JC Master Legal News Issue 809

Key Takeaways for This Issue

The National Development and Reform Commission and the Ministry of Finance have jointly issued the “Notice on Further Enhancing the Ability of Corporate Bonds to Serve the Real Economy and Strictly Preventing Local Government Debt Risks.”
Recently, the National Development and Reform Commission and the Ministry of Finance jointly issued the “Notice on Further Enhancing the Ability of Corporate Bonds to Serve the Real Economy and Strictly Preventing Local Government Debt Risks.” The notice sets forth requirements for how corporate bonds can better support the real economy, covering areas such as corporate governance structures, financing channels, and project‑financing arrangements.
The Ministry of Agriculture has issued the “Opinions on Vigorously Implementing the Rural Revitalization Strategy and Accelerating the Transformation and Upgrading of Agriculture.”
Recently, the Ministry of Agriculture issued the “Opinions on Vigorously Implementing the Rural Revitalization Strategy and Accelerating the Transformation and Upgrading of Agriculture.” The document sets out the overarching requirements for agricultural and rural economic work in 2018 and over the coming period, and lays out a comprehensive plan across five key areas, outlining 33 specific measures.
The Supreme People’s Court has issued the “Provisions on Several Issues Concerning Enforcement Settlement.”
On February 23, the Supreme People’s Court issued the “Provisions on Several Issues Concerning Enforcement Settlements.” The Provisions comprise 20 articles and address five key issues: distinguishing between enforcement settlements and out-of‑court settlements; clarifying that no order for debt-for‑property settlement may be issued based on a settlement agreement; expressly providing that the applicant for enforcement may bring a lawsuit concerning the enforcement settlement agreement; specifying the conditions for resuming enforcement; and determining the legal effect of guarantee clauses contained in enforcement settlement agreements.
The Ministry of Finance provides a detailed explanation of the accounting standards for government grants, clarifying their scope of application.
On February 22, the Ministry of Finance issued the “Interpretation on Issues Related to the Government Grants Standard,” which clarifies that government grants may be accounted for using either the gross‑amount method or the net‑amount method. Enterprises shall apply the future‑applicability approach to government grants existing as of January 1, 2017, and shall adjust any new government grants arising between January 1, 2017, and the effective date of the standard in accordance with this standard.
The People’s Bank of China has published the “Public Notice on Licensing Information for Institutions Engaged in Personal Credit Reporting Services.”
On February 22, the People’s Bank of China published the “Public Notice on Licensing for Institutions Engaged in Personal Credit Reporting Services.” The notice indicates that Baihang Credit has been granted approval to establish a personal credit reporting institution, and the qualifications of its directors, supervisors, and senior management have been duly approved. The license for personal credit reporting is valid until January 31, 2021.

Table of Contents
Table of Contents

Finance & Capital Markets

The National Development and Reform Commission and the Ministry of Finance have jointly issued the “Notice on Further Enhancing the Ability of Corporate Bonds to Serve the Real Economy and Strictly Preventing Local Government Debt Risks.”
The authorization period for the stock issuance registration system is proposed to be extended until 2020.
The China Securities Regulatory Commission has issued the “Questions and Answers on Relevant Issues Concerning the Participation of Companies Whose IPO Applications Have Been Rejected as Underlying Assets in Listed Company Restructuring Transactions.”
The China Insurance Regulatory Commission and the State Administration of Foreign Exchange have jointly issued the “Notice on Regulating Matters Related to Insurance Institutions’ Conduct of Domestic-Guaranteed, Foreign-Loaned Business.”
The Shanghai Stock Exchange has issued the “Notice on Further Clarifying Matters Related to Share Reductions by Major Shareholders of Listed Companies via Block Trades.”

Corporate & Commercial

The Ministry of Agriculture has issued the “Opinions on Vigorously Implementing the Rural Revitalization Strategy and Accelerating the Transformation and Upgrading of Agriculture.”
The China Insurance Regulatory Commission has taken over Anbang Group.
The Ministry of Finance, the Ministry of Industry and Information Technology, and two other ministries have issued the “Notice on Adjusting and Improving the Fiscal Subsidy Policy for the Promotion and Application of New Energy Vehicles.”
The China Insurance Regulatory Commission has issued the “Guidelines on Combating Insurance Fraud.”
The China Banking Regulatory Commission has issued the “Decision of the China Banking Regulatory Commission on Amending the Measures for the Implementation of Administrative Licensing Matters Concerning Foreign‑funded Banks of the China Banking Regulatory Commission.”

Taxation

The Ministry of Finance provides a detailed explanation of the accounting standards for government grants, clarifying their scope of application.
The United Nations convenes the inaugural Global Conference of the Tax Cooperation Platform.

Litigation & Arbitration

The Supreme People’s Court has issued the “Provisions on Several Issues Concerning Enforcement Settlement.”
The Supreme People’s Court has issued the “Provisions on Several Issues Concerning Enforcement Guarantees.”
The Supreme People’s Court has issued the “Provisions on Several Issues Concerning the Handling by People’s Courts of Cases Involving the Enforcement of Arbitral Awards.”

Other

The Central Committee of the Communist Party of China has put forward proposals to amend certain provisions of the Constitution.
The People’s Bank of China has published the “Public Notice on Licensing Information for Institutions Engaged in Personal Credit Reporting Services.”

Finance & Capital Markets

The National Development and Reform Commission and the Ministry of Finance have jointly issued the “Notice on Further Enhancing the Ability of Corporate Bonds to Serve the Real Economy and Strictly Preventing Local Government Debt Risks.”
Recently, the National Development and Reform Commission and the Ministry of Finance jointly issued the “Notice on Further Enhancing Corporate Bonds’ Ability to Serve the Real Economy and Strictly Preventing Local Government Debt Risks” (hereinafter referred to as the “Notice”). The Notice stipulates that applicant enterprises must establish sound corporate governance structures, management decision-making mechanisms, and financial management systems, and strictly prohibit Party and government officials from holding concurrent positions in enterprises without prior approval. Furthermore, the assets owned by applicant enterprises must be of high quality and clearly titled; it is expressly prohibited to include public schools, public hospitals, public cultural facilities, parks, public squares, office buildings of government agencies and institutions, municipal roads, non-toll bridges, non‑commercial water conservancy facilities, and non‑toll utility networks—i.e., public‑interest assets—as well as land‑use rights for reserved land—in the asset base of the applicant enterprise.
Applying enterprises shall conduct their operations in a market‑oriented and entity‑based manner and engage in market‑driven financing in compliance with applicable laws and regulations. They shall, on the basis of their own creditworthiness, formulate principal and interest repayment schedules and put in place debt‑servicing safeguards to ensure timely redemption of bond principal and interest, thereby truly upholding the principle of “borrower‑repayer, assuming risk oneself.” Applying enterprises are strictly prohibited from, under any pretext, requesting or accepting guarantees or assuming debt‑repayment obligations from local governments or their subordinate departments for their market‑based financing activities.
Purely public‑benefit projects may not be submitted as fundraising‑investment projects for corporate bond issuance. For fundraising‑investment projects financed by bond proceeds, the project capital‑equity requirement must be strictly enforced, and a market‑based investment‑return mechanism must be established to ensure sustained, stable, and reasonably feasible expected returns.
If the investment‑financed projects receive fiscal support such as investment subsidies, operational grants, or interest subsidies, the procedures and content must comply with applicable laws and regulations. Local fiscal affordability and medium‑ to long‑term fiscal sustainability must be treated as key constraints, and any practice of providing fiscal support that exceeds the local government’s financial capacity must be officely prohibited.
Standardize bond financing for public‑private partnership (PPP) projects. Strictly define the scope of application for the PPP model, prudently assess the debt‑raising risks associated with government‑payment‑based PPP projects and viability‑gap‑subsidy PPP projects, and categorically prohibit the use of the PPP model to engage in illegal or disguised borrowing.
Establish and improve credit records for responsible entities, and impose stricter penalties and hold accountable those entities—such as applicant offices, underwriting institutions, accounting offices, law offices, and credit rating agencies—and their principal officers that have been determined by the relevant authorities to be involved in illegal or non-compliant financing and guarantee activities undertaken by local governments.

The authorization period for the stock issuance registration system is proposed to be extended until 2020.
On February 23, 2018, in order to steadily advance the reform of the stock issuance registration system and further enhance the capital market’s fundamental role in serving the real economy, the “Draft Decision on Extending the Period of Authorization Granted to the State Council to Adjust the Application of Relevant Provisions of the Securities Law of the People’s Republic of China in the Course of Implementing the Stock Issuance Registration System Reform” was submitted to the 33rd Meeting of the Standing Committee of the 12th National People’s Congress for deliberation. According to the draft decision, upon the expiration of the current authorization period, it is proposed to extend the authorization by two years, until February 29, 2020.
Entrusted by the State Council, Liu Shiyu, Chairman of the China Securities Regulatory Commission, stated in his briefing to the Standing Committee of the National People’s Congress that, through two years of concerted efforts, the CSRC has created relatively favorable conditions and an enabling environment for the steady implementation of the registration-based reform by improving market institutions, refining market mechanisms, standardizing market order, enhancing market integrity, and strengthening market supervision.

The China Securities Regulatory Commission has issued the “Questions and Answers on Relevant Issues Concerning the Participation of Companies Whose IPO Applications Have Been Rejected as Underlying Assets in Listed Company Restructuring Transactions.”
On February 23, 2018, the China Securities Regulatory Commission issued the “Questions and Answers on Relevant Issues Concerning the Participation of IPO‑Rejected Companies as Underlying Assets in Listed Company Restructuring Transactions” (hereinafter referred to as the “Q&A”).
The Q&A clarifies that the CSRC will adopt a differentiated approach, tightening oversight of restructuring projects involving target assets that were previously rejected in IPO applications: For transactions classified as restructuring‑to‑listing (commonly known as backdoor listings), companies must have been operating for at least three years following an IPO rejection before they may initiate such a restructuring; for other transactions that do not constitute restructuring‑to‑listing, the CSRC will strengthen information‑disclosure supervision, with particular focus on the specific reasons for the IPO rejection and the status of corrective measures, as well as whether there have been material changes in relevant financial data and operating conditions compared with the IPO filing, along with the underlying causes. The CSRC will coordinate efforts across the Shanghai and Shenzhen stock exchanges and local securities regulatory bureaus, employing measures such as inquiry letters and on-site inspections to enhance oversight and effectively promote improvements in the quality of listed companies.

The China Insurance Regulatory Commission and the State Administration of Foreign Exchange have jointly issued the “Notice on Matters Concerning the Standardization of Domestic-Guaranteed, Foreign-Loaned Business Conducted by Insurance Institutions.”
Recently, the China Insurance Regulatory Commission, in conjunction with the State Administration of Foreign Exchange, issued the “Notice on Regulating Matters Related to Insurance Institutions’ Domestic‑Guaranteed, Foreign‑Loaned Business” (hereinafter referred to as the “Notice”), further strengthening oversight of overseas investments by insurance funds, refining the regulatory framework for such investments, guiding insurance capital to support the national “Belt and Road” initiative, and mitigating risks associated with cross‑border investment and financing.
The Notice aims to standardize insurance institutions’ conduct of domestic‑guaranteed, foreign‑borrowed financing activities, specifying both the financing ratio and the permitted uses of funds. It stipulates that the outstanding balance of actual funds raised through such operations may not exceed 20% of an insurer’s net assets as of the end of the preceding quarter, and that this figure is subject to leverage‑ratio monitoring. Furthermore, funds obtained under domestic‑guaranteed, foreign‑borrowed arrangements may be used solely for investment projects undertaken by special‑purpose entities, in compliance with national policies and relevant requirements governing overseas investment, and in accordance with the China Insurance Regulatory Commission’s regulations on the overseas deployment of insurance funds.
At the same time, the Notice stipulates that regulatory oversight shall be implemented in accordance with the look-through principle. Insurance institutions are required to adhere to this principle by identifying the broad asset class to which an investment project or its underlying assets belongs, and to aggregate domestic and overseas investment ratios on a consolidated‑statement basis. Furthermore, overseas investment custodians are mandated to apply the look‑through principle in valuing and accounting for overseas investment projects, and to conduct consolidated oversight of investment operations.
In addition, the Notice explicitly sets out prohibited activities. It strictly stipulates that investment projects and their underlying assets must not violate national macro‑regulation policies, industrial policies, or overseas investment regulations; it mandates the exclusive use of funds for their designated purposes, prohibiting insurance institutions from deploying proceeds from domestic‑guaranteed, foreign‑borrowed financing in any business other than investment projects of special purpose companies, or from extending loans to third parties; furthermore, it prohibits disguised forms of domestic‑guaranteed, foreign‑borrowed financing, obtaining credit loans abroad, and engaging in arbitrage or illegal speculative transactions.

The Shanghai Stock Exchange has issued the “Notice on Further Clarifying Matters Related to Share Reductions by Major Shareholders of Listed Companies via Block Trades.”
Recently, the Shanghai Stock Exchange issued the “Notice on Further Clarifying Matters Related to Share Reductions by Major Shareholders of Listed Companies via Block Trades” (hereinafter referred to as the “Notice”), with the aim of further specifying the regulatory requirements and operational procedures governing major shareholders’ share reductions through block trades under the “Several Provisions on Share Reductions by Shareholders, Directors, Supervisors, and Senior Management of Listed Companies” and the “Detailed Rules for the Implementation of Share Reductions by Shareholders, Directors, Supervisors, and Senior Management of Listed Companies of the Shanghai Stock Exchange” (hereinafter referred to as the “Reduction Rules”). The Notice sets forth the following requirements:
I. Block trades involving designated shares and non-designated shares shall be submitted through separate channels. When a major shareholder of a listed company reduces its holdings of designated shares, it shall submit the block‑trade reduction data via the Exchange’s “Block Trade Designated Shares Reduction Submission Interface” within the block‑trade system; for reductions of shares other than designated shares, such data shall be submitted through the Exchange’s standard submission interface of the block‑trade system (hereinafter referred to as the “block‑trade standard channel”).
II. Determination of Block‑Trade Reductions for Shares Other Than Specified Shares: Where a major shareholder simultaneously holds shares acquired through centralized bidding transactions and shares obtained by means other than centralized bidding (hereinafter referred to as “controlled shares”), any reduction conducted via the standard block‑trade channel shall, within the prescribed reduction ratio, be deemed to prioritize the sale of controlled shares; beyond the prescribed reduction ratio, it shall be deemed to prioritize the sale of shares acquired through centralized bidding.
III. Responsibilities of Relevant Parties in Block Trades Involving Shares Other Than Specified Shares: 1. The Seller: When a major shareholder reduces its shareholding through the standard block‑trade channel, it shall comply with Article 5 of the Detailed Rules on Share Reduction and clearly inform both its designated member office and the block‑trade buyer of the intended quantity, nature, type, and price of the shares to be sold. If the shares to be sold include controlled shares, the seller shall also adhere to the provisions of the Detailed Rules regarding quantity limits and other restrictions applicable to major shareholders conducting share reductions via block trades. 2. The Buyer: When an investor acquires shares reduced by a major shareholder through the standard block‑trade channel, it shall comply with Article 5 of the Detailed Rules on Share Reduction and clearly notify its designated member office of the intended quantity, nature, type, and price of the shares to be acquired. If the shares to be acquired include controlled shares, the buyer shall undertake to abide by the provisions of the Detailed Rules, including the restriction that, within six months after acquisition, the buyer may not transfer the acquired shares.

Commercial & Corporate

The Ministry of Agriculture has issued the “Opinions on Vigorously Implementing the Rural Revitalization Strategy and Accelerating the Transformation and Upgrading of Agriculture.”
Recently, the Ministry of Agriculture issued the “Opinions on Vigorously Implementing the Rural Revitalization Strategy and Accelerating the Transformation and Upgrading of Agriculture.” The document sets forth the overarching requirements for agricultural and rural economic work in 2018 and beyond: fully implement the spirit of the 19th National Congress of the Communist Party of China; take Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era as the guiding principle; adhere to the general tone of seeking progress while maintaining stability; apply the new development philosophy; and, in line with the requirements of high-quality development, use the implementation of the rural revitalization strategy as the central lever, advance supply-side structural reform in agriculture as the main thread, aim to optimize agricultural production capacity and increase farmers’ incomes, and uphold grain production capacity as an inviolable bottom line. Upholding the principles of quality‑driven and green‑oriented agriculture with efficiency as the priority, the document calls for accelerating the transformation of agricultural production methods, promoting reform and innovation, technological innovation, and institutional innovation, vigorously building a modern agricultural industrial system, production system, and management system, and robustly developing new types of business entities, new industries, and new business models. It also emphasizes advancing profound transformations in quality, efficiency, and growth drivers, speeding up the modernization of agriculture and rural areas, and pressing forward toward the goal of securing a decisive victory in building a moderately prosperous society in all respects. To meet these objectives, implementation will focus on the following five key areas:
I. Uphold the principle of quality first, and promote agriculture through quality and strengthen agriculture through branding. Key measures include vigorously advancing agricultural standardization and reinforcing law enforcement and regulatory oversight of agricultural product quality and safety, among others.
II. Uphold the principle of prioritizing efficiency, and promote the continuous enhancement of agricultural competitiveness and the steady growth of farmers’ incomes. Key measures include accelerating the mechanization of agriculture and implementing initiatives to upgrade the agricultural processing industry, among others.
III. Uphold a green development orientation and enhance the sustainability of agricultural development. Key measures include continuously reducing the use of agricultural inputs and accelerating the resource‑based utilization of agricultural waste, among others.
IV. Adhering to market orientation and focusing on adjusting and optimizing the agricultural structure. Key measures include consolidating overall grain production capacity, promoting structural adjustments in crop cultivation with an emphasis on curbing rice acreage, expanding soybean production, and shifting from grain to feed crops, as well as advancing structural reforms in animal husbandry by prioritizing swine restructuring and upgrading the dairy sector, among others.
V. Uphold reform and innovation, and accelerate the cultivation of new drivers for agricultural and rural development. Key measures include fully completing the conofficeation, registration, and certification of rural contracted land rights, and advancing the separation of the three rights related to rural contracted land.

The China Insurance Regulatory Commission has taken over Anbang Group.
On February 23, the China Insurance Regulatory Commission issued an announcement stating that Wu Xiaohui, former chairman and general manager of Anbang Insurance Group Co., Ltd. (hereinafter referred to as Anbang Group), has been formally prosecuted on suspicion of economic crimes. In view of Anbang Group’s business practices that violated relevant laws and regulations and which could seriously jeopardize its solvency, and in order to ensure the continued normal operation of the Group and safeguard the legitimate rights and interests of insurance consumers, the China Insurance Regulatory Commission, in accordance with the relevant provisions of the Insurance Law of the People’s Republic of China, decided to place Anbang Group under receivership effective February 23, 2018, for a period of one year.
The announcement stated that, effective from the date of takeover, the Anbang Group’s shareholders’ meeting, board of directors, and supervisory board shall cease to perform their duties, with all related functions assumed by the takeover working group; the head of the takeover working group shall exercise the powers of the company’s legal representative, and the working group shall assume responsibility for the management and operation of Anbang Group.
The announcement states that upon expiration of the receivership period, if the company’s operations have stabilized, the disposal of relevant assets is substantially complete, and the major strategic shareholders have fulfilled their capital contributions, the receivership task force will submit an assessment report to the China Insurance Regulatory Commission; upon approval, the receivership may be terminated. If the receivership fails to achieve the expected results, Anbang Group has not completed its equity restructuring, and normal operations have not yet resumed, the receivership may, with the approval of the CIRC, be extended for an additional year at the discretion of the authorities, provided that the total duration of the receivership does not exceed two years. Should operations remain unchanged after the two-year period, or if there is evidence indicating that the objectives of the receivership cannot be achieved, the receivership task force shall conduct an assessment and submit a report; upon approval by the CIRC, the receivership may be terminated, and other regulatory measures may be imposed in accordance with the law.

The Ministry of Finance, the Ministry of Industry and Information Technology, and two other ministries have issued the “Notice on Adjusting and Improving the Fiscal Subsidy Policy for the Promotion and Application of New Energy Vehicles.”
Recently, four ministries, including the Ministry of Finance and the Ministry of Industry and Information Technology, issued the “Notice on Adjusting and Improving the Fiscal Subsidy Policy for the Promotion and Application of New Energy Vehicles,” revising and refining the subsidy framework. Local governments are expected to steadily intensify infrastructure development and enhance the conditions for using new energy vehicles. Starting in 2018, local purchase subsidies for new energy vehicles will gradually be redirected to support the construction and operation of charging infrastructure, as well as related aspects such as the use and operation of these vehicles.
The Notice specifies that the subsidy reduction for new‑energy passenger vehicles and new‑energy buses will be 30%, while for new‑energy trucks and special‑purpose vehicles it will be 60%. In addition, the Notice outlines adjustments to refine the subsidy policy for promoting the use of new‑energy vehicles in three key areas: first, raising technical threshold requirements; second, improving the subsidy standards for new‑energy vehicles; and third, revising operational mileage requirements on a case‑by‑case basis.
With regard to technical thresholds, the Notice states that, in light of advances in power‑battery technology, the minimum energy density requirements for battery systems will be further raised for pure‑electric passenger cars, non‑fast‑charging pure‑electric buses, and special‑purpose vehicles, thereby encouraging the adoption of high‑performance power batteries. Relevant ministries and commissions will, based on factors such as technological progress in new‑energy vehicles, industry development, and the scale of promotion and application, conduct early research and issue threshold values for key technical indicators for 2019 and 2020.
With regard to refining subsidy standards, the Notice states that, in light of changes in costs and other factors, subsidy rates for new‑energy passenger vehicles will be adjusted and optimized, while subsidy levels for new‑energy buses and special‑purpose vehicles will be appropriately reduced. Subsidies for fuel‑cell vehicles will remain unchanged: passenger fuel‑cell vehicles will receive subsidies based on the rated power of their fuel‑cell systems, whereas buses and special‑purpose vehicles will be eligible for fixed‑amount subsidies.

The China Insurance Regulatory Commission has issued the “Guidelines on Combating Insurance Fraud.”
Recently, in order to safeguard the legitimate rights and interests of insurance consumers, enhance the scientific rigor and effectiveness of fraud risk management in the insurance sector, and promote the industry’s healthy and sustainable development as well as the establishment of a social integrity system, the China Insurance Regulatory Commission has issued the “Guidelines on Combating Insurance Fraud” (hereinafter referred to as the “Guidelines”).
The Guidelines comprise four chapters and 47 articles, aiming to establish standardized frameworks for fraud risk management and technical standards for anti‑fraud measures in the insurance industry, thereby further preventing and mitigating insurance fraud risks. Key areas of regulation include: First, clarifying the primary responsibility of insurance institutions for managing fraud risks. Insurance institutions are required to establish sound institutional frameworks and organizational structures for fraud risk management, clearly defining the roles, responsibilities, and reporting lines of the board of directors and its specialized committees, the supervisory board (supervisors), senior management, and relevant departments; standardizing operational procedures; enhancing foundational data and information systems; rigorously enforcing performance evaluation and accountability mechanisms; appropriately handling fraud risks; and fulfilling reporting obligations. Second, delineating the duties of the China Insurance Regulatory Commission (CIRC) and its local branches. The CIRC and its branches are mandated to exercise regulatory oversight over insurance institutions’ fraud risk management activities in accordance with the law, playing a pivotal role in planning, coordinating, guiding, and supervising efforts to combat insurance fraud. They are also required to conduct regular inspections and assessments of the soundness and effectiveness of insurance institutions’ fraud risk management systems, and to implement ongoing supervision through regulatory ratings, risk alerts, public notifications, and formal interviews. Third, specifying the responsibilities of various entities within the collaborative mechanism for combating fraud. The CIRC and its branches are tasked with refining inter‑departmental and regional cooperation mechanisms to detect, deter, and sanction insurance fraud, as well as establishing a framework for cross‑border and cross‑regional exchanges and collaboration. Insurance institutions, industry associations, China Insurance Information Technology Co., Ltd., and other stakeholders are expected, under the guidance of the CIRC and its local branches, to deepen industry‑wide cooperation, develop mechanisms for data sharing and mutual exchange of fraud‑related information, advance theoretical research, academic and international exchanges, launch joint industry initiatives, and strengthen collaborative efforts in risk mitigation.

The China Banking Regulatory Commission has issued the “Decision of the China Banking Regulatory Commission on Amending the Measures for the Implementation of Administrative Licensing Matters Concerning Foreign‑funded Banks of the China Banking Regulatory Commission.”
On February 24, the China Banking Regulatory Commission issued the “Decision of the China Banking Regulatory Commission on Amending the Measures for the Implementation of Administrative Licensing Matters for Foreign‑Capital Banks” (hereinafter referred to as the “Decision”). The Decision primarily revises the following three aspects:
First, further opening up the banking sector to foreign participation. In March 2017, the China Banking Regulatory Commission issued the “Notice of the General Office of the China Banking Regulatory Commission on Matters Relating to Certain Business Activities Conducted by Foreign‑Owned Banks” (CBRC General Office Document No. 12 [2017]), which, in principle, permitted foreign‑owned corporate banks to invest in domestic banking financial institutions. To align with these liberalization measures, the Decision introduces additional provisions regarding the licensing requirements, procedures, and application materials for foreign‑owned corporate banks seeking to establish or acquire equity stakes in domestic banking financial institutions, thereby providing a clear legal basis for such equity investments.
Second, administrative licensing requirements have been minimized, and the corresponding procedures streamlined. In line with the State Council’s plan to streamline administration and delegate power, the Decision abolishes the approval requirement for four types of business—offering overseas wealth management services on behalf of clients, providing custody services for such products, offering custody services for mutual funds, and allowing liquidated foreign‑invested financial institutions to withdraw interest‑bearing assets—and replaces them with a reporting system, while strengthening dynamic, prudential supervision during and after the event. The China Banking Regulatory Commission will employ measures such as regulatory visits, spot checks, and inspections to officely safeguard the risk threshold and prevent regulatory vacuums. Furthermore, to further rationalize and standardize intermediary services subject to approval, the Decision also removes the provision requiring foreign‑funded corporate banks to submit legal opinions issued by domestic law offices when applying to issue debt or capital‑supplementing instruments.
Third, further harmonize market access standards for both domestic and foreign‑capital banks. The Measures adhere to the principle of maintaining consistency in regulatory standards between domestic and foreign‑capital banks, aligning licensing conditions and procedures as closely as possible with those applicable to domestically‑owned commercial banks. Specifically, this includes merging the approval processes for establishing branch offices and for their opening, retaining only the approval for branch opening; streamlining the requirements for foreign‑capital banks to raise and issue debt and capital‑supplementing instruments; and further simplifying the review procedures for senior management qualifications—under which, for cases involving lateral transfers or reassignments to lower‑level positions among peer foreign‑capital banks of similar type, the prior‑approval requirement is replaced by a filing‑based regime.

Taxation TAXATATION

The Ministry of Finance provides a detailed explanation of the accounting standards for government grants, clarifying their scope of application.
On February 22, the Ministry of Finance issued the “Interpretation on Issues Related to the Government Grants Standard,” which clarifies that government grants may be accounted for using either the gross‑amount method or the net‑amount method. Enterprises shall apply the future‑applicability approach to government grants existing as of January 1, 2017, and shall adjust any new government grants arising between January 1, 2017, and the effective date of the standard in accordance with this standard.
Government grants are accounted for using two methods: the gross method and the net method. Under the gross method, upon recognition of a government grant, the full amount is recognized as income either in a single transaction or in installments, rather than being offset against the carrying amount of the related asset or against costs and expenses. Under the net method, the government grant is recognized as a reduction in the carrying amount of the related asset or in the cost or expense being compensated.
An enterprise shall, based on the substance of the economic transaction, determine whether to apply the gross‑amount method or the net‑amount method to a particular category of government grant transactions. As a general rule, only one method may be used for similar or analogous government grant transactions, and the enterprise must apply that method consistently without making arbitrary changes. For certain grants, an enterprise is required to adopt a single, prescribed method.
If an enterprise first receives government grants related to assets and then recognizes the long-term asset it has acquired, under the gross method, the deferred income shall be recognized as current income on a systematic and rational basis when depreciation or amortization of the related asset begins; under the net method, the deferred income shall be offset against the carrying amount of the asset when the asset reaches its intended usable condition or intended purpose. If, after the relevant long-term asset has been put into use, the enterprise subsequently receives government grants related to that asset, under the gross method, the deferred income shall be recognized as current income on a systematic and rational basis over the remaining useful life of the asset; under the net method, the carrying amount of the related asset shall be reduced upon receipt of the grant, and depreciation or amortization shall be calculated based on the reduced carrying amount and the asset’s remaining useful life.

The United Nations convenes the inaugural Global Conference of the Tax Cooperation Platform.
Recently, the inaugural Global Conference of the Tax Cooperation Platform, co-hosted by the International Monetary Fund, the Organisation for Economic Co-operation and Development, the United Nations, and the World Bank, was held at the United Nations Headquarters in New York from the 14th to the 16th. More than 400 senior officials from tax policy and administration agencies around the world, along with representatives from key international organizations, academia, the business community, and civil society, engaged in in-depth discussions on how to harness taxation as a policy tool to advance the Sustainable Development Goals.
At the meeting, Wang Jun, Director of the State Taxation Administration of China, outlined the Chinese tax authorities’ approaches and experiences in supporting and advancing sustainable development, including establishing a green tax system, fostering innovation-driven growth, promoting balanced and coordinated development, upholding openness and inclusiveness, ensuring the equitable sharing of benefits, and optimizing the business environment. He also put forward three initiatives: first, to coordinate with more organizations, countries, and regions to strengthen international tax cooperation; second, to jointly develop fair, reasonable, and universally applicable international tax rules; and third, to leverage tax‑cooperation platforms to extend the benefits of sustainable development to a broader range of countries and regions.

Litigation & Arbitration

The Supreme People’s Court has issued the “Provisions on Several Issues Concerning Enforcement Settlement.”
On February 23, the Supreme People’s Court issued the “Provisions on Several Issues Concerning Enforcement Settlements.” The Provisions comprise 20 articles and focus on distinguishing between enforcement settlements and out-of‑court settlements; they stipulate that no order for debt settlement by way of property may be issued based on a settlement agreement; they clarify that the applicant for enforcement may bring a lawsuit concerning the enforcement settlement agreement; and they set forth the conditions for resuming enforcement as well as the legal effect of guarantee clauses contained in enforcement settlement agreements.
The Provisions on Enforcement Settlement explicitly stipulate that a settlement agreement reached privately by the parties, provided it is jointly submitted to the people’s court or submitted by one party with the other party’s acknowledgment, constitutes an enforcement settlement, and the people’s court may, on that basis, suspend enforcement. Conversely, if the parties have no intention of submitting their privately reached settlement agreement to the people’s court, such an agreement will produce only substantive legal effects; accordingly, if the party subject to enforcement seeks to have enforcement suspended on the strength of that agreement, they must file a separate objection to enforcement.
The Provisions on Enforcement Settlement expressly stipulate that people’s courts may not issue rulings ordering debt settlement in kind based on the settlement agreement. Where, after a settlement agreement has been reached, the party subject to enforcement fails to perform its obligations, the applicant for enforcement may request that enforcement be resumed. The Provisions on Enforcement Settlement explicitly grant the applicant for enforcement a choice: when the party subject to enforcement fails to comply with the enforcement settlement agreement, the applicant may either apply to resume enforcement or file a lawsuit seeking performance of the agreement.
The Provisions on Enforcement Settlement also clearly sets forth the conditions for resuming enforcement. First, the principles of pacta sunt servanda and good faith shall apply to both parties; neither party may unreasonably breach the settlement agreement. If the enforced party is in the process of performing its obligations as agreed in the settlement, or if the prescribed performance period has not yet expired and the relevant performance conditions have not yet been met, the applicant for enforcement may not request the resumption of enforcement. Second, even if the debtor has fully performed the obligations stipulated in the settlement agreement, the applicant for enforcement may not seek to resume enforcement if there has been delayed performance or defective performance. Should such delay or defect cause damage to the applicant, the latter may file a separate lawsuit to claim compensation for losses. Finally, in view of the principle of separation between adjudication and enforcement, any party or interested party seeking to challenge the validity or rescindability of the settlement must do so through judicial proceedings; only after such a determination may they apply to the court for the resumption of enforcement.

The Supreme People’s Court has issued the “Provisions on Several Issues Concerning Enforcement Guarantees.”
On February 23, the Supreme People’s Court issued the “Provisions on Several Issues Concerning Enforcement Guarantees” (hereinafter referred to as the “Enforcement Guarantee Provisions”). The Provisions comprise 16 articles, focusing on clarifying the scope of matters covered by enforcement guarantees, the methods for enforcing such guarantees, establishing the duration of the guarantee, and defining the right of recourse in cases where an enforcement guarantee is invoked.
The Provisions on Enforcement Guarantees expressly confines enforcement guarantees to the scope set forth in Article 231 of the Civil Procedure Law, namely, guarantees provided to ensure that the party subject to enforcement fulfills the obligations determined by an effective legal document. Upon application by the applicant for enforcement, the people’s court may directly issue a ruling to enforce the guaranteed property or the guarantor’s property; however, it may not alter the status of the guarantor nor add the guarantor as an additional party subject to enforcement. Article 12 of the Provisions stipulates: “The guarantee period shall be calculated from the date when the suspension of enforcement expires. If the guarantee agreement does not specify the guarantee period, or if such specification is unclear, the guarantee period shall be one year.” Article 13 provides: “Upon expiration of the guarantee period, if the applicant for enforcement seeks to enforce the guaranteed property or the guarantor’s property, the people’s court shall not grant such request. Where another party has provided property as security, the people’s court may, upon application, lift any seizure, detention, or freezing imposed on the secured property.” The applicant for enforcement must assert its rights against the guarantor within the guarantee period; otherwise, the guarantor’s liability shall be discharged. After assuming the guarantee liability, the guarantor may seek recourse through litigation.

The Supreme People’s Court has issued the “Provisions on Several Issues Concerning the Handling by People’s Courts of Cases Involving the Enforcement of Arbitral Awards.”
On February 23, the Supreme People’s Court issued the “Provisions of the People’s Courts on Several Issues Concerning the Handling of Cases Involving the Enforcement of Arbitral Awards” (hereinafter referred to as the “Arbitral Award Enforcement Provisions”).
The Provisions on the Enforcement of Arbitral Awards comprise 24 articles and primarily address five key areas: jurisdiction over enforcement proceedings involving arbitral awards; criteria for determining when the content of an award is unclear or imprecise, along with corresponding procedures; expansion of the scope of parties eligible to apply for non-enforcement; harmonization of review standards in cases where enforcement of an arbitral award is sought to be refused; and clarification of the procedural linkages between judicial review of applications to set aside arbitral awards and those seeking non-enforcement.
The Provisions on the Enforcement of Arbitral Awards appropriately adjust the jurisdictional rules for enforcement cases, stipulating that the review of applications for non-enforcement shall remain under the jurisdiction of the intermediate people’s courts. Even where a case has already been assigned to the jurisdiction of a primary-level people’s court, it must still be transferred to the original enforcing court for separate filing, review, and disposition.
The Provisions on the Enforcement of Arbitral Awards clearly set forth the criteria for determining when the content of an arbitral award is unclear or imprecise, as well as the corresponding procedures: first, it enumerates the common scenarios in practice where an arbitral award is deemed “unclear or imprecise”; second, to alleviate the burden on the parties, it stipulates that any ambiguity or lack of specificity in the enforcement subject matter shall, in the first instance, be resolved through rectification or other appropriate means; third, if, despite such rectification or other measures, the enforcement subject matter remains unclear, the people’s court may issue a ruling dismissing the enforcement application; fourth, it clarifies that, should a party disagree with the dismissal of the enforcement application, they may directly file a request for reconsideration with the higher-level people’s court; and fifth, where the specific item ordered to be delivered under the arbitral award has been damaged or lost, the people’s court may handle the matter by terminating the enforcement proceedings or through other suitable means.
The Provisions on the Enforcement of Arbitral Awards have appropriately broadened the scope of entities eligible to apply for non-enforcement, expressly granting third parties the right to seek such relief. Where a third party can furnish evidence demonstrating that the parties to an arbitration engaged in malicious or sham arbitration to the detriment of its legitimate rights and interests, it may petition the people’s court to refuse enforcement of the arbitral award or the arbitral settlement agreement. The people’s court shall conduct a rigorous review to determine whether the third party’s claim is substantiated. Moreover, with respect to the outcome of the review of a third party’s application for non-enforcement, both the parties and the third party are afforded additional avenues for redress, thereby ensuring full protection of their respective rights and interests.

Other

The Central Committee of the Communist Party of China has put forward proposals to amend certain provisions of the Constitution.
The Second Plenary Session of the 19th Central Committee of the Communist Party of China reviewed and approved the “Proposal of the CPC Central Committee on Amending Certain Provisions of the Constitution.” Constitutional amendment is a major event in the political life of the country, representing a significant decision made by the Party Central Committee with Comrade Xi Jinping at its core from the overarching and strategic perspective of upholding and developing socialism with Chinese characteristics in the new era. It is also a crucial measure to advance law-based governance across the board and to modernize China’s system and capacity for governance. By amending the Constitution to enshrine the major theoretical viewpoints and major principles and policies adopted at the 19th National Congress into the nation’s fundamental law, and by reflecting the new achievements, new experiences, and new requirements of the development of the Party and the country, this amendment will undoubtedly provide strong constitutional guarantees for upholding and developing socialism with Chinese characteristics in the new era. The content of this amendment includes, but is not limited to:
Article 3, Paragraph 3 of the Constitution, which reads: “The state administrative organs, judicial organs, and procuratorial organs are all established by the people’s congresses, accountable to them, and subject to their oversight,” is hereby amended to read: “The state administrative organs, supervisory organs, judicial organs, and procuratorial organs are all established by the people’s congresses, accountable to them, and subject to their oversight.”
Article 27 of the Constitution is amended by adding a third paragraph: “State functionaries shall, upon assuming office, take a public oath of allegiance to the Constitution in accordance with the provisions of law.”
Article 79, Paragraph 3 of the Constitution, which previously read: “The President and Vice-President of the People’s Republic of China shall serve terms of office concurrent with those of the National People’s Congress, and may not serve more than two consecutive terms,” is hereby amended to read: “The President and Vice-President of the People’s Republic of China shall serve terms of office concurrent with those of the National People’s Congress.”

The People’s Bank of China has published the “Public Notice on Licensing Information for Institutions Engaged in Personal Credit Reporting Services.”
On February 22, the People’s Bank of China published the “Public Notice on Licensing for Institutions Engaged in Personal Credit Reporting Services.” The notice indicates that Baihang Credit has been granted approval to establish a personal credit reporting institution, and the qualifications of its directors, supervisors, and senior management have been duly approved. The license for personal credit reporting is valid until January 31, 2021.
Baihang Credit’s registered address is in Shenzhen, Guangdong Province; accordingly, its business premises are located at No. 1006 Shennan Avenue, Futian District, Shenzhen, Guangdong Province, within the Shenzhen International Innovation Center. Its scope of business encompasses personal credit reporting, with a registered capital of RMB 1 billion. The largest shareholder is the China Internet Finance Association, holding a 36% stake, while eight other shareholders each hold 8%. The equity structure is as follows: China Internet Finance Association holds 36%; Zhima Credit Management Co., Ltd. holds 8%; Tencent Credit Co., Ltd. holds 8%; Shenzhen Qianhai Credit Center Co., Ltd. holds 8%; Pengyuan Credit Co., Ltd. holds 8%; Zhongchengxin Credit Co., Ltd. holds 8%; Kaola Credit Co., Ltd. holds 8%; Zhongzhicheng Credit Co., Ltd. holds 8%; and Beijing Huadao Credit Co., Ltd. holds 8%.

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