JC Master Legal News Issue 823

Key Takeaways for This Issue
The China Securities Regulatory Commission has issued the Measures for the Issuance and Trading of Depositary Receipts (Trial) and other regulations and normative documents.
On the 6th, the China Securities Regulatory Commission officially promulgated the Measures for the Issuance and Trading of Depositary Receipts (Trial), and revised and issued the Measures for the Administration of Initial Public Offerings and Listings, as well as the Measures for the Administration of Initial Public Offerings and Listings on the ChiNext Board, all of which shall take effect from the date of their publication.

The Shenzhen Stock Exchange has strengthened its oversight of companies with high debt risks.
Recently, the Shenzhen Stock Exchange has implemented a comprehensive regulatory approach—combining regulatory interviews, annual report inquiries, and inter‑agency cooperation—to urge listed companies to promptly adopt concrete and effective measures to mitigate debt default risks and fully disclose relevant information.

Hong Kong will implement tax incentive measures, including corporate expense deductions, personal income taxation, and exemptions from bond‑interest tax.
According to the Hong Kong Special Administrative Region Government, Hong Kong will implement three tax incentive measures, covering corporate expense deductions, personal income taxation, and exemptions from bond‑related profits tax.

The Ministry of Finance has, for the first time, disclosed PPP consulting fees: on average, they account for 0.05% of the investment amount.
Recently, the PPP Center of the Ministry of Finance used the fourth batch of 396 PPP demonstration projects as a sample to conduct a comprehensive analysis of the services provided by 218 consulting offices, including their consulting fees.

Jiangsu has fully launched the pilot program to replace business tax with value-added tax, resulting in tax reductions of 150 billion yuan over two years.
Since the nationwide rollout of the pilot program to replace business tax with value-added tax in May 2016, Jiangsu Province has achieved cumulative overall tax reductions totaling RMB 150 billion as a result of the tax reform. Among these, the four key pilot sectors—real estate, construction, finance, and consumer services—have collectively benefited from tax cuts exceeding RMB 40 billion.

Table of Contents
Table of Contents

Finance & Capital Markets
The China Securities Regulatory Commission has issued the Measures for the Issuance and Trading of Depositary Receipts (Trial) and other regulations and normative documents.
The China Securities Regulatory Commission has issued the Implementation Rules for Due Diligence in the Domestic Issuance of Shares or Depositary Receipts by Innovative Enterprises.
The first cross-market railway bond will be listed on the Shanghai Stock Exchange on June 11.
The Shenzhen Stock Exchange has strengthened its oversight of companies with high debt risks.
The Shenzhen Stock Exchange has launched a new version of the Corporate Bond Listing Agreement, strengthening the foundation for law-based, comprehensive, and stringent regulatory oversight.

Corporate & Commercial
The Ministry of Commerce has issued a list of exemplary experiences and best practices from the special campaign to expand consumption.
Hong Kong will implement tax incentive measures: corporate expense deductions, personal income taxation, and exemption from bond‑interest tax.
The comprehensive development level of the province’s four development zones has ranked among the top ten nationwide.
The first round of CDR simulation testing has commenced, with the basic design concept modeled after that of A-shares.
The Ministry of Finance has, for the first time, disclosed PPP consulting fees: on average, they account for 0.05% of the investment amount.

Taxation
In the first month after the VAT reform was implemented, more than 700,000 taxpayers in Jiangsu benefited from the policy.
Jiangsu has fully launched the pilot program to replace business tax with value-added tax, resulting in tax reductions of 150 billion yuan over two years.

Litigation & Arbitration
Announcement of the Supreme People’s Court on Soliciting Public Opinions on the Provisions Concerning Several Issues in the Adjudication of Civil Disputes Involving Bank Cards
The Guangdong procuratorial organs have instituted public prosecution, in accordance with the law, against Yang Qingfang on suspicion of accepting bribes.

Other
The Chairman, CEO, and CTO of ZTE will be replaced, and some EVPs will also be reshuffled.
Ant Financial announced a new round of financing totaling US$14 billion.
Finance & Capital Markets
The China Securities Regulatory Commission has issued the Measures for the Issuance and Trading of Depositary Receipts (Trial) and other regulations and normative documents.
In accordance with the Securities Law and the General Office of the State Council’s Notice on Forwarding the CSRC’s Several Opinions on Piloting the Issuance of Shares or Depositary Receipts by Innovative Enterprises within China (Guobanfa [2018] No. 21), the China Securities Regulatory Commission today officially promulgated the Measures for the Administration of the Issuance and Trading of Depositary Receipts (Trial) (hereinafter referred to as the “Measures”), amended and issued the Measures for the Administration of Initial Public Offerings of Shares and Listing (hereinafter referred to as the “IPO Measures”) and the Measures for the Administration of Initial Public Offerings of Shares and Listing on the ChiNext Board (hereinafter referred to as the “ChiNext IPO Measures”). Concurrently, it also released the Implementation Measures for the Supervision of the Domestic Issuance of Shares or Depositary Receipts and Listing by Pilot Innovative Enterprises, the Rules of Procedure of the China Securities Regulatory Commission’s Science and Technology Innovation Advisory Committee (Trial), the Guidelines on the Content and Format of Prospectuses for the Public Offering of Depositary Receipts by Pilot Red-Chip Enterprises under Rule No. 23 on Information Disclosure by Companies Issuing Securities, the Guidelines on the Content and Format of Application Documents for the Public Offering of Depositary Receipts and Listing by Pilot Red-Chip Enterprises under Rule No. 40 on Information Disclosure by Companies Issuing Securities, the Provisions on the Implementation of Due Diligence in the Sponsorship of the Domestic Issuance of Shares or Depositary Receipts by Innovative Enterprises, and Rule No. 22 on Information Disclosure by Companies Issuing Securities—Special Provisions on Financial Reporting Information for Pilot Red-Chip Enterprises (Trial). All these measures shall take effect from the date of their publication.
The Administrative Measures clarify the applicable laws and fundamental regulatory principles governing depositary receipts, and set out specific arrangements for their issuance, listing, trading, and information disclosure. The revised Measures for Initial Public Offerings and the Measures for Initial Public Offerings on the ChiNext Board explicitly stipulate that eligible innovative pilot enterprises shall no longer be subject to the requirements regarding profitability and the absence of accumulated losses.
The CSRC will strictly control the number of pilot enterprises and the amount of capital raised, and appropriately schedule the timing and pace of issuances. At the same time, it requires issuers and their lead underwriters to design issuance plans in a scientifically sound manner, tailored to each company’s specific circumstances, and to establish reasonable and effective incentive and restraint mechanisms for institutional investors participating in the bookbuilding process, thereby encouraging active and prudent bidding by professional institutional investors. It is hoped that all market participants will adopt a rational investment approach, refrain from herd behavior and speculative trading, and work together to ensure the smooth implementation of the pilot program.

The China Securities Regulatory Commission has issued the Implementation Rules for Due Diligence in the Domestic Issuance of Shares or Depositary Receipts by Innovative Enterprises.
To standardize and guide the due diligence work of sponsors in relation to the domestic issuance of shares or depositary receipts by innovative enterprises, and to enhance the quality of such due diligence, in accordance with the “Several Opinions on Piloting the Domestic Issuance of Shares or Depositary Receipts by Innovative Enterprises” and other relevant laws and regulations, as well as the China Securities Regulatory Commission’s pertinent provisions on the administration of sponsorship business, the CSRC has drafted the “Implementation Rules for Due Diligence in the Domestic Issuance of Shares or Depositary Receipts by Innovative Enterprises by Sponsors” (hereinafter referred to as the “Implementation Rules”).
The “Implementation Provisions” comprise twelve articles, with the main contents as follows:
(1) Strengthen due diligence requirements for the special circumstances and associated risks of innovative enterprises.
The current “Due Diligence Guidelines” do not cover scenarios such as red-chip enterprises or the issuance of depositary receipts, and the “Implementation Provisions” have now clarified the corresponding due diligence requirements. First, with respect to corporate governance, the guidelines have added due diligence obligations for sponsors concerning contractual control structures, dual‑class share structures, voting agreements, and other special corporate governance arrangements. Second, in the context of depositary receipt issuance, the guidelines have introduced additional due diligence requirements regarding depositary‑custody arrangements, measures to protect the rights and interests of depositary receipt holders, safeguards provided by the depositary for the underlying securities and related assets, the qualifications and credentials of the custodian, and other matters pertinent to the issuance and listing of depositary receipts. Third, on the risk‑factor front, sponsors are now required to conduct due diligence on risks arising from differences between domestic and foreign legal systems, special corporate governance arrangements, and fluctuations in the underlying shares. Fourth, in the area of investor protection, sponsors must assess whether the overall arrangements for safeguarding investors’ rights and interests meet or exceed the minimum standards mandated by domestic law. Finally, the guidelines have expanded due diligence requirements to encompass overseas violations of laws and regulations by innovative enterprises, as well as the establishment of domestic securities‑related institutions.
(2) Simplify certain due diligence requirements that are inapplicable or unnecessary for innovative enterprises.
Due to differences in legal systems and regulatory environments between China and overseas jurisdictions, certain requirements under the Due Diligence Guidelines are either inapplicable or of limited relevance to some innovative enterprises; accordingly, the Implementation Provisions have been appropriately streamlined. First, for innovative enterprises that do not undergo restructuring or similar procedures, the sponsor’s due diligence obligations regarding such matters have been waived. Second, for red-chip enterprises, the due diligence requirements pertaining to incorporation through restructuring, historical evolution, shareholders, and fundraising in overseas markets have been simplified. Third, for innovative enterprises that meet the prescribed criteria, the due diligence requirements concerning the use of proceeds from this offering have been streamlined.
(3) Enhance due diligence methodologies for certain innovative enterprises.
For red-chip enterprises already listed overseas, the relevant information has been publicly disclosed in statutory documents filed with the foreign market. In such cases, the Implementation Provisions have refined the due diligence procedures applicable to these innovative enterprises, permitting sponsors to conduct due diligence by reviewing legally valid public disclosure documents—such as overseas prospectuses and annual financial reports—and by relying on professional opinions issued by overseas intermediaries. At the same time, to ensure the quality of sponsorship work and safeguard the legitimate rights and interests of domestic investors, sponsors are required to perform appropriate and prudent verification of the aforementioned public disclosure documents and professional opinions; where doubts remain, they must undertake further investigation and re‑examination. The Implementation Provisions emphasize that a sponsor’s legal responsibilities cannot be waived or reduced by virtue of relying on public disclosure documents or professional opinions.

The first cross-market railway bond will be listed on the Shanghai Stock Exchange on June 11.
On June 6, China Railway Corporation successfully issued its first cross‑market railway bond, with a total issuance size of RMB 20 billion across the exchange‑traded and interbank bond markets. Specifically, the 5‑year tranche amounted to RMB 10 billion at an issuance rate of 4.46%, while the 20‑year tranche totaled RMB 10 billion at an issuance rate of 4.78%. This cross‑market offering attracted strong demand from banks, insurance institutions, securities offices, corporate pension funds, and other investors, generating a robust market response and marking further progress in the interconnectedness of the bond markets. The bonds will be listed and traded on the Shanghai Stock Exchange starting June 11, with trading conducted through auction, quotation, request‑for‑quote, and negotiated transactions. Both retail and qualified investors are eligible to participate, and following listing, the bonds will be eligible for repo transactions under a repurchase discount factor of 0.96.
On June 1, the Shanghai Stock Exchange issued the “Notice on Matters Relating to the Listing and Trading of China Railway Construction Bonds,” along with relevant supporting rules. The cross‑market issuance of railway bonds represents a concrete step taken by the SSE to implement its strategic cooperation agreement with China Railway Corporation. Moving forward, the SSE will continue to broaden the investor base for railway bonds, enhance secondary‑market liquidity, optimize the structure of the exchange‑traded bond market, and proactively support high‑quality central state‑owned enterprises, remain officely committed to serving the real economy, and leverage its advantages in resource allocation.

The Shenzhen Stock Exchange has strengthened its oversight of companies with high debt risks.
Recently, several listed companies, grappling with excessively high debt-to-asset ratios and tight cash flows, have experienced defaults on their debts and become embroiled in litigation, severely hampering their operations and production. The Shenzhen Stock Exchange has attached great importance to these issues, responded proactively, and implemented a comprehensive regulatory approach—comprising supervisory interviews, annual report inquiries, and inter‑regulatory coordination—to urge these companies to promptly adopt concrete and effective measures to mitigate debt default risks and fully disclose relevant information, thereby providing investors with an accurate picture of the listed companies’ financial condition.
Recently, the Shenzhen Stock Exchange convened a series of focused meetings with chairpersons, general managers, chief financial officers, and board secretaries of listed companies whose asset‑to‑liability ratios exceeded 100% as of the end of the first quarter. During these meetings, the Exchange placed particular emphasis on issues such as overdue debts, the status of ongoing litigation, the presence of bankruptcy or restructuring risks, and the feasibility of measures to mitigate those risks. It required the companies to provide detailed explanations regarding their debt profiles, plans for addressing default risks, and the impact of high leverage on production and operations, profitability, and compliant corporate governance. At the same time, the Exchange reminded directors, supervisors, and senior executives to exercise due diligence, faithfully fulfill their information‑disclosure obligations, and continuously disclose the measures taken and progress made in addressing debt‑default risks, while fully alerting stakeholders to potential hazards. To enhance the efficiency of these meetings, strengthen regulatory effectiveness, and reduce costs for listed companies, the Exchange adopted an innovative approach in two cases: it coordinated with local securities regulators to conduct joint video‑conference sessions. This enabled the companies to promptly grasp the implications and consequences of operating with high leverage, yielding positive results.
By analyzing the 2017 financial data of listed companies, the Shenzhen Stock Exchange has identified prominent “three-high” debt issues—high asset‑liability ratios, high financial expenses, and substantial contingent liabilities—at certain offices. These factors have created a confluence of risks, including operational and production difficulties, declining profitability, and frequent compliance‑related problems. However, in their annual reports, these companies tend to downplay or sidestep the underlying high‑debt risks and related challenges; some even set overly ambitious business plans while glossing over these concerns, thereby hindering investors’ ability to gain a comprehensive understanding of the companies’ true condition.
To ensure the stable functioning of the capital market and safeguard investors’ legitimate rights and interests, the Shenzhen Stock Exchange has placed greater emphasis on risk‑based review in its annual report examinations. With respect to the aforementioned companies facing high debt risks, the Exchange has adopted a “multi‑layered annual report review plus public inquiry letters” approach, publicly disclosing, from multiple angles and across all dimensions, the various risk factors identified at these offices. The Exchange requires these companies to fully disclose their true financial condition to investors and urges investors to exercise due diligence when making investment decisions. At the same time, the Exchange conveys to the relevant companies its regulatory stance of comprehensive, stringent oversight in accordance with the law, explicitly demanding that they address operational and production challenges by improving corporate governance, optimizing their financial structures, and enhancing profitability—rather than resorting to illicit practices such as financial fraud, abnormal trading, or concealment of liabilities to artificially inflate their financial statements and earnings.
In addition, to further leverage the advantages of coordinated regulatory oversight, the Shenzhen Stock Exchange has actively participated in on-site inspections conducted by local securities regulatory authorities. For example, when a company disclosed its 2017 annual report and applied for the removal of the delisting risk alert, the Shenzhen Stock Exchange focused on issues such as debt waivers, debt restructuring, and the failure to make impairment provisions for certain assets, and accordingly brought these matters to the attention of the relevant local securities regulators. To verify these concerns, Shenzhen Stock Exchange supervisors joined the local regulators’ special on-site inspection of the company, working in close collaboration to complete the inspection. Through this process, they obtained first-hand information and a clear understanding of the true nature of the key debt-related issues, enabling them to render a well-founded and reasoned decision on whether to lift the delisting risk alert for the company’s shares.

The Shenzhen Stock Exchange has launched a new version of the Corporate Bond Listing Agreement, strengthening the foundation for law-based, comprehensive, and stringent regulatory oversight.
On June 4, the Shenzhen Stock Exchange issued the “Notice on the Entry into Force of the ‘Shenzhen Stock Exchange Corporate Bond Listing (Registration) Agreement’ and the ‘Shenzhen Stock Exchange Asset-Backed Securities Transfer Service Agreement’” (hereinafter referred to as the “Notice”), which stipulates that the new versions of the “Corporate Bond Listing (Registration) Agreement” and the “Asset-Backed Securities Transfer Service Agreement” (hereinafter referred to as the “new agreements”) will take effect starting June 18. Earlier, the Exchange had already initiated the signing process for the new‑version securities listing agreements by listed companies. The issuance of this Notice represents another significant step by the Shenzhen Stock Exchange to further implement the requirements of the newly revised “Administrative Measures for Stock Exchanges” (hereinafter referred to as the “Measures”), address institutional gaps, strengthen the regulatory foundation, uphold the spirit of contractual obligations, and reinforce comprehensive, law‑based, and stringent supervision.
This revision comprehensively optimizes and adjusts the original agreement, primarily addressing the following aspects:
First, the exchange’s self-regulatory oversight functions have been strengthened. Regulatory tools have been expanded to include on-site inspections, the imposition of punitive default penalties, and the issuance of regulatory advisory letters, while also reinforcing the SZSE’s critical authority to suspend or resume trading in securities and to make decisions to suspend, resume, or terminate their trading.
Second, it strengthens the regulatory framework for information disclosure and standardized operations. It clarifies that issuers and managers must act in good faith and operate in a compliant manner, fulfilling their obligations—such as principal and interest repayment, distribution of returns, use of raised funds in accordance with contractual terms, ongoing credit risk management, information disclosure, and other relevant duties—in compliance with applicable regulations, and ensuring that the content of such disclosures is true, accurate, complete, timely, and fair.
Third, the agreement further embodies the spirit of contract, clearly stipulating that the Shenzhen Stock Exchange, issuers, and managers shall jointly comply with applicable laws, regulations, and business rules and perform their respective duties in accordance with the law. At the same time, the Shenzhen Stock Exchange is required to provide facilitative services—including facilities, advisory support, and training—for the issuance, listing and trading or over-the-counter transfer, suspension and resumption of trading, principal and interest repayment or income distribution, and information disclosure of corporate bonds and asset-backed securities. In addition, the revised agreement has amended the dispute‑resolution clause, replacing the original provision designating arbitration as the exclusive forum with a provision allowing issuers and managers to independently choose their preferred method of dispute resolution.
Fourth, the fairness and transparency of self-regulatory oversight have been further enhanced. Under the revised agreement, the Shenzhen Stock Exchange has established an internal redress mechanism for self-regulatory enforcement, ensuring that issuers and their sponsors have the right to request a hearing or seek review of significant self-regulatory decisions made by the Exchange.
Furthermore, under the revised agreement, issuers or managers that have outstanding corporate bonds or asset-backed securities listed on the Shenzhen Stock Exchange are generally not required to re-sign the agreement for any newly issued corporate bonds or newly managed asset-backed securities. Moreover, listing (or挂牌) application documents approved by the Shenzhen Stock Exchange may be incorporated as part of the new‑version agreement. With respect to existing corporate bonds and asset-backed securities currently in circulation, the Notice does not mandate the re‑signing of listing or挂牌 agreements; instead, previously executed agreements may naturally expire upon the maturity of the relevant securities, thereby reducing issuance costs for issuers.
In addition to the launch of the new version of the agreement, the Shenzhen Stock Exchange has systematically reviewed other rules and regulations governing fixed-income products that require revision or adjustment, and recently issued for public consultation draft versions of documents such as the “Shenzhen Stock Exchange Rules on the Listing of Corporate Bonds (2018 Draft for Comments).” Going forward, the Exchange will further leverage its role as a core platform in the capital market, earnestly assume its frontline regulatory responsibilities, continuously uphold an open, fair, and impartial market order, develop innovative fixed-income instruments, broaden corporate financing channels, and effectively support the high-quality development of the real economy.
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 SZSE 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 members 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 management 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 on investor suitability management, ensuring thoroughness, precision, and depth. In terms of objectives, the inspections aim to reinforce regulatory standards and drive improvements, 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 elevate their awareness and capabilities in client management. At the same time, the inspections serve 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 also 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 fostering the long-term stability and sound development of a multi‑tiered capital market.
Commercial & Corporate
The Ministry of Commerce has issued a list of exemplary experiences and best practices from the special campaign to expand consumption.
Recently, the General Office of the Ministry of Commerce issued the “Notice on Replicating and Promoting Typical Experiences and Practices from the Special Campaign to Accelerate Innovation in Domestic Trade Circulation, Advance Supply-Side Structural Reform, and Expand Consumption” (Shang Zhi Zi [2018] No. 9), which calls for the replication and dissemination of effective experiences and practices developed across regions in implementing the special campaign to boost consumption. These include six key areas—promoting the informatization, standardization, and intensification of circulation; deepening reforms of the circulation system; building a unified national market; increasing the effective supply of goods; enhancing the quality of lifestyle services; and optimizing the consumer environment—covering a total of 55 specific measures.
Going forward, the Ministry of Commerce will further strengthen the exchange and sharing of best practices, vigorously implement the “Consumption Upgrade Action Plan,” and continuously enhance the fundamental role of consumption in driving economic development.

Hong Kong will implement tax incentive measures, including corporate expense deductions, personal income taxation, and exemptions from bond‑interest tax.
On the 8th, the Hong Kong Special Administrative Region Government announced that Hong Kong will implement three tax incentive measures, covering corporate expense deductions, personal income taxation, and exemptions from bond‑related profits tax.
In the 2018–2019 Budget presented by the Hong Kong Special Administrative Region Government in February, three tax incentive measures were proposed: allowing enterprises to deduct the full cost of capital expenditures on environmentally friendly equipment in a single year, rather than spreading the deduction over five years as currently permitted; permitting married couples to each opt for individual income taxation; and expanding the scope of tax exemptions for debt instruments under the Eligible Debt Instruments Scheme.
The 2018 Inland Revenue (Amendment) (No. 5) Bill, which incorporates the three aforementioned proposals, will be tabled before the Legislative Council of the Hong Kong Special Administrative Region on June 13 for deliberation. Upon its passage by the Legislative Council, the three tax incentive measures will take effect from the 2018/19 tax year.
A government spokesperson stated that, with respect to enterprises’ acquisition of renewable energy and other equipment, the latest amendment allows capital expenditures to be deducted in a single year instead of over five years, thereby encouraging businesses to invest in environmentally friendly technologies. “Individual income taxation is a tax relief measure that may help reduce the tax burden on certain individuals,” the spokesperson added. Originally, if both a married individual and their spouse had taxable income and were eligible to claim individual income taxation, they were required to file jointly. To make the tax treatment for married taxpayers more flexible, this revision has relaxed the restrictions on opting for individual income taxation, permitting each spouse to choose individual income taxation independently.
To further promote the development of the bond market, the draft ordinance proposes to enhance the Eligible Debt Securities Scheme by extending the 100% profits tax exemption from debt securities with a minimum term of seven years to debt securities of all maturities. Additionally, it would allow debt securities listed on the Stock Exchange of Hong Kong to qualify for the tax exemption, in addition to those currently held and settled through the Hong Kong Monetary Authority’s Central Moneymarkets Unit.

The comprehensive development level of the province’s four development zones has ranked among the top ten nationwide.
In the comprehensive development assessment of national-level economic and technological development zones released recently by the Ministry of Commerce, Suzhou Industrial Park, Kunshan Development Zone, Jiangning Development Zone, and Nanjing Development Zone in our province all ranked among the top ten. Notably, Nanjing Development Zone entered the top ten for the first time, while Jiangning Development Zone secured seventh place among 219 national-level development zones nationwide, climbing two spots from its 2016 ranking.
The Ministry of Commerce conducts a comprehensive assessment of national economic development zones, evaluating them against 53 indicators across such areas as industrial foundation, technological innovation, regional spillover effects, ecological and environmental protection, and administrative efficiency.

The first round of CDR simulation testing has commenced, with the basic design concept modeled after that of A-shares.
Recently, the Shanghai and Shenzhen stock exchanges, along with China Securities Depository & Clearing Corporation, have issued notices to securities offices announcing the launch of CDR simulation testing. The notices specify that the basic design framework for CDRs will largely follow that of A‑shares. This means that the process by which qualified investors buy and sell CDRs will not differ significantly from trading ordinary A‑share stocks. At present, all major brokerage offices are vigorously upgrading and modifying their systems, and industry insiders expect CDRs to be launched as early as July this year.
Based on the testing frameworks of the stock exchanges and China Securities Depository & Clearing Corporation, the underlying design principles broadly follow those of A‑shares. Specifically, CDRs adopt paperless registration and custody; all funds involved in registration, trading, and settlement are denominated in RMB; the trading calendar aligns with that of A‑shares; both securities and cash accounts are consistent with the practices used by investors participating in A‑share trading; and the range of corporate action services does not exceed the scope applicable to A‑share corporate actions, with procedures likewise modeled on A‑share standards.
At present, securities offices are racing to assign dedicated teams to overhaul and upgrade their technology systems. According to industry sources, the system upgrades linking these offices to exchanges, China Securities Depository & Clearing Corporation, and other entities are relatively straightforward, as they are guided by uniformly issued testing protocols. The real challenge lies in devising a classification and tiering framework that enables investors to participate in the issuance of shares or depositary receipts by innovative enterprises.

The Ministry of Finance has, for the first time, disclosed PPP consulting fees: on average, they account for 0.05% of the investment amount.
Recently, the PPP Center of the Ministry of Finance used the fourth batch of 396 PPP demonstration projects as a sample to conduct a comprehensive analysis of the services provided by 218 consulting offices, including their consulting fees.
According to the “Analysis Report on the Service Performance of Consulting Offices for the Fourth Batch of PPP Demonstration Projects,” based on average consulting fees per project, the total consulting expenditure for the 396 projects in the fourth batch amounted to RMB 371 million, with an average fee of RMB 937,100 per project—approximately 0.049% of the average investment per project (roughly one‑five‑thousandth). By individual project, the highest consulting fee reached RMB 12.62 million, accounting for about 0.5% of the project’s total investment; meanwhile, the consulting fees for 309 projects fell within the range of RMB 200,000 to RMB 1.6 million.
The PPP Center of the Ministry of Finance found that, among the fourth batch of PPP demonstration projects, when measured by the per‑project advisory fee rate—the ratio of advisory fees to project investment—333 projects (84%) fell within the range of 0.01% (one in ten thousand) to 0.5% (five in a thousand). Additionally, 10 projects (3%) had advisory fee rates exceeding 1% of the project’s investment, with the highest rate reaching 7%.
Based on the ranking of average consulting fees across regions, 11 areas—including Beijing, the Guangxi Zhuang Autonomous Region, Guangdong Province, Zhejiang Province, Fujian Province, Yunnan Province, Shaanxi Province, the Xinjiang Production and Construction Corps, Jilin Province, the Xinjiang Uygur Autonomous Region, and Hubei Province—exceeded the national average of RMB 937,100. The highest fee was recorded in Beijing at RMB 2.8423 million, 203% above the average for the fourth batch of demonstration projects; the lowest was in Chongqing at RMB 330,000, 65% below the national average.
Based on the ranking of average consulting fees across industries, six sectors—urban comprehensive development, ecological conservation and environmental protection, sports, water conservancy construction, transportation, and municipal engineering—recorded average consulting fees exceeding the industry-wide average of RMB 937,100. The highest average fee, for urban comprehensive development, stood at RMB 1.5061 million, 61% above the average for the fourth batch of demonstration projects; the lowest, for government‑related infrastructure, was RMB 350,000, 63% below the average for that same batch.

Taxation TAXATATION
In the first month after the VAT reform was implemented, more than 700,000 taxpayers in Jiangsu benefited from the policy.
Effective May 1, two major reform measures—the adjustment of VAT rates and the standardization of the threshold for small-scale taxpayers—have been officially implemented. Over the past month, Jiangsu’s tax authorities have conducted extensive publicity and provided targeted guidance, enabling numerous enterprises to benefit from these reforms. As of June 3, a total of 763,000 taxpayers in Jiangsu had successfully issued 52.748 million invoices at the reduced VAT rate, covering transactions totaling RMB 1.58083 trillion and generating VAT liabilities of RMB 242.9 billion. In addition, 6,162 general taxpayers across the province have re-registered as small-scale taxpayers.
The VAT rate for manufacturing and other sectors has been reduced from 17% to 16%, while the rate for transportation, construction, basic telecommunications services, and goods such as agricultural products has been cut from 11% to 10%, delivering tangible tax relief to businesses. In response to these adjustments, many companies have proactively lowered their prices—both to enhance their competitiveness and to provide consumers with significant benefits.
The threshold for small-scale taxpayers has been unified, and eligible general taxpayers are permitted to reclassify as small-scale taxpayers, enabling more micro and small enterprises to benefit from the administrative convenience and tax reductions afforded by the simplified taxation regime, thereby further boosting market vitality. According to statistics, among Jiangsu’s VAT‑registered general taxpayers, 433,000 have annual sales below RMB 5 million; of these, roughly 22% face a tax burden exceeding 3%. Such taxpayers may, at their discretion, opt to revert to small-scale taxpayer status and enjoy the preferential treatment of being taxed at a lower rate. Following the adjustment of VAT rates, while corporate tax burdens have been reduced, offices have also seen an increase in working capital. An growing number of enterprises plan to allocate the resulting tax savings toward expanding production and investing in new‑technology research and development, thus facilitating transformation and enhancing competitiveness.

Jiangsu has fully launched the pilot program to replace business tax with value-added tax, resulting in tax reductions of 150 billion yuan over two years.
Since the nationwide rollout of the business tax-to-VAT reform pilot in May 2016, Jiangsu Province has achieved cumulative tax reductions totaling RMB 150 billion as a result of the tax‑system transition. Among these, the four key pilot sectors—real estate, construction, finance, and consumer services—have collectively benefited from tax cuts exceeding RMB 40 billion. Beyond the substantial tax relief, the comprehensive implementation of the business tax-to-VAT reform has streamlined the VAT credit chain, optimized the industrial structure, and is now serving as a crucial driver for unleashing enterprises’ innovation and entrepreneurship vitality and for advancing high‑quality economic development in Jiangsu.
The transition from business tax to value-added tax has, in principle, eliminated double taxation and established a seamless VAT credit chain across the secondary and tertiary sectors. From May 2016 to the first quarter of 2018, non‑pilot industries in Jiangsu obtained input VAT credits totaling RMB 81.9 billion from pilot industries. These credits have been applied to reduce the tax liabilities of downstream non‑pilot industries, thereby effectively lowering operating costs and the overall tax burden on the real economy.
The policy‑driven and incentive‑enhancing effects of the comprehensive transition from business tax to value‑added tax have been thoroughly validated, with the number of taxpayers participating in this reform continuing to grow across the province. At the outset of the pilot program, Jiangsu had 1.16 million pilot taxpayers; by April 2018, that figure had risen to 1.497 million. Nearly 3 million people in the province are employed in research and development, technical services, information technology services, and cultural and creative services, while over 8 million work in the construction sector. The rapid expansion of the tertiary industry has generated a greater number of employment opportunities.
Following the transition from business tax to value-added tax, pilot taxpayers are now able to deduct the input VAT paid on equipment purchases, bolstering their confidence in technological upgrading. Since May 1, 2016, the four pilot industries in Jiangsu Province have cumulatively declared input VAT on fixed assets totaling RMB 31.075 billion.

Litigation & Arbitration
Announcement of the Supreme People’s Court on Soliciting Public Opinions on the Provisions Concerning Several Issues in the Adjudication of Civil Disputes Involving Bank Cards
In order to ensure the proper adjudication of civil disputes involving bank cards and to safeguard the legitimate rights and interests of all parties, the Supreme People’s Court has drafted the “Provisions on Several Issues Concerning the Adjudication of Civil Disputes Involving Bank Cards” (Draft for Public Comment), in accordance with relevant laws including the Commercial Bank Law of the People’s Republic of China, the Contract Law of the People’s Republic of China, and the Tort Liability Law of the People’s Republic of China, and drawing on judicial practice. To further refine this judicial interpretation and better protect the lawful rights and interests of the parties, public comments are now being solicited through the Supreme People’s Court’s official website, the China Court Network, and other channels. Specific suggestions for revision may be submitted in writing or by email; when submitting your comments, please provide detailed reasons. Written submissions should be addressed to Bi Xiaolin, Second Civil Division, Supreme People’s Court, No. 27 Dongjiaominxiang, Dongcheng District, Beijing, Postal Code 100745. Email submissions should be sent to 111xuexue@163.com. The deadline for submitting comments is June 30, 2018.

The Guangdong procuratorial organs have instituted public prosecution, in accordance with the law, against Yang Qingfang on suspicion of accepting bribes.
Recently, the case involving Yang Qingfang, former deputy general manager of Guangdong Radio and Television Network Co., Ltd. (at the deputy-department level), who is suspected of accepting bribes, was assigned jurisdiction by the Guangdong Provincial People’s Procuratorate and subsequently prosecuted by the Shenzhen Municipal People’s Procuratorate before the Shenzhen Intermediate People’s Court.
During the review and prosecution stage, the procuratorial organ duly informed the defendant, Yang Qingfang, of his procedural rights and, in accordance with the law, interrogated him and heard the views of his appointed defense counsel. The indictment filed by the Shenzhen People’s Procuratorate alleges that, while serving as Deputy Director of Dongguan Radio and Television Station, as an accountant at Guangdong Radio and Television Network Co., Ltd., and as its Deputy General Manager, the defendant, Yang Qingfang, abused his official position to secure benefits for others, repeatedly accepting bribes; accordingly, he should be held criminally liable for the crime of bribery.
Other
The Chairman, CEO, and CTO of ZTE will be replaced, and some EVPs will also be reshuffled.
According to CNBC, U.S. Secretary of Commerce Wilbur Ross stated on June 7, U.S. time, that the United States has reached an agreement with ZTE, bringing an end to the severe sanctions imposed on the company. The U.S. has dispatched a compliance team to ZTE, and the company is required to replace its board of directors and senior management within 30 days. The U.S. will suspend the ten-year ban, but if ZTE violates the terms again, the sanctions will be reinstated.
According to the U.S. Department of Commerce’s official website, under the new agreement, ZTE must pay a $1 billion fine to the U.S. government and set aside an additional $400 million in escrow funds—funds that will be forfeited if ZTE violates the terms again—until the Department removes ZTE from its Entity List.
In addition to the $892 million in penalties that ZTE has already paid to the U.S. government under the March 2017 settlement agreement, the total fines imposed on ZTE for the export ban now amount to $2.29 billion (approximately RMB 14.6 billion). According to ZTE’s latest financial report, the company recorded revenue of RMB 108.8 billion and net profit of RMB 4.554 billion in 2017. The new agreement also requires ZTE to retain a team of special compliance coordinators appointed by the U.S. Department of Commerce for a period of ten years. Their role will be to monitor in real time whether ZTE complies with U.S. export control laws, and it mandates that ZTE replace its entire board of directors and senior management. Should any additional violations occur during the ten-year period, the U.S. Department of Commerce may impose the ban at any time.
Ant Financial announced a new round of financing totaling US$14 billion.
On June 8, Ant Financial announced a new round of financing. The funds will be primarily allocated to Alipay’s global expansion, investment in independent research and development, and the recruitment of world-class talent, thereby enhancing Alipay and its partners’ ability to deliver inclusive financial services to consumers and small and micro‑enterprises worldwide. In addition, the capital will be used to cultivate local tech talent in emerging markets, supporting their digital transformation.
Ant Financial, officially known as Zhejiang Ant Small and Micro Financial Services Group Co., Ltd., was founded in October 2014 through a rebranding of Zhejiang Alibaba E‑Commerce Co., Ltd. At its inception, Ant Financial had a registered capital of RMB 1.229 billion, with two partnership‑type entities—Hangzhou Junhan Equity Investment Partnership and Hangzhou Jun’ao Equity Investment Partnership—as its shareholders. Subsequently, Ant Financial underwent a shareholding reform and completed two rounds of financing in July 2015 and April 2016, respectively.
Ant Financial has not disclosed its latest valuation following the completion of the new funding round, though external estimates put it at between $150 billion and $160 billion. With this latest financing round, coupled with earlier leadership changes and shifts in its equity structure with Alibaba, market expectations for Ant Financial’s IPO have been rekindled. However, Ant Financial stated, “There is currently no timetable for an IPO.”

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