JC Master Legal News Issue 814

Key Takeaways for This Issue
The China Securities Regulatory Commission has issued the “Several Opinions on Launching a Pilot Program for Innovative Enterprises to Issue Stocks or Depositary Receipts Domestically.”
With the approval of the State Council, the General Office of the State Council has forwarded the China Securities Regulatory Commission’s “Several Opinions on Launching a Pilot Program for Innovative Enterprises to Issue Stocks or Depositary Receipts Domestically.” The main contents include: first, the eligible entities and the selection mechanism; second, the issuance conditions and review procedures for pilot enterprises; third, information disclosure and ongoing supervision of pilot enterprises; and fourth, investor protection.
The Ministry of Finance has issued the “Notice on Regulating Issues Related to Financial Institutions’ Investment and Financing Activities with Local Governments and State-Owned Enterprises.”
Recently, the Ministry of Finance issued the “Notice on Regulating Financial Institutions’ Investment and Financing Activities Involving Local Governments and State-Owned Enterprises.” The notice aims to standardize such investment and financing activities, synergize with policies on local government debt management, and jointly prevent and mitigate risks associated with local government debt.
The State Council has finalized measures to deepen VAT reform.
Recently, the State Council Executive Meeting approved measures to deepen VAT reform, further reducing the tax burden on market entities. The three tax-cutting measures adopted at the meeting are expected to lower the tax burden on market entities by more than 400 billion yuan for the year.
Zhejiang and Shanghai’s public security, procuratorial, and judicial authorities have successively issued documents: severely cracking down on the criminal offense of “loan-trap” schemes.
Recently, the public security, procuratorial, and judicial authorities in Zhejiang and Shanghai have jointly issued documents to severely crack down on the criminal offense of “loan‑trapping.” The documents provide clear guidelines on overarching requirements, case classification, the determination of the amount involved in joint offenses, and the handling of assets related to such cases.
The Central Commission for Comprehensively Deepening Reform has adopted the “Guiding Opinions on Regulating Asset Management Business of Financial Institutions.”
On March 28, the Central Commission for Comprehensively Deepening Reform adopted the “Guiding Opinions on Regulating Asset Management Business of Financial Institutions.” The meeting emphasized that regulating financial institutions’ asset management business requires a holistic approach that covers the entire asset management industry, integrates macroprudential and microprudential supervision, and combines institutional oversight with functional regulation. It also calls for the establishment of unified regulatory standards across asset management product types, the implementation of fair market access and supervision, the maximization of efforts to eliminate regulatory arbitrage, and the promotion of the sound and orderly development of asset management activities.

Table of Contents
Table of Contents

Finance & Capital Markets
The China Securities Regulatory Commission has issued the “Several Opinions on Launching a Pilot Program for Innovative Enterprises to Issue Stocks or Depositary Receipts Domestically.”
The China Securities Regulatory Commission has issued the Measures for the Supervision and Administration of Integrity in the Securities and Futures Markets.
The China Securities Regulatory Commission has officially issued the “Guidelines on Internal Controls for Investment Banking Activities of Securities Companies.”
The Asset Management Association of China has issued the “Decision on Further Strengthening Self-Regulatory Management in the Private Fund Industry.”
The Asset Management Association of China has issued the “Guidelines on Valuation of Private Equity Investments in Unlisted Companies (Trial).”

Corporate & Commercial
The Ministry of Finance has issued the “Notice on Regulating Financial Institutions’ Investment and Financing Activities Involving Local Governments and State-Owned Enterprises.”
The Ministry of Human Resources and Social Security and the Ministry of Finance have issued the “Guiding Opinions on Establishing a Mechanism for Determining Basic Old-Age Insurance Benefits for Urban and Rural Residents and for Regularly Adjusting the Basic Pension.”
The National Development and Reform Commission has promulgated the “Regulations on Engineering Projects Subject to Mandatory Tendering.”
New regulations on scan‑code payment limits take effect on the 1st.

Taxation
The State Council has finalized measures to deepen VAT reform.
Four departments have issued the “Notice on Relevant Corporate Income Tax Policies for Integrated Circuit Manufacturing Enterprises.”

Litigation & Arbitration
Zhejiang and Shanghai’s public security, procuratorial, and judicial authorities have successively issued documents: severely cracking down on the criminal offense of “loan-trap” schemes.
Zhongjiang Trust Involved in the Dalian Machine Tool “Radish Stamp” Scandal

Other
The Central Commission for Comprehensively Deepening Reform has adopted the “Guiding Opinions on Regulating Asset Management Business of Financial Institutions.”
People’s Bank of China Monetary and Gold & Silver Work Conference: Launching Rectification and Cleanup Efforts Targeting All Types of Virtual Currencies

Finance & Capital Markets
The China Securities Regulatory Commission has issued the “Several Opinions on Launching a Pilot Program for Innovative Enterprises to Issue Stocks or Depositary Receipts Domestically.”
With the approval of the State Council, the General Office of the State Council has forwarded the China Securities Regulatory Commission’s “Several Opinions on Launching a Pilot Program for Innovative Enterprises to Issue Stocks or Depositary Receipts Domestically” (hereinafter referred to as the “Several Opinions”). Going forward, the CSRC will strengthen coordination and cooperation with local authorities and relevant departments, promptly refine the related supporting systems and regulatory rules, and steadily advance the pilot program.
The main components of the pilot program include:
First, the pilot program’s target entities and selection mechanism. The pilot is primarily aimed at a select group of innovative enterprises that align with national strategies, possess core competitiveness, enjoy high market recognition, and operate in cutting-edge sectors such as the internet, big data, cloud computing, artificial intelligence, software and integrated circuits, high-end equipment manufacturing, and biopharmaceuticals—provided they have reached a substantial scale. With respect to selection criteria: (1) for red-chip companies already listed overseas, the market capitalization must be no less than RMB 200 billion; (2) for innovative enterprises not yet listed overseas—including both red-chip companies and domestically registered offices—their revenue for the most recent year must be no less than RMB 3 billion, with a valuation of no less than RMB 20 billion; alternatively, they must demonstrate rapid revenue growth, possess independently developed technologies that are internationally leading, and hold a relative competitive advantage within their respective industries. The specific criteria will be formulated by the China Securities Regulatory Commission (CSRC). As for the selection process, the CSRC has established an Advisory Committee on the Industrialization of Scientific and Technological Innovation, which will fully leverage the expertise of relevant industry regulators and academic experts, comprehensively weigh pertinent factors, and rigorously screen eligible pilot enterprises.
Second, the issuance criteria and review mechanisms for pilot enterprises. Under this pilot program, eligible red-chip enterprises may, in accordance with prescribed procedures, issue depositary receipts for listing on the domestic capital market; pilot red-chip enterprises that meet the conditions for stock issuance and listing may also apply to issue and list shares domestically; and domestically incorporated pilot enterprises may likewise apply to issue and list shares within China.
Third, information disclosure and day-to-day supervision of pilot enterprises. When pilot enterprises issue shares or depositary receipts within China, all related activities—including issuance, listing, and trading—are subject to the existing securities laws. The China Securities Regulatory Commission (CSRC) exercises oversight in accordance with the Securities Law, the “Several Opinions,” and other relevant regulations.
Fourth, investor protection requirements for the pilot program. For pilot enterprises issuing shares, the existing domestic investor protection regime applicable to share offerings shall apply. Controlling shareholders, actual controllers, directors, and senior management of pilot enterprises that have not yet achieved profitability shall refrain from reducing their holdings of pre‑IPO shares until the enterprise becomes profitable.

The China Securities Regulatory Commission has issued the Measures for the Supervision and Administration of Integrity in the Securities and Futures Markets.
Recently, the China Securities Regulatory Commission issued the revised Measures for the Supervision and Administration of Integrity in the Securities and Futures Markets (hereinafter referred to as the “Measures”). The revised Measures comprise six chapters and 50 articles, covering general provisions, the collection and management of integrity information, the disclosure and inquiry of such information, mechanisms for integrity‑based constraints, incentives, and guidance, supervision and administration, and supplementary provisions. This revision places particular emphasis on seven key areas:
First, the scope of entities covered by integrity information and the range of information included have been expanded, achieving full‑coverage integrity supervision in the capital market. Second, a “blacklist” system has been established for publicly disclosing information on serious violations and breaches of trust. Third, an integrity‑commitment mechanism has been put in place at the market‑access stage to rigorously screen applicants. Fourth, an integrity‑points management system has been introduced for major market participants, enabling classified regulatory oversight based on their integrity profiles. Fifth, a “green channel” for administrative licensing has been established to incentivize good faith, granting priority review to applicants with exemplary integrity records. Sixth, a robust system for querying the integrity status of market participants has been put in place, strengthening self‑regulation and accountability in market transactions. Seventh, post‑event regulatory measures have been reinforced through integrity‑based constraints, ensuring that integrity records are consulted at every stage and in every step of the regulatory process and serving as a key factor in determining appropriate enforcement actions.

The China Securities Regulatory Commission has officially issued the “Guidelines on Internal Controls for Investment Banking Activities of Securities Companies.”
Recently, the China Securities Regulatory Commission officially issued the “Guidelines on Internal Controls for Investment Banking Activities of Securities Offices.” The Guidelines comprise eight chapters and 103 articles, outlining requirements in four key areas:
First, by focusing on the key contradictions and salient issues in the management and operation of investment banking business, and by setting forth requirements for centralized and unified oversight of business origination and execution, the refinement of the business‑governance framework, and the standardization of compensation and incentive mechanisms, we aim to address the root causes of risks in investment banking—namely, inadequate control over business activities and excessive incentives.
Second, the emphasis is on standardizing internal control requirements for investment banking activities. Based on a thorough review of existing internal control standards across different offices and various types of investment‑banking business, a set of uniform industry‑wide internal control requirements has been distilled, covering internal control processes, ongoing supervision and fiduciary management, as well as inquiry and verification procedures, work‑log maintenance, and working‑paper management. Moreover, when a securities office operates multiple business lines that concurrently engage in similar investment‑banking activities, it is explicitly required to adopt consistent professional and internal control standards, thereby preventing inconsistencies among these lines.
Third, we will refine the basic “three-line defense” framework—comprising project teams, business units, quality control, and the internal review and compliance‑risk management functions—so as to establish an internal control system for investment banking activities that features a rational division of responsibilities, clear delineation of powers and duties, mutual checks and balances, and effective oversight. At the same time, we will clearly define the scope of responsibilities for each internal control function, emphasizing that project teams and business units strengthen front‑line execution and management, while quality control implements end‑to‑end process oversight. Meanwhile, the internal review function rigorously manages office‑level gatekeeping, and compliance‑risk management reinforces external supervision, thereby ensuring that all parties fulfill their respective roles and responsibilities. This approach seeks to prevent the blurring or overlap of duties arising from unclear delineations of responsibilities and divisions of labor, thus enhancing the efficiency of internal controls in investment banking operations.
Fourth, emphasis is placed on the effectiveness of internal controls over investment banking activities, with detailed specifications for the specific forms of duty performance at each line of defense. Strengthened standardization and guidance are provided at the execution level for project initiation, quality control, and the internal review committee, among other processes. Concrete requirements are set forth regarding staffing of internal control functions, the composition and proportions of meeting participants in project‑approval and internal‑review committees, voting mechanisms, on-site inspections, and other aspects, thereby addressing issues such as perfunctory procedures and formalism that have persisted in practice.

The Asset Management Association of China has issued the “Decision on Further Strengthening Self-Regulatory Management in the Private Fund Industry.”
Recently, the Asset Management Association of China issued the “Decision on Further Strengthening Self-Regulatory Management in the Private Fund Industry,” with the following key provisions:
I. Leveraging Mediation to Safeguard Investors’ Legitimate Rights and Interests. Private fund managers shall conscientiously fulfill their obligations of honesty, trustworthiness, diligence, and due care, and proactively assume social responsibility. The Association encourages private fund managers to engage in lawful settlements with investors or other relevant parties, to actively shoulder the civil liabilities prescribed by laws and regulations and agreed upon in contracts, and to promptly provide explanations or take measures to mitigate or eliminate any adverse impacts. For private fund managers that voluntarily clarify the circumstances or implement proactive measures to address adverse effects, the Association will refrain from initiating investigations, imposing disciplinary sanctions, or adopting further self-regulatory measures, and will recommend to the regulatory authorities that administrative penalties be reduced or waived in accordance with the law.
II. Enhance the industry’s reputation and safeguard members’ legitimate rights and interests. Further tighten the criteria for private fund managers seeking association membership, refine the admission process, and systematically guide such entities to join the association. Private fund managers with unresolved complaints, adverse public sentiment, or significant operational risks will be denied membership.
III. Uphold industry standards and establish a rapid response mechanism for handling institutions engaged in abnormal operations. For private fund managers that have been investigated by judicial or regulatory authorities and determined to no longer meet registration requirements, the Association will directly issue a public notice of cancellation based on the findings of such investigations. For non‑member private fund managers exhibiting abnormal operational circumstances and failing to proactively mitigate adverse effects, the Association requires them to engage a law office to submit a legal opinion clarifying whether they continue to comply with registration requirements. If a manager fails to submit such a legal opinion, or if the legal opinion concludes that the manager no longer meets registration criteria, the Association will publicly announce its cancellation. For private fund managers facing significant operational risks, or those under investigation with unresolved outcomes, the Association will suspend the acceptance of new fund registration applications, applications for material changes involving such managers, and registration applications for newly established private fund management entities affiliated with them. The Association will rigorously hold practitioners accountable: senior management personnel holding fund‑industry qualifications at institutions canceled due to serious violations of laws or regulations will have their qualifications revoked and be placed on a blacklist. Following the cancellation of a private fund manager’s registration, the relevant entity shall be prohibited from raising or establishing new private funds; any privately‑funded products already registered must be properly liquidated in accordance with applicable laws, regulations, and contractual agreements, thereby safeguarding the legitimate rights and interests of investors.
IV. Leverage the role of lawyers and establish a sound accountability mechanism. A robust accountability framework shall be put in place for legal opinions issued in connection with the registration of private fund managers. Within one year of issuing such a legal opinion, if the relevant private fund manager is publicly announced as having been deregistered, no further legal opinions on registration submitted by the same law office or lawyer shall be accepted for a period of three years.

The Asset Management Association of China has issued the “Guidelines on Valuation of Private Equity Investments in Unlisted Companies (Trial).”
On March 30, the Asset Management Association of China issued the “Guidance on Valuation of Private Equity Investments in Non‑Listed Companies (Trial),” which will take effect on July 1. The Guidance comprises three sections: General Provisions, Valuation Principles, and Valuation Methods. Its key contents include:
First, the scope of application of the Guidelines is clearly defined. The Guidelines stipulate that equity investments in unlisted companies by private equity funds fall within their purview; for companies listed on the National Equities Exchange and Quotations System but exhibiting inactive trading, the Guidelines may be applied by analogy. Second, the responsibilities of valuation entities are strengthened. The Guidelines require that private equity fund managers, as the primary parties accountable for valuation, assume managerial responsibility for the valuation methods and parameters employed, and regularly validate their valuation conclusions to guard against significant deviations. Third, consistency in valuation techniques is maintained. The Guidelines mandate that fund managers estimate the fair value of each individual investment on the valuation date, and that the same valuation technique be applied consistently across all investments with similar asset characteristics on each valuation date. Fourth, the principle of fair‑value valuation is emphasized. The Guidelines stipulate that, when determining the fair value of unlisted equity, fund managers must adhere to the principle that substance prevails over form. Fifth, assumptions underlying the valuation of unlisted equity are specified. The Guidelines provide that, in estimating the fair value of unlisted equity, fund managers should assume that a transaction to sell such equity has occurred on the valuation date, and base the measurement of its fair value on the price of that hypothetical transaction. Sixth, comprehensive considerations for selecting valuation techniques are outlined. The Guidelines require private equity fund managers to take into account both the valuation subject and relevant market conditions, while also accounting for differences in rights and obligations among various rounds of equity financing, and to choose among multiple valuation methods drawn from different approaches; they may also employ scenario analysis to integrate several valuation techniques. Seventh, reverse‑testing of valuations is prescribed. The Guidelines establish a reverse‑testing mechanism, requiring private equity fund managers to monitor and analyze any material discrepancies between the exit prices of unlisted equity investments and the fair values estimated during the holding period. Eighth, five specific valuation methods, their applicable scenarios, and corresponding implementation guidelines are set forth.

Commercial & Corporate
The Ministry of Finance has issued the “Notice on Regulating Issues Related to Financial Institutions’ Investment and Financing Activities with Local Governments and State-Owned Enterprises.”
Recently, the Ministry of Finance issued the “Notice on Regulating Financial Institutions’ Investment and Financing Activities Involving Local Governments and State-Owned Enterprises” (Cai Jin [2018] No. 23, hereinafter referred to as the “Notice”). The Notice aims to standardize financial institutions’ investment and financing activities with local governments and state-owned enterprises, synergizing with policies such as local government debt management to jointly prevent and mitigate risks associated with local government debt.
The Notice comprises seventeen provisions. First, it addresses overarching requirements and key review priorities. It mandates that state-owned financial institutions strictly comply with the Budget Law and other relevant regulations, ensuring that their investment and financing activities are conducted in a standardized manner when supporting local development and infrastructure projects. The Notice specifies that such institutions must strengthen “penetrative” scrutiny of capital contributions and prudently assess the repayment capacity of borrowing entities, thereby ensuring that their own operating cash flows can cover both principal and interest on maturing debts. Second, it focuses on risk prevention and control in critical areas such as investment funds, asset management, and public–private partnerships (PPPs). State-owned financial institutions are prohibited from providing support for local governments’ illegal or disguised borrowing when establishing investment funds in partnership with local authorities, engaging in asset management or financial intermediary services, or participating in PPP project financing. Policy-based and development-oriented financial institutions, as well as government-backed guarantee agencies, are required to operate in accordance with market‑based principles. In addition, the Notice makes clear that state-owned financial institutions may not extend unified credit lines to local governments. Third, it sets forth requirements for financial and capital management, along with performance evaluation criteria. It stipulates that state-owned financial institutions must rigorously adhere to applicable regulations governing capital contribution management, financial administration, and property rights management, so as to mitigate financial risks and prevent the loss of state‑owned assets. These institutions are also required to actively cooperate with rectification efforts; those found to have provided financing in violation of laws or regulations will see their performance ratings downgraded. Furthermore, the responsibilities of fiscal authorities for oversight and inspection are clearly defined.

The Ministry of Human Resources and Social Security and the Ministry of Finance have issued the “Guiding Opinions on Establishing a Mechanism for Determining Basic Old-Age Insurance Benefits for Urban and Rural Residents and for Regularly Adjusting the Basic Pension.”
The Ministry of Human Resources and Social Security and the Ministry of Finance recently issued the “Guiding Opinions on Establishing a Mechanism for Determining Basic Old-Age Insurance Benefits for Urban and Rural Residents and for Regularly Adjusting the Basic Pension.” The opinions stipulate the establishment of four key mechanisms for the basic old-age insurance system for urban and rural residents, ensuring the preservation and appreciation of funds in individual accounts. They also call for gradually raising the level of benefits under this system in line with economic development.
The “Guiding Opinions” clearly stipulate the need to refine and establish four mechanisms, with the main contents including:
First, the mechanism for determining benefits has been improved. The basic old-age insurance benefits for urban and rural residents consist of a basic pension and an individual account pension, and the mechanisms for determining each have been clearly defined.
Second, a mechanism for the regular adjustment of basic pensions shall be established. It is clarified that the Ministry of Human Resources and Social Security, in coordination with the Ministry of Finance, shall, taking into account factors such as the growth of urban and rural residents’ incomes, changes in the price level, and adjustments to other social security standards—including those for the basic old-age insurance for employees—promptly propose a plan to adjust the national minimum standard for basic pensions, which shall then be submitted to the CPC Central Committee and the State Council for approval. As for adjustments to local basic pensions, the local human resources and social security authorities, in conjunction with the finance departments, shall formulate a proposal and submit it to the corresponding-level Party committee and government for approval.
Third, a mechanism for adjusting individual contribution levels has been established. It is stipulated that local authorities shall, in light of changes in urban and rural residents’ incomes, reasonably determine and adjust the contribution tiers for the basic old-age insurance scheme, thereby providing options for urban and rural residents.
Fourth, establish a mechanism for adjusting contribution subsidies. It is clarified that local authorities shall, in light of economic development, increases in individual contribution rates, and fiscal capacity, appropriately adjust the level of basic old-age insurance contribution subsidies for urban and rural residents, and put in place a dynamic adjustment mechanism for such subsidies, thereby encouraging urban and rural residents to opt for higher‑tier contribution levels.

The National Development and Reform Commission has promulgated the “Regulations on Engineering Projects Subject to Mandatory Tendering.”
With the approval of the State Council, the National Development and Reform Commission recently issued the “Regulations on Engineering Projects Subject to Mandatory Tendering” (Order No. 16 of the NDRC), significantly narrowing the scope of engineering projects that are required to undergo tendering. The main contents are as follows:
The main revisions address three key areas: First, the scope of projects subject to mandatory tendering has been narrowed. With respect to the nature of funding, the “projects that are wholly or partially funded by state-owned capital or national financing” stipulated in Article 3 of the Tendering and Bidding Law have been clarified as those financed by budgetary funds totaling RMB 2 million or more, where such funds account for at least 10% of the total investment, as well as projects financed by state-owned enterprises and public institutions where these entities hold a controlling or dominant stake. In terms of specific project categories, the State Council’s development and reform authority, in conjunction with relevant departments, is authorized to formulate, on the principle of necessity and strict limitation, detailed criteria for large-scale infrastructure, public utility, and other projects that affect public interest and safety, and to submit these criteria to the State Council for approval. At present, the National Development and Reform Commission, together with relevant departments, has drafted corresponding specific scopes, which represent a substantial reduction compared with Order No. 3; upon submission for State Council approval, these will be promulgated prior to the official implementation of the Regulations on Projects Subject to Mandatory Tendering. Second, the threshold levels for mandatory tendering have been raised. In line with the level of economic and social development, the tendering threshold for construction works has been increased to RMB 4 million, for the procurement of major equipment and materials to RMB 2 million, and for services such as surveying, design, and supervision to RMB 1 million—each representing a doubling relative to Order No. 3. Third, a unified national scale standard has been established. The provision in Order No. 3 stating that “the people’s governments of provinces, autonomous regions, and municipalities directly under the central government may, based on local conditions, specify the particular scope and scale standards for projects requiring tendering within their respective jurisdictions, but shall not narrow the scope of projects required to undergo tendering as defined herein” has been deleted, thereby ensuring that uniform rules apply nationwide and that no further adjustments may be made at the local level.

New regulations on scan‑code payment limits take effect on the 1st.
According to the barcode payment business regulations previously issued by the People’s Bank of China, starting from the 1st, scan‑based payments will be subject to tiered transaction limits. The China Payments & Clearing Association advises consumers to heighten their security awareness, strengthen the management of mobile devices and other personal gadgets, and opt for more secure barcode payment methods whenever possible. Among the new rules on barcode payments, the “500‑yuan limit” has drawn the most attention. Under the new regulations, for transactions using static barcodes, the total daily transaction amount per customer—whether through a single bank account or across all payment accounts—must not exceed 500 yuan.
“This limit applies only to static‑barcode payments,” said a spokesperson for the China Payments & Clearing Association. “In other words, it covers transactions typically made by scanning QR codes posted at street stalls and small convenience stores—payment methods that have fewer risk‑control measures and lower security.”
With the implementation of new payment regulations, the China Payments & Clearing Association advises consumers not to scan QR codes indiscriminately to avoid the risk of malware or malicious software being installed. Smart devices should be subject to robust security management, with regular “health checks” performed on mobile phones, and users should refrain from opening suspicious websites or downloading untrusted apps. The Association also recommends that, where feasible, consumers proactively request dynamic barcode payments—such as asking merchants to use a barcode scanner for transactions or scanning a merchant‑provided dynamic QR code.
If a payment institution is found to be in violation of regulations, consumers may file a real-name report through the Payment and Settlement Violation Reporting System of the China Payments & Clearing Association.

Taxation TAXATATION
The State Council has finalized measures to deepen VAT reform.
Recently, the State Council Executive Meeting approved measures to deepen VAT reform, further reducing the tax burden on market entities. The three tax-cutting measures adopted at the meeting are expected to lower the tax burden on market entities by more than 400 billion yuan for the year.
In accordance with the arrangements of the CPC Central Committee and the State Council, and in order to further improve the tax system, support the development of the real economy—including manufacturing and small and micro enterprises—and continue to reduce the burden on market entities, the meeting decided that, effective May 1, 2018: first, the value-added tax rate for industries such as manufacturing will be reduced from 17% to 16%, and the rate for sectors including transportation, construction, and basic telecommunications services, as well as for goods such as agricultural products, will be lowered from 11% to 10%; second, the threshold for small-scale VAT taxpayers will be standardized. The annual sales thresholds for small-scale taxpayers in the industrial and commercial sectors will be raised from RMB 500,000 and RMB 800,000, respectively, to RMB 5 million, and, for a specified period, enterprises already registered as general taxpayers will be permitted to re-register as small-scale taxpayers, enabling more businesses to benefit from the preferential tax treatment under the lower tax rate; third, eligible enterprises in advanced manufacturing sectors such as equipment manufacturing, modern service industries such as research and development, and power grid enterprises will receive a one-time refund of any outstanding input VAT credits that remain undeducted over a specified period.

Four departments have issued the “Notice on Relevant Corporate Income Tax Policies for Integrated Circuit Manufacturing Enterprises.”
Recently, the Ministry of Finance, the State Taxation Administration, the National Development and Reform Commission, and the Ministry of Industry and Information Technology jointly issued the “Notice on Relevant Corporate Income Tax Policies for Integrated Circuit Manufacturing Enterprises.” The key provisions are as follows: For integrated circuit manufacturing enterprises or projects established through new investment after January 1, 2018, with a process node of less than 130 nanometers and an operating period of at least 10 years, corporate income tax shall be exempted for the first two years, and levied at half the statutory rate of 25% from the third to the fifth year, with this preferential treatment continuing until the end of the prescribed period. For such enterprises or projects established through new investment after January 1, 2018, with a process node of less than 65 nanometers or a total investment exceeding RMB 15 billion and an operating period of at least 15 years, corporate income tax shall be exempted for the first five years, and levied at half the statutory rate of 25% from the sixth to the tenth year, with this preferential treatment also extending until the end of the prescribed period.

LITIGATION & ARBITRATION
Zhejiang and Shanghai’s public security, procuratorial, and judicial authorities have successively issued documents: severely cracking down on the criminal offense of “loan-trap” schemes.
Recently, the public security, procuratorial, and judicial authorities in Zhejiang and Shanghai have jointly issued documents to severely crack down on the criminal offense of “loan‑trapping.” The documents provide clear guidelines on overarching requirements, case classification, the determination of the amount involved in joint offenses, and the handling of assets related to such cases.
With regard to the legal characterization of such cases, the key considerations fall into three main areas: First, the classification of “routine loan” criminal cases must be determined holistically, taking into account the essential features of each case. The subjective intent of “routine loan” offenses is the unlawful appropriation of public or private property, and some perpetrators exhibit the characteristics of organized crime groups. Second, suspects and defendants, under various pretexts—such as “default penalties,” “security deposits,” “brokerage fees,” “service charges,” or “industry norms”—deceive victims into signing contracts that artificially inflate the loan amount, dual‑track loan agreements, mortgage contracts, and other types of arrangements clearly disadvantageous to the victim, or enter into related oral agreements. They then fabricate documents or evidence of fund disbursements and concoct spurious grounds to unilaterally declare the victim in breach of contract and demand repayment of the inflated debt. When the victim is unable to repay, they proceed to exert pressure on the victim or their close relatives through debt collection or by leveraging the fabricated, prejudicial evidence to file civil lawsuits, thereby seeking to appropriate the victim’s or their relatives’ lawful property. In general, such conduct should be prosecuted and punished as a property‑related crime. Third, in “routine loan” cases, where certain suspects or defendants are unaware of the true nature of the lending arrangement yet assist in committing acts such as intentional injury, illegal detention, or interference with the victim’s or their relatives’ normal life, or help fabricate facts to initiate civil litigation, and where these actions satisfy the constituent elements of the crimes of intentional injury, illegal detention, provoking trouble, illegal entry into another person’s residence, or filing a false lawsuit, those suspects or defendants shall be held criminally liable under the corresponding charges.

Zhongjiang Trust Involved in the Dalian Machine Tool “Radish Stamp” Scandal
In August 2016, Dalian Machine Tool sought cooperative financing from Zhongjiang Trust, presenting two strong assets: first, Dalian Gaojin Technology provided a guarantee for the management‑controlled investment company; second, Dalian Machine Tool offered nearly RMB 760 million in accounts receivable it “legally owns” from Huizhou BYD Electronics Co., Ltd.
Following due diligence and risk-control reviews, Zhongjiang Trust launched a trust product titled “Zhongjiang International·Jinhe No. 189 Dalian Machine Tool Industry Investment Collective Fund Trust Plan” (hereinafter referred to as “Jinhe No. 189”). Subsequently, Dalian Machine Tool defaulted and entered bankruptcy reorganization. It was only during the process of pursuing Dalian Machine Tool’s debts that Zhongjiang Trust discovered that the RMB 760 million accounts receivable held by Dalian Machine Tool from BYD Electronics in Huizhou were fictitious, and that the official seal used was a forged one.
According to reports, Jinhe No. 189 has raised a total of RMB 600 million, divided into two tranches of RMB 300 million each. Interest is paid semi-annually. The proceeds will be used to bolster the company’s liquidity, enhance Dalian Machine Tool’s ability to sustain operations, and improve its asset liquidity. Repayment will be sourced from the operating revenues of Dalian Machine Tool Group and Dalian Gaojin Technology Development Co., Ltd.

Other
The Central Commission for Comprehensively Deepening Reform has adopted the “Guiding Opinions on Regulating Asset Management Business of Financial Institutions.”
On March 28, Xi Jinping, General Secretary of the CPC Central Committee, President of the People’s Republic of China, Chairman of the Central Military Commission, and Director of the Central Commission for Comprehensively Deepening Reform, presided over the first meeting of the Central Commission for Comprehensively Deepening Reform in the afternoon and delivered an important speech. The meeting adopted the “Guiding Opinions on Regulating Asset Management Business of Financial Institutions.” It was noted that regulating financial institutions’ asset management business requires a holistic approach that covers the entire asset management industry, integrates macroprudential management with microprudential supervision, and combines institutional regulation with functional regulation. Standardized regulatory frameworks should be applied uniformly across different types of asset management products, ensuring fair market access and oversight, minimizing opportunities for regulatory arbitrage, and fostering the sound development of the asset management sector.

People’s Bank of China Monetary and Gold & Silver Work Conference: Launching Rectification and Cleanup Efforts Targeting All Types of Virtual Currencies
On March 28, 2018, the People’s Bank of China convened the 2018 National Teleconference on Currency and Gold & Silver Work. The meeting comprehensively reviewed the achievements made in currency and gold‑silver work over recent years, conducted an in-depth analysis of the current situation and challenges, and outlined key priorities for 2018. Fan Yifei, Member of the Party Committee and Vice Governor of the People’s Bank of China, attended the meeting and delivered a speech, emphasizing the following points:
First, we will further intensify reform and innovation, steadily advance the research and development of central bank digital currency, continuously refine the management of commemorative coin issuance, vigorously promote the transformation of banknote processing center operations and the issuance vault system, and strengthen efforts in non-standard gold and silver inspection as well as research on monetary history.
Second, we will focus on enhancing the quality of cash services, diligently carry out tasks related to the upgrade of the fifth series of Renminbi, continuously improve cash service standards, and steadily refine cash‑service infrastructure.
Third, we will rigorously strengthen both internal management and external oversight, attach great importance to and effectively enhance the quality control of the Renminbi, implement large‑value cash management, establish a regulatory framework for cash‑sorting enterprises in full compliance with the law, carry out rectification and cleanup of various virtual currencies, strive to build an integrated “five‑in‑one” mechanism for combating counterfeit currency, and reinforce the regulation of the market for Renminbi‑related collectibles, thereby safeguarding the orderly circulation of the Renminbi.

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