JC Master Legal News Issue 822

Key Takeaways for This Issue
The China Securities Regulatory Commission and the People’s Bank of China have jointly issued the “Guiding Opinions on Further Regulating Internet Sales and Redemption Services for Money Market Funds.”
To effectively prevent and control financial risks, the China Securities Regulatory Commission and the People’s Bank of China recently jointly issued the “Guiding Opinions on Further Regulating Internet Sales and Redemption Services for Money Market Funds.”

The Shanghai Stock Exchange has launched a public consultation on revisions to the rules governing the closing auction trading mechanism.
Recently, the Shanghai Stock Exchange issued a notice proposing to adjust its closing‑session trading mechanism by adopting a closing‑session call auction to determine the closing price. The Exchange has also opened a public consultation on the revised rules governing closing‑session trading, with the consultation period ending on June 17, 2018.

The China Banking and Insurance Regulatory Commission has issued the “Administrative Measures for Joint Credit Granting by Banking Financial Institutions (Trial).”
To curb multiple‑lending and excessive‑financing practices and effectively manage significant credit risks, the China Banking and Insurance Regulatory Commission has issued the Measures for the Administration of Joint Credit Granting by Banking Financial Institutions (Trial) and launched pilot programs.

The Shenzhen Stock Exchange strengthens law-based market governance to safeguard the legitimate rights and interests of market entities.
On May 24, 2018, the Shenzhen Stock Exchange Listing Committee held its first hearing to deliberate on the proposed decision to delist the shares of Yinji EnCarbon New Materials Group Co., Ltd. (hereinafter referred to as “*ST EnCarbon” or the “Company”), and heard the parties’ arguments on the spot.

The launch event for the inclusion of A-shares in the MSCI was held at the Shanghai Stock Exchange.
Following the market close on May 31, 2018, A‑shares were officially included in the MSCI Emerging Markets Index. This marked the first formal inclusion since MSCI launched a global consultation in June 2013 regarding the integration of A‑shares into the index.

Table of Contents
Table of Contents

Finance & Capital Markets
The China Securities Regulatory Commission and the People’s Bank of China jointly issued the “Guiding Opinions on Further Regulating Internet Sales and Redemption Services for Money Market Funds.” Meanwhile, the China Banking and Insurance Regulatory Commission promulgated the “Administrative Measures for Joint Credit Granting by Banking Financial Institutions (Trial).”
The launch event for the inclusion of A-shares in the MSCI was held at the Shanghai Stock Exchange.
The Shanghai Stock Exchange has launched a public consultation on revisions to the rules governing the closing auction trading mechanism.
The Shenzhen Stock Exchange has established a regular on-site inspection mechanism for its members, accelerating the development of a trading‑behavior regulatory model centered on member oversight.

Corporate & Commercial
The Shanghai Stock Exchange plans to adjust its closing trading mechanism: adopting a call auction system.
Focused on unicorns: Huaxia, E Fund, and four other offices were the first to file their products.
Suzhou City and Jiading District of Shanghai have signed a strategic cooperation framework agreement to build the core circle of Jia‑Kun‑Tai.
Three government departments have issued the strictest-ever photovoltaic policy.
The Provincial Department of Commerce has announced the list of Jiangsu Province’s 2017 Demonstration Markets for Transformation and Upgrading.

Taxation
The State Taxation Administration has instructed tax authorities in Jiangsu and other localities to investigate and verify the tax-related issues involved in “yin-yang contracts” used by film and television industry professionals.
Cash rewards for the commercialization of official scientific and technological achievements are eligible for individual income tax incentives.

Litigation & Arbitration
The Supreme People’s Court has released typical cases of online infringement upon the rights and interests of minors.
Prosecutorial organs in eight provinces, autonomous regions, and municipalities have launched a pilot program for conducting roving inspections of prisons.

Other
Public Notice of the First Batch of 31 “Deadbeat” Entities in the Capital Market
The development of an intellectual property operation service system continues to advance.

Finance & Capital Markets
The China Securities Regulatory Commission and the People’s Bank of China have jointly issued the “Guiding Opinions on Further Regulating Internet Sales and Redemption Services for Money Market Funds.”
To effectively prevent and control financial risks, the China Securities Regulatory Commission and the People’s Bank of China recently jointly issued the “Guiding Opinions on Further Regulating Internet Sales and Redemption Services for Money Market Funds” (hereinafter referred to as the “Guiding Opinions”).
The “Guiding Opinions” set forth requirements primarily in the following five areas:
First, in the process of internet-based sales of money market funds, the principles of “three enhancements and six prohibitions” must be strictly enforced. Specifically: strengthen requirements for licensed operations; ensure closed-loop management of fund‑sale settlement funds and mandate that such funds be deposited and withdrawn only through the same bank account; and uphold fair competition in fund‑sale activities. It is prohibited for unlicensed entities to engage in fund‑sale activities; they are also forbidden from retaining investors’ fund‑sale information. Furthermore, no institution or individual may misappropriate fund‑sale settlement funds; these funds may not be used for “T+0 redemption and withdrawal” services; unauthorized transfers of fund shares are strictly prohibited; and any discriminatory, exclusive, or tied‑selling practices targeting funds are likewise forbidden.
Second, a cap is imposed on “T+0 redemption and withdrawal.” For each individual investor’s holdings in a single money market fund, a daily limit of RMB 10,000 is set for “T+0 redemption and withdrawal” transactions at any given fund sales institution. Normal redemptions in accordance with the contract terms remain unaffected.
Third, except for commercial banks that have obtained fund sales qualifications, other institutions or individuals are prohibited from providing any form of advance funding for “T+0 redemption and cash withdrawal” services.
Fourth, standardize the promotional and information-disclosure activities related to the “T+0 redemption and withdrawal” services offered by fund managers and fund sales institutions, strengthen risk disclosures, and strictly prohibit misleading investors.
Fifth, non-bank payment institutions are prohibited from offering value-added services that enable direct payments using money market fund shares; from engaging in, or indirectly engaging in, the sale of money market funds; and from providing advance funding for “T+0 redemption and withdrawal” services.
The “Guiding Opinions” shall enter into force on June 1, 2018. In view of the time required for industry institutions to implement the requirements set forth in the “Guiding Opinions,” a one-month transition period is granted for setting the upper limit on the scale of existing‑business restructuring, and a six-month transition period is provided for the advance‑funding model applicable to such restructuring. Relevant market institutions are expected to strictly comply with the “Guiding Opinions,” fulfill their respective responsibilities, complete the standardized rectification of existing business, strengthen risk awareness, strive to enhance their compliance and risk‑control capabilities, and promote the stable and sound development of money market funds.

The China Banking and Insurance Regulatory Commission has issued the “Administrative Measures for Joint Credit Granting by Banking Financial Institutions (Trial).”
To curb multiple‑lending and excessive‑financing practices and effectively manage significant credit risks, the China Banking and Insurance Regulatory Commission has issued the Measures for the Administration of Joint Credit Granting by Banking Financial Institutions (Trial) (hereinafter referred to as the “Measures”) and has launched pilot programs.
Promoting joint credit granting among banking and financial institutions is an important measure to implement the CPC Central Committee and the State Council’s requirements for reducing corporate leverage and for preventing and defusing major financial risks. The implementation of this regulation, together with the launch of pilot programs, will play a crucial role in establishing and improving a comprehensive mechanism for banking and financial institutions to manage corporate credit risk, thereby curbing multiple‑lending and excessive‑financing practices. At the same time, the joint credit‑granting mechanism will also contribute positively to optimizing the allocation of financial resources, enhancing the efficiency of capital utilization, and supporting supply-side structural reform.
The Measures comprise 42 articles organized into six chapters, which clarify the objectives, scope of application, and fundamental operating principles of the joint credit‑granting mechanism; establish an operational management framework that includes member bank agreements, bank‑enterprise agreements, and a joint meeting system; define risk‑prevention mechanisms such as information sharing, joint credit‑limit management, and financing ledger management; set forth the risk‑response and resolution procedures for banking financial institutions when an enterprise enters a risk‑early‑warning state; and specify disciplinary measures applicable to enterprises and banking financial institutions that violate the regulations.
To ensure the steady implementation of the joint credit‑granting mechanism, the China Banking and Insurance Regulatory Commission has instructed all local banking regulatory bureaus to select, within their jurisdictions, enterprises that are representative in terms of business nature, industry, and size to carry out pilot projects on joint credit granting, and has set forth specific requirements regarding the organization and coordination, ongoing monitoring and guidance, as well as evaluation and summarization of these pilot initiatives.

The launch event for the inclusion of A-shares in the MSCI was held at the Shanghai Stock Exchange.
Following the market close on May 31, 2018, A‑shares were officially included in the MSCI Emerging Markets Index. This marked the first formal inclusion since MSCI launched a global consultation in June 2013 on integrating A‑shares into the index. After the close of trading that day, a brief yet solemn launch ceremony was held in the trading hall of the Shanghai Stock Exchange, where officials from the Shanghai Municipal Government, MSCI, and the Shanghai and Shenzhen stock exchanges, along with representatives from approximately eighty domestic and international financial institutions, jointly witnessed this further landmark moment in the opening-up of China’s capital markets.

The Shanghai Stock Exchange has launched a public consultation on revisions to the rules governing the closing auction trading mechanism.
Recently, the Shanghai Stock Exchange issued a notice proposing to adjust its closing‑session trading mechanism by adopting a closing‑session call auction to determine the closing price. The Exchange has also opened a public consultation on the revised rules governing closing‑session trading, with the consultation period ending on June 17, 2018.
Relevant officials at the Shanghai Stock Exchange stated that the closing auction is one of the primary mechanisms used in international securities markets to determine the closing price. Following extensive and rigorous research, the Exchange has concluded that adopting a closing auction helps ensure price stability during the final trading session.
Going forward, the SSE will thoroughly solicit input from all stakeholders, refine the relevant provisions of the rules, and issue and implement them upon approval by the China Securities Regulatory Commission.

The Shenzhen Stock Exchange has established a regular on-site inspection mechanism for its members, accelerating the development of a trading‑behavior regulatory model centered on member oversight.
In May 2018, the Shenzhen Stock Exchange, in collaboration with relevant securities regulatory bureaus, launched a special on-site inspection of the trading‑behavior management and investor suitability practices of seven member offices. This marked the second such targeted on-site inspection of members conducted by the Shenzhen Stock Exchange since last year, signaling the formal establishment of a regularized mechanism for member‑level on-site inspections and representing a further solid step forward in accelerating the refinement of a trading‑behavior regulatory model centered on member oversight.
Establishing a normalized mechanism for on-site inspections of market participants is an important measure taken by the Shenzhen Stock Exchange to implement the decisions and arrangements of the China Securities Regulatory Commission and to strengthen law-based, comprehensive, and stringent regulation. The Exchange’s routine on-site inspections are problem‑oriented, conducted annually on members that exhibit frequent abnormal trading activities or demonstrate poor compliance in their oversight practices; another round is scheduled for the second half of this year. In terms of content, this inspection focuses on the typical issues and weak links identified during the 2017 on-site review, while also conducting spot checks on members’ implementation of the new regulations governing investor suitability management, ensuring thoroughness, precision, and depth. As for objectives, the approach emphasizes reinforcing regulatory standards through inspection and driving improvements via scrutiny, thereby enhancing the deterrent effect of the Exchange’s self‑regulatory rules and encouraging members to trace the root causes of existing problems, make targeted corrections, and continuously refine their practices, thus elevating their awareness and capabilities in client management. At the same time, the inspection serves as an opportunity to communicate the latest regulatory guidelines and requirements to members, deepening their understanding of the regulatory framework—particularly among frontline staff—and laying a solid foundation for the subsequent promulgation and implementation of relevant rules.
Following the conclusion of this on-site inspection, the Shenzhen Stock Exchange will provide feedback to the relevant members, requiring them to submit detailed remediation plans and imposing appropriate self-regulatory measures on those with identified issues, thereby urging them to implement effective rectification and operate in compliance. In addition, the Exchange will, through a variety of channels—including specialized training sessions, thematic meetings, and field visits—communicate to all members the salient problems and weak links uncovered during the inspection, guiding them to conduct self-assessments, address deficiencies, and continuously enhance client management across the industry.
A relevant official from the Shenzhen Stock Exchange stated that, in recent years, the Exchange has earnestly implemented the China Securities Regulatory Commission’s requirements to establish a trading‑behavior regulatory model centered on member offices, proactively fulfilled its frontline supervisory duties, addressed institutional gaps, innovated regulatory approaches, and put in place a sound, standardized, institutionalized, and routine on‑site inspection mechanism. By continuously strengthening oversight and accountability for members’ performance of their duties, the Exchange has achieved phased results. The Exchange’s regulatory efforts are gradually gaining the understanding, recognition, and support of its members; members’ awareness of cooperating with and voluntarily accepting regulatory oversight continues to grow, and a positive momentum has emerged in which members and the Exchange work together to uphold market trading order.
Going forward, the Shenzhen Stock Exchange will be guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, earnestly implement the spirit of the 19th National Congress of the Communist Party of China, the Central Economic Work Conference, and the National Financial Work Conference, deepen financial system reform, improve the regulatory framework, strengthen routine supervision and inspection, and advance the implementation of a trading‑behavior oversight model centered on member offices. The Exchange will organize and guide its members to further align their thinking and build consensus, jointly shouldering the mission and responsibility of safeguarding against risks in the capital market, resolutely winning the tough battle of preventing and defusing risks, and promoting the long-term stability and sound development of a multi‑tiered capital market.
Commercial & Corporate
The Shanghai Stock Exchange plans to adjust its closing trading mechanism: adopting a call auction system.
At a press conference held on the 1st, the Shanghai Stock Exchange announced its plan to revise the closing‑session trading mechanism by adopting a closing‑session call auction to determine the closing price. The exchange has publicly sought market feedback on the proposed amendments to the relevant rules governing closing‑session trading, with the consultation period closing on June 17.
According to available information, the rules currently open for public comment include the “Shanghai Stock Exchange Trading Rules” (hereinafter referred to as the “Trading Rules”), the “Shanghai Stock Exchange Bond Trading Implementation Rules,” the “Shanghai Stock Exchange Measures for the Implementation of the Shanghai–Hong Kong Stock Connect Program,” the “Shanghai Stock Exchange Measures for the Administration of Stock Trading on the Risk Alert Board,” and the “Shanghai Stock Exchange Detailed Rules for Real-Time Monitoring of Abnormal Securities Trading.”
The main revisions to the Trading Rules include: adjusting the schedule for continuous auction trading and specifying that the closing call auction phase runs from 14:57 to 15:00; and stipulating the order‑submission arrangements during the closing call auction phase, under which the SSE’s trading system will not accept cancellation orders.
With respect to the methodology for determining the closing price, the Shanghai Stock Exchange proposes to replace the existing approach—“the volume-weighted average price of all trades executed in the minute immediately preceding the security’s last trade on the day (including that last trade)” —with a new method based on the call auction. The Exchange has also specified procedures for setting the closing price in cases where the closing call auction fails to produce a valid closing price or where no closing call auction is conducted.
In addition, the rule amendments also clarify the procedures for handling situations where a trading suspension extends beyond 14:57 and requires resumption on the same day, specify the content of real-time market data disclosed during the closing auction, and set forth the arrangements applicable to buy and sell orders that remain unfilled during the opening session.
Other accompanying revisions to the rules include: amending the methodology for determining the closing price of bond spot transactions; clarifying the relevant arrangements when the daily quota under the Shanghai Stock Connect is fully utilized during the closing call auction phase; adjusting the resumption‑of‑trading timing for intraday temporary suspensions; and refining and specifying the scope of application of the “call auction phase,” among other changes.
The Shanghai Stock Exchange stated that, based on international experience, adopting a closing auction can to some extent mitigate the risk of abnormal trading and reduce price volatility during the closing phase, thereby helping to maintain price stability at market close. Going forward, the Exchange will thoroughly solicit input from all stakeholders, refine the relevant regulatory arrangements, and issue and implement the measures upon approval by the China Securities Regulatory Commission.

Targeting unicorns: Huaxia, E Fund, and four other offices were the first to file their products.
According to the latest information from the China Securities Regulatory Commission, six companies simultaneously filed applications on May 29 for a three-year closed-end strategic‑allocation flexible‑funds product. The announcement immediately drew significant attention across the fund industry.
The six major fund companies—Southern, China Asset Management, E Fund, Harvest, Huitianfu, and CMBC—have all simultaneously filed applications for a “3-Year Closed-End Strategic Allocation Flexible Allocation Hybrid Fund,” drawing widespread attention from the industry.
Industry insiders note that this represents a major milestone for public mutual funds. As the institutional framework for the return of “unicorn” companies to the A-share market continues to mature, public funds are playing an increasingly pivotal role. For instance, on May 4, the China Securities Regulatory Commission released the Draft Measures for the Issuance and Trading of Depositary Receipts, with public comments due by June 3. Meanwhile, recent reports indicate that red-chip technology offices listed overseas will soon issue CDRs (Chinese Depositary Receipts) on the Shanghai and Shenzhen stock exchanges, further fostering closer integration between Chinese technology enterprises and domestic capital.

Suzhou City and Jiading District of Shanghai have signed a strategic cooperation framework agreement to build the core circle of Jia‑Kun‑Tai.
Recently, the signing ceremony for the strategic cooperation of the Jiakun‑Tai Collaborative Innovation Core Circle was held in Suzhou. The cities of Suzhou and Jiading District of Shanghai jointly signed the “Strategic Framework Agreement on the Jiakun‑Tai Collaborative Innovation Core Circle” and jointly released the “Action Plan for Jointly Building the Jiading District–Kunshan City–Taicang City Collaborative Innovation Core Circle.” At this new starting point, they will map out a development community for Jiakun‑Tai, work together to establish the Jiakun‑Tai Collaborative Innovation Core Circle, and strive to make it a model zone for higher‑quality, integrated, collaborative innovation in the Yangtze River Delta. Attending the ceremony were Zhang Xi, Secretary of the Jiading District Party Committee and District Mayor; Li Yaping, Deputy Secretary of the Suzhou Municipal Party Committee and Mayor; leaders from Jiading District and Suzhou; Du Xiaogang, Secretary of the Kunshan Municipal Party Committee and Mayor, along with Vice Mayor Song Deqiang; as well as leaders from Taicang City. The Jiakun‑Tai Collaborative Innovation Core Circle will become a new cornerstone for collaborative innovation in the Yangtze River Delta, helping the region advance toward higher‑quality, integrated, collaborative innovation.

Three government departments have issued the strictest-ever photovoltaic policy.
The new photovoltaic policy issued on June 1 by the National Development and Reform Commission, the Ministry of Finance, and the National Energy Administration has slammed the brakes on China’s photovoltaic industry, which has experienced rapid growth in recent years.
The “Notice on Matters Relating to Photovoltaic Power Generation in 2018” (NDRC Energy [2018] No. 823), jointly issued by the three aforementioned departments, stipulates that no new quotas will be allocated this year for either utility‑scale or distributed photovoltaic projects, with a total cap of 10 GW (1 GW = 1,000 MW). Furthermore, starting from the date of issuance, the benchmark feed-in tariff for newly commissioned utility‑scale PV plants and the per‑kilowatt‑hour subsidy for distributed PV systems will both be reduced by 5 cents. This signals a major shift in China’s regulatory framework for the photovoltaic sector, driven by a substantial shortfall in renewable energy subsidies, with strict controls on project scale and quota allocation becoming the prevailing approach. In addition, poverty‑alleviation initiatives leveraging solar power continue to receive support.
The new policy states that, in light of the industry’s actual development conditions, no construction targets will be set for conventional photovoltaic power plants in 2018. Until the state issues official guidance to launch such projects, local authorities are prohibited from approving, in any form, the development of conventional PV plants that rely on national subsidies. This means that previously issued regional quotas—such as those in Zhejiang—have been rendered invalid. The National Energy Administration has characterized this measure as “both a means of alleviating grid‑integration challenges and a way to create room for the advancement of cutting‑edge technologies and high‑quality photovoltaic projects.”
Regarding distributed photovoltaic (PV) capacity, which saw a year-on-year increase of 370% last year, the new policy calls for standardizing its development: “This year, approximately 10 million kilowatts of capacity will be allocated to support the construction of distributed PV projects. Taking into account the existing installed base of distributed PV, the policy clarifies that all distributed PV projects connected to the grid on or before May 31 will be included within the scope of nationally approved capacity management; projects not covered by this national framework will receive local-level support in accordance with applicable laws.” However, according to industry analysts, China had already achieved—or was close to achieving—the target of adding 10 GW of new distributed PV capacity prior to the May 31 deadline. Any distributed PV projects exceeding this cap will have to rely on local subsidies or wait for next year’s allocation.
With regard to feed-in tariffs, the new policy adopts a “two cuts and one hold” approach: reducing the benchmark tariffs for photovoltaic power plants in resource zones I through III by 5 cents per kilowatt-hour each; lowering the per‑kilowatt‑hour subsidy for distributed photovoltaic generation by 5 cents; and keeping the tariff for photovoltaic poverty‑alleviation projects unchanged.
Several research offices forecast that, under the impact of the new policy, China’s newly installed photovoltaic capacity in 2018 could decline to around 35 GW. By contrast, last year’s total new installations reached 53.06 GW. This sharp drop in new capacity will undoubtedly place immense pressure on the domestic PV manufacturing sector, making a新一轮 of industry consolidation driven by falling equipment prices virtually inevitable. Leading companies with strong cost‑control capabilities can find support in overseas markets, while small and medium‑sized enterprises will struggle to weather the industry’s downturn.

The Provincial Department of Commerce has announced the list of Jiangsu Province’s 2017 Demonstration Markets for Transformation and Upgrading.
The Jiangsu Provincial Department of Commerce recently announced six “2017 Jiangsu Province Demonstration Markets for Transformation and Upgrading” across the province, namely: Jiangsu Lingjiatang Market Development Co., Ltd. (Changzhou), Changzhou Garment City, Suzhou Nanhuangqiao Market Development Co., Ltd., Nantong Tongzhou District Xinzhihao Industrial Co., Ltd., Pizhou Huanlemai Agricultural Products Wholesale Market Co., Ltd., and Pizhou Suyangshan Garlic Wholesale Trading Market Co., Ltd.
In accordance with the relevant provisions of the “Provisional Standards for the Establishment of Demonstration Markets for Transformation and Upgrading in Jiangsu Province” (issued in 2015), following enterprise applications, preliminary reviews by the commerce departments of prefecture-level cities, evaluations by third-party agencies, and public online announcements, the Jiangsu Provincial Department of Commerce designated six markets—including Jiangsu Lingjiatang Market Development Co., Ltd.—as “Jiangsu Province’s Demonstration Markets for Transformation and Upgrading in 2017” in mid-May. These markets share the following common characteristics: a business area exceeding 10,000 square meters; at least three years of normal operations; and transaction volumes ranking among the top in their respective categories across the province (with annual turnover exceeding RMB 3 billion over the past two years, including more than RMB 5 billion for production‑materials markets). Furthermore, these markets have achieved notable results and distinctive features in advancing the commercialization of trading venues, modernizing trading methods, professionalizing operational management, diversifying service offerings, enhancing logistics and distribution efficiency, expanding international market reach, and strengthening brand development. They have also actively adopted and developed new technologies, models, and business formats tailored to their specific circumstances, essentially completing the transition from traditional trading venues to modern, integrated service platforms. It is reported that the designation of “Demonstration Market” is valid for three years, and any market whose title is revoked may not reapply within that same three-year period.
Taxation TAXATATION
The State Taxation Administration has instructed tax authorities in Jiangsu and other localities to investigate and verify the tax-related issues involved in “yin-yang contracts” used by film and television industry professionals.
In response to recent online reports concerning tax-related issues in “yin-yang contracts” signed by film and television industry professionals, the State Taxation Administration has attached great importance to the matter and has instructed tax authorities in Jiangsu and other localities to conduct lawful investigations and verifications. Any violations of tax laws and regulations will be dealt with strictly in accordance with the law.
Building on the already implemented assessment and investigation into the tax compliance of certain high-income, high-risk film and television professionals, the State Taxation Administration will further strengthen risk‑based monitoring and analysis, intensify tax collection and administration efforts, and rigorously investigate and prosecute any violations of laws and regulations.

Cash rewards for the commercialization of official scientific and technological achievements are eligible for individual income tax incentives.
On May 30, the Ministry of Finance, the State Taxation Administration, and the Ministry of Science and Technology jointly issued the “Notice on the Individual Income Tax Policy Concerning Cash Rewards Received by Scientific and Technological Personnel for the Commercialization of Official Scientific and Technological Achievements,” clarifying that, effective July 1, 2018, non‑profit research and development institutions and higher education institutions duly approved under the law may, in accordance with the provisions of the Law on Promoting the Commercialization of Scientific and Technological Achievements, grant cash rewards to their scientific and technological personnel from the income generated through the commercialization of official scientific and technological achievements. Such rewards shall be taxed at a reduced rate of 50% when included in the recipients’ monthly “wages and salaries” income, and individual income tax shall be paid in accordance with the law.
The three departments stated that this measure aims to further support the implementation of the national strategy of mass entrepreneurship and innovation, and to promote the commercialization of scientific and technological achievements.
The Notice clarifies that “scientific and technological personnel” refers to individuals at non‑profit research institutions and universities who have made significant contributions to the completion or commercialization of official scientific and technological achievements. Non‑profit research institutions and universities are required, in accordance with relevant regulations, to publicly disclose the list of such personnel and related information (except for the commercialization of national defense patents). “Scientific and technological achievements” include patent technologies (including national defense patents), computer software copyrights, integrated circuit layout‑design proprietary rights, new plant variety rights, new biopharmaceutical varieties, as well as other technological achievements designated by the Ministry of Science and Technology, the Ministry of Finance, and the State Taxation Administration.
Furthermore, according to the Notice, the commercialization of scientific and technological achievements refers to the transfer of such achievements by non‑profit research institutions and universities to other entities, or the granting of licenses for their use. Cash rewards are monetary incentives awarded by these institutions to their scientific and technical personnel within three years (36 months) of receiving income from the commercialization of their achievements. When engaging in the commercialization of scientific and technological achievements, non‑profit research institutions and universities must enter into technology contracts and, in accordance with the Measures for the Administration of the Recognition and Registration of Technology Contracts, submit such contracts to a designated registration agency for review and registration, thereby obtaining a certificate of recognition and registration.
The Notice requires that non‑profit research institutions and universities establish sound financial accounting systems for the commercialization of scientific and technological achievements, and prohibits including regular salaries, bonuses, and other income in the calculation of cash rewards granted to scientific and technical personnel for the commercialization of their official work. When awarding such cash rewards, non‑profit research institutions and universities must withhold and remit personal income tax in accordance with the Personal Income Tax Law and complete the required filing procedures with the tax authorities as prescribed.
Litigation & Arbitration
The Supreme People’s Court has released typical cases of online infringement upon the rights and interests of minors.
On the morning of June 1, the Supreme People’s Court held a press conference and released ten typical cases involving the infringement of minors’ rights through the internet. Jiang Qibo, Director of the Research Office of the Supreme People’s Court, attended the event, which was chaired by Lin Wenxue, Spokesperson for the Supreme People’s Court.
According to reports, over the past five years, courts at all levels nationwide have, in accordance with the law, adjudicated 18,860 criminal cases involving violations of minors’ lawful rights and interests, including child trafficking and indecent assault, organizing children to beg, and inducing young girls into prostitution, thereby convicting 19,248 offenders. Additionally, they have handled a total of 459,646 civil cases concerning guardianship, custody, visitation, and other matters related to minors.
Among the cases disclosed, there were instances of child molestation committed through ride-hailing services, extortion and blackmail involving “naked loans,” and child molestation carried out via video‑based nude chats, vividly illustrating several salient features of current internet‑based violations of minors’ rights.
To strengthen the protection of minors’ rights and interests in the internet era, the people’s courts will more fully exercise their judicial functions, rigorously punish, in accordance with the law, all types of illegal and criminal acts that exploit the internet to infringe upon the rights and interests of minors; further intensify research and investigation to refine judicial policies in a targeted manner; and enhance coordination and cooperation with relevant departments, thereby providing robust judicial safeguards to purify the online environment and ensure that minors are less vulnerable to, and remain free from, cyber‑related illegal and criminal harm.

Prosecutorial organs in eight provinces, autonomous regions, and municipalities have launched a pilot program for conducting roving inspections of prisons.
The Supreme People’s Procuratorate has decided that, from June 2018 to May 2019, the procuratorial organs of eight provinces, autonomous regions, and municipalities—namely Shanxi, Liaoning, Shanghai, Shandong, Hubei, Hainan, Sichuan, and Ningxia—will conduct a pilot program of circuit inspections of prisons.
The Supreme People’s Procuratorate held a press conference today to brief the public on the progress of the pilot program. According to the briefing, each pilot procuratorate will establish several prosecutor-led case-handling teams based on its existing resident prosecutors. These teams will, on behalf of their respective procuratorates, conduct comprehensive oversight of prisons’ compliance with the Criminal Procedure Law, the Prison Law, and other relevant statutes, as well as the legality of penal execution and correctional‑rehabilitation activities. The focus will be on supervising correctional‑rehabilitation, educational‑reform, and labor‑reform programs; ensuring prison security and preventive measures; reviewing the use of restraints and solitary confinement; and safeguarding prisoners’ lawful rights and interests. In addition, these prosecutor teams will undertake routine casework, including handling cases involving sentence reduction, parole, and temporary release for execution outside prison.
Each pilot procuratorate may conduct roving inspections through methods such as ad hoc inspections. During the pilot period, the frequency of roving inspections of prisons, as well as the duration and staffing arrangements for each inspection, may be determined independently in light of actual work needs. In accordance with supervisory requirements, cross‑jurisdictional roving inspections may be organized, employing non‑fixed personnel and visiting non‑designated prisons. Should a prison experience regulatory incidents such as the abnormal death or escape of an inmate, a special inspection shall be promptly conducted.
The methods and measures for conducting roving inspections primarily include reviewing and copying relevant case files, archival records, financial statements, meeting minutes, as well as materials pertaining to inmates’ point‑based assessments and awards; examining surveillance video footage and networked supervisory information; conducting on-site inspections of solitary confinement cells, visitation rooms, inmate wards, dormitories, medical facilities, and areas designated for inmates’ daily life, education, and labor; selecting one or two cells and interviewing inmates individually; interviewing inmates who have already been released or are nearing the end of their sentences; receiving briefings on prison operations; attending prison‑situation analysis meetings and other relevant sessions; holding discussions with supervising officers; and convening symposiums. In addition, special‑purpose inspections may be carried out.
With regard to issues identified during巡回 inspections, the pilot program sets out handling procedures in three categories: First, where minor violations, operational loopholes, or safety hazards are detected, on-the-spot oral corrective opinions or recommendations shall be communicated to the prison. Second, when serious violations are found, or when there are emerging trends or systemic problems that could lead to unfair law enforcement or major accidents, a notice of correction of illegal acts or a prosecutorial recommendation shall be issued to the prison; such matters shall be treated as supervisory cases, with corrective opinions or recommendations duly put forward in accordance with the law, and dedicated personnel assigned to track, supervise, and ensure the implementation of corrective measures. Third, if leads indicate that law enforcement or judicial personnel may be involved in official misconduct or crimes such as embezzlement, bribery, dereliction of duty, or abuse of power, the matter shall be handled or investigated in accordance with the law.
To strengthen internal oversight and checks and balances, the pilot program stipulates that, as appropriate, different prosecutor teams may be assigned to conduct roving inspections of the same prison, thereby promptly identifying and addressing any issues or shortcomings from the previous round of such inspections and further enhancing the quality and effectiveness of roving inspection work.
Other
Public Notice of the First Batch of 31 “Deadbeat” Entities in the Capital Market
In accordance with the relevant provisions of the “Opinions on Appropriately Restricting Certain Seriously Dishonest Persons from Taking Trains for a Specified Period to Promote the Construction of the Social Credit System,” the “Opinions on Appropriately Restricting Certain Seriously Dishonest Persons from Taking Civil Aircraft for a Specified Period to Promote the Construction of the Social Credit System,” and the “Detailed Rules for Implementing the Restrictions on Certain Seriously Dishonest Persons from Taking Trains and Civil Aircraft for a Specified Period,” the China Securities Regulatory Commission recently submitted the first batch of lists of specifically designated seriously dishonest persons to the railway and civil aviation authorities. These lists target two categories of market participants—“relevant responsible parties of listed companies that fail to fulfill public commitments within the prescribed time limit” and “parties who fail to pay administrative fines and confiscations in the securities and futures sectors within the prescribed time limit”—and subject them to joint punitive measures. The relevant lists were published on the “Credit China” website on June 1 and will remain publicly available for seven working days as required. Unless valid objections are raised, upon expiration of the publicity period, the railway and civil aviation authorities will impose sanctions, restricting these individuals from using high‑class train seats and civil aircraft for a period of one year.
The release of the first batch of the list of specifically serious defaulters represents a new step in fostering integrity within the capital market and serves as a stern warning to those who violate laws or breach trust. The list comprises 31 individuals, including 5 designated as “entities failing to honor public commitments” and 26 classified as “parties failing to pay fines and confiscated proceeds.” Through coordinated punitive measures imposed by the railway and civil aviation authorities, a comprehensive framework of credit-based sanctions—where one instance of misconduct results in restrictions everywhere—has been established, leaving no safe haven for defaulters in the capital market. Relevant responsible parties of listed companies must take their public commitments seriously and fulfill them scrupulously, while those subject to administrative penalties by the China Securities Regulatory Commission (CSRC) are required to promptly pay all fines and confiscated amounts—obligations mandated by law. Moving forward, the CSRC will, in accordance with regulations, routinely submit monthly updates on the list and continue to impose lawful sanctions against defaulters in the capital market, further strengthening comprehensive, stringent, and law-based regulation and officely laying the foundation of integrity for the long-term, stable, and sound development of the capital market.

The development of an intellectual property operation service system continues to advance.
On the 1st, the Ministry of Finance and the National Intellectual Property Administration issued a notice announcing that, in 2018, they will continue to select, nationwide, a number of key cities— including districts and counties under direct-administered municipalities—with high concentrations of innovation resources, strong spillover effects, and an urgent need for intellectual property‑driven development—to support the establishment of intellectual property operation service systems, thereby promoting the integration and mutual reinforcement of intellectual property operations and the real economy.
The notice specifies that, over a three-year period, key cities will have essentially established an intellectual property (IP) operation service system characterized by comprehensive elements, a sound institutional framework, and smooth functioning. As a result, the quality of IP creation, the effectiveness of protection, the benefits of utilization, management capabilities, and service standards will all see significant improvements, thereby driving transformative changes in industrial development—changes in quality, efficiency, and growth drivers.
The notice outlines the key tasks for building a comprehensive intellectual property (IP) operation service system. For instance, in terms of strengthening IP protection across the board, it calls for launching special enforcement and rights‑protection campaigns and encouraging the establishment of industry‑specific IP protection centers. Meanwhile, to bolster the creation of high‑quality IP, it proposes refining patent funding and reward policies and promoting the implementation of high‑value patent cultivation programs in priority industries and critical sectors.
According to the notice, the central government will provide RMB 200 million in support for each city, with RMB 150 million allocated in 2018 and the remaining funds disbursed upon successful assessment in subsequent years. Cities may adopt measures such as performance‑based subsidies, government procurement of services, and equity investments, pooling these resources to support the development of an intellectual property (IP) operation service system.

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