JC Master Legal News Issue 801

Key Takeaways for This Issue

The National Equities Exchange and Quotations Company has issued the “Administrative Measures for the Tiered Management of Listed Companies on the National SME Share Transfer System” and the “Detailed Rules for Stock Trading on the National SME Share Transfer System.”
On December 22, 2017, the National Equities Exchange and Quotations Company issued the “Administrative Measures for the Tiered Management of Listed Companies on the National SME Share Transfer System” and the “Detailed Rules for Stock Trading on the National SME Share Transfer System,” along with the “Detailed Rules for Information Disclosure by Listed Companies on the National SME Share Transfer System.” These measures marked a crucial step in deepening the reform of the New Third Board.
Central Economic Work Conference: High-Quality Development, Risk Prevention, and Pollution Control
Recently, the Central Economic Work Conference concluded successfully. The conference set out the key development goals and policy guidelines for 2018. While reafofficeing the overarching principle of “seeking progress while maintaining stability,” it shifted the focus to “high-quality development.”
The State Taxation Administration has issued the “Announcement on Several Matters Concerning the Administration of Value-Added Tax Invoices.”
On December 18, 2017, the State Taxation Administration issued the “Announcement on Several Matters Concerning the Administration of Value-Added Tax Invoices.” Effective January 1, 2018, when taxpayers issue value-added tax invoices through the new VAT invoice management system, the abbreviated codes corresponding to the commodity and service tax classification will be automatically displayed and printed in the “Name of Goods or Taxable Labor Services” or “Item” field on the invoice.
The draft amendment to the Judges Law has been submitted to the 31st Meeting of the Standing Committee of the 12th National People’s Congress for deliberation.
On December 13, 2017, the Supreme People’s Court issued the “Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Medical Damage Liability Dispute Cases.” The Interpretation comprises twenty-six articles, divided into six sections: scope of application, determination of the legal capacity of the parties, burden of proof, expert appraisal procedures, liability, and supplementary provisions.
The General Office of the CPC Central Committee and the General Office of the State Council have issued the “Reform Plan for the System of Compensation for Ecological and Environmental Damage.”
Recently, the General Office of the CPC Central Committee and the General Office of the State Council issued the “Reform Plan for the Ecological and Environmental Damage Compensation System,” stipulating that, effective January 1, 2018, a pilot program for the ecological and environmental damage compensation system will be implemented nationwide.

Table of Contents
Table of Contents

Finance & Capital Markets

The National Equities Exchange and Quotations Company has issued the “Administrative Measures for the Tiered Management of Listed Companies on the National SME Share Transfer System” and the “Detailed Rules for Stock Trading on the National SME Share Transfer System.”
The National Equities Exchange and Quotations Company has issued the “Detailed Rules on Information Disclosure for Companies Listed on the National SME Share Transfer System.”
The China Banking Regulatory Commission has issued the “Notice on Regulating Bank‑Trust Business.”
The National Development and Reform Commission has released the “Plan for Building the National Carbon Emissions Trading Market (Power Generation Sector).”
The new edition of the “Guidelines for Registration of Private Fund Managers” is now online.

Corporate & Commercial

Central Economic Work Conference: High-Quality Development, Risk Prevention, and Pollution Control
The Ministry of Human Resources and Social Security and the Ministry of Finance recently jointly issued the “Measures on Enterprise Annuities.”
The National Development and Reform Commission has issued the “Notice on the Pricing Policy for Photovoltaic Power Generation Projects in 2018.”
The National Development and Reform Commission and the Ministry of Water Resources have issued the “Operational Guidelines for Public-Private Partnership Projects in the Construction of Major Water Conservancy Projects (Trial).”
The National Development and Reform Commission, together with the Ministry of Commerce and three other departments, has issued the “Code of Conduct for Overseas Investment and Operations by Private Enterprises.”

Taxation

The State Taxation Administration has issued the “Announcement on Several Matters Concerning the Administration of Value-Added Tax Invoices.”
The State Taxation Administration has established special commissioner offices in Guangzhou and Chongqing.

Litigation & Arbitration

The draft amendment to the Judges Law has been submitted to the 31st Meeting of the Standing Committee of the 12th National People’s Congress for deliberation.
The second-instance trial of the Xintai Electric fraud‑in‑issuance case has commenced.

Other

The General Office of the CPC Central Committee and the General Office of the State Council have issued the “Reform Plan for the System of Compensation for Ecological and Environmental Damage.”
Several officials in Jiangsu and Guizhou have been disciplined for illegally incurring debt.

Finance & Capital Markets

The National Equities Exchange and Quotations Company has issued the “Administrative Measures for the Tiered Management of Listed Companies on the National SME Share Transfer System” and the “Detailed Rules for Stock Trading on the National SME Share Transfer System.”
On December 22, 2017, the National Equities Exchange and Quotations Company issued the “Administrative Measures for the Tiered Management of Listed Companies on the National SME Share Transfer System” and the “Detailed Rules for Stock Trading on the National SME Share Transfer System,” marking a crucial step in deepening the reform of the New Third Board.
This round of the tiered system reform primarily encompasses the following three key aspects: First, in the differentiated eligibility criteria for the Innovation Tier, the net profit threshold has been lowered, the revenue threshold has been raised, and a new trading‑market‑capitalization criterion has been introduced; second, among the common eligibility requirements for the Innovation Tier, a minimum number of qualified investors has been added; and third, the maintenance criteria for the Innovation Tier have been revised to focus mainly on legal compliance and basic financial requirements. In addition, the National Equities Exchange and Quotations Company has clarified several operational issues that previously generated significant inquiries from market participants during the tier‑adjustment process, such as the timing for initiating tier adjustments and the specific calculation methodologies for certain tier‑criteria.
The reform of the trading system reflects a clear problem‑oriented approach, aiming to address issues such as unfair pricing, lack of market acceptance, and regulatory challenges associated with the current negotiated transfer mechanism. It seeks to enhance the price‑discovery function of the New Third Board and lay the groundwork for sustained improvements in market liquidity, primarily through measures including the introduction of call auctions, the optimization of negotiated transfers, and the consolidation of market‑maker‑based trading.
First, a call auction mechanism has been introduced. Stock trading that previously relied on negotiated transfers will now be uniformly switched to call auctions during market hours, with traders able to choose between call auctions and market‑making transfers at their discretion. In tandem with the market tiering system, differentiated matching frequencies will apply to stocks traded via call auctions: the Basic Tier will feature one call auction at the daily closing session, while the Innovation Tier will conduct one call auction per hour, for a total of five sessions each day. Second, negotiated transfers have been optimized. To accommodate reasonable negotiated‑transfer needs of market participants, this round of trading‑system reforms introduces two new mechanisms—after‑hours negotiated transfers and negotiated transfers for specific matters. Negotiated transfers meeting certain thresholds for quantity, value, and price may be submitted through the trading system during regular trading hours and settled after the close; meanwhile, legitimate special transfer scenarios—such as acquisitions, performance‑based covenants, or transfers among entities under the same de facto controller—can be handled offline by applying for “negotiated transfers for specific matters.” Third, market‑making transfers have been consolidated and appropriately refined. Market‑making remains the preferred and encouraged trading method; while the mechanism for determining the closing price in market‑making transactions is being improved, the negotiated‑transfer framework will also extend to market‑making‑eligible listed stocks.

The National Equities Exchange and Quotations Company has issued the “Detailed Rules on Information Disclosure for Companies Listed on the National SME Share Transfer System.”
On December 22, 2017, the National Equities Exchange and Quotations Company issued the “Detailed Rules on Information Disclosure for Companies Listed on the National SME Share Transfer System.” This reform of the information disclosure regime is primarily aimed at achieving differentiated disclosure requirements across the market’s various tiers. Companies in the Innovation Layer have a larger number of shareholders and higher-frequency trade matching, resulting in a greater degree of public exposure; accordingly, their disclosure obligations are appropriately strengthened. By contrast, the disclosure intensity for companies in the Basic Layer remains largely unchanged.
There are several distinct requirements for information disclosure by companies in the Innovation Layer: First, the frequency of disclosure is increased; in addition to the existing obligations to file annual and semi‑annual reports, quarterly reports are now also required, while these requirements remain unchanged for companies in the Basic Layer. Second, the Innovation Layer introduces new mechanisms for “preliminary earnings releases” and “earnings forecasts.” If a company’s annual report is filed late or if there are significant fluctuations in its annual net profit, it must issue corresponding preliminary earnings releases and earnings forecasts to ensure timely disclosure. Third, stricter audit standards apply: Innovation‑Layer companies must comply with the provisions of Auditing Standard No. 1504—Communicating Key Audit Matters in the Auditor’s Report—and certified public accountants are required to rotate on a regular basis. Fourth, industry‑specific disclosure is mandated for Innovation‑Layer companies, requiring them to disclose revenue breakdowns by product and service, industry conditions, and developments in regulatory policies, thereby enhancing the relevance and specificity of their disclosures. Fifth, Innovation‑Layer companies are required to appoint a board secretary and establish an admission‑and‑qualification assessment system for such positions, aiming to raise the professional competence of those responsible for information disclosure and reduce errors arising from lack of knowledge.

The China Banking Regulatory Commission has issued the “Notice on Regulating Bank‑Trust Business.”
On December 22, 2017, the China Banking Regulatory Commission issued the “Notice on Regulating Bank‑Trust Business” (hereinafter referred to as the “Notice”), which sets forth regulatory requirements for bank‑trust business.
The Notice comprises 10 provisions and covers four main areas: First, it clarifies the definitions of bank‑trust business and bank‑trust channel business. Specifically, it brings both on‑ and off‑balance‑sheet funds and beneficial rights under the purview of bank‑trust business, and, on this basis, defines bank‑trust channel business. Second, it regulates the conduct of commercial banks in bank‑trust transactions. The Notice requires banks, in such transactions, to apply the principle of substance over form, incorporate the look‑through approach into their regulatory requirements, and restore the true economic substance of bank‑trust channel business. Third, it sets out standards for the conduct of trust companies in bank‑trust business. The Notice lays out specific requirements for trust companies, addressing both the transformation of their development model and the fulfillment of their fiduciary duties. Fourth, it strengthens oversight of bank‑trust business. The Notice stipulates that the China Banking Regulatory Commission and its local branches shall enhance supervision of such business and, in accordance with the law, impose regulatory measures—including requiring additional capital and provisions based on the actual nature of the business and imposing administrative penalties—for violations.
The Notice sets forth three key new requirements: First, new requirements for commercial banks in bank‑trust business, which primarily include implementing a whitelist system for trust companies, prudently selecting counterparties based on their risk‑management capabilities and professional investment expertise, and other related measures. Second, new requirements for trust companies in bank‑trust business, which mainly stipulate that they may not accept direct or indirect guarantees from the entrusting bank, may not enter into side agreements with the entrusting bank, may not provide conduit services to help the entrusting bank circumvent regulatory requirements or enable third parties to engage in illegal or non‑compliant activities, and may not improperly channel trust funds into restricted or prohibited sectors such as real estate, local government financing platforms, the stock market, or industries suffering from overcapacity. Third, the Notice raises the regulatory standards for bank‑trust business, stating that the China Banking Regulatory Commission will further study and clarify measures to strengthen oversight of trust companies’ conduit‑type business.

The National Development and Reform Commission has released the “Plan for Building the National Carbon Emissions Trading Market (Power Generation Sector).”
On December 18, 2017, the National Development and Reform Commission issued the “Plan for Building the National Carbon Emissions Trading Market (Power Generation Sector)” (hereinafter referred to as the “Plan”).
The “Plan” is a key guiding document for the development of the national carbon market, and its issuance marks the official launch of the national carbon emissions trading system. It is essential to uphold the carbon market’s role as a policy tool for controlling greenhouse gas emissions, adhere to the principle of advancing steadily while seeking progress, and initiate the national carbon emissions trading system by prioritizing the power generation sector. The construction of the carbon market should proceed in phases and steps, gradually expanding both the scope of participating industries and the range of trading entities, while introducing additional trading products. Ultimately, this will lead to the establishment of a carbon market characterized by clear ownership, robust protection, smooth circulation, effective regulation, and openness and transparency.
The Plan identifies three key market elements, as follows: First, trading entities. Initially, trading will be limited to key emitting entities in the power generation sector; once conditions are ripe, participation will be expanded to other high‑energy‑consumption, high‑pollution, and resource‑intensive industries. Over time, additional institutions and individuals that meet the trading rules will be permitted to participate. Second, trading products. In the initial phase, the primary product will be spot allowances; as conditions mature, nationally certified voluntary emission reductions and other eligible trading products will be added. Third, the trading platform. A nationwide, unified, interconnected, and strictly regulated carbon‑emission‑rights trading system will be established and integrated into the national public‑resource‑trading platform framework.
At the same time, the Plan also outlines the establishment of three institutional frameworks: a system for monitoring, reporting, and verifying carbon emissions; a quota management system for key emitting entities; and systems related to market trading.

The new edition of the “Guidelines for Registration of Private Fund Managers” is now online.
On December 22, 2017, the revised “Notice on Registration of Private Fund Managers” was launched on the Comprehensive Management Platform for Asset Management Business. The new version adds the following provisions: 1) It reiterates the six circumstances under which a private fund manager will not be registered, as specified in “Answers to Relevant Questions on Private Fund Registration and Filing (No. 14)”; 2) It once again emphasizes the “mechanism for publicly disclosing information on institutions that have been denied registration, along with the law offices and lawyers involved,” as outlined in “Answers to Relevant Questions on Private Fund Registration and Filing (No. 14)”; 3) It further underscores the importance of maintaining a stable organizational structure and management team for private fund managers; and 4) It requires private fund managers that have completed registration to contact the relevant private‑fund supervision division of the local securities regulatory bureau under the China Securities Regulatory Commission (CSRC) where they are registered within ten business days.

Commercial & Corporate

Central Economic Work Conference: High-Quality Development, Risk Prevention, and Pollution Control
Recently, the Central Economic Work Conference concluded successfully. The conference set forth the key development goals and policy guidelines for 2018. While reafofficeing the overarching principle of “seeking progress while maintaining stability,” it shifted the focus to “high-quality development.” Consistent with the policy orientation adopted at the 19th National Congress, the conference also underscored that, over the next three years, priority will be given to winning three critical battles: preventing and defusing major risks, eradicating poverty in a targeted manner, and tackling pollution.
The Central Economic Work Conference primarily clarified the following five key areas: First, it underscored the historic achievements and transformative changes of the past five years; second, it formally introduced Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era; third, it emphasized that promoting high-quality development is the fundamental requirement for economic development both now and in the period ahead; fourth, it identified three critical battles to be won over the next three years in order to secure a decisive victory in building a moderately prosperous society in all respects—namely, winning the battle to prevent and defuse major risks, winning the battle against poverty through targeted measures, and winning the battle to protect the environment; and fifth, it set out the overarching principles guiding next year’s economic work, which include deepening supply-side structural reform, invigorating all types of market entities, implementing the rural revitalization strategy, advancing the regional coordinated development strategy, fostering a new pattern of comprehensive opening-up, raising and safeguarding living standards, accelerating the establishment of a housing system featuring multiple providers, diversified channels of保障, and a combination of renting and purchasing, and speeding up ecological progress.

The Ministry of Human Resources and Social Security and the Ministry of Finance have jointly issued the “Measures on Enterprise Annuities.”
Recently, the Ministry of Human Resources and Social Security and the Ministry of Finance jointly issued the Measures on Enterprise Annuities. Enterprise annuities are supplementary pension schemes voluntarily established by enterprises and their employees through collective bargaining, on the basis of their lawful participation in the basic old-age insurance system. They constitute an important component of the second pillar within China’s multi-tiered old-age insurance system.
The Measures on Enterprise Annuities primarily apply to enterprises and their employees. It should be noted that, following years of reform and development, the basic old-age insurance for enterprise employees now covers urban enterprises and their employees, social organizations and their full-time staff, as well as non‑establishment personnel in government agencies and public institutions. The Measures stipulate that other employers participating in the basic old-age insurance for enterprise employees, together with their employees, may establish supplementary pension schemes in accordance with these Measures.
The costs of enterprise annuities are jointly borne by the employer and the individual employee. The employer’s annual contribution shall not exceed 8% of the total wages of the enterprise’s employees, and the combined contributions of the employer and the employee shall not exceed 12% of the total wages of the enterprise’s employees. The specific allocation of these costs shall be determined through consultation between the employer and the employees.
Enterprise annuities are funded on a fully accumulated basis, with an individual enterprise annuity account established for each participating employee. Each employee’s enterprise annuity account comprises a corporate contribution sub‑account and an individual contribution sub‑account, which respectively record the portion of employer contributions allocated to the individual and the associated investment income, as well as the employee’s own contributions and their investment returns. The enterprise annuity fund is invested and managed in accordance with relevant state regulations, and any investment income is incorporated into the enterprise annuity fund.
Enterprise annuities are governed by the principles of trust law. Following the filing of an enterprise annuity plan, both the employer and the employees—collectively referred to as the settlors—shall designate an enterprise annuity trustee, which may be a corporate trustee institution meeting national requirements or an enterprise annuity council established in accordance with state regulations. The employer, acting on behalf of the settlors, shall then enter into a trust management agreement with the trustee. Upon execution of the trust management agreement, the trustee shall appoint account administrators, investment managers, and custodians who possess the requisite qualifications for managing enterprise annuities, thereby assuming responsibility for the administration of annuity accounts, investment operations, and custody. In accordance with state‑mandated divisions of labor, the fund managers of enterprise annuities collaborate to ensure the lawful and compliant operation of the enterprise annuity fund, while striving to preserve and enhance its value.

The National Development and Reform Commission has issued the “Notice on the Pricing Policy for Photovoltaic Power Generation Projects in 2018.”
On December 19, 2017, the National Development and Reform Commission issued the “Notice on the 2018 Photovoltaic Power Generation Pricing Policy” (hereinafter referred to as the “Notice”). The Notice stipulated reductions in the 2018 grid‑connected electricity prices for photovoltaic projects; however, it kept the feed-in tariff for poverty‑alleviation photovoltaic projects unchanged, thereby demonstrating support for this sector.
Based on current advances in photovoltaic technology and reductions in costs, the benchmark grid‑connected electricity prices for photovoltaic power plants commissioned after January 1, 2018, will be lowered. The benchmark rates for resource zones I, II, and III will be adjusted to RMB 0.55, RMB 0.65, and RMB 0.75 per kilowatt-hour, respectively (inclusive of tax). Starting in 2019, all photovoltaic projects subject to annual fiscal subsidy quota management will be allocated the corresponding benchmark tariff according to their commissioning date. For distributed photovoltaic projects commissioned after January 1, 2018, operating under the “self‑generation and self‑consumption with surplus fed to the grid” model, the per‑kilowatt‑hour subsidy will be reduced by RMB 0.05, bringing the subsidy rate to RMB 0.37 per kilowatt-hour (inclusive of tax). Distributed photovoltaic projects adopting the “full‑feed‑to‑the‑grid” model will be charged at the tariff applicable to photovoltaic power plants in their respective resource zones. Furthermore, the self‑consumed electricity from distributed photovoltaic projects will be exempt from all government‑levied funds and surcharges, system reserve capacity fees, and other related grid‑connection service charges. The benchmark tariff for village‑level photovoltaic poverty‑alleviation power stations (0.5 MW and below) and the per‑kilowatt‑hour subsidy rate for household‑scale distributed photovoltaic poverty‑alleviation projects will remain unchanged.
At the same time, local authorities are encouraged to carry out pilot programs—consistent with relevant national regulations—on distributed‑generation pricing reforms and market‑based tendering for photovoltaic power consumption on a local basis, thereby gradually refining mechanisms for price discovery through market forces.

The National Development and Reform Commission and the Ministry of Water Resources have issued the “Operational Guidelines for Public-Private Partnership Projects in the Construction of Major Water Conservancy Projects (Trial).”
On December 18, the National Development and Reform Commission and the Ministry of Water Resources jointly issued the “Operational Guidelines for Government–Social Capital Partnerships in the Construction of Major Water Conservancy Projects (Trial)” (hereinafter referred to as the “Guidelines”). The document sets forth a series of standards to further regulate the participation of social capital in the construction and operation of major water conservancy projects. Comprising six chapters and 29 articles, the Guidelines outline specific requirements for the implementation procedures of major water‑conservancy PPP projects, covering such aspects as project pipeline management, feasibility studies, selection of social capital partners, and project execution. The Guidelines clarify that major water‑conservancy projects constructed and operated under the PPP model—including key water‑source projects, large‑scale water diversion and transfer projects, large irrigation districts, and backbone projects for the management of rivers, lakes, and reservoirs—are eligible. Except in special circumstances, all water‑conservancy construction and operation activities shall be open to social capital, with priority generally given to social capital’s involvement in both construction and operation.
At the same time, the Guidelines stipulate that projects with a cooperation period of less than 10 years and no cash flow, or those that engage in illegal or non-compliant financing—such as through minimum‑guarantee commitments or buyback arrangements—or that effectively incur debt in disguised forms, shall not be included in the PPP project database.

The National Development and Reform Commission, together with the Ministry of Commerce and three other departments, has issued the “Code of Conduct for Overseas Investment and Operations by Private Enterprises.”
Recently, the National Development and Reform Commission, together with the Ministry of Commerce and three other departments, issued the “Code of Conduct for Overseas Investment and Operations by Private Enterprises” (hereinafter referred to as the “Code”). The Code explicitly states that the state supports qualified private enterprises in “going global,” treating them on an equal footing with state-owned enterprises in this regard. On this basis, the Code provides guidance and regulation for private enterprises’ overseas investment and operational activities across five key areas: First, improving the management system—private enterprises are required to establish and refine internal rules and procedures covering overseas investment decision-making, authorization management, financial management, and other functions; second, operating in compliance with laws, regulations, and with integrity—private enterprises and their overseas subsidiaries must diligently fulfill all relevant domestic and international formalities, engage in fair competition, and conduct business with integrity; third, earnestly fulfilling social responsibilities—private enterprises are encouraged to actively support public welfare initiatives, promote cultural exchanges, and cultivate a positive corporate image that serves society during overseas investments; fourth, prioritizing resource conservation and environmental protection—private enterprises are urged to enhance awareness of resource efficiency and environmental stewardship, comply with the host country’s environmental regulations, and fulfill their environmental obligations and related legal duties; and fifth, strengthening risk prevention and control abroad—private enterprises should reinforce comprehensive risk management, establish robust emergency response mechanisms, improve overseas security safeguards, and ensure proper handling of safety incidents.

Taxation TAXATATION

The State Taxation Administration has issued the “Announcement on Several Matters Concerning the Administration of Value-Added Tax Invoices.”
On December 18, 2017, the State Taxation Administration issued the “Announcement on Several Matters Concerning the Administration of Value-Added Tax Invoices.” Effective January 1, 2018, when taxpayers issue value-added tax invoices—including special VAT invoices, ordinary VAT invoices, and electronic ordinary VAT invoices—through the new VAT invoice management system, the abbreviated codes corresponding to the commodity and service tax classification will be automatically displayed and printed in the “Name of Goods or Taxable Labor Services” or “Item” field on the invoice.
Effective February 1, 2018, small-scale VAT taxpayers in the industrial sector and in the information transmission, software, and information technology services sectors—hereinafter referred to as “pilot taxpayers”—whose monthly sales exceed RMB 30,000 (or whose quarterly sales exceed RMB 90,000) and who are required to issue special VAT invoices for taxable transactions may do so themselves through the new VAT invoice management system. If such pilot taxpayers sell real estate they have acquired and are required to issue special VAT invoices, they shall, in accordance with relevant regulations, apply to the local tax authorities for agency issuance. Pilot taxpayers must declare and remit the VAT corresponding to the special VAT invoices they have issued to the competent tax authority within the prescribed tax filing period. When completing the VAT return, the sales amount reported on the special VAT invoices issued during the current period shall be entered, at the applicable rates of 3% and 5%, respectively, in the “Current Period Amount” columns under “Sales Amount Excluding Tax of Special VAT Invoices Issued by the Tax Authority” in Columns 2 and 5 of the “VAT Return (for Small-Scale Taxpayers).”

The State Taxation Administration has established special commissioner offices in Guangzhou and Chongqing.
Recently, the State Taxation Administration has established special commissioner offices in Guangzhou and Chongqing. In accordance with the approval of the Central Organization and Establishment Commission, these offices are tasked primarily with overseeing the implementation of decisions and policies issued by the CPC Central Committee and the State Council within their respective jurisdictions; conducting compliance inspections of tax enforcement; carrying out internal financial audits; and investigating major cross‑regional tax‑related cases. Specifically, the Guangzhou Special Commissioner Office covers Hubei, Hunan, Guangdong, Hainan, and Shenzhen, while the Chongqing Special Commissioner Office serves Chongqing, Sichuan, Guizhou, Yunnan, Tibet, and Guangxi. The establishment of these offices responds to current economic and social development needs, aligns with the trend toward more centralized and efficient tax administration and services, and helps deliver higher‑quality, more convenient taxpayer services, further improving the business environment and tax‑filing conditions.

LITIGATION & ARBITRATION

The draft amendment to the Judges Law has been submitted to the 31st Meeting of the Standing Committee of the 12th National People’s Congress for deliberation.
On December 22, 2017, the Supreme People’s Court formally submitted a draft amendment to the Judges Law for deliberation at the 31st Meeting of the Standing Committee of the 12th National People’s Congress. In his explanatory statement to the meeting, Chief Justice Zhou Qiang of the Supreme People’s Court stated that the draft comprises eight chapters and 73 articles, with the main revisions covering: first, new provisions on the Judges Law adopted by the National People’s Congress and its Standing Committee since the current law came into effect; second, the adjustments set forth in the draft amendments to eight laws, including the Organic Law of the People’s Courts (draft revision) and the Judges Law; and third, the achievements made in deepening the reform of the judicial system. The specific amendments are as follows:
1. The titles of “judge” and “assistant judge” are abolished. 2. Requirements for educational qualifications and years of service are raised: candidates must hold a full-time undergraduate degree in law with the corresponding academic degree, or a full-time undergraduate degree or higher in a non-law field accompanied by a master’s degree or higher in law; alternatively, they may possess a full-time undergraduate degree or higher in a non-law field together with the relevant academic degree and demonstrate legal expertise. The required length of legal work experience is revised to five years. 3. Among the circumstances disqualifying individuals from serving as judges, the provision “those whose lawyer or notary public practice certificates have been revoked” has been added. 4. The president of a people’s court shall possess specialized knowledge of law and relevant professional experience. Vice presidents, members of the adjudication committee, chief justices, and deputy chief justices shall be selected exclusively from among judges. 5. Judges at intermediate-level people’s courts and above shall generally be appointed through a tiered selection process, with distinct requirements regarding judicial experience tailored to such courts. 6. If a judge fails to meet quality and efficiency standards for two consecutive years and is deemed unfit for the position, their removal from office shall be proposed in accordance with the law. 7. The Supreme People’s Court, as well as the people’s courts of provinces, autonomous regions, and municipalities directly under the central government, shall establish disciplinary committees for judges, responsible for reviewing and determining whether a judge has engaged in conduct violating judicial duties as specified in Article 49, Paragraph 5 of this Law, and for issuing opinions on whether such conduct constitutes intentional dereliction of duty, gross negligence, ordinary negligence, or no violation of duty. The people’s courts shall then render disciplinary decisions and impose appropriate sanctions in accordance with relevant regulations. 8. People’s courts shall establish committees to safeguard the rights and interests of judges, ensuring that judges perform their duties in compliance with the law, while also strengthening personal protection for judges’ family members.

The second-instance trial of the Xintai Electric fraud‑in‑issuance case has commenced.
On the morning of December 19, the second-instance trial of Xintai Electric’s lawsuit against the China Securities Regulatory Commission over an administrative penalty was held at the Beijing Higher People’s Court. Ji Luohong, Vice President of the Beijing High People’s Court, served as the presiding judge, while Huang Wei, a member of the CPC Committee and Assistant Chairman of the China Securities Regulatory Commission, appeared in court as the regulator’s representative. Reportedly, this marks the first time that a head of a central government department has personally appeared in court to respond to such a case.
In the case of Xintai Electric’s fraudulent issuance, the China Securities Regulatory Commission issued an administrative penalty decision on July 5, 2016. Dissatisfied with both the CSRC’s penalty decision and the reconsideration decision, Xintai Electric filed an administrative lawsuit with the No. 1 Intermediate People’s Court of Beijing in January 2017. On May 4, the No. 1 Intermediate People’s Court of Beijing ruled in favor of the Commission. Xintai Electric, dissatisfied with the first-instance judgment, subsequently appealed to the Beijing Higher People’s Court.
In its penalty decision, the China Securities Regulatory Commission (CSRC) found that Xintai Electric fabricated the recovery of accounts receivable by means of external borrowings, use of its own funds, or falsification of bank documents, and then offset such receivables at year‑end, semi‑annual end, and other accounting period ends. As a result, the financial data contained in the IPO application documents it submitted to the CSRC were materially false. By submitting these IPO application documents—containing false financial information—to the CSRC and obtaining the CSRC’s approval, Xintai Electric violated Articles 13 and 20, Paragraph 1, of the Securities Law, constituting the conduct described in Article 189 of the Securities Law as “an issuer that does not meet the issuance conditions and obtains issuance approval through fraudulent means.” The directly responsible senior officers are Wen Deyi and Liu Mingsheng. Accordingly, the CSRC has decided, pursuant to Articles 189, 193, Paragraphs 1 and 3, and 233 of the Securities Law, as well as Article 5 of the Regulations on Market Prohibitions, to order Xintai Electric to make corrections, issue a warning, and impose a fine of RMB 8.32 million; to issue a warning to the actual controller, Wen Deyi, impose a fine of RMB 8.92 million, and impose a lifetime market ban.

Other

The General Office of the CPC Central Committee and the General Office of the State Council have issued the “Reform Plan for the System of Compensation for Ecological and Environmental Damage.”
Recently, the General Office of the CPC Central Committee and the General Office of the State Council issued the “Reform Plan for the Ecological and Environmental Damage Compensation System” (hereinafter referred to as the “Plan”), which stipulates that, effective January 1, 2018, the ecological and environmental damage compensation system will be piloted nationwide. This marks a transition of the reform from an initial pilot phase to a stage of nationwide implementation.
The overall objective of the Plan is, by 2020, to strive to establish, on a nationwide scale, an ecological and environmental damage compensation system characterized by clearly defined responsibilities, smooth procedural channels, standardized technical guidelines, robust safeguards, adequate compensation, and effective restoration.
In accordance with the requirements of the Plan, any entity or individual that violates laws and regulations and causes an environmental incident classified as “major” or above, or that results in environmental damage within a key ecological function zone or a prohibited development area, or otherwise leads to serious adverse impacts on the ecological environment, shall undertake environmental remediation and bear corresponding liability for compensation. The scope of compensation covers pollution cleanup, ecological restoration, compensation for both temporary losses in ecological functions and permanent damage, as well as other related expenses such as investigation, appraisal, and assessment costs. Liability for compensation shall be determined through judicial proceedings, with governments at or above the prefectural level acting as representatives of the public, responsible for initiating lawsuits and overseeing the implementation of ecological restoration measures and the proper use of compensation funds.

Several officials in Jiangsu and Guizhou have been disciplined for illegally incurring debt.
On December 22, the Ministry of Finance announced that Jiangsu Province had recently submitted to it the outcomes of its handling of previously reported cases involving illegal and non-compliant borrowing and guarantee practices in certain cities and counties within the province. As a result, 57 individuals held accountable were subjected to disciplinary measures including dismissal, removal from office, demotion, reprimand, and warning. A total of 32 projects were found to have engaged in such unlawful borrowing and guarantee activities, affecting 15 counties (county-level cities and districts) across eight prefecture-level cities: Jintan District of Changzhou City; Tongzhou District and Hai’an Economic and Technological Development Zone of Nantong City; Huaiyin District and Hongze County of Huaian City; Xiangshui County, Funing County, and Jianhu County of Yancheng City; Jiangdu Economic and Technological Development Zone and Gaoyou City of Yangzhou City; Zhenjiang New Area, Yangzhong City, and Jurong City of Zhenjiang City; the core port area of Taizhou Port in Taizhou City; and Siyang County of Suqian City. On the same day, the Ministry of Finance also released Guizhou Province’s findings on accountability for illegal and non-compliant borrowing practices in five localities—Zhenyuan County and Kaili City of Qiandongnan Miao and Dong Autonomous Prefecture; Bijiang District of Tongren City; Huichuan District of Zunyi City; and Xingyi City of Qianxinan Buyei and Miao Autonomous Prefecture. Fourteen individuals responsible were disciplined with measures including demotion, removal from office, reprimand, public criticism, warning, and admonitory talks.

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Postal Code: 210036
Phone: 025-84503333
Fax: 025-84505533
Website: www.jcmaster.com
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