,” said Mingming, Chief Economist at CITIC Securities.
Market valuations are gradually returning to reasonable levels, and issuers’ willingness to call bonds at par is strengthening.
In the first half of this year, the convertible bond market experienced a sharp surge in activity, with intense speculation on newly issued and recently listed bonds, pronounced high prices and substantial premium levels, and trading volumes repeatedly hitting record highs—posing multiple hidden risks.
Take the exceptionally robust months of May and June as examples: on May 17, the heavily hyped Yongji convertible bond surged 276% on its debut day, hitting an all-time high, with a conversion premium as high as 369%. That month, total trading volume in the convertible bond market climbed to RMB 2.65 trillion, and by the following month—June—it further rose to RMB 3.38 trillion (with average daily turnover exceeding RMB 100 billion), setting a year-to-date record and far outpacing the corresponding period’s trading volume in the underlying stock market.
In response to speculative trading, the Shanghai and Shenzhen stock exchanges took decisive action. In addition to imposing self-regulatory measures on the parties responsible, they issued a suitability notice for convertible bonds in mid-June, introducing an eligibility requirement for new investors: at least two years of trading experience and total assets of no less than RMB 100,000. By the end of July, they solicited public comments on revised rules governing convertible bonds, covering such measures as price‑limitation ranges, the addition of criteria for abnormal price movements, and enhanced information disclosure requirements. These reforms officially took effect on August 1.
In the nearly two months since the new regulations took effect, the convertible bond market has undergone positive changes. On the secondary market, newly issued bonds have posted steady performance on their listing debut. According to Wind data, since August, the 25 publicly offered convertible bonds listed in August have averaged a first-day gain of 30.45%, with only one hitting the daily upper limit (a 57.3% increase), indicating that sharp price surges on the first day of trading have markedly subsided. Additionally, the average conversion premium for these 25 bonds on their debut stood at 40.31%, with the highest reaching 65.68%; the previous trend of excessively high premiums—often exceeding 100%—is now a thing of the past. Moreover, the conversion premiums of several previously high‑priced convertible bonds have also declined significantly.
“Following the issuance of the new regulations, speculative trading in convertible bonds has been significantly curbed, and the prices and valuations of certain lower‑quality convertible bonds have returned to more rational levels. Issuers have sent clearer signals regarding exercise rights, while investors’ willingness to engage in clause‑by‑clause bargaining has diminished, jointly helping to bring convertible bond market valuations back to a more reasonable range,” said Yuan Haixia, Deputy Director of the CCXI Research Institute.
Yuan Haixia further analyzed that, prior to the introduction of the new regulations, it was common for convertible bonds to already meet the conditions for downward revision or redemption, yet issuers refrained from exercising these rights and failed to disclose relevant information. This practice often sparked market speculation and prompted investors to engage in strategic bargaining over bond terms, thereby exacerbating market uncertainty. Following the implementation of the new rules, issuers are required to clarify, by the next trading day after the trigger conditions are met, whether they will exercise their rights, providing investors with more comprehensive decision‑making information and helping to keep market valuations at a reasonable level.
Following the implementation of the new regulations, issuers have become more inclined to redeem their convertible bonds ahead of schedule; 16 convertible bonds have already been or will be subject to mandatory redemption, thereby proactively managing market expectations and helping bring convertible bond valuations back into a reasonable range.
“The new regulations have tightened oversight of abnormal price swings in the secondary market for convertible bonds. For individual issues facing the risk of triggering a mandatory redemption, their valuations are proactively compressed to lower levels at an earlier stage, which helps the issuer’s bond prices and valuations rebound at a relatively steady pace after the announcement of non‑exercise. This, in turn, gives investors more ample time to adjust their investment decisions and mitigates the risk of sharp short‑term fluctuations in price and valuation,” said Li Xiaofeng, Deputy General Manager of the Research and Development Department at Orient Golden Credit.
The primary market for convertible bonds is booming, with fundraising reaching RMB 21 billion since September.
The new regulations on convertible bonds do not entail any adjustments to primary‑market financing policies and will not impede the normal functioning of the convertible bond market’s financing role. Following the implementation of these新规, the scale of primary‑market financing has further expanded.
According to Wind Information, using the date of the issuance‑result announcement as the statistical benchmark, since September, 11 convertible bonds have raised a total of RMB 21.016 billion, marking the second‑highest level so far this year—only below the figure recorded in March. The largest issuances were Changyin Convertible Bond (RMB 6.0 billion), Tianci Convertible Bond (RMB 3.4 billion), and Huai 22 Convertible Bond (RMB 3.0 billion).
“The new regulations have standardized trading order in the convertible bond secondary market, fostering a more rational and efficient pricing mechanism and highlighting the allocation value of high-quality securities,” said Yuan Haixia. Looking ahead, she noted that, on the one hand, these measures will narrow the room for speculative activity, attracting greater participation from value-oriented investors and institutional allocators, thereby effectively bolstering investment demand in the convertible bond market amid an environment of asset scarcity. On the other hand, they will encourage investors to place greater emphasis on the fundamentals of listed companies, boosting the willingness of high‑quality issuers to raise capital through the convertible bond market and promoting healthy growth in market supply.
Mingming believes that, as the convertible bond market evolves, the following factors will warrant close attention going forward: First, amid continued declines in the underlying stocks, it remains to be seen whether valuations can once again fall meaningfully; second, from a structural perspective, the valuations of many high‑priced issues have already been compressed to near‑zero levels, necessitating careful security selection, with particular focus on whether the growth sector can regain its upward momentum; and third, although convertible bond valuations are not yet undervalued, price metrics should not be overlooked—recent price corrections have been substantial. With price risks still manageable, investors can both build positions in high‑quality bonds at lower levels and, from a counter‑cyclical standpoint, capitalize on the potential upside of the underlying stocks.
Two securities offices have launched a 34-billion-yuan fundraising plan, with Guolian Securities initiating its second private placement.
As a capital-intensive industry, securities offices continue to exhibit strong demand for capital replenishment. Since September, two A+H‑listed brokerage offices—CICC and Guolian Securities—have successively unveiled refinancing plans: CICC proposes an A‑H share rights issue raising up to RMB 27 billion, while Guolian Securities plans an A‑share private placement worth RMB 7 billion.
Guolian Securities plans to raise RMB 7 billion.
Following CICC’s announcement on September 13 of a massive A‑H share rights issue raising up to RMB 27 billion, Guolian Securities launched its second private placement since listing on the A‑share market on the evening of September 28, seeking to raise no more than RMB 7 billion.
However, the secondary market has consistently shown a lukewarm response to securities offices’ capital-raising activities. On September 29, Guolian Securities’ A-shares hit the daily limit down. Similarly, on the day after CICC announced the launch of a share placement involving both A‑shares and H‑shares, its A‑shares fell 9.2% and its H‑shares dropped 7.95%.
In July 2020, Guolian Securities was listed on the A-share market, raising RMB 2.022 billion through its IPO and becoming the 13th securities office to be listed simultaneously on both the A-share and H-share markets, thereby opening up long-term financing channels in both capital markets. In February 2021, Guolian Securities unveiled its first post‑listing refinancing plan, proposing a private placement to raise no more than RMB 6.5 billion. Just eight months later, in October of the same year, the private placement was completed, with total proceeds amounting to RMB 5.09 billion.
Regarding this private placement, Guolian Securities’ strategic development direction remains clear, with the primary allocation of proceeds broadly consistent with its previous offering. Specifically, the company plans to allocate 57% of the funds to expand its trading businesses in fixed income, equities, and equity derivatives; deploy 29% to further scale its margin financing and securities lending operations; and use up to RMB 1 billion to repay debt.
Following a series of financing activities, Guolian Securities has seen rapid growth in both its business scale and financial performance. In the first half of the year, among 41 listed securities offices, only three reported year-on-year increases in both revenue and net profit; Guolian Securities, by contrast, posted operating income of RMB 1.274 billion, up 12.71% year over year, and net profit attributable to shareholders of RMB 437 million, up 15.37%, delivering exceptionally strong results.
“Guolian Securities is a mid- to small-sized brokerage with relatively certain medium- and long-term growth prospects, and its management team demonstrates strong execution capabilities and an entrepreneurial spirit,” said Gao Chao, Chief Analyst for the Non-Bank Financials sector at Kaiyuan Securities. He added that this private placement may temporarily dilute ROE in the short term; however, from a medium- to long-term perspective, businesses such as margin trading and equity derivatives typically deliver high ROE. By bolstering capital to support these high‑ROE lines of business, the company is likely to enhance its competitive edge and unlock further upside in ROE over time.
Eight securities offices have completed their refinancing this year.
According to statistics, since the beginning of this year, securities offices have steadily accelerated their secondary financings, with eight companies completing such offerings and raising a total of RMB 80.6 billion. When choosing a financing method, amid frequent and substantial dilution in recent years for private placements, securities offices have increasingly favored rights issues—characterized by high subscription rates—and convertible bonds as their preferred options within the “three mainstays” of secondary financing.
Among them, Guojin Securities and Great Wall Securities conducted private placements, raising a combined total of RMB 13.433 billion; China Galaxy and Zhejiang Commercial Securities completed the issuance of convertible bonds, raising a combined RMB 14.8 billion; meanwhile, CITIC Securities, Orient Securities, Caitong Securities, and Industrial Securities raised a total of RMB 52.367 billion through rights issues.
At present, four additional companies—CICC, Central China Securities, Guohai Securities, and Guolian Securities—are advancing refinancing plans totaling no more than RMB 49.5 billion.
In terms of fundraising allocation, capital intermediation and investment‑and‑trading activities have become the primary targets for securities offices’ refinancing. To smooth earnings volatility and enhance revenue stability, proprietary trading is shifting toward de‑concentration and greater diversification in trading strategies, thereby driving a sustained increase in funding needs. Among the refinancing projects of Caitong Securities, Zhejiang Commercial Securities, China Galaxy Securities, Guojin Securities, and Orient Securities, the proposed allocations to investment‑and‑trading businesses account for 56%, 50%, 38%, 25%, and 23%, respectively.
In recent years, investment and trading has become one of the key sources of revenue for securities offices. Amid the volatile market conditions of the first half of the year, proprietary trading has emerged as a central factor shaping offices’ performance. Notably, some securities offices have bolstered their non-directional investment strategies, developing and deploying derivative instruments to smooth out market volatility, thereby demonstrating remarkable resilience in their proprietary‑trading operations.
Among the 41 listed securities offices, only Guolian Securities, BOC Securities, Founder Securities, Pacific Securities, and China Galaxy reported year-on-year growth in their proprietary trading revenues in the first half of the year. Specifically, Guolian Securities posted proprietary trading revenue of RMB 576 million, up 12.93% year over year; its gains from changes in fair value totaled RMB 597 million, a substantial 437.1% increase compared with the same period last year, primarily driven by higher unrealized gains on derivative financial instruments. Notably, in 2021, Guolian Securities generated RMB 280 million in revenue from over-the-counter transactions with institutional clients, a remarkable 5,803% year-over-year surge, ranking it 10th in the industry.
Another round of capacity expansion! The securities industry’s “most profitable business” is once again seeing a new contender, with 45 trading offices competing on the same stage, leading to a decline in market concentration among the top players.
On September 27, the China Securities Association’s website published the “Announcement on the List of OTC Options Traders (16th Batch),” which revealed that Xiangcai Securities has been granted secondary‑level trading qualifications for OTC options. With this addition, the number of OTC options traders in the securities industry has increased to 45, comprising 8 primary‑level traders and 37 secondary‑level traders.
In response, Xiangcai Securities stated that the company will continue to uphold a solid and prudent operating approach, closely align with market dynamics, actively engage in trading with various institutional investors, and steadily expand its business scale.
Since the appointment of Xiangcai Securities’ new president in July 2022, the office has been delivering one positive development after another. In August, Xiangcai Securities announced a strategic partnership with Yimeng Co., Ltd., stating that the two parties will pursue comprehensive, in-depth collaboration across multiple areas, including internet‑based customer engagement, investment advisory services, wealth management, research, information technology, and equity-related initiatives. Most recently, Xiangcai Securities has secured qualification as a secondary dealer for over-the-counter options, leaving the market eager to see whether it can deliver even more impressive performance in the OTC securities market.
Xiangcai Securities has been newly designated as a Level‑II trader in the over-the-counter options market.
On September 27, the China Securities Association’s website published the “Announcement on the List of OTC Options Traders (16th Batch),” which indicated that Xiangcai Securities has been granted secondary trader status for OTC options.
In September 2021, the Securities Association of China issued the Measures for the Administration of Over-the-Counter Options Business of Securities Companies. Under these new regulations, the regulatory authorities have adopted a tiered management approach for securities companies’ participation in OTC options trading, classifying them into Tier‑1 and Tier‑2 dealers based on their capital strength, regulatory classification, comprehensive risk management capabilities, as well as the qualifications of their professional personnel and technical systems. The Tier‑2 dealer qualification for OTC options business also serves as recognition by the securities regulators of a brokerage’s ongoing ability to operate in compliance with standards, its technical expertise, its level of system sophistication, and its risk management capacity.
In 2021, the over-the-counter (OTC) securities business experienced explosive growth, with sharp increases in the scale of OTC derivatives, non‑public bonds, and income certificates. Throughout the year, the total notional principal of newly initiated OTC derivative transactions rose by 76.56% year over year. Meanwhile, securities offices issued a cumulative 44,100 income certificates, with a total issuance value of RMB 1.02 trillion. In the “Analysis of Securities Offices’ Operating Performance for the First Half of 2022,” recently released by the China Securities Industry Association, OTC derivatives continued to be highlighted as a key driver of revenue growth for securities offices. Despite a 38.53% year-on-year decline in securities investment income during the first half of this year, OTC derivatives posted counter‑trend growth. As of June 30, 2022, the outstanding notional principal of OTC financial derivatives across the industry stood at RMB 2.21 trillion, up 9.52% from year‑end.
Industry insiders note that, amid escalating international political risks and growing market uncertainty, both clients’ hedging needs and securities offices’ risk‑hedging requirements have risen sharply, driving a substantial expansion in the overall size of the derivatives market. Compared with other trading products, derivatives exhibit higher volatility and greater risk, placing heightened demands on brokerage offices’ ability to price over-the-counter derivatives.
Xiangcai Securities stated that, although China’s derivatives market remains at a relatively early stage compared with its international counterparts, it still holds substantial growth potential from a domestic development perspective. While derivatives trading is primarily geared toward institutional investors, the market size is expanding steadily and continues to offer considerable room for further expansion.
In the over-the-counter derivatives business, Xiangcai Securities stated that it will continue to uphold a solid and prudent operating approach. On the one hand, it will fully leverage its financial technology capabilities and extensive branch network to further enhance its level of digitalization; on the other hand, it will continuously streamline its business processes, refine and optimize its performance‑based incentive and risk‑control mechanisms in line with regulatory requirements, keep pace with market dynamics, and actively engage in trading with a diverse range of institutional investors, steadily expanding its business scale. Looking ahead, Xiangcai Securities will remain committed to the relevant guidelines of the China Securities Regulatory Commission, aiming to serve the real economy and guided by clients’ risk‑management needs, while faithfully fulfilling its duties as a secondary dealer in OTC options in full compliance with applicable laws and regulations.
The number of over-the-counter options dealers has expanded to 45.
According to the latest list of over-the-counter options trading offices disclosed by the China Securities Association, as of September 27, the number of OTC options dealers in the securities industry has increased to 45, comprising 8 primary dealers and 37 secondary dealers.
It is reported that securities offices’ over-the-counter derivatives business operates under a dealer‑management framework. In December 2021, the Securities Association of China issued the Measures for the Administration of Securities Offices’ Return Swaps Business, clarifying that OTC options dealers are permitted to engage in return swap activities.
Notably, in the list of over-the-counter options trading offices published on August 5 this year, the number of secondary dealers declined for the first time: Northeast Securities and Cinda Securities were removed from the secondary dealer roster, reducing the total from 38 to 36. Meanwhile, five securities offices—including HuAn Securities, Huaxi Securities, Shanxi Securities, Tianfeng Securities, and Southwest Securities—were designated as being “in the transition period.”
Pursuant to Article 13 of the Measures for the Administration of Over-the-Counter Options Business of Securities Companies, the China Securities Regulatory Commission and the Association shall conduct periodic assessments of traders’ compliance with applicable requirements and implement dynamic adjustments based on the assessment results. Under these Measures, securities companies that, following assessment, no longer meet the criteria for trader status shall be granted a one-year transition period during which they may not expand their business scale; upon expiration of the transition period, those that still fail to satisfy the requirements for either Tier I or Tier II traders shall be removed from the corresponding trader‑status list.
In this regard, Guotai Junan’s non‑banking analysts Liu Xinqi and Niu Luqing commented that the release of this list aims to publicly disclose the latest roster of trading participants, updated based on assessments of their OTC options‑trading performance, thereby standardizing the development of the OTC derivatives market. Guotai Junan believes that securities offices with stronger product‑development capabilities and more robust compliance and risk‑control frameworks will stand to benefit the most. It is expected that adjustments to the OTC options‑trading participant list will become a regular occurrence, and further market normalization will effectively raise the bar for business operations, making strong product‑innovation capacity and superior compliance and risk‑management capabilities even more critical.
Over-the-counter derivatives business may become the core competitive advantage of securities offices in the future.
According to the non‑banking securities team at Dongwu Securities, as the scale of derivatives continues to expand and regulatory access is progressively relaxed, brokerage offices’ efforts to capture the derivatives market are helping to boost their return on equity (ROE). Offices are accelerating their deployment in over-the-counter (OTC) derivatives, enhancing client stickiness among institutional investors, diversifying revenue streams, and strengthening their overall service capabilities and competitive edge. With their inherent high leverage and hedging characteristics, derivatives help stabilize securities offices’ ROE; moreover, as the derivatives market grows, it will further increase market activity, making OTC derivatives a key source of future competitive differentiation for brokerages.
Tianfeng Securities’ non‑banking team also notes that, from a business‑type perspective, unlike traditional market‑driven activities such as directional proprietary trading, brokerage, and margin financing, the core use case of over-the-counter (OTC) derivatives is to provide “insurance” for investment. By selling volatility and hedging risk, securities offices can generate profits under virtually any market condition, helping to mitigate the pronounced cyclicality of their earnings. Moreover, unlike conventional capital‑intermediation businesses, where larger scale typically entails higher risk, the OTC derivatives business—characterized by its roles as a trading intermediary, a matching platform, and a hedging conduit—exhibits greater resilience: the more counterparties involved, the richer the array of risk‑management tools, and the larger the transaction volume, the better the controllability of risk transfer. In addition, OTC derivatives offer a range of ancillary services, including leveraged financing, cross‑border transactions, and cross‑asset‑class allocation, thereby supporting diverse investment strategies.
Although leading securities offices continue to enjoy a clear advantage, as more and more brokerage offices join the ranks of secondary dealers, the concentration of new transactions in the over-the-counter derivatives market has been steadily declining. According to the “China Securities Industry Development Report (2022)” recently released by the China Securities Association, in terms of transaction concentration, the concentration ratio of new OTC derivatives transactions—defined as the share of the combined notional principal of the top five securities offices in monthly new trades relative to the entire market—remained at a relatively high level in 2021. However, this figure declined compared with the overall trend in 2020, and the monthly trend throughout the year showed a steady downward trajectory.
Commercial & Corporate
The floor for first-home mortgage rates may soon fall below 4.1%. Which cities meet the new policy’s threshold?
On September 29, the People’s Bank of China and the China Banking and Insurance Regulatory Commission issued a notice announcing a temporary adjustment to the differentiated housing credit policy. Eligible city governments may, at their discretion, maintain, lower, or eliminate the floor on interest rates for newly issued first-home loans in their jurisdictions through the end of 2022.
Under the new policy, for cities where the sales prices of newly built commercial residential properties recorded consecutive month-on-month and year-on-year declines from June to August 2022, the floor for the interest rate on first-home commercial personal housing loans will be temporarily relaxed before the end of 2022. The policy floor for second-home commercial personal housing loan rates will remain in accordance with existing regulations.
The interest rate on commercial individual housing loans for first-time homebuyers is expected to fall below 4.1%.
According to the Loan Prime Rate (LPR) published by the National Interbank Funding Center authorized by the People’s Bank of China, as of September 20, 2022, the 1-year LPR stands at 3.65%, and the LPR for terms of five years and above is 4.3%, both remaining unchanged.
According to the regulations, the interest rate on newly issued first-home personal housing loans may not be lower than the corresponding-term LPR (4.3% based on the September 20th LPR for terms of five years or longer); the interest rate on second-home personal housing loans may not be lower than the corresponding-term LPR plus 60 basis points (4.9% based on the September 20th LPR for terms of five years or longer).
Furthermore, in accordance with the “Notice on Adjusting Relevant Issues of Differentiated Housing Credit Policies” issued on May 15 this year by the People’s Bank of China and the China Banking and Insurance Regulatory Commission, for resident households purchasing ordinary self‑occupied housing, the lower limit for the interest rate on first‑home commercial personal housing loans has been adjusted to no lower than the Loan Market Quote Rate for the corresponding term minus 20 basis points, while the lower limit for second‑home commercial personal housing loan rates will continue to be implemented in accordance with existing regulations.
Accordingly, previously the minimum mortgage rate for first-time homebuyers across various regions was 4.1%.
Under the latest policy issued by the People’s Bank of China and the China Banking and Insurance Regulatory Commission, eligible city governments may, at their discretion, temporarily maintain, lower, or eliminate the floor on interest rates for newly issued first-home mortgages in their jurisdictions before the end of 2022.
Yan Yuejin, Research Director at the E-House Institute Think Tank, pointed out that, building on the previous reduction of the mortgage rate floor by 20 basis points, this latest policy permits an even larger downward adjustment—meaning that rates can be lowered further from the 4.1% level.
23 cities meet the threshold for the new policy.
As required, the cities eligible for a reduction in newly issued first-home mortgage rates are primarily those where new commercial residential sales prices recorded consecutive month-on-month and year-on-year declines during June–August 2022.
Industry insiders believe that the central bank has clarified that cities experiencing excessively sluggish housing prices may employ this tool, meaning it is primarily targeted at cities with weak real estate markets.
According to data provided by the E-House Research Institute’s Think Tank Center, among the housing price index data for 70 large and medium-sized cities compiled by the National Bureau of Statistics, at least 23 cities meet the criteria set forth in the PBOC’s latest policy. These include Harbin, Lanzhou, Wuhan, Dalian, Tianjin, Shijiazhuang, Kunming, Guiyang, Quanzhou, Wenzhou, Luzhou, Yueyang, Yichang, Beihai, Dali, Qinhuangdao, Zhanjiang, Baotou, Anqing, Jining, Changde, Xiangyang, and Guilin, among others.
The new policy stipulates that, in accordance with the principle of “city-specific policies,” eligible local governments may, based on changes in the local real estate market and regulatory requirements, independently decide whether to temporarily maintain, lower, or eliminate the floor on interest rates for first-home commercial personal housing loans. The People’s Bank of China and the CBIRC’s branch institutions will provide guidance, while provincial-level self-regulatory mechanisms for market-based interest rate pricing will coordinate implementation.
Based on current mortgage rate trends across regions, according to data monitored by the Shell Research Institute, following the reduction in the over‑5-year LPR on August 22, mortgage rates in 100 cities all declined in September. As of September 19, mainstream mortgage rates in 86 cities had fallen to the lower limits of 4.10% for first-time homebuyers and 4.90% for second-home buyers. Meanwhile, first-tier cities continue to have the highest mortgage rates, with an average of 4.6% for first-time purchases and 5.13% for second homes, while second- and third-tier cities’ average rates are approaching these lower bounds.
According to the central bank’s website, the introduction of this policy measure will help city governments implement tailored policies and make full and effective use of the available policy toolkit, thereby promoting the stable and sound development of the real estate market. Within the scope of local policies, banks and borrowers may negotiate and determine the specific interest rates for newly issued first-home loans, which will help reduce households’ interest expenses and better support rigid housing demand.
Chen Wenjing, Director of Market Research at the Index Division of the China Index Academy, pointed out that since 2022, more than 800 real estate policy measures have been rolled out nationwide. However, the overall impact of these policies has been limited. According to data from the China Index Academy, in September, the year-on-year decline in sales area of commodity residential properties in 100 key cities remained above 20%, underscoring a lackluster “Golden September.” Homebuyers’ sentiment remains subdued, with widespread wait-and-see attitudes, making the real estate sector a key drag on the steady recovery of the macroeconomy.
Chen Wenjing stated that, at present, the downward trend in the real estate market has yet to show any significant improvement. The People’s Bank of China and the China Banking and Insurance Regulatory Commission have introduced temporary adjustments to differentiated housing‑credit policies, which should help reduce home‑buying costs and stimulate demand. However, overall market expectations remain weak. In the fourth quarter, it will still be necessary to implement more robust, broader‑scope, and faster‑paced policy measures—particularly in core second‑tier cities—allowing markets with sound fundamentals to see a moderate rebound in activity, thereby generating a demonstration effect and helping to restore overall market sentiment.
Signs of an improving liquidity environment as property developers collectively undertake debt restructuring.

According to the 2022 interim reports disclosed by property developers, only a handful of companies reported year-on-year growth in revenue and net profit, while sharp declines in profitability have become the norm across the industry. Statistical data show that among the 194 A-share and Hong Kong‑listed property offices that have released their interim results, 141—73%—reported a year-on-year drop in net profit. In addition, financial statements for another 19 developers, including Evergrande and Sunac, remain delayed.
From the sales perspective, during the first eight months of this year, most property developers saw substantial declines in both contract sales value and sales area. Evergrande’s contract sales fell by 97% from January to June, while Shimao, Sunac, Yuzhou Group, and others all recorded year-to-date declines exceeding 60%. Meanwhile, Vanke, Country Garden, and Gemdale Group posted year-on-year drops of around 30% for the same period.
Poor cash recovery combined with a tightening financing environment has led to a rise in credit risks across the real estate sector, manifesting in various forms such as redemption crises involving wealth-management products, bond extensions, delayed interest payments, and outright defaults. As of September 19, the total outstanding amount of defaulted real estate bonds—including those subject to extensions—stood at RMB 134 billion, affecting 30 issuers.
Yang Hua, a manager in the risk management department of a securities office (pseudonym), said: “These days, it’s virtually impossible to issue real estate bonds. Our company explicitly prohibited the purchase of such bonds as early as March this year—no matter whether they’re issued by central state-owned enterprises, local state-owned enterprises, or private developers. Moreover, we’ve already sold off all the real estate bonds we previously held.”
Property developers are caught in a vicious cycle: declining sales, tightening liquidity, obstructed financing, eroding homebuyer confidence, and further drops in sales.
To break the negative cycle and improve their credit profiles, most property developers are doing everything they can to deleverage. On the one hand, they are ramping up sales to reduce inventory and divesting assets to swiftly generate cash; on the other, they are proactively engaging with creditors to negotiate extensions, thereby avoiding the triggering of cross‑default clauses and buying time to restore liquidity. In addition, they are seeking support from strategic investors—such as state-owned enterprises and central SOEs—to bolster their creditworthiness and secure additional funding.
Real estate developers’ liquidity crunch
Sales of commercial housing is a key indicator for gauging the overall liquidity of the real estate sector.
On September 16, the National Bureau of Statistics released real estate data for January–August 2022. In August alone, nationwide sales of commercial residential properties totaled 97.12 million square meters, with sales value reaching RMB 1.01 trillion—down 23% and 20%, respectively, year on year. Overall, national commercial housing sales remain at historically low levels.
In terms of sales collections—comprising individual mortgage payments, deposits, and prepayments—sales collections for the first eight months of 2022 totaled RMB 4.9 trillion, down 32.5% year on year; in August alone, sales collections amounted to RMB 621.8 billion, a year-on-year decline of 23.6%.
Sales data are most clearly reflected at the level of individual property developers. According to statistics for the first eight months of the year, the 20 leading developers recorded combined contracted sales of RMB 2.04 trillion, accounting for 41.6% of the industry’s total during that period. Poly Development posted the highest sales volume, at RMB 281.7 billion, down 24.72% year over year; Vanke ranked second with RMB 279.9 billion, a 36.8% decline from the same period last year. Six developers—including Evergrande, World Trade Shares, Sunac, Yuzhou Group, and Country Garden—saw their contracted sales plunge by more than 60% year over year, while another ten, including Vanke, China Jinmao, and OCT A, experienced year-over-year declines of 30% to 55%.
Sluggish sales have directly impacted property developers’ interim financial results. According to the 2022 interim reports already released, 60% of developers reported year-on-year revenue declines, while 73% saw a year-on-year drop in net profit. Losses have virtually become the norm across the industry.
Among them, Evergrande Property reported a net loss attributable to shareholders of RMB 6.92 billion in the first half of this year, followed by Jianye Real Estate, which posted a loss of RMB 5.6 billion. Landsea Green Group also recorded a staggering loss; after posting a loss exceeding RMB 10 billion in 2021, it again incurred a nearly RMB 5 billion loss in the first half of this year. Meanwhile, Tahoe Group, Sunac China, and Rongsheng Development all reported net losses attributable to shareholders ranging from RMB 2 billion to RMB 4 billion.
On the one hand, property developers are posting widespread losses; on the other, tightening regulations on the supervision of pre-sale funds have left them with substantial capital tied up at the project-company level, unable to be repatriated to the parent company.
An executive at a major Shenzhen‑based property developer said, “These days, the primary sources of cash are either sales or asset disposals. However, most of the proceeds from sales are held in escrow accounts, leaving only a very small portion—perhaps less than 20%—available for use. The group is finding it extremely difficult to access funds from its projects, which has resulted in severe liquidity challenges.”
According to financial data for 71 key listed property developers compiled by CRIC, in the first half of this year, the cash holdings of these sampled companies declined by 15% compared with the beginning of the period, while the share of restricted cash continued to rise. Meanwhile, total interest-bearing debt edged down slightly, but short-term interest-bearing liabilities increased by 1.39%. Against this backdrop, the ratio of unrestricted cash to short-term debt fell to 1.1; if pre-sale escrow funds are excluded, this ratio would be even lower, raising concerns about the company’s near-term liquidity buffer.
Another key indicator likewise underscores the current liquidity pressures faced by property developers: net cash flow from financing activities.
Affected by the industry-wide trend of deleveraging, real estate offices have seen their financing volumes steadily decline. Net cash inflows from financing fell from roughly RMB 700 billion in 2017 and 2018 to about RMB 340 billion in 2019 and the first half of 2020, a drop of 51%. Starting in the second half of 2021, constraints on corporate financing intensified, leading to net outflows of RMB 397.8 billion in that period and ultimately resulting in a full-year net outflow of RMB 189.3 billion in 2021. In the first half of 2022, property developers again recorded net outflows in their financing cash flows, totaling RMB 143.9 billion; if all Hong Kong‑listed property companies were to disclose their interim reports, this figure would likely rise further.
Sluggish sales and net outflows of financing have jointly weighed on the real estate sector, pushing some developers into liquidity distress and triggering a series of credit‑risk events.
Default incidents are frequent, particularly among U.S. dollar‑denominated bonds.
In 2021, the total value of defaulted real estate bonds reached RMB 73.5 billion, involving 67 bond issues, marking a peak in recent years. Since the beginning of 2022, the credit conditions in the real estate sector have yet to show any significant improvement.
Statistics show that, as of September 21, a total of 168 property‑related bonds had either defaulted or been extended. Among these, 97 bonds experienced substantive defaults, with a total outstanding principal of RMB 56.324 billion, while 71 bonds were subject to extensions, involving a total of RMB 126.71 billion in outstanding principal.
Bond investor Yang Yan said, “As things stand, bond extensions are essentially defaults. For example, the USD‑denominated bonds of Yuzhou Property that I hold were originally due in March this year, but they have yet to be repaid. The developer has been negotiating with us for an extension, but since no agreement has been reached, the payments have been continually delayed. In the current market, when property‑sector bonds are extended, it ultimately boils down to a lack of funds to repay.”
If extended‑maturity bonds are included, the total value of property‑sector bond defaults this year has already reached RMB 183 billion, hitting a record high. These bonds involve 54 issuers, all private enterprises, and encompass most of the well‑known property developers—excluding Vanke and Country Garden—including Sunac, Prosperity Real Estate, Zhongliang Holdings, Kaisa Group, Evergrande Property, Shimao Group, Fantasia, and Yuzhou, among others.
Notably, among the 97 property‑related bonds that have defaulted in substance, 65 were denominated in U.S. dollars, accounting for 67% of the total; the aggregate default amount totaled RMB 31.03 billion, representing 55% of the overall figure.
According to data from the China Index Academy, in the second half of this year, outstanding bonds issued by property developers totaled RMB 492.07 billion, with overseas bonds accounting for 35.4% of the total. As of September 21, bonds maturing within one year amounted to RMB 972.37 billion, of which overseas bonds represented 38%.
A wave of defaults has swept through the industry, unsettling fixed-income investors. “One after another, every U.S. dollar‑denominated property bond we hold has gone into default. We’re no longer focused on yields; we’re zeroing in on how these companies will make their payments,” said Zheng Qiong, another investor holding U.S. dollar‑denominated property bonds.
Affected by individual credit‑risk events, the secondary market for Chinese‑denominated U.S. dollar bonds has continued to decline. According to Wind data, nearly a hundred property‑sector USD bonds are currently trading below $10 per bond, with one issue from Sunshine Group quoted as low as $0.763—while its face value is $100 per bond, representing a 99% drop in price. This indicates that investors no longer believe the company can meet its debt obligations, prompting them to “vote with their feet” in the secondary market.
As of September 21, the Asia‑China‑Issued U.S. Dollar Bond Index (Markit iBoxx) stood at 170.02, the Asia‑China‑Issued U.S. Dollar Real Estate Investment Grade Bond Index at 187.97, and the Asia‑China‑Issued U.S. Dollar Real Estate High‑Yield Bond Index at 135.76—each at historically relatively low levels, with the latter hitting a new multi‑year low in mid‑August.
The sharp volatility in the secondary market for property developers’ U.S. dollar bonds signals that refinancing is under strain and that industry credit risks have once again come to the fore. Defaults on U.S. dollar bonds carry significant repercussions, as Yang Hua notes: “A default in the public market would immediately bar the company from raising capital through the public markets, further tightening its liquidity. It would also weigh on other developers’ bond issuance and increase their financing costs.”
Although bond issuance has been hampered, there are already signs of improvement.
“In March this year, we issued a notice prohibiting the purchase of real estate bonds—neither state‑owned nor private‑sector real estate bonds are permitted. Previously, our holdings of such bonds totaled over RMB 2 billion; today, the outstanding balance stands at roughly RMB 400–500 million, and we had already significantly reduced that position well before March. Looking back, the decision to divest at the time proved to be the right one,” said Yang Hua.
According to Yang Hua, most securities offices currently have explicit or implicit policies prohibiting the purchase of private‑sector real estate bonds, while some allow only state‑owned or centrally‑administered enterprise‑issued real estate bonds.
Even when bond issuance is feasible, issuers and underwriting institutions proceed with extreme caution in practice. Yang Hua stated: “Earlier, we assisted a real estate company in issuing ultra-short-term financing notes. As the lead underwriter, our issuance plan included detailed commitments and exit arrangements to address scenarios such as insufficient subscription, inadequate payment, issuer default, and postponement of the offering—resulting in an exceptionally comprehensive set of contingencies.”
Over the past decade, amid a relatively accommodative financing environment, U.S. dollar‑denominated bonds have become one of the primary channels for property developers to raise capital; however, the role of offshore bond issuance in real estate financing has now been significantly diminished.
According to Wind data, from the beginning of 2022 through September 22, mainland Chinese property developers issued $17.1 billion in offshore bonds, compared with $43.4 billion during the same period last year—a year-on-year decline of 60.6%. Meanwhile, it has become increasingly difficult for developers to refinance maturing debt; net issuance of U.S. dollar‑denominated bonds has remained negative for 12 consecutive months, with a cumulative net outflow of $42.0 billion, indicating that new bond issuances are currently insufficient to repay existing liabilities.
In addition, according to data from the China Index Academy, in the first half of 2022, non‑bank financing for the real estate sector fell to RMB 482.56 billion, a sharp year‑on‑year decline of 56.5%. Specifically, corporate bond issuance decreased by 24.2% year over year, trust financing dropped by 79.6%, and asset‑backed securities (ABS) fell by 41.1%.
In summary, property developers have become trapped in a vicious cycle: declining sales, tightening liquidity, obstructed financing, weakening homebuyer expectations, and further declines in sales.
To prevent the situation from further deteriorating, the latest government‑announced support measures include a 200-billion-yuan special relief fund to ensure the delivery of pre-sold housing units.
Earlier in August, the National Association of Financial Market Institutional Investors convened a symposium with several private real estate developers to explore ways to support their bond issuances through China Credit Enhancement Corporation. As among the first batch of participating companies, Country Garden, Longfor, Midea Real Estate, Xincheng Holdings, and Agile Group have recently completed bond offerings, with coupon rates ranging from 3.2% to 3.33% and issuance sizes between RMB 1 billion and RMB 1.5 billion. Moreover, China Credit Enhancement has provided an “unconditional, irrevocable, joint and several guarantee covering the full amount.”
Fang Ling of CRIC Research Institute stated that an “unconditional, irrevocable joint and several liability guarantee covering the full amount” can be regarded as the strongest safeguard for creditors’ rights, and this measure is intended to improve property developers’ financing environment.
According to reports, property developers participating in the second round of symposiums—including private-sector offices such as China South Construction, Jinke, Baolong, Shimao Group, and Country Garden—have already begun preparing to issue bonds backed by credit enhancements. Moreover, many other developers are actively managing their debt levels, refusing to “lie flat” and pinning their hopes on weathering this challenging period.
Debt Restructuring: Proactive Self-Rescue
Standing atop a towering mountain of debt, property developers face a long and arduous path to deleveraging. In particular, with respect to maturing U.S. dollar‑denominated bonds, the outstanding balance had reached US$52.17 billion (approximately RMB 369.2 billion) as of September 30.
According to Yang Yan, as long as a company demonstrates to investors a office commitment to repayment and presents a clear repayment plan—convincing them that the company is not insolvent and that, with the easing of policy measures, it may eventually emerge from its difficulties—most investors are willing to sit down and engage in constructive discussions.
According to a research report by S&P Global Ratings, from 2018 through August 2022, the typical approaches for managing default risks associated with onshore and offshore bonds issued by Chinese property developers were bond swaps (exchange offers) and extensions. Among the defaulted offshore bonds that have been resolved, bond swaps accounted for nearly 79%, while among the defaulted onshore bonds, extensions accounted for 72%.
According to statistics, since the beginning of this year, a total of 47 listed property developers have issued 204 announcements regarding bond extensions or swaps, with the real estate bond market dominated by calls for extension. As of September 21, the cumulative value of extended real estate bonds has reached RMB 126.7 billion, hitting a record high.
For example, in August, Evergrande Group arranged a comprehensive extension of 10 U.S. dollar‑denominated bonds totaling nearly US$5 billion, with maturities extended by three to four years. The accompanying documents detailed provisions for revising interest rates, adding clauses on the disposal of designated assets, and amending “default event” terms, among other conditions.
On September 13, Country Garden Holdings announced that the exchange of two USD‑denominated bonds totaling US$900 million, due in September 2022, had been approved by approximately 93% of the outstanding principal; likewise, the exchange of a US$700 million bond maturing in September 2023 was endorsed by roughly 91% of the principal. With respect to the remaining six U.S. dollar‑denominated bonds scheduled to mature between 2024 and 2027, consent solicitations were conducted, and amendments to certain investor protection provisions—aimed at waiving cross‑default triggers related to bond exchanges or extending the maturity dates of existing issues—were also approved.
Behind what appears to be a straightforward announcement lies intense bargaining and a protracted tug-of-war among multiple parties. According to sources, less than 8% of Country Garden’s bondholders have yet to approve the debt‑swap proposal, and the company is continuing discussions with this group in hopes of reaching an amicable resolution.
“In reality, we don’t have many options, because real‑estate bonds are typically unsecured. So once a developer defaults, we have very limited leverage and little room for negotiation—either we agree to a extension, or we let the company default outright. As long as the company isn’t insolvent or undergoing bankruptcy liquidation, the principal will eventually be repaid; the only question is how long it takes. Of course, investors who hold U.S. dollar‑denominated bonds can also file for winding‑up proceedings in the High Court of Hong Kong—Evergrande, Sunac, and Fantasia have all faced such situations. But the likelihood of successfully obtaining a winding‑up order is quite low; it’s largely just a way for creditors to vent their frustration,” said Zheng Qiong, an investor holding U.S. dollar‑denominated bonds.
Almost all private-sector property developers that have defaulted are now embarking on debt restructuring. Li Jia’en, Global Leader of Deloitte’s Emergency Planning and Insolvency Services, has offered self-help guidance to property offices seeking to turn the tide and ensure their survival.
First is equity restructuring. This involves bringing in strategic or financial investors from state-owned enterprises and central SOEs, while balancing the interests of investors, existing shareholders, creditors, and minority shareholders. It entails assessing the group’s overall liquidity and investment value to provide a pricing basis for rebalancing stakeholder interests, as well as evaluating exit strategies and their associated risks. Moreover, when formulating a specific restructuring plan, it is essential to carefully consider how resource allocation can be leveraged to achieve a fairer balance of interests among all parties—this is the key to successful restructuring.
Second, debt restructuring. We will conduct a comprehensive assessment of debt risks across three tiers—overseas holding companies, domestic holding companies, and domestic project companies—and perform a tiered analysis of the debt at each level. For the stratified debts within each structural tier, we will develop tailored debt‑restructuring plans, outlining specific terms, timelines, funding requirements for repayment, available resources, contingency measures to address aggressive creditor actions, and potential refinancing strategies. The key to successful debt restructuring lies in treating all creditors equitably and securing the support of major creditors; by rallying their backing, we can enhance the efficiency of restructuring negotiations.
Third, asset and business restructuring. This involves identifying core and non-core assets and assessing their value under both going‑concern and liquidation scenarios, thereby determining appropriate restructuring strategies—such as retaining certain assets, disposing of others, engaging third parties to revitalize assets, or isolating risks. During the implementation of asset and business restructuring, particular attention should be paid to ensuring the stable operation of assets and businesses related to delivering pre‑sold homes, as well as to the sources of funds earmarked for such deliveries, the pathways through which these funds flow, the security of their eventual exit, and the design of robust fund‑monitoring mechanisms.
In addition to actively pursuing debt restructuring, property developers are now also deploying credit protection instruments, including CDS (credit default swaps) and CRMW (credit risk mitigation warrants).
Many localities have introduced new regulations to standardize the rental market.
On September 1 this year, the Beijing Municipal Regulations on Housing Rental came into effect. This local regulation addresses issues such as partitioned‑room subletting and unscrupulous agents’ failure to return security deposits. The housing rental market is broad in scope and closely tied to everyday life. Recently, many localities have introduced policies and measures to regulate the housing rental sector, setting clearer requirements for safeguarding consumers’ rights and interests.
Rental complaints are rampant, and many localities have introduced new regulations.
The survey found that problems persist in the housing rental market in some areas. On the Black Cat Complaint platform, a keyword search for “rental” yielded more than 30,000 complaints; among them, complaints about rental agencies refusing to return security deposits were particularly prevalent—searching with the phrase “rental deposit” turned up over 13,000 complaints. In addition, there were numerous reports of issues such as landlords subdividing units into unauthorized partitions and including “unfair terms” in rental contracts.
In late July this year, the Qingdao Municipal Housing and Urban–Rural Development Bureau issued a “Notice on Complaints Against Housing Rental Enterprises in the First Half of 2022,” disclosing the top ten housing rental companies by complaint volume during the first half of the year. The notice highlighted that these enterprises, in the course of their operations, have primarily engaged in practices such as arbitrarily withholding security deposits, rents, and other guarantees; providing substandard ancillary rental services; exhibiting poor customer service; and failing to address complainants’ grievances in a timely manner—issues that have severely disrupted market order.
In response to the challenges facing the housing rental market, since the beginning of this year, many localities have introduced and implemented local regulations or related supervisory measures on housing rentals.
On January 1 of this year, the Shanghai Municipal Housing Administration and the Shanghai Regulatory Bureau of the China Banking and Insurance Regulatory Commission jointly issued the “Detailed Rules for the Supervision of Funds in Housing Rental Transactions in Shanghai (Trial),” which came into effect. In the second half of this year, the Standing Committee of the Shanghai Municipal People’s Congress will also advance legislative initiatives, including the Housing Rental Regulations. In April, the Guangzhou Municipal Housing and Urban–Rural Development Bureau released the “Notice of the Guangzhou Municipal Housing and Urban–Rural Development Bureau on Regulating the Housing Rental Market.” In May, the Standing Committee of the Beijing Municipal People’s Congress reviewed and adopted the “Beijing Housing Rental Regulations,” which took effect on September 1. In August, the Wuhan Municipal Housing Security and Housing Administration promulgated the “Wuhan Municipal Detailed Rules for the Supervision of Housing Rental Funds (Trial).”
In addition, since the beginning of this year, cities including Qingdao, Shijiazhuang, Hefei, Zhengzhou, Fuzhou, and Wuxi have all introduced policies related to housing rentals.
Huang Hui, a senior analyst at the Shell Research Institute, believes that the intensified efforts across regions to rectify and standardize the housing rental market are aimed at curbing practices by rental agencies that violate regulations and infringe upon the rights and interests of both tenants and landlords, making them a robust measure for governing the housing rental sector.
Safeguarding Tenants’ Rights and Regulating the Rental Market
An analysis reveals that housing‑rental regulations introduced across various regions largely address issues frequently raised by the public—such as landlords’ refusal to return security deposits or rent, and real estate agents’ practice of installing partition walls—while emphasizing the protection of tenants’ rights and the orderly functioning of the rental market.
— Strengthen financial oversight to ensure the safety of tenants’ funds.
Recently, the Zhengzhou Housing Rental Platform has launched a “Housing Rental Funds Supervision” feature. All housing rental enterprises are required to select a supervising bank that is integrated with the platform, open a dedicated escrow account, and, in accordance with applicable regulations, place tenants’ rent and security deposits under escrow.
“Many renters are young people with modest incomes, and a few thousand yuan in rent and security deposits can easily weigh heavily on their livelihoods,” said Li Chuanwen, executive director of Beijing Aokun Law Office. He added that if landlords fail to return the security deposit or other issues arise, tenants are legally entitled to file a lawsuit. However, given the high costs and lengthy timelines of litigation, many tenants end up swallowing their grievances in silence.
The Beijing Municipal Regulations on Housing Rental stipulate that housing rental enterprises may generally collect a security deposit not exceeding one month’s rent, which must be held in a dedicated third-party escrow account as prescribed. In Shanghai, the regulations require that rents and security deposits collected by housing rental operators be remitted directly by tenants into an escrow account; funds obtained through individual “rental‑loan” schemes must be disbursed by the lending institution directly to the escrow account. Shenzhen mandates that enterprises engaged in housing rental operations within the city establish a dedicated bank account for receiving tenants’ security deposits and rents, and that such escrowed funds may not be used at will.
— Tackle the issue of “partitioned” subletting units to ensure public safety.
Many localities have explicitly stipulated that unauthorized alterations to a building’s structure are prohibited in order to safeguard public safety. For example, the Beijing Housing Rental Regulations provide that rented housing must “use the originally planned and designed rooms as the minimum rental unit and may not install partitions to alter the internal structure,” and prescribe specific penalties for violations. The newly revised Guangdong Province Urban Housing Rental Regulations likewise clearly state: “During the lease term, any modification, expansion, or change in the use or structure of the leased property by the lessee shall require the lessor’s prior consent.”
— Strengthen contract filing and registration management to regulate the rental market.
The Beijing Municipal Regulations on Housing Rental stipulate that “the lessor shall, within thirty days from the date of conclusion of the housing lease contract, file the lease registration with the district-level housing and urban–rural development or housing authority where the leased property is located, in accordance with the relevant provisions.” Shanghai requires that all housing rental activities within its administrative area be subject to online contract signing and filing as prescribed. Cities such as Nanjing, Hangzhou, and Guangzhou have implemented online contract registration and filing through rental‑platforms, enabling real-time monitoring of enterprises’ leasing operations and ensuring that leasing companies and brokerage agencies comply with the filing requirements.
Implement the responsibilities of all parties and strengthen dynamic oversight.
Industry insiders believe that, given the sheer scale and widespread prevalence of rental housing, strengthening market oversight in the housing‑rental sector will require local authorities and relevant departments to further intensify enforcement, hold all parties accountable, conduct on-the-ground surveys at the community level, establish comprehensive management records, and enhance dynamic monitoring and control.
It is reported that, following the official implementation of the Beijing Municipal Regulations on Housing Rental, the Beijing Municipal Commission of Housing and Urban–Rural Development will launch comprehensive enforcement of the regulations. In particular, it will conduct targeted enforcement actions—especially with respect to long-term rentals, short-term rentals, shared rentals, and internet‑based platforms, which have been included in the legislative framework for the first time—while rigorously addressing any illegal or non‑compliant conduct by market entities.
Li Chuanwen believes that the Beijing Municipal Regulations on Housing Rental impose penalties for numerous irregular practices, thereby serving as a strong model in safeguarding rental relationships, regulating the rental market, and protecting the rights and interests of the public. Going forward, as localities accelerate legislation and introduce relevant rules and regulations, the healthy development of the housing rental sector will be effectively promoted, and issues such as low contract‑filing rates and difficulties tenants face in reclaiming their security deposits will gradually be resolved.
Zhao Xiuchi, a professor at the Capital University of Economics and Business and vice president of the Beijing Real Estate Law Society, recommends that local regulatory authorities streamline complaint channels, promptly publicize violations such as the unlawful withholding of security deposits, and take proactive measures to reduce tenants’ costs of defending their rights. Regarding the issue of subletting through partitioned rooms, housing and urban–rural development, public security, and fire‑safety departments should strengthen interagency coordination, work closely together to investigate and address non‑compliant practices, and eliminate safety hazards. As for the low rate of rental contract registration, local governments could tailor incentive and penalty mechanisms to their specific circumstances, standardize contract usage, boost registration rates, and address longstanding market problems such as unclear baseline data.
In addition, Huang Hui believes that the credit system for the housing rental sector should be further refined, with enhanced credit management for landlords, tenants, and rental enterprises. In June of this year, the Jinan Municipal Housing and Urban–Rural Development Bureau issued the “Measures for Credit Management in the Real Estate Brokerage Industry of Jinan,” which conducts a comprehensive assessment and grading of the integrity of housing rental enterprises and their practitioners throughout the city as they engage in housing rental activities. This approach holds certain demonstrative value.
Experts note that, from an industry‑development perspective, the current leasing sector still relies on a relatively narrow range of business models. Moreover, with occupational certification and talent‑development systems remaining incomplete, the supply of professional services is inadequate. To address these challenges, it is essential to further promote institutionalized, professionally managed housing‑rental markets, cultivate relevant specialized talent, and establish and refine industry standards across product design, service experience, and post‑rental support, thereby advancing the housing‑rental sector toward greater standardization, sophistication, and professionalism.
Taxation
Announcement of the Ministry of Finance, the State Taxation Administration, and the Ministry of Science and Technology on Strengthening Tax Deductions for Technological Innovation
To support the innovative development of high-tech enterprises and promote equipment renewal and technological upgrading, the following policy on pre‑tax deductions for corporate income tax is hereby announced:
I. For high-tech enterprises, equipment and instruments newly acquired between October 1, 2022, and December 31, 2022, may be fully deducted in the year of acquisition when calculating taxable income, and are also eligible for a 100% additional tax deduction prior to taxation.
Any enterprise that held high-tech enterprise status during the fourth quarter of 2022 is eligible to apply this policy. If an enterprise’s deduction under this policy falls short in the year it opts to apply it, the remaining amount may be carried forward and applied in subsequent years in accordance with the relevant current regulations.
The equipment and instruments referred to above mean fixed assets other than houses and buildings; the criteria and administrative measures for high‑tech enterprises shall be implemented in accordance with the “Notice of the Ministry of Science and Technology, the Ministry of Finance, and the State Taxation Administration on Revising and Issuing the Measures for the Recognition of High‑Tech Enterprises” (Guo Ke Fa Huo [2016] No. 32).
Tax administration matters related to the application of this policy by enterprises shall be governed by the existing tax administration regulations.
II. For enterprises currently eligible for a 75% pre-tax additional deduction rate on R&D expenses, the pre-tax additional deduction rate will be increased to 100% during the period from October 1, 2022, to December 31, 2022.
When calculating the annual corporate income tax final settlement and determining eligibility for the additional deduction of R&D expenses in 2022, enterprises may, at their discretion, either compute fourth-quarter R&D expenses based on the actual amounts incurred or calculate them by multiplying the total R&D expenses actually incurred during the year by the ratio of the number of operating months after October 1, 2022, to the total number of operating months in 2022.
The relevant policy guidelines and administrative procedures for enterprises benefiting from the pre‑tax additional deduction policy for R&D expenses shall be implemented in accordance with the provisions set forth in documents such as the “Notice of the Ministry of Finance, the State Taxation Administration, and the Ministry of Science and Technology on Improving the Policy for Pre‑Tax Additional Deduction of Research and Development Expenses” (Cai Shui [2015] No. 119) and the “Notice of the Ministry of Finance, the State Taxation Administration, and the Ministry of Science and Technology on Relevant Policy Issues Concerning the Pre‑Tax Additional Deduction of Overseas Commissioned Research and Development Expenses” (Cai Shui [2018] No. 64).
This is hereby announced.
Ministry of Finance, State Taxation Administration, Ministry of Science and Technology
September 22, 2022
Announcement of the State Taxation Administration and the Ministry of Industry and Information Technology on the Release of the Sixth Batch of the “Catalogue of Non-Transport Special-Purpose Vehicles with Fixed Installations Exempt from Vehicle Acquisition Tax”
In order to thoroughly implement the “Opinions on Further Deepening Tax Collection and Administration Reform” issued by the General Office of the CPC Central Committee and the General Office of the State Council, and to better serve market entities, in accordance with the relevant provisions of the “Announcement of the Ministry of Finance, the State Taxation Administration, and the Ministry of Industry and Information Technology on Policies Regarding the Exemption of Vehicle Acquisition Tax for Non‑Transport Specialized Vehicles Equipped with Fixed Installations” (No. 35, 2020) and the “Announcement of the State Taxation Administration and the Ministry of Industry and Information Technology on Administrative Matters Concerning the Exemption of Vehicle Acquisition Tax for Non‑Transport Specialized Vehicles Equipped with Fixed Installations” (No. 20, 2020), the “Catalogue of Non‑Transport Specialized Vehicles Equipped with Fixed Installations Exempt from Vehicle Acquisition Tax” (Sixth Batch) is hereby published.
This is hereby announced.
State Taxation Administration Ministry of Industry and Information Technology
September 23, 2022
Interpretation of the “Announcement by the State Taxation Administration and the Ministry of Industry and Information Technology on the Release of the Sixth Batch of the ‘Catalogue of Non-Transport Special-Purpose Vehicles with Fixed Installations Exempt from Vehicle Acquisition Tax’”
The following is an interpretation of the relevant matters pertaining to the “Announcement by the State Taxation Administration and the Ministry of Industry and Information Technology on the Publication of the Sixth Batch of the ‘Catalogue of Non-Transport Special-Purpose Vehicles with Fixed Installations Exempt from Vehicle Acquisition Tax’” (hereinafter referred to as this Announcement):
I. Background to the Issuance of the Announcement
Previously, the tax authorities’ implementation of the exemption from vehicle acquisition tax for non‑transport special‑purpose vehicles equipped with fixed installations (hereinafter referred to as “special‑purpose vehicles”) largely followed the traffic authorities’ prior administrative model: relevant enterprises submitted applications through the Ministry of Industry and Information Technology’s (MIIT) information‑collection system to have their vehicle models included in the “Exemption Catalogue for Non‑Transport Special‑Purpose Vehicles Equipped with Fixed Installations” (hereinafter referred to as the “Exemption Catalogue”). The MIIT then transmitted the pertinent information to the State Taxation Administration, which was responsible for reviewing and compiling and publishing the Exemption Catalogue. Taxpayers subsequently applied for the tax exemption based on the Exemption Catalogue.
To effectively implement the State Council’s requirements for optimizing the business environment, enhance taxpayer services, better safeguard taxpayers’ rights and interests, and improve the precision, convenience, and timeliness of managing the exemption from vehicle acquisition tax for special-purpose vehicles, the Ministry of Finance, the State Taxation Administration, and the Ministry of Industry and Information Technology have jointly issued the “Announcement of the Ministry of Finance, the State Taxation Administration, and the Ministry of Industry and Information Technology on Policies Relating to the Exemption from Vehicle Acquisition Tax for Non-Transport Special-Purpose Vehicles Equipped with Fixed Installations” (No. 35 of 2020) and the “Announcement of the State Taxation Administration and the Ministry of Industry and Information Technology on Administrative Matters Concerning the Exemption from Vehicle Acquisition Tax for Non-Transport Special-Purpose Vehicles Equipped with Fixed Installations” (No. 20 of 2020). These measures further streamline the management mechanism for exempting such vehicles from vehicle acquisition tax by shifting from tax authority review to review by designated professional institutions, and by replacing the previous practice of determining eligibility based on comparison with the “Exemption Catalogue” with an automatic entitlement process grounded in the “Catalogue of Non-Transport Special-Purpose Vehicles Equipped with Fixed Installations Exempt from Vehicle Acquisition Tax” (hereinafter referred to as the “Catalogue”). The specific details are as follows:
First, vehicle manufacturers, importers of vehicles, or individuals (hereinafter referred to as “applicants”) shall submit the required application materials through the Ministry of Industry and Information Technology’s “Management System for Non-Transport Special-Purpose Vehicles with Fixed Installations Exempt from Vehicle Acquisition Tax.” Second, the State Taxation Administration and the Ministry of Industry and Information Technology entrust the Equipment Industry Development Center of the Ministry of Industry and Information Technology (hereinafter referred to as the “Equipment Center”) to conduct a technical review of the application materials submitted by the applicants. Third, the Equipment Center shall carry out the technical review in accordance with the “Technical Requirements for Non-Transport Special-Purpose Vehicles with Fixed Installations” (hereinafter referred to as the “Technical Requirements”). Fourth, after the Equipment Center submits the vehicle models that have passed the review, the State Taxation Administration and the Ministry of Industry and Information Technology will jointly issue the “Catalogue.”
II. General Overview of This Batch of the Catalogue
This batch of the “Catalogue” is the second release of 2022 and the sixth in total, covering 477 vehicle models from 197 enterprises.
III. Matters Requiring Clarification
(1) How should cases that fail the technical review be handled?
“Failure to pass the technical review” refers to situations in which, after submitting the relevant documentation through the application system, the Equipment Center issues a “fail” determination due to non‑compliance with the Technical Requirements, incomplete submission of materials, or errors in the information provided. For example:
Example 1. Company A applied to have the XXX‑type communication vehicle included in the Catalog. Although the vehicle’s rated payload (the maximum permissible payload specified by the manufacturer) is less than 1,000 kg, the specialized equipment provided by the enterprise has a projected area on the vehicle floor that is less than 50% of the floor area; therefore, it does not qualify as a special‑purpose vehicle.
Example 2. Company B has applied to have the XXX compacting garbage truck included in the Catalog. The vehicle is equipped with a hydraulic press and a compactor, serving as a specialized dump‑type transport vehicle designed for self‑compaction, loading, transportation, and unloading of waste, with waste transport as its primary purpose; therefore, it does not qualify as a special‑purpose vehicle.
Example 3. Company C applied to have the XXX‑type fire‑prevention publicity vehicle included in the Catalogue. This vehicle is a specialized van‑type operational vehicle equipped with video, audio, and power‑generation equipment for disseminating fire‑safety information; however, its specialized apparatus consists largely of portable devices and equipment that are not permanently mounted on the vehicle body, and therefore it does not qualify as a dedicated special‑purpose vehicle.
In cases where the technical review is not passed, if the applicant disagrees with the Equipment Center’s technical review conclusion, they may resubmit their application at any time through the submission system. During the resubmission, the applicant may submit their own comments on the Equipment Center’s technical review conclusion and provide supporting documentation. The Equipment Center will then issue a revised technical review conclusion. If the applicant remains dissatisfied with the Equipment Center’s re‑reviewed technical conclusion, they may seek advice, make suggestions, or file a complaint via the MIIT’s 12381 public service hotline, or submit a written letter to the MIIT outlining the relevant issues; the MIIT will process such matters in accordance with established procedures.
(2) How should special-purpose vehicles that were manufactured and sold prior to the issuance of the Catalogue be processed for tax exemption?
In accordance with the applicable regulations, for special-purpose vehicles that were manufactured and sold prior to the issuance of the Catalogue, applicants may, once the vehicle model has been included in the Catalogue, mark the exempt‑from‑taxation indicator in the vehicle’s electronic information and re‑upload it. Taxpayers may then submit the exempt‑from‑taxation indicator, together with the relevant electronic vehicle information and supporting documentation, to the competent tax authority to apply for tax exemption.
For example: On August 28, 2022, Company A sold a vehicle to taxpayer B that was not included in the sixth batch of the “Catalog.” When uploading the vehicle’s electronic information, Company A did not mark it with the tax‑exempt indicator. Subsequently, the sixth batch of the “Catalog,” issued by the State Taxation Administration and the Ministry of Industry and Information Technology, included the model of the vehicle in question. Following the publication of this sixth batch, Company A may amend the electronic information for the vehicle purchased by taxpayer B, add the tax‑exempt indicator, and re‑upload the updated data. Taxpayer B may then, on the basis of the tax‑exempt indicator and other relevant documentation, lawfully benefit from the tax‑exemption policy.
(3) How should a special-purpose vehicle that has been included in the “Catalogue” after the taxpayer has paid the Vehicle Purchase Tax be handled?
If a taxpayer has purchased a special-purpose vehicle and paid the vehicle acquisition tax, and subsequently that vehicle is included in the Catalog, the applicant may, once the vehicle model has been added to the Catalog, mark the vehicle’s electronic information with an exemption indicator and re‑upload it. The taxpayer may then submit the exemption indicator, along with other relevant electronic vehicle information and supporting documentation, to the competent tax authority to apply for a tax refund; the competent tax authority shall, in accordance with the law, refund the tax already paid by the taxpayer.
For example: On August 28, 2022, Company A sold a vehicle to taxpayer B that was not included in the sixth batch of the “Catalog.” After purchasing the vehicle, taxpayer B paid the vehicle acquisition tax. Subsequently, the sixth batch of the “Catalog,” issued by the State Taxation Administration and the Ministry of Industry and Information Technology, came to include the model of the vehicle in question. Following the publication of this sixth batch, Company A may amend the electronic information for the vehicle purchased by taxpayer B, mark it with an exemption indicator, and re‑upload the updated data. Taxpayer B may then use the exemption indicator, together with other required documentation, to apply to the competent tax authority for a tax refund.
The tax authorities in Xuzhou, Jiangsu Province, have investigated a case involving an intermediary agency’s unauthorized publication.
Processing tax-related false advertising information.
Recently, the Xuzhou Municipal Tax Service Bureau of Jiangsu Province, acting on leads from internet data monitoring, took enforcement action against Youshuibao (Xuzhou) Financial and Tax Services Co., Ltd. for illegally publishing false tax-related promotional materials.
Upon investigation, the company was found to have disseminated false tax‑related promotional content via social media, touting “legitimate tax‑avoidance strategies” and “effective measures to reduce corporate tax burdens,” thereby distorting the interpretation of tax policies and misleading the public. Further inquiries by the tax authorities revealed additional suspected violations, including engaging in unauthorized tax planning to assist taxpayers in evading taxes and aiding others in issuing fraudulent value‑added tax invoices. In collaboration with local cyberspace administration and market regulation authorities, the Xuzhou Municipal Tax Service Bureau summoned the company for a formal interview, ordered it to remove the unlawful content and promptly mitigate its adverse effects, and, in accordance with the Provisional Measures for the Supervision of Tax‑Related Professional Services, designated it as a key regulatory target and suspended acceptance of any tax‑related matters it represents. At present, the alleged misconduct—engaging in unauthorized tax planning to help taxpayers evade taxes and assisting others in issuing fraudulent VAT invoices—has been referred to the public security organs for criminal investigation.
An official from the Xuzhou Municipal Tax Service Bureau of Jiangsu Province stated that, in the next phase, the bureau will thoroughly implement the “Notice on Regulating Tax‑Related Intermediary Services and Promoting the Healthy Development of the Tax‑Related Intermediary Industry” issued by the State Taxation Administration, the Cyberspace Administration of China, and the State Administration for Market Regulation. The bureau will institutionalize regulatory oversight, rigorously investigate and address violations, foster the sound development of the tax‑related intermediary sector, and safeguard both national tax revenues and the legitimate rights and interests of taxpayers and payers.
Providing Strong Support for Market Entities to Overcome Difficulties and Promote Development — The State Taxation Administration Reports on Progress in Implementing Policies on Tax and Fee Reductions, Deferrals, and Exemptions.
Since the beginning of this year, a series of new bundled tax and fee support measures, along with a comprehensive package of policies to stabilize the economy and follow-up measures, have been rolled out in phases, providing strong support for easing the burden on market entities and maintaining macroeconomic stability. On the 29th, the State Taxation Administration held a press conference to brief the public on the latest progress in implementing tax and fee reduction, deferral, and exemption policies.
Nationwide, new tax and fee reductions, along with tax and fee refunds and deferrals, have exceeded 3.4 trillion yuan.
Cai Zili, Chief Auditor of the State Taxation Administration, stated that the tax authorities have adopted a multi-pronged approach—expediting tax refunds, cracking down hard on fraudulent claims, rigorously investigating internal errors, welcoming external oversight, and maintaining ongoing public awareness campaigns—to ensure the steady implementation of policies designed to benefit businesses and the people. As of September 20, nationwide measures to cut taxes and fees, along with tax and fee deferrals and refunds, had totaled over RMB 3.4 trillion. Cai Zili further explained that this RMB 3.4 trillion comprises three main components: first, from January 1 to September 20 this year, VAT credit refunds totaling RMB 2.2113 trillion have been issued to taxpayers’ accounts; second, from January to August, nationwide new tax and fee reductions amounted to RMB 591.6 billion; and third, from January 1 to September 20 this year, cumulative tax and fee deferrals reached RMB 632.6 billion.
“The series of tax and fee support policies implemented this year include both temporary measures and institutional arrangements; they encompass both rate-based and base‑level incentives; they comprise refund, reduction, exemption, and deferral policies as well as fee cuts and payment deferrals; they feature both broadly applicable relief measures and targeted assistance for specific sectors; and they comprise both centrally coordinated policies and locally enacted measures implemented in accordance with the law. By effectively combining and coordinating these diverse policy tools, we have provided robust support to market entities in alleviating their burdens and fostering their development,” said Cai Zili.
Tax and fee support policies have been implemented and are taking effect, providing strong backing for stabilizing the overall macroeconomic landscape. Tax data show that in August, nationwide corporate sales revenue rose 5.2% year on year, up 2.1 percentage points from July and 4.1 percentage points from the second quarter, continuing the trend of recovery and growth.
Shen Xinguo, Director-General of the Taxpayer Services Department of the State Taxation Administration, stated that the tax authorities have established a nationwide unified tax and fee knowledge‑tagging system, leveraging tax‑related big data to deliver policy information with precision. At the same time, “non‑contact” tax filing and payment services have been further expanded to cover 233 items. Moving forward, efforts will be intensified to ensure the effective implementation of measures under the “Spring Breeze Action for Convenient Tax Services,” helping market entities fully, promptly, and efficiently benefit from policy incentives.
Increase support for manufacturing, high-tech enterprises, and other sectors.
At its meeting on the 13th, the State Council Executive Meeting stated that, for small and medium-sized manufacturing enterprises and individual business households, the five taxes and two fees that were previously deferred will, starting September 1, have their payment deadlines extended by an additional four months after the original deadline expires, involving a total of 440 billion yuan in deferred tax liabilities. Fu Yangfan, Deputy Director-General of the Tax Collection and Management and Science & Technology Development Department of the State Taxation Administration, explained that the tax authorities have optimized and upgraded the relevant information systems, so taxpayers do not need to take any action; the payment deadlines for the originally deferred taxes and fees will be automatically extended by four months. If taxpayers choose to pay the deferred taxes and fees ahead of schedule during the deferral period, the system will automatically prompt them to conoffice, guiding them to fully benefit from the policy.
“Since the implementation of the tax and fee deferral policy, a total of 3.05 million small and medium-sized manufacturing enterprises nationwide have benefited from deferred tax and fee payments amounting to RMB 525.6 billion,” said Fu Yangfan. According to estimates, the policy is expected to help these enterprises save over RMB 20 billion in financing costs, thereby further easing their liquidity constraints and reducing their overall financial burden.
At its meeting on the 7th, the State Council Executive Meeting outlined a phased tax‑cut policy to support corporate innovation, stipulating that for high‑tech enterprises, expenses incurred in the fourth quarter of this year for the purchase of equipment will be eligible for full, one‑time pre‑tax deduction in the same year, along with a 100% additional tax deduction. Furthermore, both local and central governments will provide additional fiscal support.
Wang Shiyu, Director-General of the Income Tax Department of the State Taxation Administration, stated that the Administration, in conjunction with the Ministry of Finance and the Ministry of Science and Technology, has issued an announcement clarifying the specific scope and time limits for implementing the policy. At the same time, drawing on the new policy’s operational characteristics and third-party data, it has developed risk‑control indicators to conduct anomaly detection and risk‑mitigation measures regarding enterprises’ eligibility for tax incentives, thereby cracking down on fraudulent practices aimed at illicitly obtaining such benefits.
Implement measures to support export tax rebates and boost foreign trade development.
“In the first eight months of this year, the country cumulatively processed export tax refunds and exemptions totaling 1.35 trillion yuan, playing a positive role in ensuring steady growth in China’s foreign trade exports,” said Xie Wen, Director-General of the Department of Goods and Services Tax at the State Taxation Administration.
Upon investigation, to help enterprises benefit from policy incentives, the tax authorities have streamlined the documentation required for 11 types of export‑tax‑rebate procedures across seven categories, while intensifying the implementation of “non‑contact” processing and “deficiency‑acceptance” measures. As of September 20, a total of 31,000 enterprises have collectively reduced their paper‑based submissions by 270,000 documents; all export‑tax‑rebate matters for the 310,000 enterprises filing such returns can now be handled entirely online; and 6,089 newly established enterprises have benefited from the convenience of deficiency‑acceptance processing.
Xie Wen stated that, in order to expedite export tax rebates and help exporting enterprises alleviate financial pressures, since the beginning of this year, tax authorities nationwide have reduced the average processing time for standard export tax rebates to within six working days. Starting June 20 this year, a temporary measure has been implemented to further accelerate the processing of export tax rebates for Category I and Category II exporters, shortening the average turnaround time for standard rebates to three working days.
At the press conference, it was announced that tax authorities have maintained a steadfast focus on cracking down on illegal activities such as the issuance of false invoices and the fraudulent claiming of export tax rebates and tax incentives through “fake enterprises,” “fake exports,” and “false declarations.” As of September 20, a total of 143,500 enterprises suspected of issuing false invoices to defraud taxes had been investigated and penalized, along with 1,578 export enterprises suspected of tax fraud, resulting in the recovery of tax losses amounting to RMB 4.284 billion.
Litigation & Arbitration
The Supreme People’s Court has released typical cases of financial crimes punished by the people’s courts in accordance with the law.
Case 1
“e‑Zubao” Case of Fundraising Fraud and Illegal Acceptance of Public Deposits—Illicit Fundraising Crimes Committed Under the Guise of Internet Finance
I. Basic Facts of the Case
The defendant entities, Anhui Yucheng Holding Group and Yucheng International Holding Group Co., Ltd., between June 2014 and December 2015, without the requisite qualifications of a banking financial institution, leveraged the “e‑Zubao” and “Zhima Finance” platforms to issue fictitious financing‑lease‑related and individual‑creditor‑rights projects. These were packaged as various wealth‑management products, such as “e‑Zu Nian Xiang” and “Nian An Feng Yu,” and marketed to the public through promises of principal and interest repayment, along with extensive publicity via television, the internet, and leaflets. As a result, they illegally raised more than RMB 76.2 billion from over 1.15 million investors. The majority of these funds were used to repay principal and interest, acquire offline sales companies, and cover other platform operating expenses; the remainder was squandered or diverted to other illegal and criminal activities, resulting in losses exceeding RMB 38 billion. In addition, Yucheng International Holding Group Co., Ltd., Ding Ning, and others engaged in smuggling precious metals, illegally possessing firearms, and illegally crossing national borders.
II. Judgment Result
This case was tried in the first instance by the No. 1 Intermediate People’s Court of Beijing and in the second instance by the Beijing Higher People’s Court.
The court held that the defendant entities, Anhui Yucheng Holding Group and Yucheng International Holding Group Co., Ltd., as well as the defendants Ding Ning, Ding Dian, Zhang Min, and eight others, with the intent of illegal appropriation, employed fraudulent methods to illegally raise funds, thereby constituting the crime of fundraising fraud. Furthermore, the defendants Wang Zhihuan and 15 others violated state regulations on financial administration by surreptitiously soliciting public deposits, thus constituting the crime of illegally absorbing public deposits. The illegal fundraising activities of both defendant entities and the aforementioned defendants involved exceptionally large sums, resulting in substantial property losses for investors across numerous regions nationwide, severely disrupting the national financial management order. Given the particularly grave circumstances and consequences of these offenses, they must be punished in accordance with the law. Accordingly, the court sentenced Yucheng International Holding Group Co., Ltd. to a fine of RMB 1.803 billion for the crimes of fundraising fraud and smuggling precious metals; Anhui Yucheng Holding Group to a fine of RMB 100 million for the crime of fundraising fraud; Ding Ning to life imprisonment for the crimes of fundraising fraud, smuggling precious metals, illegal possession of firearms, and illegal border crossing, with deprivation of political rights for life, confiscation of personal property amounting to RMB 500,000, and a fine of RMB 101 million; and Ding Dian to life imprisonment for the crime of fundraising fraud, with deprivation of political rights for life and a fine of RMB 70 million. Additionally, Zhang Min and 24 other defendants were each sentenced to fixed-term imprisonment ranging from 15 years to 3 years for the crimes of fundraising fraud, illegal absorption of public deposits, smuggling precious metals, and illegal border crossing, together with deprivation of political rights and imposition of fines. The funds seized or frozen in the case have been returned to the investors in proportion; real estate, vehicles, equity interests, and other items subject to seizure or attachment have been sold and the proceeds distributed to the investors, with any shortfall to be further ordered to be reimbursed and returned according to the same principles.
III. Typical Significance
This case is a typical example of illegal fundraising carried out through an internet‑finance model. The defendant entities, Anhui Yucheng Holding Group and Yucheng International Holding Group Co., Ltd., operated under the banner of “financial innovation,” leveraging internet‑finance platforms and using such pretexts as internet‑finance innovation, virtual‑currency investment, and online lending. Luring investors with promises of exorbitant interest rates, they fabricated financing‑lease projects and repeatedly engaged in illegal fundraising by means such as rolling over old debts with new funds and self‑guarantees—clearly constituting a full‑blown Ponzi scheme. The sums involved in this case are extraordinarily large, affecting a vast number of investors and inflicting massive financial losses on them, thereby gravely infringing upon the legitimate rights and interests of investors and seriously jeopardizing national financial security. Given the particularly grave circumstances and consequences of the crime, strict punishment in accordance with the law is warranted. The court sentenced the defendants Ding Ning and Ding Dian to life imprisonment for the crime of fundraising fraud and imposed hefty fines on the defendant entities, Anhui Yucheng Holding Group and Yucheng International Holding Group Co., Ltd., fully reflecting the principle of imposing severe penalties.
Case 2
“Kunming Fanya” Case of Illegally Absorbing Public Deposits—Using a Legitimate Business Form to Commit the Crime of Illegal Fundraising
I. Basic Facts of the Case
Between November 2011 and August 2015, the defendant unit Kunming Pan‑Asia Company, under the direction of its chairman and general manager (president) Shan Jiuliang, together with its responsible personnel Guo Feng and Wang Biao, conspired to violate provisions of national financial regulatory laws. Under the guise of financing and margin trading in rare metals, they promoted “entrustment‑trustee” business practices, publicly advertised these schemes, promised fixed returns, and thereby induced the general public to invest, effectively soliciting massive deposits from the public. The defendant units, including Yunnan Tianhao Rare‑Earth Company and two other companies, as well as the defendants Qian Jun and others, knowingly assisted Kunming Pan‑Asia in illegally raising public funds. Kunming Pan‑Asia illegally absorbed more than RMB 167.8 billion in public deposits, involving over 130,000 investors, resulting in outstanding liabilities exceeding RMB 33.8 billion that could not be repaid. Furthermore, during their tenure managing and operating Kunming Pan‑Asia, Shan Jiuliang and Yang Guohong, taking advantage of their official positions, either individually or jointly appropriated company assets for their own use.
II. Judgment Result
This case was tried in the first instance by the Intermediate People’s Court of Kunming City, Yunnan Province, and on appeal by the Higher People’s Court of Yunnan Province.
The court held that the defendant entity, Kunming Pan‑Asia Company, together with three other companies, and the defendants including Shan Jiuliang, collectively violated state regulations on financial administration by illegally soliciting public deposits in disguised forms, involving an enormous sum; their conduct thus constitutes the crime of illegally absorbing public deposits. Furthermore, Shan Jiuliang and Yang Guohong, taking advantage of their official positions, unlawfully appropriated property belonging to their respective units in an especially large amount, constituting the crime of embezzlement; both should be punished in accordance with the law. Accordingly, Kunming Pan‑Asia Company was sentenced to a fine of RMB 1 billion for the crime of illegally absorbing public deposits; the three other defendant entities—Yunnan Tianhao Rare‑Earth Company and two others—were each fined RMB 500 million, RMB 50 million, and RMB 5 million, respectively. Shan Jiuliang was sentenced to 18 years’ imprisonment for the crimes of illegally absorbing public deposits and embezzlement, with his personal property confiscated in the amount of RMB 50 million and a fine of RMB 500,000 imposed. The remaining defendants were each held criminally liable in accordance with the law. The seized, impounded, or frozen assets involved in the case shall be disposed of in accordance with the law and returned to the investors in proportion; any illicit gains shall continue to be recovered, with any shortfall ordered to be further reimbursed, and such amounts shall likewise be returned to the investors.
III. Typical Significance
This case is a typical example of using the guise of lawful business operations to commit the crime of illegal fundraising. In this instance, the defendant entity, Kunming Pan‑Asia Company, legally established, operated under the banner of “financing and warehousing in rare‑metal trading,” promoting services such as “entrusted delivery and entrusted declaration” and “trust‑based entrustment.” By doing so, it fashioned itself into an institution resembling a financial exchange. Working in concert with certain metal‑producing and -selling enterprises, it fabricated false funding needs on the Pan‑Asia trading platform, creating the illusion of brisk trading activity. Leveraging large‑scale online media, television and telephone advertising, economic expert forums, outdoor billboards, and even displays at bank counters, it marketed these activities as quasi‑financial investment products whose returns were purportedly unrelated to fluctuations in metal prices and which allowed funds to flow in and out at will. This scheme lured the general public into investing, resulting in substantial capital being locked up, which the defendants then controlled and allocated, thereby achieving the effect of de facto absorption of public deposits. Such conduct satisfies all the elements of the crime of illegally absorbing public deposits and, in accordance with the law, warrants criminal liability. This case serves as a warning to all types of companies and enterprises: operate strictly in compliance with laws and regulations, and never exploit the façade of lawful business to engage in unlawful or criminal activities; otherwise, you will inevitably face legal sanctions.
Case 3
Shanghai “Fuxing” Fund-Raising Fraud Case — A licensed private equity office committed the crime of illegal fund-raising under the guise of issuing private equity funds.
I. Basic Facts of the Case
Beginning in September 2014, the defendants Zhu Yidong, Zhao Zhuoquan, and others decided that Fuxing Group would engage in financing activities. They employed methods such as fabricating investment targets, exaggerating the value of investment projects, and conducting public advertising, while luring investors with promises of high returns and guaranteed principal and interest repayment upon maturity. They designed and sold wealth-management products—including debt‑rights‑based and private‑fund‑based offerings—raising funds illegally from the general public, using new funds to repay old ones in order to continuously expand their capital base and sustain their liquidity. By June 2018, Fuxing Group had illegally raised more than RMB 56.5 billion, with outstanding principal payments exceeding RMB 21.8 billion at the time of the case’s discovery. During this period, Fuxing Group, along with Zhu Yidong, Zhu Chengwei, and others, leveraged their financial strength, shareholding or position‑holding advantages, or informational advantages to jointly or repeatedly trade shares of “Dalian Electric Porcelain.” By controlling the generation of information related to the listed company or by manipulating the content, timing, and pace of information disclosure, they misled investors into making investment decisions, thereby influencing securities prices and trading volumes, and engaging in market manipulation of a particularly serious nature.
II. Judgment Result
This case was tried in the first instance by the Second Intermediate People’s Court of Shanghai and in the second instance by the Shanghai Higher People’s Court.
The court held that the defendant entity, Fuxing Group, engaged in illegal fundraising by means of fraud with the intent of unlawful appropriation, thereby constituting the crime of fundraising fraud. The defendants Zhu Yidong, Zhao Zhuoquan, and others, as directly responsible senior personnel or other persons directly liable within Fuxing Group, likewise committed the crime of fundraising fraud. Furthermore, the acts of Fuxing Group, Zhu Yidong, and Zhu Chengwei also constitute the crime of manipulating the securities market, and given the particularly serious circumstances, multiple offenses shall be punished cumulatively. Accordingly, in accordance with the law, Fuxing Group was sentenced to a fine of RMB 2.1 billion for the crimes of fundraising fraud and manipulating the securities market; Zhu Yidong was sentenced to life imprisonment, with deprivation of political rights for life, and a fine of RMB 15 million, for the crimes of fundraising fraud and manipulating the securities market; and Zhao Zhuoquan was sentenced to life imprisonment, with deprivation of political rights for life, and a fine of RMB 8 million, for the crime of fundraising fraud. The remaining defendants were each sentenced to appropriate penalties. The illicit proceeds of the defendant entity, Fuxing Group, and all defendants were ordered to be recovered and returned to the respective victims and victimized entities; any shortfall was ordered to be further reimbursed by the defendant entity and the individual defendants.
III. Typical Significance
This case is a typical example of an unlicensed private equity office committing the crime of illegal fundraising under the guise of issuing private funds. Although these funds appear compliant on paper, they in fact fail to meet the regulatory requirements and operational norms governing private equity funds at every stage—raising, investment, management, and exit. For instance, during the sales process, there are practices such as disguised public promotion, promises of fixed returns, implicit guarantees, sales to non‑qualified investors, and failure to fulfill risk‑disclosure obligations. In the investment and management phases, there are instances of self‑financing, “funds‑pooling” operations, misappropriation of fund assets, investments made outside the agreed‑upon purposes, fictitious investment projects, failure by the manager to discharge its fiduciary duties, and the disclosure of false information. At the exit stage, phenomena such as “issuing new funds to repay old ones” and rigid repayment are widespread, with principal and interest being repaid not through investment returns but through other means. In assessing the “illegality, publicity, inducement, and social impact” of such private‑fund‑based illegal fundraising schemes, the criteria differ from those applied to ordinary illegal fundraising offenses, requiring careful evaluation and discernment by the judiciary. Meanwhile, regulatory authorities should strengthen investor education and oversight of private‑equity institutions, while investors ought to heighten their risk‑awareness, acquire essential financial‑investment knowledge, and proactively safeguard their legitimate rights and interests.
Case 4
Shenyang “Lao Ma Le” Fundraising Fraud Case—Illicit Fundraising Crimes Committed Under the Guise of “Elderly‑Care Investments”
I. Basic Facts of the Case
In August 2013, the defendant Jin Jiafu established Shenyang Laomule Trading Co., Ltd. (hereinafter referred to as “Laomule Company”) in Shenyang City. In October 2015, Jin Jiafu recruited defendants Liang Chuang, Zhang Yan, and others as senior management personnel, jointly engaging in illegal fundraising activities. They promoted these schemes to the public through leaflet distribution, lectures, and meetings, falsely claiming that investing in Laomule Company would yield substantial returns after a specified period and entitle investors to complimentary travel and other perks, thereby deceiving the public into making investments. By November 2017, Laomule Company had opened more than 1,000 outlets nationwide, defrauding over 1.7 million investors of more than RMB 6.2 billion, of which over RMB 4.2 billion had been repaid prior to the case’s discovery.
II. Judgment Result
This case was tried in the first instance by the Intermediate People’s Court of Shenyang, Liaoning Province, and in the second instance by the Higher People’s Court of Liaoning Province.
The court held that the defendant, Jin Jiafu, in collusion with Liang Chuang, Zhang Yan, and others, employed fraudulent methods to illegally raise funds from the general public with the intent of unlawful appropriation, involving an especially large sum; such conduct constitutes the crime of fundraising fraud. Jin Jiafu, Liang Chuang, and Zhang Yan all played principal roles in the joint offense and shall be punished accordingly. Accordingly, in accordance with the law, Jin Jiafu was sentenced to life imprisonment for the crime of fundraising fraud, with deprivation of political rights for life, and confiscation of all his personal property; Liang Chuang was sentenced to thirteen years’ imprisonment, with deprivation of political rights for three years, and a fine of RMB 500,000; and Zhang Yan was sentenced to twelve years’ imprisonment, with deprivation of political rights for two years, and a fine of RMB 500,000.
III. Typical Significance
This case is a typical example of pension fraud committed under the guise of “pension investment.” In recent years, as the elderly population has continued to grow and demand for elderly care services has risen, some criminals have exploited seniors’ limited digital literacy and weak critical‑thinking skills. Under the pretext of providing elderly care services, investing in pension projects, or selling pension‑related products, they have lured victims with promises of high returns on investments, set traps, engaged in false advertising, and perpetrated pension fraud to swindle money from older adults. The defendant, Jin Jiafu, established the “Lao Mule” company and, under the banner of member‑based investment rebates, opened more than 1,000 outlets across over 20 provinces and municipalities nationwide. Using fraudulent methods, he illegally raised funds from elderly investors, attracting more than 1.7 million participants and causing approximately RMB 2 billion in losses—seriously infringing upon the legitimate rights and interests of senior citizens and posing a grave threat to public order. In accordance with the law, the court sentenced three defendants to fixed-term imprisonment of ten years or more, and even life imprisonment, for the crime of fundraising fraud. This demonstrates the people’s courts’ office stance and unwavering determination to impose strict legal penalties on pension fraud and resolutely safeguard the “pension savings” of the elderly. At the same time, the public—especially senior citizens—is urged to exercise caution when making investments, enhance their ability to recognize and prevent scams, and avoid falling into the traps set by criminal offenders.
Case 5
Jiangxi “Lao Qingxiang” Case of Illegally Absorbing Public Deposits—Multi‑pronged Measures to Maximize Recovery of Stolen Funds and Mitigate Losses
I. Basic Facts of the Case
Beginning in May 2011, the defendant company, Laoqingxiang, acting on the decision of its legal representative, Zhang Zhixiong, illegally solicited funds from the general public by offering higher discounts on elderly care services, complimentary periods of free residence in senior‑care apartments, and one‑time cash rebates equivalent to annual interest, all under the guise of prepaying “service fees” and promising fixed high‑interest returns. By the time the case was uncovered, the company had illegally raised over RMB 940 million from more than 7,800 individuals, resulting in economic losses exceeding RMB 520 million for the investors.
This case was tried in the first instance by the People’s Court of Nanchang County, Jiangxi Province, and on appeal by the Intermediate People’s Court of Nanchang City. In accordance with the law, Laoqingxiang Company was sentenced to a fine of RMB 1 million for the crime of illegally absorbing public deposits; Zhang Zhixiong was sentenced to eight years’ imprisonment and a fine of RMB 400,000; and Zhao Lei and others were sentenced to fixed-term imprisonment ranging from five years to three years and two months, along with fines ranging from RMB 300,000 to RMB 200,000. The relevant assets involved in the case and the illegal proceeds shall be returned to the investors in proportion to their respective investment shares.
II. Implementation Status
Following the entry into force of the criminal judgment in this case, the original trial court initiated enforcement proceedings, with the total amount involved exceeding RMB 520 million. Enforcement investigations revealed that the case involved a large number of investors—more than 4,000 of whom were elderly—and that their claims varied significantly. The assets at issue are complex; some properties are leased or lack valid property titles, posing challenges in verifying information, disposing of assets, and returning funds and property, thereby attracting widespread public attention. Relying closely on the local Party committee and benefiting from its strong leadership and the government’s robust support, the original trial court coordinated with public security, civil affairs, and other relevant departments to refine the asset disposal plan, steadily advance park‑cooperation operations, and engage a notary institution to provide full‑process oversight of the asset‑disposal process. At the same time, it promptly addressed public concerns by holding regular monthly meetings with representatives of the investors and providing timely updates on progress in asset disposal. The court also pioneered an integrated online–offline registration system, systematically and prudently advancing information verification and registration, thus laying a solid foundation for subsequent fund repayments. To date, all assets involved have been disposed of, with a total of over RMB 271 million successfully enforced. After deducting appraisal fees, amounts owed to priority creditors, and rent for the sole residence, the actual total amount returned to investors exceeds RMB 269 million. Repayment totaling over RMB 260 million has been distributed to 4,944 individuals, with more than RMB 9 million placed in escrow in accordance with the law, resulting in a repayment rate of 51.8%.
III. Typical Significance
This case is a typical example of the people’s courts’ vigorous efforts to recover stolen funds and mitigate losses in the special campaign to combat and rectify pension fraud. In this case, the people’s courts, officely relying on the leadership of the Party committees, comprehensively employed enforcement measures, conducted thorough analysis and assessment, and formulated well‑thought‑out strategies, thereby effectively addressing key bottlenecks and challenges in property disposal, information verification, and fund restitution. They spared no effort to recover assets and compensate victims, striving to minimize economic losses and safeguard the legitimate rights and interests of elderly persons to the greatest extent possible. This demonstrates the people’s courts’ commitment to rule‑of‑law thinking and their sense of responsibility in earnestly protecting the interests of the people. The “dual-track online–offline registration system” pioneered in this case has provided replicable and scalable experience for resolving the difficult issue of information verification in mass‑involved property enforcement and restitution. By appropriately defusing risks and conflicts that could undermine social stability, the court has achieved a harmonious integration of political, legal, and social outcomes, significantly enhancing the public’s sense of security, happiness, and fulfillment.
Case 6
Dandong Xintai Electric Co., Ltd., Wen Deyi, and others—Case of Fraudulent Issuance of Shares and Illegal Disclosure of Material Information—Fraudulent Issuance of Shares, Illegal Disclosure of Material Information
I. Basic Facts of the Case
On March 30, 2011, the defendant company, Xintai Electric, had its application for listing on the ChiNext Board rejected by the China Securities Regulatory Commission (CSRC) on the grounds that it did not meet the requirements for sustained profitability. Between 2011 and June 2013, the defendants Wen Deyi and Liu Mingsheng conspired to fabricate financial data by artificially reducing accounts receivable and understating provisions for bad debts, among other methods, and subsequently included materially false information in the periodic financial reports submitted to the CSRC as part of their application for an initial public offering and listing on the ChiNext Board. On January 3, 2014, the CSRC approved Xintai Electric’s listing on the ChiNext Board. Subsequently, Xintai Electric incorporated into its “Prospectus for the Initial Public Offering and Listing on the ChiNext Board” financial reports containing materially false information. On January 27, 2014, Xintai Electric’s shares were listed on the ChiNext Board of the Shenzhen Stock Exchange, with 15.778 million shares publicly offered at an issue price of RMB 16.31 per share, raising a total of RMB 257 million.
After the defendant company, Xintai Electric, went public, the defendants Wen Deyi and Liu Mingsheng continued to employ the aforementioned methods to commit financial fraud, thereby disclosing to the public materially false information in its 2014 semi-annual report, 2014 annual report, and other key documents. In July 2017, the Shenzhen Stock Exchange decided to delist and remove Xintai Electric from trading, and the lead underwriter, Industrial Securities Co., Ltd., made advance compensation totaling over RMB 236 million to more than 10,000 investors.
II. Judgment Result
This case was tried by the Intermediate People’s Court of Dandong City, Liaoning Province. Following the pronouncement of the judgment, no appeal or protest was filed within the statutory time limit, and the original judgment has thus become legally effective.
The court held that the defendant entity, Xintai Electric Co., Ltd., and the defendants Wen Deyi and Liu Mingsheng all committed the crime of fraudulent issuance of stocks; moreover, the conduct of Wen Deyi and Liu Mingsheng also constituted the crime of illegally disclosing material information, and they should be punished for multiple offenses in accordance with the law. Following their apprehension, Wen Deyi truthfully confessed to his crimes, and Liu Mingsheng voluntarily surrendered himself, both of which entitle them to lighter punishment under the law. Accordingly, Dandong Xintai Electric Co., Ltd. was sentenced to a fine of RMB 8.32 million for the crime of fraudulent issuance of stocks; Wen Deyi was sentenced to three years’ imprisonment and fined RMB 100,000 for the crimes of fraudulent issuance of stocks and illegal disclosure of material information; and Liu Mingsheng was sentenced to two years’ imprisonment and fined RMB 80,000 for the crimes of fraudulent issuance of stocks and illegal disclosure of material information.
III. Typical Significance
This case is a typical example of a listed company that, in the period before and after its IPO application, engaged in repeated financial fraud, resulting in criminal penalties and a mandatory delisting ordered by law. At present, China is advancing a securities issuance registration system centered on information disclosure. The cultivation of integrity among market participants is vital to the healthy and stable development of the capital market. Fraudulent issuance, financial fraud, and other illegal and criminal acts gravely undermine the rigor of the information-disclosure regime, erode the foundation of market integrity, and inflict severe harm on investors; they are “malignant tumors” of the securities market and must be resolutely punished with strict adherence to the law. The proper handling of this case fully demonstrates the people’s courts’ zero‑tolerance stance and unwavering resolve toward illegal and criminal conduct in the capital market, serving as an important warning against the current trend of imposing stringent penalties on financial fraud and fraudulent issuance. The Eleventh Amendment to the Criminal Law has revised the offenses of fraudulent issuance of stocks or bonds and the crime of illegally disclosing or failing to disclose material information, further strengthening penalties for these two categories of crimes and providing stronger legal safeguards to ensure the steady and sustained advancement of the registration‑based reform and the sound, stable development of the capital market.
Case 7
Zhangjiagang Bonded Zone Yishidun International Trading Co., Ltd., Jin Wenxian, and others—case of manipulating the futures market: illegally exploiting technological advantages to manipulate the futures market.
I. Basic Facts of the Case
The defendant entity, Yishidun Company, was established in September 2012 and subsequently opened a futures account with Huaxin Futures Co., Ltd. (hereinafter referred to as Huaxin Futures) through the defendant Jin Wenxian. From June 2013 to July 2015, in order to evade securities and futures regulation, Yishidun Company, upon the introduction of defendants Gao Yan and Jin Wenxian, effectively controlled—through leasing or acquisition—19 individual and 7 corporate futures accounts. These accounts were grouped together with Yishidun’s own account to form an account group, which engaged in stock index futures trading using high-frequency algorithmic strategies. During this period, Yishidun concealed key facts, including its actual control over the Yishidun account group and the extensive use of these accounts for high-frequency algorithmic trading, thereby circumventing the regulatory measures imposed by the China Financial Futures Exchange and gaining an unfair trading advantage. Furthermore, in collusion with Jin Wenxian and others, Yishidun illegally interfaced its self-developed order‑submission trading system with the CFFEX trading platform, enabling direct execution of trades and securing an additional illicit speed advantage. Between June 1 and July 6, 2015, Yishidun Company, along with Gao Yan and Liang Zezhong, acting in concert with Jin Wenxian, leveraged the trading‑speed advantage obtained through unlawful means—including evading fund‑and position‑verification requirements imposed by the futures brokerage office—to execute a massive volume of trades totaling 3.7744 million contracts on the CSI 500 and SSE 300 stock index futures main contracts, thereby illegally profiting more than RMB 389.3 million. In addition, the defendant Jin Wenxian, taking advantage of his official position, misappropriated funds from Huaxin Futures amounting to over RMB 13.48 million.
II. Judgment Result
This case was tried in the first instance by the No. 1 Intermediate People’s Court of Shanghai and in the second instance by the Shanghai Higher People’s Court.
The court held that the acts of the defendant entity, Yishidun Company, and the defendants Jin Wenxian, Gao Yan, and Liang Zezhong all constituted the crime of manipulating the futures market, with particularly serious circumstances; moreover, Jin Wenxian’s conduct also amounted to the crime of embezzlement by a public official, and he should therefore be punished for multiple offenses in accordance with the law. In view of Yishidun Company’s admission of guilt and remorse, a lighter sentence may be imposed at the court’s discretion; Gao Yan and Liang Zezhong, having surrendered themselves and demonstrated remorse, are eligible for reduced punishment and probation; and Jin Wenxian, who has voluntarily surrendered himself with respect to both offenses, is likewise granted reduced punishment for each offense. Accordingly, Yishidun Company was sentenced to a fine of RMB 300 million for the crime of manipulating the futures market, with illicit gains totaling RMB 389.3 million to be recovered; Gao Yan was sentenced to three years’ imprisonment, suspended for four years, and fined RMB 1 million; Liang Zezhong was sentenced to two years and six months’ imprisonment, suspended for three years, and fined RMB 800,000; and Jin Wenxian was sentenced to five years’ imprisonment for the crime of manipulating the futures market and to a fine of RMB 600,000 for the crime of embezzlement by a public official.
III. Typical Significance
This case is a typical example of a new type of crime involving manipulation of the futures market, and neither the law nor relevant judicial interpretations provide explicit provisions governing the manipulative methods employed herein. In this case, the defendant entity, Yishidun Company, together with the defendant Jin Wenxian and others, violated applicable regulations by concealing their actual control over the Yishidun account group and the use of numerous accounts to engage in high-frequency algorithmic trading, thereby circumventing the China Financial Futures Exchange’s risk‑control oversight measures. They illegally interfaced their self‑developed order‑submission trading system with the Exchange’s trading platform and, leveraging a trading‑speed advantage obtained through unlawful means—such as evading fund‑and‑position verification requirements imposed by futures offices—engaged in large‑scale manipulation of stock index futures, thereby influencing futures prices or trading volumes. Such conduct satisfies all the constituent elements of the crime of manipulating the futures market. Yishidun Company’s manipulative behavior gravely undermined the fair‑trade order and principles of the stock index futures market; it is essentially equivalent to the manipulative practices of continuous trading and self‑dealing as defined in the Criminal Law, and may thus be classified as “manipulating the securities or futures markets by other means.” The proper adjudication of this case not only complies with the provisions of the Criminal Law but also aligns with the criminal policy of combining leniency with severity, thereby achieving unity between legal outcomes and social impact.
Case 8
The case of Yuanda Petrochemical Co., Ltd. and Wu Xiangdong manipulating the futures market—manipulating the futures market by means such as hoarding spot commodities to influence futures prices.
I. Basic Facts of the Case
The defendant, Yuanda Petrochemical Co., Ltd., at the direction of its then‑legal representative and chairman, the defendant Wu Xiangdong, convened a meeting and resolved, from May 24 to August 31, 2016, to leverage its de facto control over 18 accounts to convert its financial strength into position‑holding advantage by executing large, continuous market‑price purchases to establish long positions. Simultaneously, through direct purchases, agency procurement and nominee holding, as well as post‑sale repurchase arrangements, the company amassed substantial spot inventories of polypropylene, artificially creating an illusion of robust demand and thereby exerting a reverse influence on the futures market, thus manipulating the price of the PP1609 contract across both the futures and spot markets. The total illicit proceeds of Yuanda Petrochemical Co., Ltd. exceeded RMB 436 million; Wu Xiangdong’s illicit gains amounted to over RMB 4.87 million; and the other 11 accounts involved in the case collectively generated more than RMB 100 million in illicit proceeds. Following the discovery of the case, Yuanda Petrochemical Co., Ltd. proactively returned the illicit proceeds.
II. Judgment Result
This case was tried in the first instance by the Intermediate People’s Court of Fushun City, Liaoning Province, and in the second instance by the Higher People’s Court of Liaoning Province.
The court held that the defendant, Yuanda Petrochemical Co., Ltd., manipulated the futures market by hoarding spot commodities to influence futures price trends and other means, with particularly serious circumstances; such conduct constitutes the crime of manipulating the futures market. The defendant, Wu Xiangdong, as a directly responsible senior manager, likewise committed the crime of manipulating the futures market and should be punished in accordance with the law. In light of the fact that the defendant company actively cooperated with the investigation and promptly returned its illegal gains, a lighter sentence may be imposed. Furthermore, Wu Xiangdong truthfully confessed to his crimes, constituting voluntary admission of guilt, and is therefore eligible for a lighter punishment under the law. Accordingly, Yuanda Petrochemical Co., Ltd. was sentenced to a fine of RMB 300 million for the crime of manipulating the futures market, and Wu Xiangdong was sentenced to five years’ imprisonment and fined RMB 5 million. Additionally, the illicit proceeds of Yuanda Petrochemical Co., Ltd., totaling over RMB 400 million, were ordered to be recovered, as were Wu Xiangdong’s illicit proceeds amounting to more than RMB 4.8 million; the illicit proceeds associated with the remaining 11 accounts involved in the case will continue to be pursued.
III. Typical Significance
This case is a typical example of criminal manipulation of the futures market, carried out through methods such as hoarding spot commodities to influence futures prices. Article 182, Paragraph 1 of the Criminal Law enumerates several common methods of manipulating securities and futures markets, while Article 1 of the “Interpretation by the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues Concerning the Application of Law in Handling Criminal Cases of Manipulating Securities and Futures Markets” specifies seven additional methods; “manipulation across the futures and spot markets” is one of them. In this case, the defendant entity employed various means—including direct procurement, agency purchasing and nominee holding, and after‑sale repurchase—to accumulate substantial spot positions, thereby influencing futures price trends, which constitutes “manipulation across the futures and spot markets.” Furthermore, the defendant entity leveraged multiple futures accounts under its actual control, pooling financial resources to engage in continuous trading of futures contracts and manipulate their prices, generating illicit proceeds amounting to hundreds of millions of yuan—circumstances that warrant classification as “particularly serious.” Based on the facts, nature, circumstances, and social harm of the offense, the court rendered lawful convictions and penalties against both the defendant entity and the individual defendants, with full legal basis. The proper adjudication of this case serves as an important cautionary lesson, helping to strengthen the rule-of-law awareness of all market participants and investors, and to regulate and safeguard the order of the capital market. All market participants and the broader investing public must respect the market and uphold the rule of law, jointly upholding the regulatory order of the securities and futures markets and protecting the legitimate rights and interests of investors, thereby promoting the healthy and stable development of the national capital market.
Case 9
Yuan Gangzhi Money Laundering Case — Underground Banks Committing Money-Laundering Crimes
I. Basic Facts of the Case
The defendant, Yuan Gangzhi, engaged in the unauthorized operation of foreign‑exchange‑conversion services without approval from the relevant state authorities. He marked up the exchange rates quoted by upstream clients and conducted fund conversions with downstream clients, charging additional fees to pocket the resulting profit margin. Between May 2018 and May 2020, despite knowing that Zeng Moumou and others (being prosecuted separately) were involved in smuggling offenses, Yuan Gangzhi repeatedly assisted them in converting RMB into U.S. dollars. After agreeing on exchange rates and transaction amounts via a WeChat group, Yuan Gangzhi received RMB transfers into bank accounts under his control; after deducting his own commission, he remitted the remaining funds to bank accounts designated by his upstream clients. Upon receiving these transfers, the upstream clients used Hong Kong‑based bank accounts to wire the illegally converted U.S. dollars to collection accounts in Hong Kong provided by Zeng Moumou and others. Investigation and verification have established that Yuan Gangzhi facilitated the illegal conversion of foreign currency for Zeng Moumou and others and arranged for the transfer of such funds overseas, totaling approximately RMB 170 million.
II. Judgment Result
This case was tried in the first instance by the No. 1 People’s Court of Dongguan City, Guangdong Province, and on appeal by the Intermediate People’s Court of Dongguan City, Guangdong Province.
The court held that the defendant, Yuan Gangzhi, knowingly assisted in transferring funds overseas to conceal and disguise the source and nature of proceeds derived from smuggling offenses, constituting a serious offense. His conduct thus constitutes the crime of money laundering and is subject to punishment in accordance with the law. Accordingly, Yuan Gangzhi was sentenced to six years’ imprisonment and fined RMB 1 million for the crime of money laundering.
III. Typical Significance
This case is a typical example of money laundering committed by an underground banking network. In recent years, amid shifting domestic and international economic conditions, the internationalization of terrorist crimes, the rise in smuggling and cross-border drug offenses, and China’s intensified crackdown on corruption and bribery, criminal cases involving underground banks have continued to increase. Underground banks have become the primary conduit for illicit actors to engage in money laundering and the transfer of funds; they are not only implicated in economic and financial crimes but are increasingly used as channels for funneling illicit proceeds from telecom fraud, online gambling, and other criminal activities. They have thus turned into “money‑laundering tools” and accomplices for corrupt officials and terrorist organizations, seriously undermining market order and posing grave threats to national economic and financial security as well as social stability—acts that must be severely punished in accordance with the law. In this case, the operator of the underground bank was held criminally liable for money laundering, fully demonstrating the authorities’ resolute stance against money‑laundering offenses linked to such networks and enhancing the effectiveness of efforts to dismantle their financial infrastructure and cut off their sources of funding.
Case 10
Zhou Zhangcheng Money-Laundering Case — Cross-Border Transfer of Embezzled Public Funds Constituting Money-Laundering Offense
I. Basic Facts of the Case
Between January 2015 and November 2018, co-defendant Ni Leju (already sentenced) instigated her sister, Ni Leping (being prosecuted separately), to exploit her official position and systematically embezzle substantial public funds from the Management Committee of the Industrial Park in Qingyuan County, Lishui City, Zhejiang Province, as well as from its subordinate state-owned enterprises. During this period, defendant Zhou Zhangcheng, fully aware that the funds Ni Leju used for gambling were public monies, nevertheless assisted her by providing his own bank account or arranging for casinos and underground money‑laundering networks to supply bank accounts, thereby facilitating the transfer of public funds misappropriated by Ni Leping from within China to overseas destinations, totaling over RMB 87.82 million. In addition, Zhou Zhangcheng earned commissions exceeding RMB 700,000 by “laundering chips” for Ni Leju at casinos.
II. Judgment Result
This case was tried in the first instance by the Intermediate People’s Court of Lishui City, Zhejiang Province, and on appeal by the Higher People’s Court of Zhejiang Province.
The court held that the defendant, Zhou Zhangcheng, knowingly assisted in transferring public funds overseas despite being aware that the funds were proceeds of embezzlement, and that the circumstances were serious, thus constituting the crime of money laundering. The “commission” obtained by Zhou Zhangcheng for “laundering chips” on behalf of Ni Leju at a casino constituted illegal proceeds and shall be confiscated or ordered to be returned. Accordingly, in accordance with the law, the defendant, Zhou Zhangcheng, was sentenced to eight years’ imprisonment for the crime of money laundering and fined RMB 9 million. The defendant’s illegal proceeds have been confiscated, and any shortfall has been ordered to be further reimbursed.
III. Typical Significance
This case is a typical example of money laundering committed through the cross-border transfer of embezzled public funds via underground banking networks. The defendant, Zhou Zhangcheng, knowingly provided his bank account opened at a Macau casino to Ni Leju, who was using funds derived from public embezzlement for gambling, in order to obtain illegal profits. Subsequently, by either offering his own bank account or coordinating with casinos and underground banks to supply bank accounts, he assisted Ni Leju in receiving public funds that had been misappropriated by Ni Leping and transferred overseas, while also reconciling accounts with the casinos to conoffice the transfers, thereby completing the cross-border movement of these illicit funds. When handling upstream crimes that give rise to money‑laundering offenses, the focus should be on “tracing the flow of funds,” thoroughly uncovering leads related to money‑laundering activities, and pursuing such offenses in parallel. It is essential to implement the “dual investigation” mechanism for each case, ensuring that both the money‑laundering offense and its underlying upstream crime are prosecuted in accordance with the law. During the course of this case, it was discovered that substantial sums of illicit proceeds had been routed overseas. Accordingly, the authorities adhered to the “dual investigation” approach, conducting an exhaustive probe into the money‑laundering schemes concealed behind official misconduct, and imposing strict legal penalties. This approach fully embodies the spirit of rigorously combating money‑laundering crimes; it not only contributes positively to maintaining a sound economic and financial order but also effectively dismantles the profit chains underlying corruption and bribery, thereby helping to curb the occurrence of such upstream offenses.
A young woman died after being bitten by a venomous snake she had purchased online—so who should be held responsible?
The family sought nearly 1.72 million yuan in damages, but the court ruled that the girl herself bore 80% of the responsibility, with the six defendants—including the seller, the secondhand platform, and the courier company—ordered to pay just over 330,000 yuan.
A 21-year-old woman purchased two highly venomous silver-ringed snakes online through a secondhand trading platform and tragically died after being bitten. Her parents have filed a lawsuit against six defendants—the seller, the platform, and the delivery company—seeking compensation exceeding 1.72 million yuan. The case is complex: in addition to involving six defendants, it remains unclear which specific silver-ringed snake inflicted the bite. Accordingly, how will the court determine and allocate liability among the parties?
Recently, the Haidian District People’s Court of Beijing released the judgment in this case. The 37-page ruling provides a detailed analysis of the legal issues at stake, and the court ultimately held that the girl who purchased the snake bears 80% of the responsibility for her own damages, while the six defendants are jointly liable for compensating more than RMB 330,000 on a proportional basis.
The “fourth deadliest snake” in online shopping: a 21-year-old woman died days after being bitten.
In June and July 2018, Yang Ling, a 21-year-old woman from Shaanxi, spent a total of 225 yuan to purchase two silver-ringed snakes from Shao on a secondhand trading platform, making two separate transactions. Shao did not ship the snakes directly; instead, upon receiving each order, he contacted Yang via WeChat, paid her 70 yuan and 80 yuan respectively, and instructed her to mail the snakes to Yang’s address. Yang shipped the first snake by courier, while for the second she reached out to Wang, who arranged for it to be sent through a different delivery service.
The banded krait is a “three‑category” protected wild animal in China, though it is not listed as a nationally key protected species. It possesses extremely potent venom and ranks fourth among the most venomous terrestrial snakes. When posting a sale listing on the platform, Shao added phrases such as “not detoxified” and “super‑toxic” to the title and issued a warning to Yang Ling.
However, an accident still occurred. On July 9, 2018, Yang Ling was bitten on the index finger of her left hand by a silver-ringed snake. That afternoon, she told her mother over the phone that she had been bitten by a snake in the park, but she did not specify the species. Her mother took Yang Ling to the hospital for treatment. Despite receiving antivenom for the silver-ringed snake, her condition was beyond saving, and she tragically passed away on July 15.
A peculiar aspect of this case is that Yang Ling purchased two silver-ringed snakes in succession, yet the evidence presented by all parties fails to establish which of the two snakes inflicted the fatal bite.
Accordingly, Yang Ling’s parents brought a lawsuit against Shao, Yang, Wang, the secondhand trading platform, and two courier companies before the Haidian District People’s Court, seeking joint and several compensation from all six defendants totaling over RMB 1.72 million, covering medical expenses, death compensation, and damages for emotional distress.
The six defendants argued that Yang Ling voluntarily purchased the banded krait and should have foreseen the risks associated with keeping venomous snakes, thereby assuming responsibility on her own. Furthermore, they contended that, following the bite, she concealed the facts and delayed seeking treatment, which exacerbated the resulting harm.
What liability should the six defendants bear? The court has made the following determination.
So, is there a legal causal relationship between the conduct of the six defendants in this case and the death of Yang Ling? The judgment in this case analyzes the matter from two perspectives: the collective trading conduct of the six defendants and their individual actions.
From the perspective of overall transactional conduct, the court held that, applying the “but for” standard, it can be presumed that both sets of actions undertaken by the six defendants bear a causal relationship to the harm suffered by Yang Ling. The court further stated that, to rebut this presumption of causation, the party seeking to do so must shoulder the burden of proving that “the other set of actions was the sole cause of Yang Ling’s harm.”
From the perspective of individual conduct, Shao and two others engaged in the sale and mailing of banded krait snakes, thereby constituting the providers of the hazard; the secondhand trading platform furnished an online marketplace and related services for such transactions; and two courier companies accepted, transported, and delivered parcels containing banded krait snakes. The court held that, absent each defendant’s respective actions, the outcome of delivering the banded krait snakes to Yang Ling would not have occurred.
The judgment further states that the six defendants’ unlawful acts—providing online trading services for silver-ringed snakes, as well as selling, mailing, transporting, and delivering such snakes—all involved negligence and thus each bears tort liability.
Court: The girl’s own conduct was the primary cause of the harm, and she bears the principal responsibility.
With regard to the allocation of liability among the six defendants, the court held that their conduct met the criteria of “indirect concurrence of acts resulting in the same harm,” and thus each defendant should bear corresponding compensation liability in proportion to the degree of fault or the relative causal contribution. At the same time, considering that Yang Ling proactively contacted Shao to place an order for a banded krait, that Shao had clearly explained the snake’s dangers and advised taking appropriate protective measures, and that Yang Ling failed to seek immediate medical attention after being bitten and did not truthfully disclose the circumstances, the court determined that Yang Ling’s own conduct was the primary cause of her injury and assigned her 80% of the liability.
Based on factors such as the respective defendants’ positions in the transaction chain and the roles they played, the court held that Shao, Yang, and Wang each bear joint and several liability for 15% of the infringement, while noting that Wang’s share of liability should be lower than that of the other two. The secondhand‑goods platform was assigned 2% of the liability, and each of the two courier companies was assigned 1.5%. After calculation, the total compensable losses in this case amounted to over RMB 1.68 million, and the court ultimately ordered the six defendants to compensate for these losses in proportion to their respective shares of liability.
Attorney: Each defendant engaged in unlawful conduct and, therefore, must bear partial liability.
Some netizens argue that buying venomous snakes is tantamount to knowingly taking on risk—so why should the seller, the platform, and the courier also bear a share of the responsibility?
Attorney Xu Xudong of Jiangsu Yicheng Law Office stated that this civil tort dispute involves highly complex legal principles; in essence, the seller, the platform, and the courier all engaged in unlawful conduct and must each bear liability in proportion to their respective degrees of fault.
Xu Xudong stated that, according to the judgment, the court found that the seller of the banded krait in this case violated the Wildlife Protection Law and relevant civil laws; accordingly, in addition to administrative penalties, the seller must also bear civil liability for the buyer’s death. The platform, by failing to rigorously review illegal transactions and exercising inadequate oversight, contravened both the E‑Commerce Law and the Wildlife Protection Law. Meanwhile, the courier company was at fault in its inspection and acceptance procedures, having shipped a highly toxic live animal—thus violating the Postal Law and the Provisional Regulations on Express Delivery. Consequently, both the platform and the courier company clearly infringed upon administrative and civil law, and must therefore assume both types of legal liability, which are not mutually substitutable. (All parties mentioned in this article are pseudonyms.)

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