JC Master Legal News Issue 1078

Release Date:

2023-09-04 19:30

Key Takeaways for This Issue

SSE: Actively promoting the inclusion of infrastructure REITs as eligible securities under the Shanghai–Hong Kong Stock Connect program.
On August 29, the Shanghai Stock Exchange issued a notice outlining work arrangements for optimizing the issuance and trading mechanisms of publicly offered infrastructure real estate investment trusts (REITs).
The Ministry of Industry and Information Technology has issued the “Implementation Opinions on Building and Applying a Technological Innovation System for the Manufacturing Sector.”
Recently, the Ministry of Industry and Information Technology issued the “Opinions on Building and Applying a Technological Innovation System for the Manufacturing Sector” and provided interpretations of its key provisions.
The two departments have extended the policy on individual income tax for year-end one-time bonuses.
To further ease the tax burden on taxpayers, the Ministry of Finance and the State Taxation Administration issued a public announcement on the 28th, clarifying the extension of the policy on individual income tax for year-end lump-sum bonuses.
The second draft of the revised Civil Procedure Law has refined the system of procedures for foreign-related civil litigation.
The second draft amendment to the Civil Procedure Law was submitted on the 28th for deliberation at the Fifth Meeting of the Standing Committee of the 14th National People’s Congress.
Finance & Capital Markets
The China Securities Regulatory Commission is coordinating the balance between primary and secondary markets and optimizing regulatory arrangements for IPOs and refinancing.
The China Securities Regulatory Commission, taking into full account the current market conditions, has refined the counter-cyclical adjustment mechanisms for both the primary and secondary markets and, with a focus on appropriately managing the pace of IPOs and refinancing, has made the following arrangements:
I. In light of recent market conditions, the IPO pace will be temporarily tightened to foster a dynamic balance between investment and financing.
II. For large‑scale refinancing by listed financial institutions or other large‑cap companies in other sectors, a pre‑communication mechanism shall be implemented to ensure that the financing is both necessary and appropriately timed.
III. Emphasize supporting high-performing companies while restricting underperforming ones: For listed companies that have experienced share price below par value, net asset value per share below par, sustained operating losses, or a disproportionately high proportion of financial investments, appropriate restrictions shall be imposed on the intervals and scales of their subsequent financings.
IV. Guide listed companies to appropriately determine the scale of their refinancing and strictly enforce the prescribed intervals between financings. During the review process, particular attention will be paid to whether the proceeds from the previous fundraising have been substantially utilized and whether the projects funded by such proceeds have achieved their expected performance.
V. Strictly require that funds raised by listed companies be allocated to their principal business activities and impose stringent restrictions on diversified investments.
VI. Listed real estate companies are exempt from the restrictions on refinancing imposed by share price below IPO price, trading below net asset value, or reporting losses.

The China Securities Regulatory Commission has further standardized share reduction activities.
The China Securities Regulatory Commission has given full consideration to market concerns and has carefully studied and assessed the share‑sale restriction regime. In order to further regulate the share‑selling activities of relevant parties, the following requirements are hereby issued:
If a listed company is trading below its IPO price or its book value, or if it has not paid cash dividends in the most recent three years and its cumulative cash dividends are less than 30% of its average annual net profit over that period, the controlling shareholder and the actual controller shall be prohibited from reducing their holdings of the company’s shares on the secondary market. Persons acting in concert with the controlling shareholder and the actual controller shall be subject to the same requirements. If a listed company discloses that it has no controlling shareholder or actual controller, the largest shareholder and its actual controller shall be subject to the aforementioned requirements.
At the same time, the total volume of share reductions by other listed-company shareholders will be strictly capped, guiding them to calibrate their reduction schedules in line with market conditions; controlling shareholders, actual controllers, and other shareholders are encouraged to commit to refraining from selling shares or to extend the lock-up period for their holdings.
The China Securities Regulatory Commission is expediting revisions to the “Several Provisions on Share Reductions by Shareholders, Directors, Supervisors, and Senior Management of Listed Companies,” elevating the regulatory framework’s legal status, refining relevant liability provisions, and intensifying enforcement against unlawful share reductions.

The stock exchange has lowered the margin requirement ratio to support moderate financing needs.
To implement the package of policies recently issued by the China Securities Regulatory Commission (CSRC) aimed at invigorating the capital market and boosting investor confidence, and to enhance the functionality of margin trading and short selling while better meeting investors’ legitimate trading needs, with the approval of the CSRC, the Shanghai Stock Exchange, the Shenzhen Stock Exchange, and the Beijing Stock Exchange have issued notices revising the Detailed Rules for Margin Trading and Short Selling. Specifically, the minimum margin ratio required for investors to finance the purchase of securities has been lowered from 100% to 80%. This adjustment will take effect after the close of trading on September 8, 2023.
In recent years, the margin trading and securities lending business has operated steadily, with ongoing improvements to trading mechanisms, continuous enhancement of compliance and risk‑control capabilities among securities offices, and a marked increase in investors’ rationality and risk‑management awareness. As of August 24, 2023, the on‑exchange balance of margin trading and securities lending stood at RMB 1.5678 trillion, with margin ratios remaining at relatively high levels, ensuring that overall risks remain manageable. Against the backdrop of broadly controllable leverage risks, moderately relaxing the margin ratio for margin financing will help better harness the functions of this business and unlock idle capital.
This adjustment applies to both newly opened contracts and existing positions, and investors can benefit from the new margin ratios without having to close their existing positions. Securities offices may, based on a comprehensive assessment of each client’s creditworthiness and履约 performance, appropriately determine the financing margin ratio for individual clients. Investors should continue to adopt a rational investment approach and, in line with their own risk tolerance, make prudent use of margin trading and short‑selling instruments. The China Securities Regulatory Commission will urge securities offices to strengthen risk management, enhance investor services, and safeguard investors’ legitimate rights and interests.

The third draft of the revised Company Law further implements the requirement for equal protection of property rights.
On August 28, the third draft of the revised Company Law was submitted to the Fifth Session of the Standing Committee of the 14th National People’s Congress for deliberation. The third draft introduces amendments and refinements aimed at further implementing the principle of equal protection of property rights and strengthening regulation of controlling shareholders and de facto controllers.
To further implement the requirement of equal protection of property rights, the third‑reading draft has further refined provisions on the protection of minority shareholders’ rights, stipulating that if a controlling shareholder abuses its shareholder rights to the serious detriment of the company or other shareholders, the other shareholders may request the company to acquire their shares at a fair price. The draft also enhances the provisions governing shareholders’ right to inspect and copy relevant company documents in joint‑stock companies and adds a provision prohibiting the company from raising the shareholding threshold for shareholders submitting ad hoc proposals.
To further strengthen the regulation of controlling shareholders and de facto controllers, the third draft adds a provision stating that where a controlling shareholder or de facto controller does not serve as a director of the company but nevertheless exercises actual control over its affairs, the provisions applicable to directors—namely, their duties of loyalty and diligence—shall apply.
To further refine the subscribed‑capital registration system and safeguard capital adequacy and transactional security, the third draft adds provisions on the subscription deadline for shareholders of limited liability companies, stipulating that the total amount of contributions subscribed by all shareholders shall be paid in full within five years from the date of the company’s establishment, in accordance with the articles of association.
The third‑reading draft also adds provisions stipulating that the directly responsible supervisors and other persons directly liable who obtain company registration by falsely reporting registered capital, submitting false documents, or employing other fraudulent means to conceal material facts shall be subject to a fine of no less than RMB 10,000 and no more than RMB 50,000. Furthermore, for violations of laws such as the Accounting Law and the Asset Evaluation Law, penalties shall be imposed in accordance with the relevant provisions of the Accounting Law, the Asset Evaluation Law, the Certified Public Accountants Law, and other applicable laws and administrative regulations.

Local finances continue to grow and are making vigorous efforts.
According to the latest statistics released by the Ministry of Finance, from January to July, local governments’ general public budget revenue at the primary level totaled 7.5485 trillion yuan, up 11.8% year on year, while expenditures reached 13.2006 trillion yuan, an increase of 2.9% compared with the same period last year. Experts note that, overall, local fiscal operations remain stable, and proactive fiscal policies continue to deliver strong support, providing effective safeguards for economic recovery. At the same time, however, local governments face certain difficulties and challenges that will require concerted efforts to address.
Fiscal revenue has grown rapidly.
Statistics show that, cumulatively from January to July, all 31 provinces recorded year-on-year growth in revenue. Among them, five provinces posted growth of over 20%, 18 saw increases between 10% and 20%, and eight reported single-digit growth. Major economic provinces generally experienced relatively rapid fiscal revenue expansion; for example, in the first seven months, Jiangsu’s general public budget revenue reached 661.7 billion yuan, up 18.4%.
“Local fiscal revenue has posted a relatively strong growth rate, driven in part by the economy’s recovery and, more significantly, by the large-scale value-added tax credit refunds implemented since April last year, which led to a substantial reduction in the base figure. This year, as such refund measures have returned to normal levels, tax revenues have risen sharply, thereby boosting the overall growth rate of fiscal revenue,” said Wang Zecai, a researcher at the Chinese Academy of Fiscal Sciences.
By region, income in the eastern, central, western, and northeastern regions grew year on year by 11.6%, 8.3%, 14.7%, and 15.8%, respectively. Experts note that positive year-on-year income growth was recorded across all four regions, indicating that the divergence in income growth among regions is steadily narrowing.
“In the first seven months, local general public budget revenue posted strong growth. According to the data, the growth rate of local fiscal general public budget revenue has generally outpaced both the national average and the growth rate of central government‑level general public budget revenue,” said Wen Laicheng, Executive Director of the CUFE–Anrong Institute for Local Fiscal Investment and Financing at the Central University of Finance and Economics.
The supporting role of key industries in fiscal revenue has further strengthened. Taking Beijing as an example, in the first half of the year, the top seven sectors contributing to the city’s fiscal revenue—financial services, real estate, information services, manufacturing, wholesale and retail trade, business services, and scientific and technological services—accounted for 77.3% of the city’s total revenue, up 3 percentage points from 74.3% in the first quarter, reflecting a steadily improving support.
Meanwhile, in many regions, the share of tax revenue in total fiscal revenue has risen, signaling an ongoing improvement in the quality of fiscal income. In the first seven months, Beijing’s local tax revenue reached RMB 347.42 billion, up 17.0%; taxes accounted for 87.3% of total revenue, with revenue quality remaining at a high level. In Henan, tax revenue for the first half of the year totaled RMB 164.58 billion, an increase of 19.8%, and taxes represented 61.8% of general public budget revenue—up 3.7 percentage points year on year.
Since the beginning of this year, the central government has increased the scale of transfer payments, providing robust financial support to local governments for ensuring the “three guarantees” at the grassroots level. In 2023, the central government allocated 10.06 trillion yuan in transfer payments to local governments, representing a 7.9% increase after excluding special-purpose transfers aimed at supporting grassroots implementation of tax and fee reductions and key livelihood initiatives. As of the end of June, 91.1% of these central transfer payments had been disbursed, with all eligible funds fully allocated.
Despite the rapid growth in local fiscal revenues, challenges remain. Experts note that the robust recovery in tax revenues across many regions is largely attributable to last year’s low base; revenue levels have yet to return to pre‑pandemic norms. As the carryforward VAT refunds gradually normalize in the second half of last year, the low‑base effect will diminish, leading to a corresponding moderation in the pace of fiscal revenue growth in the second half—overall aligning with economic expansion. Meanwhile, land‑related revenues continue to decline, and the real estate market remains in an adjustment phase; restoring market confidence will take time, leaving steady fiscal revenue growth subject to ongoing challenges.
In addition, from January to July, local government funds recorded 2.6382 trillion yuan in revenue at the primary level, down 15.5% year on year. Among this, revenue from the transfer of state-owned land use rights totaled 2.2875 trillion yuan, a decline of 19.1% compared with the same period last year. “Looking at the situation across provinces, while performance varies regionally, the overall picture is one of relatively strong progress in general public budget revenue, juxtaposed with slower progress in government‑funded budget revenue—primarily driven by proceeds from the transfer of state‑owned land use rights,” notes Wang Dehua, a researcher at the Institute of Financial Strategy of the Chinese Academy of Social Sciences. He argues that, going forward, it will be essential to continue implementing robust measures to restore economic vitality, help the real estate market gradually return to normal, and, through improvements in the underlying economic fundamentals, ensure that revenue targets are met more effectively.
Ensure key expenditures
Since the beginning of this year, fiscal authorities at all levels have strengthened the coordinated allocation of fiscal resources, maintained an appropriate level of spending, and continued to increase investment in areas where economic and social development remains weak and in critical sectors. Key expenditures—covering basic living standards, rural revitalization, major regional strategies, education, and scientific and technological breakthroughs—have been well secured.
Where exactly are local governments’ fiscal “purses” being spent? “Looking at the expenditure structure, since the beginning of this year, local governments have steadily increased spending on areas that directly affect people’s livelihoods, such as social security and employment, education, and healthcare,” said Wang Zecai. For example, in the first half of this year, Fujian’s general public budget expenditures totaled 288.401 billion yuan, up 5.7% year on year. Of this amount, spending on people’s livelihoods reached 223.99 billion yuan, a year-on-year increase of 7.0%, accounting for 77.7% of total general public budget expenditures—a share that has remained above 70% consistently.
In the first seven months, Shanxi’s expenditures on people’s livelihood totaled 269.59 billion yuan, accounting for 80.2% of the province’s general public budget outlays, up 8.8% and representing an increase of 21.75 billion yuan. In Beijing, education spending reached 66.22 billion yuan in the same period, a rise of 7.0%, while health and wellness expenditures amounted to 47.59 billion yuan, up 11.0%.
Since the beginning of this year, local governments have further leveraged the direct‑allocation mechanism for fiscal funds to ensure their precise and efficient use. Taking Shaanxi Province as an example, in the first seven months of this year, the provincial-level budget allocation and disbursement of directly allocated funds reached over 99 percent; a total of RMB 134.09 billion in central and provincial direct‑allocation funds has been disbursed. Across the province, the disbursement rate of central‑government direct‑allocation funds stood at 70.1 percent, nearly 12 percentage points ahead of the scheduled pace—marking the highest level of expenditure progress since the implementation of the direct‑allocation mechanism.
With a focus on helping businesses overcome difficulties, fiscal authorities across the country have been stepping up their efforts. For example, Jiangsu’s finance department recently expanded the scale of its special-purpose loan program for small, medium, and micro enterprises—designed to alleviate financial distress and boost production and efficiency—to RMB 20 billion. Eligible SMEs can obtain loans ranging from a minimum of RMB 500,000 to a maximum of RMB 5 million per borrower. Meanwhile, Jiangxi has introduced a policy offering fee reductions and subsidies for financing guarantees aimed at small and micro enterprises, aiming to leverage over RMB 200 billion in social capital throughout the year through fiscal‑financial instruments such as the “Caiyuan Credit Pass” program and guarantee schemes.
Experts recommend that, in terms of spending, Party and government agencies should continue to tighten their belts and cut expenditures to ensure fiscal resources are freed up for safeguarding people’s livelihoods and providing relief to businesses. Wen Laicheng suggests: “We must further optimize the expenditure structure, substantially reduce all types of routine consumption expenditures by Party and government bodies, and adhere to the principle of living frugally, so as to secure and increase funding for key projects vital to local economic and social development.”
Since the beginning of this year, many localities have continued to strengthen budget performance management to ensure that public funds are spent where they matter most. For example, Guangdong Province launched a key fiscal performance evaluation this year, covering 145.08 billion yuan in expenditures. By implementing a series of measures—such as establishing a full‑process tracking and oversight mechanism involving third‑party institutions—the province has further enhanced the quality of its evaluations and the effective use of their findings, helping to reduce ineffective, inefficient, and unnecessary spending.
“It is essential to adopt a mindset of routinely tightening fiscal constraints, adhering to a ‘goal‑oriented, problem‑oriented, and performance‑oriented’ approach, and substantively integrating performance management into the unified budget‑performance management framework. This will enable us to reduce non‑essential expenditures in order to improve basic living standards and support market entities, while ensuring adequate funding for major strategies, priority areas, and rigid demand,” said Wang Zecai.
Stabilize investment and boost consumption
Since the beginning of this year, fiscal authorities across the country have taken proactive measures, stepping up efforts on multiple fronts to stabilize investment and boost consumption. From January to July, local governments issued 2.4971 trillion yuan in new special-purpose bonds, of which 2.3598 trillion yuan was allocated to project construction. “These funds were primarily directed toward key areas such as municipal infrastructure, industrial park facilities, social services, transportation networks, affordable housing projects, and agricultural, forestry, and water‑conservation initiatives, playing a vital role in stimulating effective investment and ensuring the steady operation of the economy,” said an official from the Ministry of Finance. Looking ahead, the Ministry will guide localities in promptly completing the issuance and deployment of special-purpose bonds, continue advancing priority projects, generate tangible physical output, and provide robust support for high‑quality development.
Local governments have also implemented a series of measures tailored to their specific circumstances to boost the recovery and expansion of consumption. For example, Hubei has established a 50-billion-yuan consumer‑loan program, with an initial allocation of 30 billion yuan, to encourage in‑store credit purchases—such as automobiles, home renovations, and durable household appliances and furniture—while providing interest subsidies. In Hunan, local authorities are partnering with financial institutions, payment platforms, and businesses to issue shopping and service vouchers; moreover, cities like Changsha, where conditions permit, are distributing digital RMB red envelopes. At the provincial level, Hunan provides subsidies covering 30% of the actual expenditures incurred by municipalities and prefectures, with a maximum subsidy of 10 million yuan.
What key areas will local governments prioritize in the second half of the year? Recently, many regions have released their first-half budget execution reports, outlining relevant plans. For example, Beijing will, in the second half, provide targeted support to restore and expand consumption, adapt to shifting demand, refine the implementation details of pro‑consumption policies, and launch innovative consumer‑stimulating initiatives. At the same time, it will intensify efforts in coordinating and advancing major projects, ensuring adequate resource allocation, and building up project pipelines, while accelerating the disbursement of government bond funds and infrastructure‑related capital to sustain robust investment. Meanwhile, Sichuan will continue to increase fiscal spending on people’s livelihoods in the second half, deliver on 30 concrete measures to improve living standards, and maintain public‑service expenditures at no less than 65% of the total budget. In addition, the province will review and refine the mechanisms for allocating revenue‑based transfer payments, ensuring that newly available fiscal resources are directed toward financially challenged areas and bolstering the capacity of grassroots governments to ensure basic living needs, social security, and operational sustainability.
“We will resolutely address arbitrary fees, fines, and levies; continue to refine, optimize, and effectively implement tax and fee reduction policies; and support technological innovation, the real economy, and the development of small, medium, and micro enterprises. We will treat all types of market entities equally in areas such as fiscal and tax incentives and government procurement, accelerate the direct delivery of policy funds, and foster the robust growth of the private sector,” said a responsible official from the Hunan Provincial Department of Finance.
“In the second half of the year, in line with the overarching principle of ‘decentralizing fiscal resources,’ we will continue to increase transfer payments to local governments, explore ways to expand the scale of direct fiscal funding, channel fiscal resources down to the grassroots level, ensure the smooth functioning of local finances, and officely safeguard the basic “three guarantees” at the community level,” Wang Zecai suggested. He further recommended conducting more research into innovative structural fiscal policies to support projects that improve people’s livelihoods, address shortcomings, and strengthen weak areas, while consistently setting performance targets in advance, implementing dynamic monitoring during execution, and carrying out comprehensive evaluations afterward.
On the front of special-purpose bonds, Wen Laicheng recommends that, in the second half of the year, the pace of bond issuance within the local government debt limits approved by the Standing Committee of the National People’s Congress should be further accelerated, and the implementation of special‑purpose bond‑financed projects should be expedited to generate more tangible physical output and thereby boost economic growth. Since the beginning of this year, local governments have stepped up the issuance of special‑purpose bonds to support the development of small and medium‑sized banks, fostering their sound operations and helping to mitigate risks in the regional financial system. “To further enhance the effectiveness of special‑purpose bond capital injections,” said Zhao Quanhou, a researcher at the Financial Research Center of the Chinese Academy of Fiscal Sciences, “it is essential to conduct a comprehensive inventory of small and medium‑sized banks, clarify the responsibilities of all stakeholders, prevent irregular related‑party transactions, and improve the quality of these banks’ services to the real economy.”

The central bank once again injects liquidity, stepping up reverse repos by hundreds of billions of yuan.
At the end of August, the People’s Bank of China continued to ramp up its reverse repo operations by RMB 100 billion, as it has done in previous periods, to safeguard market liquidity. On August 28, the PBOC announced on its official website that, to ensure stable end-of-month liquidity, it conducted a reverse repo operation totaling RMB 332 billion, with a seven-day tenor and an interest rate of 1.8%, unchanged from the previous level. With RMB 34 billion in reverse repos maturing on the same day, the open market saw a net injection of RMB 298 billion.
Smooth out short-term liquidity fluctuations.
In fact, to safeguard end-of-month market liquidity, the People’s Bank of China has recently conducted increased‑size reverse repo operations on multiple consecutive business days.
On August 25, the People’s Bank of China conducted reverse repo operations totaling RMB 221 billion through a rate‑based tender process, with a winning rate of 1.8%. With RMB 98 billion in reverse repos maturing on the same day, the net injection for the day amounted to RMB 123 billion. Meanwhile, on August 23, the central bank carried out reverse repo operations worth RMB 301 billion via a rate‑based tender, aiming to ensure reasonably ample liquidity in the banking system. Although the operation rate remained unchanged at 1.8%, the RMB 301 billion scale represented a new high in nearly six months.
Regarding the recent reverse repo operations, Zhou Maohua, a macro researcher at the Financial Markets Department of China Everbright Bank, stated that the People’s Bank of China has stepped up its reverse repo activities and increased net injections of short-term liquidity, primarily to flexibly manage short-term funding pressures arising from end-of-month transitions and bond issuance, thereby meeting institutions’ short-term funding needs.
Looking back at the previous trading day, August 25, liquidity conditions tightened further. The Shanghai Interbank Offered Rate (Shibor) for the overnight tenor rose by 25 basis points to 1.819%, while the 7-day Shibor increased by 10.1 basis points to 1.896%. At the close of the day, based on repo rates, the DR007 weighted average rate climbed to 1.9411%, exceeding the policy rate level.
“With the peak tax‑payment period approaching and local government bond issuance set to accelerate in August and September, bank liquidity is likely to remain tight amid overall stability while still facing short‑term timing‑related fluctuations. By stepping up reverse‑repo operations, the People’s Bank of China can implement precise, efficient, and forward‑looking adjustments to liquidity, thereby smoothing potential disruptions to funding conditions and mitigating possible volatility,” said Pang Ming, Chief Economist and Head of Research for Greater China at JLL.
Observing open market operations reveals that the People’s Bank of China has been steadily stepping up its intervention. Zhou Maohua likewise notes that this is primarily due to market interest rates hovering slightly above policy rates, reflecting a marked increase in short-term funding demand. In response, the central bank has adopted flexible measures and appropriately scaled up its open market operations. Recent volatility in liquidity conditions has been driven mainly by an accelerated pace of local government bond issuance, banks’ faster deployment of credit to the real economy, and temporary factors such as tax and reserve‑requirement payments.
The probability of a reserve requirement ratio cut in the third quarter has increased.
Based on the characteristics of previous operations, industry insiders expect the People’s Bank of China to continue maintaining a relatively large volume of open-market operations. Against the backdrop of accommodative monetary and fiscal policies, liquidity conditions are likely to remain stable as they transition into the next month.
As Zhou Maohua pointed out, market liquidity is expected to remain reasonably ample going forward. The People’s Bank of China will employ a variety of tools and conduct flexible operations to safeguard liquidity conditions and foster a conducive monetary environment for the recovery of the real economy.
There remain considerable expectations within the industry regarding future monetary policy tools.
Pang Ming expects that, going forward, the People’s Bank of China will continue to employ a comprehensive array of monetary policy tools to fine-tune short-term liquidity in a flexible, precise, appropriately calibrated, and dynamically efficient manner. This will ensure an adequate scale and intensity of open market operations, dampen short-term disruptions in liquidity conditions and fluctuations in the central level of money‑market rates, soothe market sentiment and expectations, and maintain reasonably ample, stable, and moderately accommodative market liquidity—keeping liquidity conditions neither too tight nor too loose, but broadly balanced and dynamically aligned. In doing so, it will help stabilize overall market liquidity and the balance between supply and demand for funds, while also keeping funding costs at reasonable levels and guiding market interest rates to fluctuate around policy rates.
In addition, Pang Ming noted that the People’s Bank of China still has room to cut the reserve requirement ratio in the near term. By injecting long-term liquidity and lowering banks’ funding costs, it can bolster financial institutions’ willingness and ability to extend credit, strengthen counter-cyclical policy adjustments, and coordinate with fiscal policy to deliver targeted, robust, and well‑timed support—thereby fostering a conducive monetary and financial environment that underpins the economy’s sustained, high‑quality growth.
In addition, on August 21—just a few days ago—the National Interbank Funding Center released the latest Loan Prime Rate (LPR) quotations: the one-year LPR was cut by 10 basis points to 3.45%, while the five-year rate remained unchanged. Wang Yunjin, a senior researcher at the Zhixin Investment Research Institute, noted that this round of rate cuts may not yet be over and that further reductions could still occur in the fourth quarter.
In Wang Yunjin’s view, domestic demand in China remains notably weak. The People’s Bank of China will continue to refine its policy‑rate framework to help keep corporate financing and household borrowing costs on a steady downward trajectory, as there is still solid market demand for interest-rate cuts. With commercial banks facing significant cost pressures on the liability side, the central bank will deploy tools such as further reductions in policy rates, a cut in the reserve requirement ratio, or an expansion of open‑market operations to push interest rates lower.
In addition, the likelihood of a reserve requirement ratio cut in the third quarter has increased. According to Wang Yunjin, between September and December, a substantial RMB 2.4 trillion in medium-term lending facility (MLF) maturities is due, while market liquidity has begun to tighten slightly. With the pace of government bond issuance expected to accelerate and robust demand for funding to boost domestic demand, a modest 0.25 percentage-point reduction in the reserve requirement ratio in the third quarter would be needed to bolster banks’ liquidity, lower their funding costs at an early stage, and encourage them to step up credit extension. At the same time, expanding the money supply would help mitigate potential liquidity risks among certain enterprises and financial institutions, thereby guarding against the emergence of systemic risks.

Commercial & Corporate
Five departments have issued a notice to standardize data services provided by currency brokerage offices.
According to the website of the National Administration of Financial Regulation, in order to standardize data services provided by money brokerage offices, encourage the lawful and appropriate use of data, ensure data security, enhance market information transparency, promote fair competition, and foster high-quality industry development, the National Administration of Financial Regulation, the People’s Bank of China, the China Securities Regulatory Commission, the Cyberspace Administration of China, and the State Administration of Foreign Exchange recently issued a notice on matters related to the regulation of data services offered by money brokerage offices. The specific contents of the notice are as follows:
I. Strengthen data governance to ensure data security.
(1) Currency brokerage offices engaging in data processing and providing data services to the market shall comply with applicable laws and regulations and uphold business ethics; respect social morality and ethical standards; fulfill their obligations to safeguard data security; refrain from jeopardizing national security, financial stability, or the public interest; and avoid infringing upon the legitimate rights and interests of financial institutions.
(II) Currency brokerage offices shall integrate data governance into their corporate governance framework, establish a data security governance system aligned with their business development objectives, refine their data security management policies, strengthen the standardized professional conduct of brokerage personnel, develop a security protection mechanism that covers the entire data lifecycle and all applicable use cases, conduct data security risk monitoring and assessment, and ensure the safe and sound delivery of data services.
(3) Currency brokerage offices shall strictly comply with information technology regulatory requirements, strengthen the establishment of an information technology risk management framework, enhance their capacity to manage risks associated with IT outsourcing, rigorously control access permissions to production systems, reinforce data security safeguards, and ensure network and data security.
II. Standardize data provision standards to enhance the quality of data services.
(4) With the authorization and consent of the trading institution, a money brokerage office may provide the market with the trading institution’s quotation data and trade‑intention data. Such data shall adhere to the principles of “minimum necessity, protection of client privacy, and facilitation of information sharing,” and shall not disclose any information that could identify the parties to the transaction. The standards for data provision are set out in Annex 1, except for data subject to other provisions under applicable laws, regulations, or supervisory requirements.
(5) Currency brokerage offices shall strengthen the review of the qualifications of trading institutions and traders, shall not accept quotations from institutions or individuals that do not meet the准入 requirements of the interbank market or the exchange‑traded market, and shall not include such quotations in their data‑service offerings.
(6) When a currency brokerage office identifies errors in the quotation parameters of a trading institution or quotations that clearly deviate from prevailing market conditions, it shall verify such information with the trading institution prior to publication, thereby preventing the dissemination of erroneous quotes and mitigating the impact of abnormal data on the market.
(7) Currency brokerage offices shall strictly comply with regulatory requirements for data reporting and, in accordance with applicable provisions, submit relevant business data to financial regulatory authorities and relevant self-regulatory organizations.
III. Clarify the scope of institutions eligible to receive data services and strengthen collaborative governance.
(8) The financial regulatory authorities, in consultation with the Cyberspace Administration of China, shall establish a list of financial infrastructures, financial information service providers, and other institutions that are authorized to receive data services from currency brokerage offices (see Annex 2), and shall dynamically adjust the scope of such institutions based on actual circumstances.
(9) Currency brokerage offices shall, in accordance with market‑based principles, engage in data‑service collaborations with financial information service providers and other commercial entities, and establish and implement admission, assessment, and exit mechanisms for their data‑service partners to ensure that such partners use and manage data in compliance with applicable laws and regulations.

IV. Enter into Service Agreements to Standardize Data Usage
(10) Currency brokerage offices shall enter into agreements with data users, such as financial infrastructure providers and financial information service providers, clearly defining the rights and obligations of both parties and making explicit provisions regarding data security, data presentation, processing and use, secondary distribution, service fees, and other relevant matters. The framework for such agreements is set out in Annex 3.
(11) With respect to financial information service providers and financial infrastructure entities that use data for market‑data display, value‑added services, or other commercial purposes (except where such use is non‑profitable and no fees are charged to their users), money brokerage offices may, in accordance with commercial principles, levy reasonable data‑service fees to cover the costs of data provision and to promote fair market transactions.
(12) Financial regulatory authorities shall strengthen oversight and supervision of data services provided by money brokerage offices, and, in cases of violations of laws, regulations, or the provisions set forth in this Notice, shall impose regulatory measures or administrative penalties in accordance with the law.
The China Banking Association, the China Securities Industry Association, the China Foreign Exchange Trade System, the National Association of Financial Market Institutional Investors, and the Shanghai, Shenzhen, and Beijing stock exchanges, among others, exercise self-regulatory oversight over the data services provided by money brokerage offices in accordance with relevant regulations.

In August, the national carbon market price surged; in September, carbon prices are expected to rise across the board.
With the launch of quota allocation and compliance for the 2021 and 2022 periods, the national carbon market has seen a sharp surge in prices. Since August, the average daily closing price of the national carbon allowance (CEA) has stood at RMB 69.07 per tonne, marking a further substantial increase of 13.21% from last month’s peak and recently hitting a new all-time high since the national carbon market began trading.
According to the results of the Fudan Carbon Price Index for September 2023, recently released by the Center for Sustainable Development at Fudan University (hereinafter referred to as the “Center”), both the national carbon market’s CEA and CCER price indices are expected to continue rising across the board in September.
In August, the national carbon market price “soared.”
The Ministry of Ecology and Environment recently announced that the national carbon emissions trading market has recently commenced the allocation of allowances and compliance procedures for the 2021 and 2022 periods. At present, allowance allocation has been largely completed, and the settlement and compliance process is now fully underway.
With the launch of work related to the second compliance period, prices in China’s national carbon market have surged since August. According to the research center’s summary of August’s market performance, the average daily closing price of the China Emissions Allowance (CEA) has stood at 69.07 yuan per tonne since August 2023, marking a further sharp increase of 13.21% from last month’s peak. This month, the closing price broke through 70 yuan per tonne for the first time and, on the 23rd, reached a new all-time high since the national carbon market began trading.
In terms of trading volume, the national carbon market has remained robust since August, with monthly allowance transactions exceeding 7.32 million tonnes—marking a new annual high for single-month trading. On more than two-thirds of trading days, volumes surpassed 100,000 tonnes, and the average daily turnover reached 385,800 tonnes.
“Overall, the national carbon market in August exhibited the following salient features: first, price volatility increased, with prices repeatedly hitting new highs; second, trading remained robust, with a substantial surge in transaction volume,” the research center stated.
The CEA and CCER price indices are expected to rise across the board in September.
The Fudan Carbon Price Index, released concurrently by the research center, shows that in September, the expected purchase price for national carbon emission allowances is RMB 70.27 per tonne, the expected sale price is RMB 74.19 per tonne, and the midpoint price is RMB 72.23 per tonne. The purchase‑price index stands at 175.67, up 21.54%; the sale‑price index is 167.40, up 20.56%; and the midpoint‑price index is 171.32, up 21.03%. Meanwhile, for September 2023, the expected purchase price for using China Certified Emission Reduction (CCER) credits to fulfill compliance obligations in the national carbon market is RMB 59.74 per tonne, the expected sale price is RMB 62.84 per tonne, and the midpoint price is RMB 61.29 per tonne. The purchase‑price index is 150.18, up 8.05%; the sale‑price index is 151.17, up 8.16%; and the midpoint‑price index is 150.68, up 8.10%.
Regarding local pilot carbon markets, in September, the expected purchase price for CCERs used for compliance in Beijing and Shanghai is RMB 65.75 per ton, with an expected sale price of RMB 71.16 per ton; in Guangzhou, the expected purchase price is RMB 63.73 per ton, and the expected sale price is RMB 68.64 per ton; in other pilot carbon markets, the expected purchase price is RMB 58.01 per ton, and the expected sale price is RMB 62.46 per ton.
The research center reported that in September, CCER price indices across both the national carbon market and the pilot markets generally rose. In the national carbon market, there is a 95% probability that CCER prices used for compliance will fall within the range of RMB 59.74–62.84 per tonne, marking a significant increase from the previous month. After nearly four months of divergent trends, although the Beijing–Shanghai and Guangzhou markets continue to lead, the price differentials among regional markets have narrowed considerably and are gradually converging.
The Ministry of Ecology and Environment recently stated that it aims to launch the national voluntary greenhouse gas emission reduction trading market as soon as possible this year, thereby effectively leveraging the market mechanism to curb greenhouse gas emissions and foster innovation in green and low-carbon technologies.

Fiscal policy once again emphasizes “strengthening力度 and improving effectiveness,” with multiple measures set to be accelerated.
Minister of Finance Liu Kun stated at a recent meeting of the Standing Committee of the National People’s Congress that efforts will be stepped up to ensure the effective and efficient implementation of an active fiscal policy. He added that, going forward, measures such as accelerating the disbursement of fiscal expenditures, speeding up the issuance of special-purpose bonds, and rolling out tax and fee reductions will be expedited.
In the first seven months of this year, broad‑based fiscal spending totaled approximately RMB 20.1 trillion, down about 5% year on year, yet still maintaining a relatively robust level of expenditure. However, constrained by insufficient revenue and compounded by cuts in local government spending, the pace of fiscal outlays has lagged slightly behind that of previous years.
According to data from the Ministry of Finance, in the first seven months, national general public budget expenditures increased by 3.3% year on year, a deceleration of 0.6 percentage points compared with the first half of the year; the budget execution rate stood at 55.1%, below the five-year average of 56.5% for the same period.
Liu Kun stated that efforts will be stepped up to strengthen monitoring of fiscal and economic performance and conduct in-depth situational analysis, closely track the implementation of local and departmental budgets, make full use of the direct‑allocation mechanism for fiscal funds, appropriately accelerate the pace of fiscal spending, comprehensively enhance the efficiency of fund disbursement, and ensure the timely and effective implementation of all fiscal and tax policies.
“Over the first seven months of this year, the gap in the pace of public fiscal revenue and expenditure has widened further. Judging from the deficit‑utilization rate, there is room for a faster ramp-up of fiscal spending going forward,” said Zhong Zhengsheng, Chief Economist at Ping An Securities. He added that, in response to shifts in economic growth momentum, adjusting the scale and timing of fiscal outlays—while providing support without overextending resources—will serve as the “bottom line” for counter‑cyclical fiscal policy.
The issuance of special-purpose bonds is a key tool for implementing an active fiscal policy. According to data from the Ministry of Finance, in the first seven months of this year, the country issued 2.9706 trillion yuan in new bonds, including 473.5 billion yuan in general bonds and 2.4971 trillion yuan in special-purpose bonds.
As August began, the issuance of new special-purpose bonds accelerated markedly. Liu Kun stated that this year’s newly issued special bonds are expected to be largely allocated by the end of September, and the funds from these bonds earmarked for project construction are slated to be fully disbursed by the end of October. Efforts are underway to broaden the scope of eligible investment areas and the range of projects that can use such bonds as equity capital, thereby leveraging and stimulating private investment. At the same time, measures will be strengthened to enhance project pipeline management and post‑investment oversight.
Zhang Yiqun, vice chairman of the China Fiscal Budget Performance Committee, stated that the third quarter will be the fastest period for local government bond issuance throughout the year. By steadily increasing government debt‑financed investment and accelerating the pace of spending, this approach is expected to attract follow‑on private capital and stimulate growth in consumer spending.
“Apart from agricultural water‑conservancy projects such as flood‑control and disaster‑relief initiatives and the reconstruction of water‑damaged infrastructure, investment will increasingly focus on building new types of infrastructure, including data centers and artificial intelligence. In practical terms, it is possible that local government bond funds will gradually make moderate inroads into certain competitive sectors that are fundamental to long‑term national development and people’s livelihoods, thereby enhancing both the returns and safety of bond investments and, more importantly, addressing the shortfall in market demand for such investments,” said Zhang Yiqun.
One of the key priorities Liu Kun highlighted is to strengthen coordination and synergy among fiscal, monetary, and other policies. In this regard, industry observers generally agree that, amid efforts to stabilize growth in the fourth quarter, policy‑driven and development‑oriented financial instruments remain viable options.
Wang Qing, Chief Macro Analyst at Orient Securities, believes that special-purpose bonds and policy-based development finance instruments will be the primary pillars supporting fiscal funding for infrastructure investment going forward. The issuance of special-purpose bonds is expected to accelerate significantly in August and September, with banks providing matching funds to follow suit. In addition to speeding up the issuance and deployment of these bonds, the role of policy-based development finance tools will also be further leveraged, and an increase in their allocation cannot be ruled out.
Tax and fee reduction policies also constitute a key component of the proactive fiscal policy in the second half of the year. Recently, in order to stabilize market expectations and ease the burden on businesses and individuals, the Ministry of Finance and several other departments have rolled out a package of measures to extend existing tax and fee relief policies. For example, the preferential policy allowing year-end bonuses to be taxed separately under individual income tax, the exemption from additional tax payments for individual income tax settlements up to 400 yuan, and the VAT reductions and exemptions for small and micro enterprises have all been extended through the end of 2027. In addition, the Ministry of Finance and other authorities have introduced targeted measures, such as halving the stamp duty on securities transactions, to invigorate the capital markets and bolster investor confidence.

The Ministry of Industry and Information Technology has issued the “Implementation Opinions on Building and Applying a Technological Innovation System for the Manufacturing Sector.”
Recently, the Ministry of Industry and Information Technology issued the “Opinions on Building and Applying a Technological Innovation System for the Manufacturing Sector” (MIIT Science and Technology [2023] No. 122, hereinafter referred to as the “Opinions”). To facilitate a better understanding and implementation of these Opinions, an interpretation of the relevant provisions is provided below:
I. What is the background behind the issuance of the “Implementation Opinions”?
To implement the spirit of the 20th National Congress of the Communist Party of China and the relevant decisions and arrangements for promoting high-quality development of the manufacturing sector, and to advance the intelligent, green, and integrated transformation of industries, the Ministry of Industry and Information Technology has organized the issuance of the “Implementation Opinions.” These opinions aim to comprehensively assess the current state of industrial technologies, effectively carry out technological breakthroughs, facilitate the commercialization of research outcomes, and promote advanced, applicable technologies. By focusing on key technology supply chains—covering typical manufacturing products, bill of materials, and leading manufacturers—and on technology support chains—including R&D and design tools, production equipment, standards, quality assurance, management services, and critical software—the Ministry seeks to establish a systematic, standardized technological framework. This framework will underpin the enhancement of industrial foundational capabilities, foster new systemic competitive advantages, achieve a high level of self-reliance and strength in industrial science and technology, and accelerate the process of new‑type industrialization.
II. What are the work objectives of the “Implementation Opinions”?
In line with a three-year planning horizon and a five-year outlook, the Implementation Opinions set forth two-phase objectives: In the first phase, by 2025, a scientific, practical, and standardized methodology for building a manufacturing‑technology innovation system will be established; a technology framework covering key products across all major manufacturing sectors will be essentially in place; and, through tiered classification, repositories will be created for addressing technological bottlenecks, building up strengths, and promoting advanced, applicable technologies. Through effective implementation, the technology system will begin to demonstrate tangible benefits in areas such as industry‑wide technological breakthroughs, commercialization of scientific and technological achievements, dissemination of new technologies, strengthening and supplementing industrial chains, cluster‑based development, and enterprise supply‑chain management. In the second phase, by 2027, an advanced manufacturing‑technology innovation system will be fully in place, forming a comprehensive network of horizontally coordinated and vertically integrated technological capabilities. This system will be comprehensively applied to industrial R&D, technology transfer, and the promotion of new technologies, providing robust guidance for local manufacturing innovation and agglomeration, while effectively helping enterprises establish cutting‑edge R&D frameworks and sound supply‑chain management practices. In doing so, it will offer critical support for achieving self-reliance and high‑quality development in the manufacturing sector.
III. What is the main framework of the manufacturing industry’s technological innovation system?
The technical system can be summarized as “1295”: by segmenting processes according to the product‑manufacturing workflow or product architecture, a cohesive analytical framework is established; centered on two main threads—industrial technology supply and support—a comprehensive inventory of nine categories is developed, including key technologies, materials, enterprises, R&D and design tools, production‑manufacturing equipment, quality, standards, management services, and critical software; and, based on models of technological and manufacturing maturity, gaps between domestic and international benchmarks are assessed, resulting in five evaluation tiers.
IV. How should the manufacturing sector’s technological innovation system be constructed, evaluated, updated, and expanded?
The technical system has established a full‑process closed-loop management mechanism, with construction, evaluation, updating, and expansion as its core components. Specifically:
In terms of development, we will systematically map and analyze key technologies, materials, enterprises, R&D and design tools, production equipment, quality standards, management services, and critical software, organizing them into nine distinct inventories aligned with product‑manufacturing processes or component‑assembly stages. Based on technology maturity and manufacturing‑industry maturity, a five‑tier rating scale will be established to conduct both overall and detailed assessments. Regarding evaluation, a comprehensive assessment will be carried out, taking into account the system’s comprehensiveness, timeliness, precision, and level of advancement. Periodic evaluations will also be conducted to assess how the technology framework supports strategic scientific and technological breakthroughs, informs project guidelines, manages project execution, and facilitates appraisal and acceptance procedures. For updates, a technology‑system information‑monitoring service platform will be established to enable continuous, real‑time tracking of the framework. In response to technological progress, product iterations, and evolving industry applications, the technology system will be promptly revised and updated. Finally, in the area of expansion, we will address bottlenecks and critical constraints associated with flagship products in priority sectors by conducting in‑depth problem analysis and rigorous evaluations. This will progressively refine the technology‑system architecture, creating an integrated, multi‑layered framework that ensures seamless interconnection and deepening across all levels.
V. What are the main application areas supported by the manufacturing technology innovation system?
The “Implementation Opinions” outline six major areas of application: First, supporting breakthroughs in critical core technologies. A catalog of key core technology R&D projects will be established to ensure comprehensiveness and accuracy, preventing omissions and redundant project approvals. At the same time, this effort will be effectively aligned with the Key R&D Program for Scientific and Technological Innovation, major science and technology special projects, the Industrial Foundation Reconstruction Project, and the Major Technical Equipment Breakthrough Project. Second, supporting the industrialization of scientific and technological achievements. An inventory of results will be compiled, and industrialization initiatives will be carried out on a categorized basis, fostering collaborative synergy among enterprises, universities, and research institutions. Efforts will also be intensified to strengthen intermediate-scale pilot testing capabilities and provide comprehensive support services for commercialization. Third, supporting the dissemination of advanced, applicable technologies. By precisely identifying areas of competitive advantage, a catalog of such technologies will be developed, leveraging the roles of industry associations and specialized agencies and making effective use of standards and certification mechanisms. Fourth, supporting the development of foundational industrial technical capabilities. A systematic review of these capabilities will be conducted, underpinning efforts to formulate and promote standards, enhance quality‑testing and experimental capacities, improve metrology infrastructure, and bolster capabilities related to scientific and technological成果, industrial information, and intellectual property. Fifth, supporting regional industrial development. Targeted measures will be implemented to reinforce and extend industrial chains, coupled with tailored investment promotion strategies. High‑quality enterprises will be nurtured and attracted, fostering a tiered ecosystem of high‑level innovative offices. Regional industrial infrastructure will be coordinated to deepen specialization and facilitate agglomeration‑driven growth. Sixth, supporting corporate R&D and supply chain management. The current state of corporate R&D and supply chain operations will be accurately assessed, enabling optimization of R&D management systems, more effective R&D execution, strengthened supply chain oversight, and the establishment of robust risk‑early warning and prevention mechanisms.
VI. What safeguards are in place to ensure the smooth implementation of the “Implementation Opinions”?
First, strengthen overall coordination. Establish a working mechanism featuring central–local collaboration and multi‑stakeholder synergy, bringing together leading enterprises, industry associations, industrial alliances, universities, research institutes, and specialized think tanks to pool resources and create synergies. Second, reinforce foundational support. Enhance the capacity of industrial technology infrastructure service platforms, key laboratories, and standardization bodies, and conduct multi‑level training on methodologies for building and applying technical systems. Third, prioritize data security. Put in place advanced data security management mechanisms, implement tiered and classified management in accordance with regulations, and conduct regular data risk assessments of technical system development and application efforts. Fourth, promote open cooperation. Strengthen joint construction, sharing, and exchange among regions, industries, and departments, fostering deep collaboration across the value chain and leveraging complementary strengths in innovation. At the same time, bolster international exchanges and cooperation in technology, as well as soft connectivity in areas such as markets and regulatory frameworks.

The State Administration for Market Regulation plans to issue the “Enforcement Guidelines on the Identifiability of Internet Advertising.”
On August 28, the website of the State Administration for Market Regulation published an announcement soliciting public comments on the “Enforcement Guidelines on the Identifiability of Internet Advertising (Draft for Public Comment).” The deadline for submitting feedback is September 27.
The Guidelines clarify that when internet advertisers use textual labeling, they must prominently mark such content as “Advertisement” and may not substitute terms like “Sponsored,” “Promoted,” “Recommended,” or “AD.” Furthermore, if advertisements are disseminated in the form of product or service introductions, experience sharing, consumer reviews, or similar formats, accompanied by purchase links or other purchasing mechanisms, the advertiser must clearly indicate that the content is an advertisement. Where news reports include detailed information—such as the business address, telephone number, email address, website, QR code, product barcode, or instant‑messaging app account—of a goods operator or service provider, such content shall be deemed to constitute disguised advertising in the guise of news reporting, unless it pertains to public oversight, emergency measures addressing product quality, or charitable activities such as poverty alleviation and assistance.

Taxation
The two departments have extended the policy on individual income tax for year-end one-time bonuses.
To further ease the tax burden on taxpayers, the Ministry of Finance and the State Taxation Administration issued a public announcement on the 28th, clarifying the extension of the policy on individual income tax for year-end lump-sum bonuses.
According to the announcement, if an individual resident receives a one-time annual bonus that meets the requirements set forth in the “Notice of the State Administration of Taxation on Adjusting the Method for Calculating and Collecting Individual Income Tax on One-Time Annual Bonuses and Other Items” (Guo Shui Fa [2005] No. 9), such bonus shall not be included in the individual’s annual comprehensive income. Instead, the applicable tax rate and quick deduction amount shall be determined based on the quotient obtained by dividing the total one-time annual bonus by 12 months, using the monthly‑converted comprehensive income tax rate schedule, and the tax shall be calculated separately. At the same time, individual residents may also elect to include the one-time annual bonus in their annual comprehensive income for tax calculation purposes. This announcement shall remain in effect until December 31, 2027.
On the same day, the two departments also issued several public announcements, clarifying that a number of preferential policies related to individual income tax will continue to be implemented.
The announcement clarifies that, from January 1, 2024, to December 31, 2027, resident individuals whose annual comprehensive income does not exceed RMB 120,000 and who are required to file an annual tax reconciliation and pay any additional tax, or whose annual reconciliation‑and‑supplement‑tax amount does not exceed RMB 400, shall be exempt from filing the annual individual income tax reconciliation for comprehensive income. This exemption does not apply where, at the time the comprehensive income is received, the withholding agent has failed to withhold and remit taxes in accordance with the law.
In addition, the personal income tax policies applicable to foreign nationals’ allowances and subsidies, as well as the personal income tax policy for deep-sea seafarers, will remain in effect until December 31, 2027.

LITIGATION & ARBITRATION
The second draft of the revised Civil Procedure Law has refined the system of procedures for foreign-related civil litigation.
The second draft of the amendment to the Civil Procedure Law was submitted on the 28th to the Fifth Session of the Standing Committee of the 14th National People’s Congress for deliberation. The second draft focuses on revising and improving the system of civil litigation procedures involving foreign elements, which will help further enhance the quality and efficiency of adjudicating such cases, better safeguard the parties’ procedural rights and legitimate interests, and more effectively protect China’s sovereignty, security, and development interests.
In December 2022, the 38th session of the Standing Committee of the 13th National People’s Congress conducted a first reading of the draft amendment to the Civil Procedure Law. Based on feedback from various quarters, the second‑reading draft submitted for consideration at this session of the Standing Committee includes the following key revisions: refining provisions on territorial jurisdiction in foreign-related cases; appropriately addressing conflicts of jurisdiction and improving relevant rules; enhancing provisions on service of process in foreign-related cases; clarifying the criteria for determining the jurisdiction of foreign courts; and adding provisions to ensure consistency with foreign state immunity laws.
For example, the second‑reading draft provides that, in the same dispute between the parties, if one party brings an action before a foreign court while the other party brings an action before a people’s court, or if one party brings actions simultaneously before both a foreign court and a people’s court, the people’s court may accept the case where it has jurisdiction under this Law. If the parties have entered into an exclusive choice‑of‑court agreement designating a foreign court as the competent forum, provided that such agreement does not contravene the provisions of this Law on exclusive jurisdiction and does not impinge upon the sovereignty, security, or public interests of the People’s Republic of China, the people’s court may issue a ruling dismissing the lawsuit.

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