JC Master Legal News Issue 808

Key Takeaways for This Issue

The China Banking Regulatory Commission has issued the “Guidelines on the Management of Conduct for Personnel of Banking Financial Institutions” and is seeking public comments.
On February 11, 2018, the China Banking Regulatory Commission issued the “Guidelines on the Management of Conduct for Personnel of Banking Financial Institutions (Draft for Comments)” (hereinafter referred to as the “Guidelines”). The Guidelines comprise five chapters and 28 articles, covering general provisions, the governance framework for managing personnel conduct, institutional arrangements for such management, regulatory oversight, and supplementary provisions.
Central Document No. 1 Released: “Opinions of the CPC Central Committee and the State Council on Implementing the Rural Revitalization Strategy”
Recently, the Central Committee and the State Council issued Document No. 1, “Opinions of the CPC Central Committee and the State Council on Implementing the Rural Revitalization Strategy.” The document sets the direction, outlines the guiding principles, defines the key tasks, and establishes the policies for advancing the rural revitalization strategy. Grounded in a problem‑oriented approach, it lays out a comprehensive plan to coordinate and promote economic, political, cultural, social, ecological‑civilization, and Party‑building efforts in rural areas.
The State Taxation Administration Provides Authoritative Answers to 33 Environmental Protection Tax Questions
Recently, Cai Zili, Director-General of the Property and Behavioral Tax Department of the State Taxation Administration, and Sun Qun, Deputy Director-General, appeared on the Administration’s website to address 33 specific questions regarding the background of the environmental protection tax, its institutional provisions, and implementation procedures.
The Supreme People’s Court has issued the “Interpretation of the Supreme People’s Court on the Application of the Administrative Litigation Law of the People’s Republic of China.”
On February 7, 2018, the Supreme People’s Court issued the “Interpretation of the Supreme People’s Court on the Application of the Administrative Litigation Law of the People’s Republic of China.” The full text of the Interpretation is divided into thirteen parts, comprising a total of 163 articles. The Interpretation represents a revision, supplementation, and refinement of the earlier “Several Interpretations” and “Application Interpretations.”
U.S. Senate Hearing: Supports Blockchain Technology, Strictly Regulates ICOs
A hearing of the U.S. Senate Committee on Banking, Housing, and Urban Affairs was held on February 6, local time, with J. Christopher Giancarlo, Chairman of the Commodity Futures Trading Commission (CFTC), and Jay Clayton, Chairman of the Securities and Exchange Commission (SEC), attending to share their views. Both Clayton and Giancarlo stated that additional legislation is not needed in the near term.

Table of Contents
Table of Contents

Finance & Capital Markets

The China Banking Regulatory Commission has issued the “Guidelines on the Management of Conduct for Personnel of Banking Financial Institutions” and is seeking public comments.
The National Association of Financial Market Institutional Investors has released the “Information Disclosure Form for Special Debt Financing Instruments for Innovation and Entrepreneurship.”
The Shenzhen Stock Exchange has released the “Outline of the Shenzhen Stock Exchange’s Development Strategy (2018–2020).”
Securities regulatory authorities across the country have successively issued notices requiring private equity funds to conduct self-inspections.

Corporate & Commercial

Central Document No. 1 Released: “Opinions of the CPC Central Committee and the State Council on Implementing the Rural Revitalization Strategy”
The Ministry of Finance has issued the Interim Provisions on Centralized Procurement Management for State-Owned Financial Enterprises.
The National Energy Administration has issued the “Notice on Launching the Construction of Demonstration Projects for Clean District Heating in County-Level Biomass Cogeneration in ‘One Hundred Towns’.”
China Unicom’s board of directors has completed its leadership transition: the BATJ group has entered the core decision-making ranks.

Taxation

The State Taxation Administration Provides Authoritative Answers to 33 Environmental Protection Tax Questions
The State Taxation Administration has issued the “Announcement on Issues Related to ‘Beneficial Owner’ under Tax Treaties.”

Litigation & Arbitration

The Supreme People’s Court has issued the “Interpretation of the Supreme People’s Court on the Application of the Administrative Litigation Law of the People’s Republic of China.”
Supreme People’s Procuratorate: Correct, in accordance with the law, newly identified cases of excessive pre-trial detention and prolonged unresolved detentions.

Other

U.S. Senate Hearing: Supports Blockchain Technology, Strictly Regulates ICOs
NetEase has launched its blockchain product, “Planet.”

Finance & Capital Markets

The China Banking Regulatory Commission has issued the “Guidelines on the Management of Conduct for Personnel of Banking Financial Institutions” and is seeking public comments.
On February 11, 2018, the China Banking Regulatory Commission issued the “Guidelines on the Management of Conduct for Personnel of Banking Financial Institutions (Draft for Comments)” (hereinafter referred to as the “Guidelines”). The Guidelines comprise five chapters and 28 articles, covering general provisions, the governance framework for managing personnel conduct, institutional arrangements for such management, regulatory oversight, and supplementary provisions. They primarily address three key areas:
First, the Guidelines clarify the governance framework for managing the conduct of banking professionals. They delineate the organizational structure for such management, specifying the respective responsibilities of the board of directors, the supervisory board, and senior management. The Guidelines require banking financial institutions to designate a lead department for overseeing professional conduct and to appoint dedicated personnel to manage this function. In addition, the Guidelines mandate that banking financial institutions establish an information system for managing their employees’ conduct and continuously collect relevant data on employee behavior.
Second, it concerns the institutional framework for regulating the conduct of financial professionals. The Guidelines stipulate that banking institutions must adopt a risk‑based approach to managing employee conduct, establishing bank‑wide codes of conduct and business‑line‑specific behavioral guidelines. Employees are required to comply with applicable laws and regulations, uphold professional discipline, and undergo regular training and education. Furthermore, the Guidelines mandate that banking institutions conduct periodic assessments of employee behavior, establish long-term monitoring systems and ad hoc review mechanisms, promptly address any identified issues, evaluate candidates’ behavior relevant to their roles during the recruitment process, and use the results of these assessments as a key factor in determining compensation and promotion decisions. In addition, the Guidelines require banking institutions to put in place whistleblowing channels for reporting misconduct and to strengthen oversight and accountability.
Third, strengthen external supervision over the conduct management of banking professionals. The Guidelines require banking financial institutions to submit their codes of conduct for employees and corresponding assessment reports to the banking regulatory authorities. In turn, these authorities are to enhance their oversight, regulation, and information‑gathering efforts regarding the conduct management of banking personnel. For banking financial institutions that fail to meet the relevant requirements for managing employee conduct, the regulatory authorities may mandate the formulation of remediation plans, order corrective measures within a specified timeframe, and, depending on the circumstances, impose appropriate supervisory measures.

The National Association of Financial Market Institutional Investors has released the “Information Disclosure Form for Special Debt Financing Instruments for Innovation and Entrepreneurship.”
On February 9, 2018, on the basis of a study conducted by market participants organized by the Association into the working mechanisms related to the dual‑innovation special debt financing instrument, the “Information Disclosure Form for the Dual‑Innovation Special Debt Financing Instrument” (hereinafter referred to as the “Disclosure Form”) was formulated.
The information disclosure form primarily covers risk warnings and explanations, the use of raised funds, the company’s key financial condition, and arrangements for information disclosure. First, with respect to risk warnings and explanations, it mainly discloses risks associated with equity investments related to dual‑innovation bonds and risks associated with entrusted loans.
II. With respect to the use of raised funds, the key disclosures include: an overview of the overall utilization of the raised funds; details of specific uses, including allocations to equity investments and entrusted loans; information on the screening process for innovative enterprises; additional commitments regarding the disbursement of raised funds; enhanced commitments to the dedicated‑account management of such funds; disclosure of debt‑repayment safeguards; and disclosure of any changes in the intended use of the raised funds.
III. With respect to the issuer’s principal financial position, the key disclosures include: the issuer’s equity interest in its investees and the consolidated financial statement status, together with the relevant accounting basis; the composition and changes in the issuer’s long-term equity investments; the composition and changes in the available-for-sale financial assets account; and the composition and changes in the trading financial assets account.
IV. With respect to information disclosure arrangements, it is clarified that the issuer shall disclose, no later than April 30 each year, the status of the use of raised funds, including but not limited to the implementation of the fund‑utilization plan, the recovery of funds, whether any delays have occurred, and the development progress of enterprises in which investments are planned or entrusted loans have been extended.

The Shenzhen Stock Exchange has released the “Outline of the Shenzhen Stock Exchange’s Development Strategy (2018–2020).”
On February 9, 2018, the Shenzhen Stock Exchange released the “Outline of the Shenzhen Stock Exchange’s Development Strategy (2018–2020)” (hereinafter referred to as the “Outline”). The Outline sets forth the following development goals for the next three years: first, to establish a leading market system that supports innovation, with the proportion of national high-tech enterprises and the growth prospects of small and medium-sized innovative offices ranking ahead of those in global emerging markets; second, to build a cutting-edge innovation capital ecosystem, ensuring that coverage of key regions, penetration of innovation‑related industrial chains, and the influence of industry organizations are aligned with the needs of the real economy; third, to develop a state‑of‑the‑art market supervision and risk‑control framework, continuously enhancing investor satisfaction and improving the effectiveness of major risk prevention and mitigation; and fourth, to create a world‑class market infrastructure and institutional framework, with indicators such as market performance, regulatory completeness, and core system security ranking among the highest globally.
To achieve the aforementioned objectives, the Shenzhen Stock Exchange has identified its key priorities for the next three years across three main areas: market system development, internationalization, and comprehensive capacity building. First, it will vigorously advance the reform of the ChiNext Board and optimize the multi-tiered market structure. Second, it will refine the Shenzhen market’s product lineup to ensure balanced development across equities, bonds, funds, and derivatives, while intensifying efforts to expand fixed-income offerings and diversify bond‑market trading products. It will also explore pilot programs for REITs, with a view to establishing a REITs segment that reflects the unique characteristics of the Shenzhen market. Third, it will devote full effort to winning the three critical battles. Fourth, it will remain officely market‑oriented and further improve the market’s foundational operating mechanisms. Fifth, it will promote the standardization and productization of trading technologies, thereby elevating the Shenzhen Stock Exchange’s level of internationalization. Sixth, it will proactively embrace cutting-edge technologies such as big data and artificial intelligence to comprehensively enhance its technological regulatory capabilities. Finally, it will establish a nationwide network of localized services to attract leading innovative enterprises to list on the exchange.

Securities regulatory authorities across the country have successively issued notices requiring private equity funds to conduct self‑inspections.
Recently, securities regulatory authorities across the country have successively issued notices requiring private equity funds to conduct self‑inspections. According to documents related to the 2018 self‑inspection workpapers for private equity institutions released by the Guangdong Securities Regulatory Bureau, with respect to fund raising, regulators have mandated that private equity offices verify whether the leverage ratios of equity‑type and hybrid structured products exceed 1x, those of fixed‑income structured products exceed 3x, and those of other types of structured products exceed 2x; they must also conoffice whether the ratio of total assets to net assets for structured products exceeds 140% and for non‑structured products exceeds 200%. Furthermore, the names of structured products must include the terms “structured” or “tiered.”
In the context of fund investments, it is necessary to clarify whether principal‑and‑return guarantees are provided—directly or indirectly—to holders of senior shares, including, but not limited to, provisions in the fund contract for accruing returns on senior shares, imposing pre‑termination penalty interest, requiring subordinated investors or third‑party institutions to make up any shortfall in senior returns, or setting aside risk reserves to cover such shortfalls. It is also essential to verify, on a look‑through basis, the underlying assets of structured products and to determine whether these products themselves are nested into subordinate tranches of other structured financial instruments. Furthermore, with respect to private equity funds, regulators require that private funds disclose the names of underlying assets, the amounts invested, the investment terms, and even details regarding structuring and tiering. In addition, the tiering leverage ratio must be clearly stated.
Funds pooling has also become a key focus of regulatory scrutiny. Under the relevant requirements, private‑placement institutions must clearly disclose to regulators whether they engage in or participate in funds‑pooling activities, and whether there are instances of commingling among different fund assets or situations where funds and underlying assets cannot be reliably matched. Additionally, they must conoffice whether fund products maintain separate accounting records and independent financial reporting, prepare standalone valuation schedules, conduct appropriate valuations in accordance with regulations when opening subscriptions and redemptions or issuing rolling‑release funds, and ensure that the actual yields of the underlying assets are separately priced.

Commercial & Corporate

Central Document No. 1 Released: “Opinions of the CPC Central Committee and the State Council on Implementing the Rural Revitalization Strategy”
Recently, the No. 1 Central Document, “Opinions of the CPC Central Committee and the State Council on Implementing the Rural Revitalization Strategy,” was released. The document comprehensively implements the spirit of the 19th National Congress of the CPC, guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, and sets the direction, outlines the approach, defines the tasks, and establishes the policies for advancing the rural revitalization strategy. Adhering to a problem‑oriented approach, it lays out a comprehensive plan for coordinated progress in rural economic development, political development, cultural development, social development, ecological progress, and Party building. The key contents are as follows:
First, the overarching requirements and key tasks for implementing the Rural Revitalization Strategy have been clearly defined. The No. 1 Central Document summarizes these as “five new aspects” and “one enhancement”: prioritizing thriving industries to elevate the quality of agricultural development and foster new drivers of rural growth; making ecological livability a cornerstone to advance green rural development and create a new paradigm of harmonious coexistence between humanity and nature; ensuring cultural civility in rural areas to invigorate rural culture and usher in a fresh spirit of rural civility; grounding efforts in effective governance to strengthen grassroots work at the rural level and establish a new rural governance system; and taking prosperous livelihoods as the fundamental goal to improve social security and living standards in rural areas, thereby shaping a new aesthetic of beautiful countryside. Moreover, with poverty alleviation as a prerequisite, the document calls for winning the battle against poverty through targeted measures, thereby enhancing the sense of gain among impoverished populations.
Second, the document clarifies the major policies and measures for implementing the rural revitalization strategy. It stipulates that, in pursuing this strategy, emphasis should be placed on “four areas of strengthening”: first, strengthening institutional supply by focusing on improving the rural property rights system and market-based allocation of production factors; second, facilitating the flow of talent, technology, and management to rural areas to cultivate more local professionals and bolster human‑resource support; third, establishing a sound system for ensuring adequate investment and exploring diversified financing channels to reinforce funding guarantees; and fourth, formulating a national rural development strategic plan to enhance the guiding role of planning.
Third, it calls for ensuring that the Party’s leadership over rural work is effectively implemented. The document emphasizes leveraging the political strengths of Party leadership, enforcing accountability, improving institutional mechanisms, and strengthening performance assessments, so that the implementation of the rural revitalization strategy becomes a shared will and concerted action across the entire Party. This requires achieving unified understanding and coordinated action, embedding the principle of giving priority to agricultural and rural development in all aspects—giving priority to cadre allocation, prioritizing the allocation of production factors, ensuring adequate funding, and giving precedence to public services—so as to guarantee that the Party maintains overall leadership and coordinates all parties in rural work, thereby providing robust political support for rural revitalization.

The Ministry of Finance has issued the Interim Provisions on Centralized Procurement Management for State-Owned Financial Enterprises.
Recently, the Ministry of Finance issued the Interim Provisions on Centralized Procurement Management for State-Owned Financial Enterprises, further clarifying matters related to the organizational management, institutional framework, and procurement methods of centralized procurement in such enterprises. The Provisions stipulate that state-owned financial enterprises may not divide projects that should be procured through public tender into smaller components or circumvent public tendering by any other means.
The Regulations stipulate that state-owned financial institutions conducting centralized procurement activities shall comply with relevant national provisions, establish an internal management system characterized by unified oversight, tiered authorization, and mutual checks and balances, and effectively safeguard the overall interests of both the enterprises and the state. State-owned financial institutions are required to put in place a robust management framework that separates decision-making and oversight functions from operational execution functions. In their centralized procurement practices, such institutions shall give priority to procuring energy-efficient and environmentally friendly products.
The Regulations stipulate that state-owned financial institutions shall establish a centralized procurement management committee, whose members shall comprise relevant senior executives of the institution as well as heads of finance, legal, and other pertinent business departments, and which shall be responsible for making decisions on and managing the institution’s centralized procurement activities.
According to the Regulations, state-owned financial institutions may conduct centralized procurement through open tendering, invitational tendering, competitive negotiation, competitive dialogue, single-source procurement, request for quotation, or other procurement methods recognized by the relevant administrative authorities. Where open tendering is employed, the procuring entity shall, in accordance with applicable provisions, publish a tender notice and a prequalification announcement, and make public all information throughout the entire process, including the shortlisted candidates and the winning bid results. The content of the public notice of the winning bid shall include, but not be limited to, the name of the procurement project, the procuring entity, the tendering agency, the date of the tender notice, the winning bidder, the scope of the contract, and the contract price—key elements essential to the procurement process. Both the tender notice and the winning‑bid results shall be made public through the same channel.

The National Energy Administration has issued the “Notice on Launching the Construction of Demonstration Projects for Clean District Heating in County-Level Biomass Cogeneration in ‘One Hundred Towns’.”
Recently, the National Energy Administration issued the “Notice on Launching the Construction of Demonstration Projects for Clean District Heating in County‑Level Biomass Cogeneration in ‘One Hundred Towns.’”
The primary objective of the “Hundred Towns” biomass cogeneration county‑level clean heating demonstration project is to establish a biomass cogeneration–based clean heating model at the county level, developing a distributed clean heating production and consumption system that features local raw material collection, on‑site processing and conversion, and in‑situ energy use, thereby opening up new avenues for addressing the widespread use of loose coal in rural counties. The project aims to create more than 100 county seats and townships—along with a number of small and medium‑sized industrial parks—where biomass cogeneration serves as the main source of clean heating, achieving a critical scale capable of replacing coal combustion; and to provide a solid foundation for exploring the full transition of biomass power generation to cogeneration and for refining policies and measures supporting biomass cogeneration.
The “Hundred Towns” biomass cogeneration and county‑level clean heating demonstration project primarily comprises new or retrofitted biomass cogeneration facilities for agricultural and forestry residues, as well as municipal solid waste incineration cogeneration projects at the county level; a small number of projects involve biogas‑based cogeneration. Residential heat demand is concentrated in county seats (or districts within prefecture‑level cities) and densely populated townships, while industrial heat demand is served by small and medium‑sized industrial parks. The key requirements for these demonstration projects are as follows: (1) Project design shall adhere to the principle of sizing capacity based on heat demand; for projects primarily serving residential heating, the total heated area in county seats must be no less than 200,000 m², and in individual townships no less than 20,000 m², with a heat‑to‑power ratio during the heating season of at least 100%. For projects focused on industrial heat supply, the annual average heat‑to‑power ratio must be no less than 100%. (2) Supporting district heating networks must be completed concurrently with the start of heat supply; a distributed clean heating system should be established, along with comprehensive mechanisms for heat metering, monitoring, and service provision. (3) Construction and operation of the demonstration projects must comply with national and local pollutant emission standards and other relevant requirements. Specifically, biomass cogeneration facilities for agricultural and forestry residues must meet ultra‑low emission standards for particulate matter, sulfur dioxide, and nitrogen oxides, while municipal solid waste incineration cogeneration projects must achieve EU‑level emission limits for major pollutants. (4) Based on local resource conditions, projects should enhance their heating capacity and expand the serviceable heating area by adding biomass‑fired boilers or installing thermal storage systems, among other measures.

China Unicom’s board of directors has completed its leadership transition: the BATJ group has entered the core decision-making ranks.
On February 9, China Unicom issued an announcement stating that the company held its first extraordinary general meeting of shareholders on the 8th, at which it approved the proposal to renew the board of directors and elect members of the sixth-term board. Wang Xiaochu, Lu Yimin, Li Fushen, Yin Zhaojun, Lu Shan, Li Yanhong, Liao Jianwen, and Hu Xiaoming were elected as non‑independent directors of the company’s sixth‑term board. Feng Shidong, Wu Xiaogen, Lü Tingjie, Chen Jianxin, and Xiong Xiaoge were elected as independent directors of the sixth‑term board.
Among China Unicom’s 13 board members, three are from the company itself—Chairman Wang Xiaochu, President Lu Yimin, and Group Deputy General Manager Li Fushen—while external investors such as Baidu, Alibaba, Tencent, and JD.com have been nominated for six seats. These include Yin Zhaojun, Vice President of China Life; Lu Shan, Senior Executive Vice President of Tencent; Robin Li, Chairman and CEO of Baidu; Liao Jianwen, Chief Strategy Officer of JD.com; Hu Xiaoming, Senior Vice President of Alibaba; and Lü Tingjie, who has served as an independent director on China Unicom’s board since May 2016.
Under China Unicom’s mixed‑ownership reform plan, the company brought in a range of strategic investors, including China Life Insurance, Tencent Xinda, Baidu Penghuan, JD Sanhong, Alibaba Innovation Ventures, Suning Commerce, Guangqi Interconnect, Huaihai Ark, Xingquan Fund, and the Structural Adjustment Fund. Following the reform, China Unicom Group’s shareholding was reduced from 62.7% to 36.7%, while the ten strategic investors collectively hold approximately 35.2% of the shares. Employee stock ownership stands at 2.7%, and public shareholders hold 25.4%, resulting in a diversified equity structure.
Recently, with the approval of the State Council, China National Nuclear Corporation (hereinafter referred to as “CNNC”) and China Nuclear Engineering Group Corporation (hereinafter referred to as “CNEC”) have undergone a restructuring. CNEC has been wholly transferred to CNNC without compensation and is no longer directly supervised by the State-owned Assets Supervision and Administration Commission of the State Council. As a result, the number of central enterprises has been reduced to 97, with one less state‑owned defense‑related enterprise.

Taxation TAXATATION

The State Taxation Administration Provides Authoritative Answers to 33 Environmental Protection Tax Questions
Recently, Cai Zili, Director-General of the Property and Behavioral Tax Department of the State Taxation Administration, and Sun Qun, Deputy Director-General, appeared on the Administration’s official website. Under the theme “Energy Conservation and Emission Reduction, Green Development—Discussing the Legislation of the Environmental Protection Tax,” they engaged in an online dialogue with netizens to address issues of public concern. During the session, Director-General Cai Zili and Deputy Director-General Sun Qun provided detailed answers to 33 specific questions covering the background of the tax’s introduction, relevant institutional provisions, implementation procedures, and other related matters.
In response to questions regarding the role and operational mechanisms of the environmental protection tax, Director Cai explained that, institutionally, the tax seeks to leverage taxation as a policy tool by establishing “two mechanisms,” thereby creating a long-term institutional framework to promote environmental protection. First is a positive incentive mechanism for emission reduction—“more emissions, more tax; less emissions, less tax; no emissions, no tax.” Under this system, the environmental protection tax is levied on pollutants according to their respective emission volumes, with higher taxes imposed on greater emissions. At the same time, differentiated pollution‑equivalent values are set for pollutants based on their varying degrees of harm, ensuring that highly hazardous pollutants are subject to higher tax rates. Second is a dynamic tax‑rate adjustment mechanism—“the central government sets a floor, while local authorities may impose higher rates.” The Environmental Protection Tax Law establishes upper and lower limits for the tax rates applicable to taxable air and water pollutants, while empowering the people’s governments of provinces, autonomous regions, and municipalities directly under the central government to, in light of local conditions and taking into account regional environmental carrying capacity, current pollutant‑emission levels, and the goals of economic, social, and ecological development, formulate specific proposed tax rates. These proposals are submitted to the standing committees of the people’s congresses at the corresponding levels for decision, and must be filed with the Standing Committee of the National People’s Congress and the State Council, thus enabling tailored responses to the environmental governance needs of different regions.
In terms of policy, the Environmental Protection Tax Law reinforces three guiding principles: “encouraging clean production, promoting centralized treatment, and fostering recycling.” First, it encourages clean production. Under Article 13 of the Law, depending on how much a taxpayer’s concentrations of taxable air and water pollutants fall below the national and local emission standards, two tiers of tax reductions are provided: taxpayers whose pollutant concentrations are 30% below the prescribed limits pay at a reduced rate of 75%, while those whose concentrations are 50% below the limits pay at a reduced rate of 50%, thereby leveraging tax incentives to promote environmentally sound practices. Second, it encourages centralized treatment. Article 4 stipulates that enterprises, public institutions, and other producers or operators that discharge taxable pollutants into legally established facilities for centralized treatment of wastewater or municipal solid waste are exempt from paying the environmental protection tax. Furthermore, Article 12 provides that such facilities, when discharging corresponding taxable pollutants in compliance with national and local emission standards, shall be temporarily exempt from the environmental protection tax. Third, it promotes recycling. Article 12 specifies that taxpayers who comprehensively utilize solid waste in accordance with national and local environmental protection standards shall be temporarily exempt from the environmental protection tax.

The State Taxation Administration has issued the “Announcement on Issues Related to ‘Beneficial Owner’ under Tax Treaties.”
Recently, the State Taxation Administration issued specific clarifications on issues related to “beneficial owner” under tax treaties. The main points are as follows:
1. “Beneficial owner” refers to a person who has ownership and control over the income or the rights or property from which such income arises.
II. When determining whether a resident of the other Contracting State (hereinafter referred to as the “applicant”) qualifies as a “beneficial owner” for the purposes of benefiting from the tax treaty, a comprehensive analysis shall be conducted based on the factors set forth in this Article, taking into account the specific facts and circumstances of each individual case.
III. Where the income derived by the applicant from China is dividends, even if the applicant does not meet the “beneficial owner” criteria, if the person who directly or indirectly holds 100% of the applicant’s shares meets such criteria and satisfies the relevant conditions, the applicant shall be deemed to qualify as a “beneficial owner.” Furthermore, where the eligible applicant derives dividends from China, it may, without conducting a comprehensive analysis based on the factors set forth in Article 2 of this Announcement, directly determine that the applicant qualifies as a “beneficial owner.”

Litigation & Arbitration

The Supreme People’s Court has issued the “Interpretation of the Supreme People’s Court on the Application of the Administrative Litigation Law of the People’s Republic of China.”
On February 7, 2018, the Supreme People’s Court held a press conference on the “Interpretation of the Supreme People’s Court on the Application of the Administrative Litigation Law of the People’s Republic of China,” providing a comprehensive overview of the newly promulgated Interpretation.
The full text of the “Interpretation on Administrative Litigation” is divided into thirteen parts, comprising a total of 163 articles. This Interpretation amends, supplements, and refines the “Several Interpretations” and the “Applicable Interpretations.” The following outlines the main contents of the “Interpretation on Administrative Litigation”:
1. Clearly define the boundaries of the scope of administrative litigation acceptance, both addressing the longstanding issue of “difficulty in filing a case” and preventing frivolous lawsuits.
2. Summarize the achievements of the administrative litigation jurisdiction reform, addressing both the issue of “home-field advantage” in litigation and adhering to the principle of “convenience for both parties.”
3. Clearly define the standing of the parties, ensuring both unimpeded access to remedies and the maximization of the efficiency of limited judicial resources.
4. Improve the rules of evidence in administrative litigation, striving to restore objective truth while upholding the principle of procedural fairness.
5. Fully implement the case filing and registration system, ensuring both the parties’ lawful right to bring suit and compliance of the lawsuit with statutory requirements.
6. Standardize the trial and judgment procedures, ensuring both impartial adjudication of cases and enhanced litigation efficiency.
7. Standardize the practice of administrative agency heads appearing in court to respond to lawsuits, ensuring both the solemnity of administrative litigation and the substantive resolution of administrative disputes.
8. Implement the system of designating the reconsideration authority as a co-defendant, which both strengthens the supervisory function of administrative reconsideration and focuses on resolving the actual disputes at issue.
9. Refine the ancillary review of normative documents: while upholding the validity of lawful administrative normative documents in accordance with the law, it is also necessary to prevent unlawful provisions from entering into the implementation phase.

Supreme People’s Procuratorate: Correct, in accordance with the law, newly identified cases of excessive pre-trial detention and prolonged unresolved detentions.
Wang Shou’an, Director of the Criminal Execution Procuratorial Department of the Supreme People’s Procuratorate, stated today that in 2018, efforts to prevent and rectify cases involving excessive pretrial detention and prolonged unresolved detentions will be sustained; legal oversight of detention periods will be strengthened, and any newly identified instances of over‑term detention or prolonged unresolved detentions will be corrected in accordance with the law. Furthermore, supervision of the concurrent implementation of sentence modifications will be enhanced and improved, with particular attention paid to cases where commutation, parole, or temporary release outside prison have not been proposed as required by law. Measures will also be taken to prevent and correct miscarriages of justice in criminal proceedings, and the handling of complaints, reports, and appeals filed by persons subject to criminal execution and their relatives will be further strengthened.

Other
U.S. Senate Hearing: Supports Blockchain Technology, Strictly Regulates ICOs
On February 6, local time, the U.S. Senate Committee on Banking, Housing, and Urban Affairs held a hearing, at which J. Christopher Giancarlo, Chairman of the Commodity Futures Trading Commission (CFTC), and Jay Clayton, Chairman of the Securities and Exchange Commission (SEC), appeared to share their views. This was one of the most high-profile hearings on virtual currencies in recent years.
In recent months, the SEC and CFTC have filed lawsuits and launched investigations into alleged scams, regulated the launch of Bitcoin futures, issued warnings to investors, and, more broadly, begun addressing a rapidly evolving market environment. However, both Clayton and Giancarlo have stated that additional legislation is not needed in the short term.
J. Christopher Giancarlo stated that the CFTC lacks the authority to regulate spot virtual currency platforms or other cash commodities, including imposing registration requirements, conducting oversight and supervision, mandating trade reporting, enforcing personnel conduct standards, providing customer education, setting capital adequacy requirements, ensuring trading system safeguards, conducting cybersecurity assessments, or imposing any other such requirements.
Jay Clayton cautioned investors that, to date, no ICOs have been registered with the SEC, and the Securities and Exchange Commission has not approved the listing or trading of any exchange‑traded products—such as ETFs—that involve cryptocurrencies or other crypto‑related assets.
Investors considering these products should also recognize that these markets transcend national borders, and funds may swiftly flow overseas without their knowledge. National securities regulators may lack the authority or resources to effectively prosecute wrongdoers or recover lost funds.

NetEase has launched its blockchain product, “Planet.”
On February 9, NetEase launched an internal beta test of a blockchain product called “Planet,” allowing users to claim the digital asset “Black Diamond” after registering with an invitation code.
NetEase Planet is an ecosystem‑based value‑sharing platform powered by blockchain technology. By leveraging blockchain, it enables users to record their behavioral data more securely and effectively, thereby enhancing the value of their actions across the entire ecosystem. Every user generates valuable contributions at every moment—ranging from credit‑related information and browsing histories to purchases, entertainment activities, and travel patterns. These behaviors constitute critical personal data assets. Planet provides users with a comprehensive digital ecosystem, using blockchain‑based encryption to help them manage their behavioral data more safely and efficiently, while also unlocking value through decentralized mechanisms within the platform.
Black Diamonds are a form of value generated through individual contributions, built on blockchain technology. The number of Black Diamonds a user can earn depends on the amount of “Force” they accumulate on the planet—higher Force yields more Black Diamonds. Browsing, trading, socializing, and other activities within the planetary ecosystem help increase one’s Force score. While the total supply of Black Diamonds is fixed, the daily issuance remains constant; every two years, the total supply is halved, calculated on a calendar-year basis. Although the overall quantity is capped, the distribution never truly runs out: as the supply dwindles, it approaches infinitesimally small fractions—1/2, 1/4, 1/8, and so on—yet it never reaches zero.

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