JC Master Legal News Issue 825

Key Takeaways for This Issue
The China Securities Regulatory Commission is rigorously cracking down on illegal practices in environmental information disclosure by listed companies.
To implement the spirit of General Secretary Xi Jinping’s important speech at the National Conference on Ecological and Environmental Protection held on May 18 this year, the China Securities Regulatory Commission has rigorously addressed violations in environmental information disclosure by listed companies and, in accordance with the law, imposed penalties in two cases involving listed companies that concealed material information on environmental pollution.

The China Securities Regulatory Commission released its report on the integrity of the securities and futures markets in 2017.
Recently, the Office for Integrity Building in the Capital Market of the China Securities Regulatory Commission conducted a statistical analysis of the 2017 capital market integrity landscape, based on data from the capital market integrity database.

The Shenzhen Stock Exchange has launched the signing process for the new version of the fund listing agreement.
On June 20, the Shenzhen Stock Exchange held listing ceremonies for the Fullgoal 1000 Fund and the Dongzheng Chuangyou Fund, officially launching the signing process for the revised “Fund Listing Agreement.” Relevant officials from the Shenzhen Stock Exchange attended the ceremonies.

142 listed state-owned enterprises are involved in major restructuring.
In the A-share market, a total of 142 listed state-owned enterprises are involved in major restructuring transactions, including 56 controlled by central government‑owned assets, 52 controlled by provincial government‑owned assets, and 34 controlled by municipal government‑owned assets.

The personal income tax threshold is proposed to be raised to 5,000 yuan.
On the morning of June 19, the draft amendment to the Individual Income Tax Law (hereinafter referred to as the “draft”) was submitted for its first reading at the third session of the Standing Committee of the 13th National People’s Congress. The proposed revision would raise the basic deduction for comprehensive income to RMB 5,000 per month (RMB 60,000 per year).

Table of Contents
Table of Contents

Finance & Capital Markets
The China Securities Regulatory Commission is rigorously cracking down on illegal practices in environmental information disclosure by listed companies.
The China Securities Regulatory Commission released its report on the integrity of the securities and futures markets in 2017.
China’s first-ever special-purpose bond for urban shantytown redevelopment was successfully tendered and issued on the Shanghai Stock Exchange.
The Shenzhen Stock Exchange has launched the signing process for the new version of the fund listing agreement.
The Shenzhen Stock Exchange has tightened oversight of environmental information disclosure and rigorously addressed the violations committed by Luoping Zinc & Electricity.

Corporate & Commercial
In the first five months, profits of state-owned enterprises increased by 20.9% year on year.
This year, the China Securities Regulatory Commission has vigorously advanced the revision of the Securities Law.
142 listed state-owned enterprises are involved in major restructuring.
The New Third Board has, for the first time, proposed a dual‑pronged approach that gives equal weight to “incremental reform” and “stock‑based optimization.”
The China Securities Regulatory Commission has put forward the “eight principles” governing administrative penalties.

Taxation
The personal income tax threshold is proposed to be raised to 5,000 yuan.
China is advancing tax and fee reductions to invigorate the market.

Litigation & Arbitration
The Wuzhong People’s Court has released a typical case involving the illegal absorption of public deposits.
The Ministry of Justice has issued the “Implementation Opinions” to comprehensively promote the coordinated development of forensic expertise across the Yangtze River Economic Belt.

Other
China’s financial sector is opening up to the outside world at “high-speed rail” pace.
The signals conveyed by the central bank’s establishment of an international financial risk monitoring task force
Finance & Capital Markets
The China Securities Regulatory Commission is rigorously cracking down on illegal practices in environmental information disclosure by listed companies.
To implement the spirit of General Secretary Xi Jinping’s important speech at the National Conference on Ecological and Environmental Protection held on May 18 this year and to support the decisive battle against pollution, the China Securities Regulatory Commission has rigorously addressed violations in environmental information disclosure by listed companies. It has urged all market participants, including listed companies, to earnestly fulfill their statutory obligations to prevent and control environmental pollution, and has imposed legal penalties in two cases involving listed companies that concealed material information on environmental pollution. In doing so, the Commission has officely shouldered its political responsibility for ecological civilization construction and, through concrete actions, fulfilled its solemn duty to safeguard against environmental risks.
On April 11, 2017, the Zhuji Environmental Protection Bureau, in coordination with the Zhuji Public Security Bureau, conducted a joint inspection of Zhejiang Shangfeng Building Materials Co., Ltd. (hereinafter referred to as Shangfeng Building Materials), a key subsidiary of Gansu Shangfeng Cement Co., Ltd. (hereinafter referred to as Shangfeng Cement). The inspection revealed that Shangfeng Building Materials was suspected of committing environmental pollution offenses. Following their knowledge of these facts, Yu Feng, Chairman and General Manager of Shangfeng Cement; Qu Hui, Deputy General Manager and Board Secretary; and Director Yu Xiaofeng, among others, failed to fulfill their reporting obligations, resulting in Shangfeng Cement’s failure to promptly disclose the incident. In response to these violations by Shangfeng Cement, the Gansu Securities Regulatory Bureau swiftly initiated enforcement proceedings and, in accordance with relevant provisions of the Securities Law, on May 30 issued warnings to Shangfeng Cement and three responsible individuals, imposing fines of RMB 400,000, RMB 100,000, RMB 100,000, and RMB 80,000, respectively.
On April 17, 2018, China Central Television reported on the solid waste and wastewater pollution issues at Shanxi Sanwei Group Co., Ltd. (hereinafter referred to as Shanxi Sanwei), drawing widespread public attention. In response to evidence indicating that Shanxi Sanwei had failed to promptly disclose its serious environmental violations, the Shanxi Securities Regulatory Bureau immediately took action, dispatched personnel to the site to verify the facts, and on April 19 initiated an investigation into alleged violations of information disclosure by Shanxi Sanwei. The investigation revealed that from 2014 to 2017, Shanxi Sanwei was subjected to seven administrative penalties by local environmental protection authorities for severe environmental pollution, and repeatedly exceeded emission standards in its day-to-day production and operations. However, Shanxi Sanwei failed to accurately disclose this information in its semi‑annual and annual reports for the years 2014–2017. In light of these actions, on May 24, the Shanxi Securities Regulatory Bureau issued a preliminary notice of administrative penalties against Shanxi Sanwei and a total of 28 individuals, including the then‑and current chairman and general manager, and imposed sanctions in accordance with the law after hearing their statements and defenses.
The development of ecological civilization is a key component of the “five-sphere integrated plan” and the “four-pronged comprehensive strategy.” Listed companies must earnestly shoulder their political responsibility for advancing ecological civilization and must never pursue economic gains at the expense of the environment or ecological integrity. They must officely embrace the profound conviction that “lucid waters and lush mountains are invaluable assets,” and make every effort to contribute to the building of a beautiful China.
Going forward, the China Securities Regulatory Commission will maintain a stringent enforcement stance against violations involving the disclosure of material environmental pollution information, imposing comprehensive and rigorous administrative penalties in accordance with the law. It will urge listed companies to earnestly fulfill their obligations to protect the ecological environment, guide them in upholding corporate social responsibility, and strive to win the tough battle against pollution in the capital market and the protracted war for ecological civilization.

The China Securities Regulatory Commission released its report on the integrity of the securities and futures markets in 2017.
Recently, the Office for Integrity Building in the Capital Market of the China Securities Regulatory Commission conducted a statistical analysis of the 2017 capital market integrity landscape, based on data from the capital market integrity database.
Based on the illegal and untrustworthy information recorded in the Integrity Database, the China Securities Regulatory Commission conducted an analysis and compilation of the integrity status of various active market participants in the securities and futures markets for 2017. With respect to entities with records of violations or breaches of trust, a total of 1,072 institutions were identified in 2017. These included 355 entities associated with listed companies, 117 entities linked to non-listed public companies, 57 corporate bond issuers, 75 securities offices, 27 fund management companies, 52 futures companies, 46 securities investment consulting offices, 37 fund sales agencies, 2 credit rating agencies, 22 accounting offices, 16 asset appraisal agencies, 14 law offices, 174 private fund managers, 61 institutional investors, and 17 other entities with records of violations or breaches of trust. Among these, entities associated with listed companies, private fund managers, and non-listed public companies accounted for the majority, representing approximately 60.2% of all entities found to have engaged in illegal or unethical conduct.
In 2017, a total of 1,716 individuals were found to have records of illegal or untrustworthy conduct. Among them: 927 were associated with listed companies; 77 with non-listed public companies; 24 with corporate bond issuers; 109 employed by securities offices; 60 by fund management companies; 54 by futures companies; 1 by a securities investment consulting office; 106 by accounting offices; 37 by asset appraisal agencies; 18 by law offices; 29 by private fund managers; 245 individual investors; and 29 others. Notably, the largest group—accounting for 54.0%—consisted of personnel affiliated with listed companies, including directors, supervisors, and senior executives of listed companies; controlling shareholders and actual controllers of listed companies; individual investors holding at least 5% of the shares in listed companies; directors, supervisors, and senior executives of counterparties in M&A and restructuring transactions involving listed companies; and directors, supervisors, and senior executives of companies planning to go public.
From the perspective of unlawful and untrustworthy conduct, among market‑related violations, information disclosure offenses remain by far the most prevalent, accounting for 47.4% of all cases. Internal control and management violations account for 21.5%, business‑operation violations for 17.2%, and market‑trading violations for 13.6%. For listed companies, the primary type of unlawful and untrustworthy behavior is information‑disclosure noncompliance, which to a significant extent underscores that such violations are both the focal point of regulatory oversight for listed offices and a “high‑risk zone” in the broader market.
Going forward, the China Securities Regulatory Commission will continue to attach great importance to and steadily strengthen integrity-building efforts, thereby fostering the long-term stability and sound development of the capital market.

China’s first-ever special-purpose bond for urban shantytown redevelopment was successfully tendered and issued on the Shanghai Stock Exchange.
On June 20, the first tranche of Tianjin’s Hongqiao District Slum Renovation Special Bonds for 2018 was successfully issued through the Ministry of Finance–Shanghai Stock Exchange Government Bond Issuance System, marking the official launch of the nation’s first-ever special bond dedicated to slum renovation since the Ministry of Finance and the Ministry of Housing and Urban–Rural Development jointly issued, on March 1, the “Notice on the Issuance of the Administrative Measures for the Pilot Issuance of Local Government Special Bonds for Slum Renovation.”
This tranche of special-purpose bonds for shantytown redevelopment is earmarked for the Xigu South Area Shantytown Renovation Project in Tianjin and the Xiyuzhuang Area Shantytown Renovation Project in Hongqiao District, Tianjin. The bonds have a five-year tenor, with an anticipated total financing scale of RMB 10.8 billion; this issuance amounts to RMB 1.5 billion. Going forward, debt service will be primarily funded by land‑sale proceeds. Based on the project’s financing plan and construction progress, the projected coverage ratio of land‑sale revenue relative to the project’s total financing costs stands at 1.52, indicating a relatively strong self‑sustaining financial position. In terms of issuance, the bonds attracted aggregate subscriptions 2.69 times the offering size, with underwriters submitting bids totaling RMB 1.55 billion. The coupon rate was set at 3.88%, 22 basis points lower than that of comparable ordinary special‑purpose bonds issued concurrently.
The special-purpose bonds for shantytown redevelopment represent another innovative pilot product launched by the Ministry of Finance, following the land‑reserve and toll‑road special bonds. These bonds achieve self‑balancing between project revenues and financing, offering a new framework for local governments to raise funds for shantytown renovation projects. Shantytown redevelopment is currently one of the key livelihood‑oriented initiatives receiving strong national support, and securing adequate financing is a critical prerequisite for project implementation. At present, local governments face substantial funding needs. Under the traditional model, they typically rely on project‑implementing enterprises to obtain bank loans and other forms of financing. By issuing special bonds dedicated to shantytown redevelopment, local authorities can broaden their sources of capital, encourage the orderly participation of social capital in these projects, provide low‑cost funding, and leverage the bonds’ dual roles in improving public welfare and mitigating risks.
The Shanghai Stock Exchange has actively implemented the work plans of the Ministry of Finance and the China Securities Regulatory Commission, providing support to the Tianjin Municipal Bureau of Finance in facilitating the issuance of the nation’s first special-purpose bond for shantytown redevelopment. Leading a consortium of third-party institutions—including securities offices, accounting offices, and law offices—the Exchange has leveraged their professional expertise to offer advisory services on project design and feasibility studies. This tranche of special-purpose bonds was meticulously structured in strict accordance with relevant regulatory requirements, taking full account of the asset‑return characteristics of shantytown redevelopment projects, thereby achieving alignment among borrowing, utilization, and repayment, and ensuring that project revenues are sufficient to cover the financing costs of the bonds. Successfully tendered and issued on the SSE market, this bond is poised to set a benchmark in its niche segment and is expected to serve as a model for the future development of similar special-purpose bonds. Building on the successful issuance of this inaugural shantytown redevelopment bond, the Shanghai Stock Exchange will continue, in close coordination with the Ministry of Finance and local fiscal authorities, to steadily advance innovative developments in special-purpose bonds that achieve self‑balancing between project revenues and financing costs.
In addition to the special-purpose bonds for shantytown redevelopment, Tianjin also issued general government bonds, special-purpose government bonds, and land‑reserve‑specific bonds, with issuance sizes of RMB 7.269 billion, RMB 7.08 billion, and RMB 16.202 billion, respectively. The coupon rates ranged from 3.56% to 4.29%. This round of bond offerings attracted strong subscription from securities‑office underwriters, with total bids reaching RMB 50.12 billion—1.56 times the offering size—and winning allocations of RMB 1.725 billion, or 5.38% of the total issuance. These results underscore that, as the local government bond market continues to mature, the investment and allocation value of this instrument is increasingly recognized by securities offices and their clients.

The Shenzhen Stock Exchange has launched the signing process for the new version of the fund listing agreement.
On June 20, the Shenzhen Stock Exchange held listing ceremonies for two funds—Fullgoal 1000 and Dongzheng Chuangyou—officially launching the signing process for the revised Fund Listing Agreement. The chairman of Fullgoal Fund Management Co., Ltd., the general manager of Oriental Red Asset Management Co., Ltd., along with relevant senior executives, attended the ceremonies, which were also graced by officials from the Shenzhen Stock Exchange.
Earlier, the Shenzhen Stock Exchange had smoothly initiated the signing of the new‑version Securities Listing Agreement and the new‑version Corporate Bond Listing Agreement. This time, the Shenzhen Stock Exchange has signed the new‑version Fund Listing Agreement with the managers of listed funds. This move represents another important step by the Exchange to further implement the requirements of the newly revised Measures for the Administration of Stock Exchanges, address regulatory gaps, strengthen the foundation of oversight, uphold the spirit of contractual obligations, and reinforce comprehensive, stringent, and law‑based supervision.
The revised Fund Listing Agreement has been adjusted, optimized, and refined compared with the original version, with the main changes falling into the following areas:
First, the exchange has enriched its self-regulatory oversight tools. It has clarified that the exchange may conduct on-site inspections of fund managers and specified the methods and measures for such inspections; moreover, it stipulates that if a fund manager breaches the relevant rules or agreements, the exchange may impose punitive liquidated damages.
Second, the regulatory framework for information disclosure has been strengthened. It is now clearly stipulated that fund managers shall act with honesty and integrity, operate in a standardized manner, and fulfill their obligations to disclose information and other related duties as prescribed, ensuring that the content of such disclosures is true, accurate, complete, timely, and fair.
Third, it embodies the spirit of contract and underscores the exchange’s self-regulatory nature. It explicitly stipulates that the exchange shall provide facilities, advisory services, and training to facilitate activities such as fund subscription, listing and trading, subscription and redemption, suspension and resumption of trading, and information disclosure. The revised Fund Listing Agreement has also amended its dispute‑resolution provisions, allowing fund managers to choose either to bring suit in a court of competent jurisdiction or to submit disputes to arbitration before an arbitral tribunal.
Fourth, the internal redress mechanism has been clarified to enhance the fairness and transparency of self-regulatory oversight. The revised Fund Listing Agreement stipulates that the Shenzhen Stock Exchange shall establish an internal redress system for self-regulatory supervision, ensuring that fund managers have the right to request a hearing or seek review of significant self-regulatory decisions made by the Exchange.
An official from the Shenzhen Stock Exchange stated that, going forward, the Exchange will, in accordance with the unified deployment of the China Securities Regulatory Commission, earnestly implement all requirements set forth in the Measures for the Administration of Stock Exchanges. It will further leverage its role as a core platform of the capital market, strengthen communication and collaboration with all market participants, and, building on the Shenzhen market’s foundational strengths and distinctive features, continue to refine its product offerings. The goal is to develop the Shenzhen Stock Exchange’s fund market into an innovative, one-stop global asset allocation and wealth management platform, achieve balanced development across the equity, bond, fund, and derivatives markets, foster a leading market system that supports innovation, and establish an internationally premier hub for the formation of innovative capital.

The Shenzhen Stock Exchange has tightened oversight of environmental information disclosure and rigorously addressed violations by Luoping Zinc & Electricity.
On June 21, the Ministry of Ecology and Environment released a report on heavy-metal pollution at Yunnan Luoping Zinc & Electricity Co., Ltd. (hereinafter referred to as “the Company”). The report indicated that during the first round of central environmental inspections in 2016, significant risks of heavy-metal contamination were identified at the Company; yet, rather than being addressed, these issues have continued to worsen, posing a serious threat to the water‑environmental safety of the upper reaches of the Pearl River.
Upon receiving the aforementioned information, the Shenzhen Stock Exchange promptly implemented regulatory measures, conducting a telephone inquiry with the company to obtain relevant details and requiring it to disclose the matters outlined in the notice and provide a response on the same day. The Exchange also issued a letter of concern, urging the company to immediately conduct a self‑examination of its prior environmental information disclosures, assess whether any violations of laws or regulations in environmental information disclosure had occurred, and evaluate the impact of the notified matters on the company’s production and operations. Furthermore, the Exchange reminded the company to expedite corrective actions, promptly disclose relevant progress, and conscientiously fulfill its information disclosure obligations.
Earlier, during its review of the company’s 2017 annual report, the Shenzhen Stock Exchange noted that the company had failed to disclose, in a truthful, accurate, and complete manner, the environmental information required under the China Securities Regulatory Commission’s “Guidelines on the Content and Format of Annual Reports” for key pollutant‑discharging entities. In the annual report inquiry letter it issued to the company, the Exchange requested supplementary disclosures; to date, no response has been received. Following the issuance of this public notice, the Shenzhen Stock Exchange, in light of the disclosed information, conducted a further thorough review of the company’s prior information‑disclosure practices and identified suspected violations, including the failure to promptly disclose material information related to environmental pollution. In view of these actions, which are alleged to contravene relevant provisions of the Rules for Listing Stocks, the Guidelines for Standardized Operations of Companies Listed on the SME Board, and other applicable regulations, the Shenzhen Stock Exchange has initiated public censure proceedings against the company and the relevant parties, and will take stringent measures to address the company’s breaches of information‑disclosure requirements.
The Shenzhen Stock Exchange has consistently attached great importance to environmental information disclosure by listed companies. In response to recent violations of environmental information‑disclosure requirements by *ST Sanwei and Huifeng Shares, the Exchange has imposed strict disciplinary measures in each case. Going forward, under the leadership of the China Securities Regulatory Commission, the Shenzhen Stock Exchange will, in accordance with the law, exercise comprehensive and stringent oversight over listed companies’ environmental information‑disclosure practices; continuously urge these companies to fulfill their disclosure obligations; rigorously investigate and resolutely address any breaches of environmental‑information‑disclosure rules; and adopt a multi‑pronged approach to help listed companies win the battle against pollution, thereby actively contributing to the building of an ecological civilization.
Commercial & Corporate
In the first five months, profits of state-owned enterprises increased by 20.9% year on year.
According to the latest data released by the Ministry of Finance, from January to May this year, state-owned and state-controlled enterprises nationwide demonstrated strong economic performance. Total operating revenue reached RMB 22,299.71 billion, up 10.2% year on year; total profits amounted to RMB 1,290.13 billion, an increase of 20.9% compared with the same period last year—outpacing revenue growth by 10.7 percentage points. Meanwhile, both debt-servicing capacity and profitability improved relative to the corresponding period of the previous year.
From January to May, the total operating costs of state-owned enterprises amounted to RMB 21,448.17 billion, up 9.7% year on year. Within this, sales expenses, administrative expenses, and financial expenses increased by 7.4%, 9.8%, and 13.9%, respectively, compared with the same period last year. As of the end of May, the total assets of state-owned enterprises stood at RMB 16,893.751 trillion, up 9.3% year on year; total liabilities reached RMB 10,985.490 trillion, up 8.7% year on year; and total equity totaled RMB 5,908.261 trillion, up 10.4% year on year.
Among them, central enterprises reported total assets of RMB 77,062.99 billion, up 6.7% year on year; total liabilities of RMB 52,227.58 billion, up 6.1% year on year; and total equity of RMB 24,835.41 billion, up 7.8% year on year. Local state-owned enterprises recorded total assets of RMB 91,874.52 billion, up 11.6% year on year; total liabilities of RMB 57,627.32 billion, up 11.2% year on year; and total equity of RMB 34,247.20 billion, up 12.3% year on year.
Looking at profit performance across major industries, from January to May, the steel, petroleum and petrochemical, and coal sectors all posted substantial year-on-year gains in profits, with growth rates exceeding their revenue expansion.

This year, the China Securities Regulatory Commission has vigorously advanced the revision of the Securities Law.
On June 22, the China Securities Regulatory Commission (CSRC) released a report on its efforts to build a law-based government in 2017. In 2017, in accordance with the requirements of the Securities Law, the Administrative Compulsory Law, and other relevant regulations, the CSRC rigorously implemented the institutional separation between the application for and the review and decision-making processes regarding seizure and freezing measures. It reviewed and issued 10 freezing orders, with total frozen funds exceeding RMB 18 billion. In 2018, the CSRC will vigorously advance legislative initiatives, including the revision of the Securities Law and the drafting of the Futures Law.
In 2017, a total of 633 IPO applications were reviewed and approved, with 419 companies completing their initial public offerings and raising RMB 218.6 billion. Additionally, 266 listed companies carried out secondary financings, raising RMB 800.2 billion. Throughout the year, 32 applications for overseas listings and refinancings by domestic enterprises were approved, supporting domestic offices in raising HK$216.5 billion on the Hong Kong market.
Meanwhile, the China Securities Regulatory Commission has rigorously investigated and prosecuted illegal activities, strengthening regulatory enforcement. By strictly handling major cases across various sectors, it has established a strong deterrent effect. In 2017, 478 new investigations were initiated, with 312 additional cases formally filed; 335 filed cases were concluded, a year-on-year increase of 43%. Throughout the year, 224 administrative penalty decisions were issued, imposing fines and confiscations totaling RMB 7.479 billion—an increase of 74.74% compared with the previous year—and barring 44 individuals from the securities market. The Commission also launched a follow-up campaign to rectify and standardize various trading venues, effectively addressing violations at local trading platforms.
In 2017, the China Securities Regulatory Commission further strengthened the capital market legal framework tailored to China’s national conditions, steadily advancing legislative work on foundational laws—such as the revision of the Securities Law, the enactment of the Futures Law, and amendments to the Company Law and the Criminal Law—that serve as the “four pillars and eight beams” of the capital market, thereby continuously improving the top-level institutional design of the capital market. It also refined market trading mechanisms, including share reduction rules; frontline regulatory systems, such as stock exchange self‑regulation; issuance‑related oversight frameworks, including refinancing by listed companies; and regulatory provisions governing regional equity markets. Throughout the year, a total of 13 regulations and 27 normative documents were issued, while various regulatory bodies within the system promulgated more than 100 self‑regulatory rules.
In 2017, the China Securities Regulatory Commission also mobilized specialized expertise to revise and formulate a number of key regulatory rules and provisions, including the “Several Provisions on Share Reductions by Shareholders, Directors, Supervisors, and Senior Management of Listed Companies,” the “Administrative Measures for Stock Exchanges,” the “Administrative Measures for Integrity-Based Supervision and Management in the Securities and Futures Markets,” the “Regulations on Procedures for the Implementation of Administrative Licenses,” and the “Administrative Measures for Law Offices Engaging in Securities‑Related Legal Services.”
In 2018, the China Securities Regulatory Commission will vigorously advance legislative efforts, including revising the Securities Law and enacting the Futures Law, further refining the coordinated and integrated framework for comprehensive regulation and law enforcement—covering routine supervision, case investigations, administrative penalties, and administrative reviews—while rigorously cracking down on all types of illegal and non-compliant activities. It will also intensify public awareness-raising and education on the rule of law in the capital market, thereby achieving new progress in building a law-based government.

142 listed state-owned enterprises are involved in major restructuring.
According to data from Tonghuashun, as of yesterday this year, a total of 142 listed state-owned enterprises in the A-share market have been involved in major restructuring transactions. Among them, 56 are controlled by central government‑owned assets, 52 by provincial‑level state‑owned assets, and 34 by municipal‑level state‑owned assets. In terms of restructuring objectives, these initiatives encompass both horizontal and vertical integrations, as well as diversification‑oriented strategic restructurings.
Zhou Lisha, an associate researcher at the Research Center of the State-owned Assets Supervision and Administration Commission of the State Council, stated in an interview that promoting state‑owned enterprise restructuring through horizontal integration can amplify economies of scale, leverage synergies in operations and management, enhance industry concentration, and facilitate intensive, efficient management. Meanwhile, vertical integration enables complementary advantages, allowing offices at different stages of the value chain to engage in specialized division of labor and cooperation, thereby fostering the socialization of production and balanced economic development. In addition, certain specialized restructurings can improve the efficiency of capital allocation among state‑owned enterprises, directing resources toward leading companies and concentrating them on their core businesses.
In fact, in addition to state-owned enterprises listed on the stock market actively pursuing mergers and reorganizations, local state-owned enterprises are also accelerating their consolidation and restructuring efforts, particularly in the Northeast region as well as in provinces such as Hebei and Shandong.
In the course of advancing mergers and reorganizations, local state-owned enterprises should remain focused on their core businesses, extend upstream and downstream along the industrial chain and into related sectors, and cultivate synergistic advantages. At the same time, they should integrate these efforts effectively with capacity‑reduction initiatives, accelerate their exit from non‑core areas lacking competitive edge and from low‑end segments of the industry, and further optimize their product mix and market positioning. In addition, it is essential to expedite the establishment and improvement of laws, regulations, and supporting mechanisms for corporate mergers and reorganizations, strengthen oversight and enforcement in this area, and reinforce information‑disclosure requirements, thereby promoting the rule of law and standardization of such activities.

The New Third Board has, for the first time, proposed a dual‑pronged approach that gives equal weight to “incremental reform” and “stock‑based optimization.”
“Following the path of refined, tiered segmentation and delivering differentiated institutional frameworks and services tailored to each tier will be the NEEQ’s guiding principle and priority for the foreseeable future. In terms of specific approaches, we have adopted a dual‑pronged strategy of ‘incremental reform’ and ‘stock‑level optimization,’” said Sui Qiang, Deputy General Manager of the National Equities Exchange and Quotations System, on June 22.
On that day, Sui Qiang delivered a speech at the 2018 New Third Board Development Forum of the 7th China (Guangzhou) International Financial Trading Expo. He emphasized that, for the New Third Board, failing to innovate and fail to develop constitutes the greatest systemic risk. During the event, Sui Qiang publicly introduced, for the first time, a reform approach that places equal emphasis on “incremental reform” and “stock‑based optimization.”
At present, the New Third Board has entered a new stage of development that places greater emphasis on operational quality, and the market’s intrinsic demand has undergone profound changes. According to annual report data over the years, core indicators such as total assets, operating revenue, and net profit of listed companies have grown cumulatively by 102.02%, 75.97%, and 91.61%, respectively, compared with five years ago—each reaching or approaching a doubling. Furthermore, 906 companies have achieved scale upgrades since listing, and a number of high-quality enterprises continue to grow and strengthen within the New Third Board market.

Sui Qiang stated that, following sustained exploration and practical implementation, the New Third Board has identified viable pathways and approaches for serving tens of thousands of enterprises. Specifically, by leveraging a refined market-tiering framework, it is coordinating and advancing reforms across issuance, trading, investor access, information disclosure, and regulatory oversight, while steadily promoting two-way market opening and comprehensively enhancing the market’s core functions—price discovery, resource allocation, and risk management.
Regarding the dual‑pronged approach of “incremental reform” and “stock‑based optimization,” Sui Qiang explained that, on the stock‑optimization front, for instance, the current sequential arrangement in issuance‑financing management—such as the timing of filing‑based oversight and the use of funds—while effective in mitigating risks, also entails significant time and capital costs; some have suggested shifting from a serial to a parallel process. Similarly, across different market tiers, the same issuance procedures and information‑disclosure requirements apply regardless of the size of the offering or the identity of the investors, leaving considerable room for adjustment and refinement. Furthermore, the number of new investors admitted in each private placement, as well as the suitability‑testing standards for investors in asset‑acquisition transactions, currently exhibit limited alignment between the institutional framework and actual practice. Lastly, market participants generally perceive the disclosure requirements for the Innovation Layer as excessively stringent and burdensome.
On the front of incremental reforms, Sui Qiang stated that all market participants have put forward numerous constructive proposals—ranging from establishing new market tiers and introducing more efficient issuance mechanisms to streamlining operational processes and refining trading frameworks—and that we are carefully incorporating these inputs through thorough multi‑party assessments and deliberations. We are also actively coordinating on related IPO policies as well as on matters concerning state‑owned and foreign‑invested capital.

The China Securities Regulatory Commission has put forward the “eight principles” governing administrative penalties.
Recently, Yan Qingmin, a member of the CPC Committee and Vice Chairman of the China Securities Regulatory Commission (CSRC), visited the CSRC’s Administrative Penalty Committee (hereinafter referred to as the Penalty Committee) to conduct research and provide guidance on administrative penalty work. He held a symposium with officials at or above the department level of the Penalty Committee and set forth specific requirements for further strengthening and improving administrative penalty procedures.
Yan Qingmin emphasized that, in the next phase, administrative penalty work must adhere to the “eight principles,” with focused efforts concentrated on the following eight areas:
First, we must uphold “political integrity.” We must strengthen our political awareness, refine our political experience, demonstrate political responsibility, and maintain strict political self-discipline, approaching administrative penalty work with unwavering conviction, fearless courage, and a broad-minded spirit.
Second, we must strengthen the “technological dimension.” We need to devote significant effort to advancing the technological modernization of law enforcement, leveraging scientific and technological tools to drive iterative upgrades in enforcement practices.
Third, we must enhance “standardization.” We need to make concerted efforts to refine law enforcement, continuously strengthen our capacity and competence in administering according to the law, and ensure that administrative penalty work is carried out with high quality. We should summarize experience gained from handling typified cases, standardize rules for fact-finding and criteria for determining penalties. Furthermore, we must further standardize the content and format of legal documents to improve their overall quality. In addition, we should continue to streamline adjudication procedures, establish standardized operating protocols, and bolster our institutional “soft power.”
Fourth, strengthen “consistency.” We must intensify oversight, guidance, and coordinated management of administrative penalty enforcement by dispatched agencies, refine the supervisory and coordination mechanisms, and ensure that administrative penalty work across the entire system is carried out in a coordinated and consistent manner. At the same time, it is essential to clearly define the duties and responsibilities of dispatched agencies in exercising their administrative penalty powers, as well as the boundaries of those powers, so as to ensure that the exercise of such powers is aligned with corresponding responsibilities.
Fifth, emphasis should be placed on “extension.” We must make every effort to establish and strengthen the Shanghai and Shenzhen circuit‑trial offices, turning them into front‑line platforms for administrative penalty work. Using the development of these circuit‑trial offices as a connecting link, we will reinforce the close coordination between administrative penalties and the exchanges’ frontline regulatory functions, and ensure the effective integration of enforcement resources. At the same time, we will further enhance communication and coordination with legislative, judicial, and government legal‑affairs bodies, pooling the strengths of all stakeholders to advance administrative penalty work in a concerted manner.
Sixth, emphasize “strictness.” We must excel in regulatory oversight, dare to assume responsibility, and fully shoulder our duties in administrative penalty enforcement.
Seventh, enhance “sensitivity.” Law enforcement publicity must be pursued consistently and tirelessly, officely safeguarding the primary front for news and public opinion on administrative penalties.
Eighth, we must pursue “professionalism.” Administrative penalty work is highly specialized; we must ground ourselves in the practical realities of case adjudication, maintain a sense of “capability anxiety,” and continuously enhance our professional competence.
Taxation TAXATATION
The personal income tax threshold is proposed to be raised to 5,000 yuan.
On the morning of June 19, the draft amendment to the Individual Income Tax Law (hereinafter referred to as the “draft”) was submitted for its first reading at the third session of the Standing Committee of the 13th National People’s Congress.
Under the proposed amendment to the Individual Income Tax Law, the basic deduction for comprehensive income will be increased to RMB 5,000 per month (RMB 60,000 per year). The taxable income subject to calculation is the balance remaining after deducting RMB 60,000 in annual expenses, as well as special deductions, special additional deductions, and other legally prescribed deductions, from the total income earned in each tax year.
This marks the seventh amendment to the Individual Income Tax Law of the People’s Republic of China (hereinafter referred to as the “Individual Income Tax Law”) since its enactment in 1980, and it will usher in a fundamental reform. The proposed changes not only seek to raise the personal income tax threshold but also, for the first time, introduce special additional deductions for expenses such as children’s education, continuing education, major illness medical expenses, housing loan interest, and housing rent. In addition, for the first time, a comprehensive tax system will be applied to four categories of labor‑related income: wages and salaries, labor remuneration, manuscript fees, and royalty income.
The personal income tax threshold of 3,500 yuan was set in 2011. Since the enactment of the Personal Income Tax Law in 1980, the threshold has been adjusted three times: from 800 yuan in 1980 to 1,600 yuan in 2006, then to 2,000 yuan in 2008, and finally to 3,500 yuan in 2011, a level that has remained in effect ever since.
The 2018 Government Work Report stated: raise the personal income tax threshold, increase special deductions for expenses such as children’s education and major medical expenses, appropriately reduce the tax burden, and encourage the people to increase their incomes through work and move toward prosperity.
In presenting the draft, Minister of Finance Liu Kun stated that individual income tax is currently China’s third-largest tax, after value-added tax and corporate income tax, and plays a vital role in raising fiscal revenue and regulating income distribution.
In accordance with the requirement to “gradually establish a personal income tax system that combines comprehensive and classified approaches,” and taking into account the current capacity of tax administration and relevant supporting conditions, the draft bill brings four categories of labor‑related income—wages and salaries, labor compensation, manuscript fees, and royalty income—within the scope of comprehensive taxation, subject to a unified progressive tax rate.
The draft stipulates that the brackets for the three lower tax rates—3%, 10%, and 20%—will be expanded: the bracket for the 3% rate will be doubled, and the portion of income currently taxed at 10% will be reclassified under the 3% rate; the bracket for the 10% rate will be substantially broadened, with income currently taxed at 20% and a portion of income currently taxed at 25% being reclassified under the 10% rate; the portion of income currently taxed at 25% will be reclassified under the 20% rate; correspondingly, the bracket for the 25% rate will be narrowed, while the brackets for the three higher rates—30%, 35%, and 45%—will remain unchanged.
The draft, while raising the basic deduction standard for comprehensive income and reafofficeing that existing special deductions—such as contributions to basic old-age insurance, basic medical insurance, unemployment insurance, and housing provident funds—as well as other legally prescribed deductions will remain in effect, also introduces additional special additional deductions closely related to people’s livelihoods, including expenses for children’s education, continuing education, major illness medical care, housing loan interest, and housing rent.
To close tax loopholes, the draft proposes, for the first time, to introduce anti‑avoidance provisions. These provisions address tax avoidance practices such as individuals transferring assets in a manner that does not comply with the arm’s length principle, engaging in tax avoidance in offshore jurisdictions, or implementing unreasonable commercial arrangements to obtain undue tax benefits. They empower tax authorities to make tax adjustments using reasonable methods and stipulate that, when tax adjustments result in additional tax liabilities, the relevant taxes must be collected, together with interest calculated in accordance with the law.

China is advancing tax and fee reductions to invigorate the market.
The VAT reform measures, implemented from May 1, have already delivered substantial tax‑cut benefits to many enterprises. Chinese fiscal and tax experts note that these tax and fee reductions play a significant role in promoting industrial transformation and upgrading, as well as in boosting market vitality and social creativity.
Effective May 1, China has implemented three measures to deepen VAT reform: reducing VAT rates, unifying the threshold for small-scale VAT taxpayers, and providing a one-time refund of outstanding input VAT credits to taxpayers in certain industries. These steps further bolster the development of the real economy, particularly manufacturing and small and micro enterprises. To date, more than a month has passed since the new VAT policies took effect, and the benefits of the reform are beginning to emerge across various sectors.
Over the past period, significant progress has been made in tax and fee reductions. With the implementation of measures such as the deepened VAT reform, seven tax优惠政策 for small and micro enterprises, and four categories of government‑imposed fee cuts—collectively dubbed “tax and fee red envelopes”—the cost burden on the real economy has been effectively lowered, bolstering momentum for transformation and upgrading. In recent years, China has steadily intensified its efforts to cut taxes and fees; over the past five years, the transition from business tax to VAT alone has resulted in cumulative tax reductions totaling 2.1 trillion yuan. Coupled with tax incentives for small and micro enterprises and the streamlining of various charges, these measures have collectively eased the burden on market entities by more than 3 trillion yuan.

Litigation & Arbitration
The Wuzhong People’s Court has released a typical case involving the illegal absorption of public deposits.
On the morning of June 13, in response to the district-wide campaign for the Month of Public Awareness on Preventing Illegal Fundraising, the People’s Court of Wuzhong District held a press conference to brief the public on the court’s handling of cases involving the illegal absorption of public deposits and to present five representative典型案例. The event aimed to strengthen public risk awareness, enhance preventive capabilities, and encourage citizens to consciously steer clear of and resist illegal fundraising, thereby curbing such offenses at their source and effectively safeguarding the property rights and interests of the people. Journalists from numerous media outlets attended the press conference.
According to available information, from 2014 to 2017, the Wuzhong District People’s Court accepted a total of 10 such cases. As of now in 2018, it has already received 7 cases, reflecting a rapid increase in case filings. Among the concluded cases, three involved amounts exceeding RMB 100 million, with the largest reaching RMB 420 million.
Wu Wanjin, deputy chief judge of the Criminal Division of the court, explained that the rise in cases involving the illegal absorption of public deposits is primarily due to the large amounts of idle funds held by the general public, which seek stable, high‑yield investment channels but lack adequate financial literacy. Meanwhile, criminals lure investors with promises of substantial, fixed returns, leading them to believe they can reap hefty profits without bearing the risk of investment failure, thus prompting them to pour their money into such schemes. These cases exhibit the following key characteristics: first, they use the lure of exorbitant returns to entice individuals to invest their principal in exchange for high interest; second, they operate in a corporate‑style manner, cloaking criminal activities in a veneer of legality and thereby enhancing their deceptive appeal; third, they integrate online and offline channels, expanding their reach considerably; fourth, the methods employed are constantly evolving, with a pronounced trend toward financial‑management‑oriented tactics; fifth, middle‑aged and elderly investors constitute the primary victim group, often falling prey to false advertising; and sixth, recovering stolen funds is extremely difficult, leaving investors frequently suffering heavy losses.
On that day, the Wuzhong District People’s Court handed down a verdict in a case of illegally absorbing public deposits. From September 2015 to July 2016, the defendant, Wu, established Shenzhen Hongshi Wealth Co., Ltd. and set up branch offices in Nanchang and Suzhou. Without obtaining lawful approval from the relevant authorities, he solicited funds under the pretext of mining operations and expanding production. By organizing training sessions and dispatching team managers and sales representatives to distribute promotional materials, he promised annual interest rates ranging from 12% to 20%, thereby illegally raising RMB 4.73 million from 52 members of the public through entrusted wealth management. He subsequently paid back RMB 221,065.1 in interest to investors, resulting in total losses amounting to RMB 4,508,934.9. The Wuzhong District People’s Court found that the defendant, Wu, had publicly advertised to an indefinite group of persons and promised to repay principal and interest within a specified period, thereby illegally absorbing public deposits totaling RMB 4.73 million. His conduct constituted the crime of illegally absorbing public deposits, involving a particularly large sum. Accordingly, the court sentenced him to three years and six months’ imprisonment and imposed a fine of RMB 50,000.
The Ministry of Justice has issued the “Implementation Opinions” to comprehensively promote the coordinated development of forensic expertise across the Yangtze River Economic Belt.
Recently, the Ministry of Justice issued the “Implementation Opinions on Comprehensively Promoting the Coordinated Development of Forensic Science across the Yangtze River Economic Belt” (hereinafter referred to as the “Implementation Opinions”), outlining seven measures to advance the coordinated development of forensic services in the 11 provinces and municipalities along the Yangtze River Economic Belt, thereby better supporting the region’s economic and social development.
The “Implementation Opinions” emphasize that the Yangtze River Economic Belt is a key pilot zone for reforming the judicial appraisal management system. It calls for promoting rational planning and spatial allocation of appraisal institutions, formulating a development plan for environmental‑damage forensic appraisal institutions in the Yangtze River Economic Belt, and progressively completing development plans for forensic, physical‑evidence, and audio‑visual‑material appraisal institutions, so as to achieve a balanced number of institutions, scientifically sound distribution, and orderly development. Strict adherence to the regulations on admission and registration of judicial appraisers is required, with unified admission criteria and practice classifications for appraisal institutions. A cross‑provincial (and municipal) pool of review experts should be established, ensuring precise and uniform application of specific requirements and conditions for admission, thereby avoiding differential treatment and implementing a single, standardized entry threshold. Efforts should be made to explore the establishment of a system of routine competency assessments for appraisers and a unified examination for applicants seeking registration. The adoption of uniform appraisal standards should be promoted, with enhanced guidance on the application of such standards and norms to ensure their scientific and appropriate implementation. Joint practice inspections and document‑quality reviews are to be organized; each year, one category of appraisal will be selected, with uniformly developed quantitative inspection and assessment criteria, and joint practice inspections and document‑quality reviews involving 11 provinces and municipalities will be conducted. A mechanism for coordinated training and resource sharing should be put in place, establishing a roster of trainers and continuing‑education bases for judicial appraisal in the Yangtze River Economic Belt, and facilitating the sharing of educational resources. Appraisal institutions and practitioners may freely choose to participate in continuing‑education programs hosted by bases in other provinces or municipalities, with the credits earned being mutually recognized. Industry self‑regulation and inter‑institutional collaboration must be strengthened. Industry associations are to be guided in setting up specialized committees for forensic, physical‑evidence, audio‑visual‑material, and environmental‑damage judicial appraisals within the Yangtze River Economic Belt, undertaking major theoretical research projects, and, when necessary, convening cross‑provincial expert consultations on complex or difficult cases. Support is to be provided for the establishment of a code of ethical conduct for judicial appraisal institutions and practitioners in the Yangtze River Economic Belt, fostering inter‑provincial cooperation in resolving disputes and safeguarding the legitimate rights and interests of appraisers. Information exchange on judicial appraisal management and cross‑regional assistance in appraisal matters should be reinforced, achieving interconnectedness of information‑management systems and resource sharing. Judicial appraisal assistance should be integrated into the unified administration of legal aid, with the establishment of green channels for cross‑provincial assistance. Finally, the formulation of fee standards for environmental‑damage judicial appraisals should be accelerated.
Other
China’s financial sector is opening up to the outside world at “high-speed rail” pace.
On the 21st, President Xi Jinping stated during a meeting with heads of renowned multinational corporations attending the special roundtable summit of the Global CEO Council that China’s door of opening-up will not close; on the contrary, it will open even wider. China will continue to significantly ease market access, further foster a more attractive investment environment, strengthen intellectual property protection, and proactively expand imports, thereby creating a more conducive and orderly environment for entrepreneurs at home and abroad to invest and start businesses.
“The door of China’s opening-up will not be closed; it will only open wider and wider.” This phrase has been cited three times by President Xi Jinping in the past 70 days, underscoring China’s confidence in its openness and inclusiveness, as well as its willingness to rise to challenges. It also signals that, in the period ahead, China will continue to deepen its opening-up, expand international cooperation, and pursue common development with all countries on the basis of peace, thereby achieving mutual benefit and win-win outcomes.
Reform and opening-up is China’s fundamental national policy and the primary driving force behind its future development. It is universally acknowledged that reform and opening-up have enabled China to achieve remarkable economic progress and significant developmental accomplishments: in 1978, China’s GDP stood at just 365.02 billion yuan, with per capita GDP of only 382 yuan, placing the country among the world’s low-income nations. By the end of 2017, China’s GDP had reached 82.7122 trillion yuan, ranking second globally, while per capita GDP for the year totaled 59,660 yuan.
During China’s process of opening up to the outside world, the substantial liberalization of the financial sector has emerged as a major highlight of this round of reforms. Beginning in 2017, following the State Council’s issuance in January of the “Notice on Several Measures to Expand Opening-Up and Actively Utilize Foreign Investment,” a series of policies and measures were introduced to accelerate the comprehensive opening of China’s financial industry. As 2018 commenced, the pace of opening-up gained further momentum. In early April, the Boao Forum for Asia explicitly called for a significant relaxation of market access, including the implementation of key measures to lift foreign‑ownership caps in the banking, securities, and insurance sectors. At the same time, efforts to open up were intensified, with accelerated progress in the insurance sector, relaxed restrictions on the establishment of foreign‑invested financial institutions, an expanded scope of business for such institutions operating in China, and broader cooperation between domestic and international financial markets.
Meanwhile, at the Boao Forum for Asia 2018 Annual Conference’s sub-forum on “The Normalization of Monetary Policy,” People’s Bank of China Governor Yi Gang announced specific measures and a timetable for further opening up the financial sector to foreign investors. Yi also stated that preparations for the Shanghai–London Stock Connect are progressing smoothly and that the initiative aims to launch within 2018.

At the end of April, the China Banking and Insurance Regulatory Commission announced four specific measures to open up the banking and insurance sectors to foreign investment. In May, the China Securities Regulatory Commission issued regulations governing the establishment and operation of overseas equity‑holding subsidiaries by foreign‑invested futures offices and securities/fund management companies. As a result, the opening-up of the financial services sector—encompassing banking, securities and fund management, and insurance—emerged as a central pillar of China’s 2018 financial liberalization agenda.
This major liberalization of the financial sector sends two key signals: first, it reflects the confidence of a major power—China has both the capability and the resolve to further expand the scope of financial openness; second, it seeks to use opening-up as a catalyst for reform, thereby addressing the weaknesses that have long constrained China’s financial system. However, it is important not to overlook the fact that, while greater openness may serve as a reform‑driven impetus for the financial industry and its institutions, it also poses a comprehensive test and assessment for financial regulators. As we carefully calibrate the pace and roadmap of opening-up, we must likewise strike an appropriate balance between managing financial risks and strengthening regulatory capacity.

The signals conveyed by the central bank’s establishment of an international financial risk monitoring task force
Recently, a responsible official at the People’s Bank of China for the first time announced the establishment of an International Financial Risk Monitoring Group, with the aim of closely tracking developments in both the global and domestic economic and financial landscapes and guiding and stabilizing market expectations. Market observers believe that, amid today’s complex and volatile international financial environment, strengthening analysis and monitoring of global economic and financial trends is essential for formulating sound domestic policies.
Since the beginning of this year, China’s financial sector has accelerated its opening-up, and under these conditions, the domestic financial system is increasingly exposed to external shocks. PBOC Governor Yi Gang recently stated that as financial markets open further, capital flows will cross markets, regions, and national borders, giving rise to a host of financial innovations. To raise the level of financial openness, it is imperative to strengthen financial regulatory capacity.
Experts believe that, at present, the global economic and financial landscape is exceptionally complex, with risks clearly evident. “The Federal Reserve has shifted to raising interest rates, bringing an end to the decade-long period of U.S. monetary easing. This means that global liquidity, which had previously been abundant and overly accommodative, is now moving toward a state of scarcity, and the turning point marked by tighter liquidity has already arrived. Consequently, some of the financial bubbles that emerged during the earlier phase of easy monetary conditions are likely to burst,” said Zeng Gang, deputy director of the National Institution for Finance & Development, in an interview with People’s Daily Online. He added that, historically, whenever the Fed persistently raises rates and liquidity reaches an inflection point, international financial risks tend to mount.
In Zeng Gang’s view, on the one hand, the Federal Reserve’s interest-rate hikes and the resulting tightening of liquidity have exerted downward pressure on China’s capital outflows and exchange-rate movements, while also affecting domestic macroeconomic policy adjustments. On the other hand, ongoing geopolitical and trade tensions are further complicating the global economic and financial environment.
Under the influence of a “strong U.S. dollar,” emerging-market economies have been falling like dominoes. Since May, currencies in several key emerging markets—including Argentina, Brazil, and Turkey—have depreciated sharply, while equity and bond markets have simultaneously come under heavy pressure. According to data from the Institute of International Finance (IIF), year-to-date, investors have withdrawn $19 billion from the stock markets of India, Indonesia, the Philippines, South Korea, Thailand, Taiwan, and other regions, marking the fastest pace of capital outflows since the 2008 global financial crisis.
Guo Shuqing, Secretary of the CPC Committee of the People’s Bank of China and Chairman of the China Banking and Insurance Regulatory Commission, recently pointed out that China has long embraced the medical principle of “preventing disease before it occurs,” and that managing and defusing financial risks likewise requires a preventive mindset—identifying risks early, issuing timely warnings, and taking prompt corrective action—to nip potential problems in the bud and address them at their earliest stages.
In recent years, safeguarding against financial risks has been elevated to an unprecedented level. The report of the 19th National Congress of the Communist Party of China stated: “We will improve the financial regulatory system and ensure that systemic financial risks do not materialize.” In this year’s Government Work Report, “making significant progress in preventing and defusing major risks” was designated as one of the three critical battles. To win the battle of preventing and defusing major risks, the most crucial task is to effectively control and mitigate financial risks.
In the current complex and volatile international financial environment, the formulation of domestic economic and financial policies must give greater consideration to and closely monitor developments in the global economic and financial landscape.

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