JC Master Legal News Issue 830

Key Takeaways for This Issue
The China Securities Regulatory Commission has issued the “Decision on Amending the Several Opinions on Reforming, Improving, and Strictly Implementing the Delisting System for Listed Companies.”
Recently, the China Securities Regulatory Commission issued the “Decision on Amending the Several Opinions on Reforming, Improving, and Strictly Implementing the Delisting System for Listed Companies,” making revisions to the 2014 “Several Opinions on Reforming, Improving, and Strictly Implementing the Delisting System for Listed Companies” (hereinafter referred to as the “Delisting Opinions”).

The China Securities Regulatory Commission has released the 2018 classification results for securities companies.
In accordance with the Regulations on Categorized Supervision of Securities Companies, and following self-assessment by the securities companies, preliminary review by the local securities regulatory bureaus, re-examination by the Securities and Fund Institutions Supervision Department of the China Securities Regulatory Commission, as well as deliberation by the Expert Review Committee for the Categorization of Securities Companies—comprising representatives from the regulatory bureaus, self-regulatory organizations, and the securities companies themselves—the 2018 classification results for securities companies have been finalized.

The China Securities Regulatory Commission has published the second batch of the registration list for operators of regional equity markets nationwide.
　In accordance with the relevant provisions of the General Office of the State Council’s Notice on Regulating the Development of Regional Equity Markets, the list of operating institutions for regional equity markets shall be managed and publicly announced by the people’s governments at the provincial level, and concurrently filed with the China Securities Regulatory Commission.

The Shenzhen Stock Exchange has imposed trading restrictions on the shares held by relevant shareholders of Changsheng Bio.
On July 23, Changsheng Biotechnology Co., Ltd. was placed under investigation by the China Securities Regulatory Commission for suspected violations of information disclosure laws and regulations. On the same day, the company announced that, should the regulatory authorities ultimately determine that it has engaged in material illegal conduct or refer the matter to public security organs in connection with the aforementioned investigation, its shares could be subject to a delisting risk alert, suspension of trading, or termination of listing, in accordance with the relevant provisions of the Shenzhen Stock Exchange’s Rules for Listing Stocks.

The Shenzhen Stock Exchange has stated it will adopt a zero-tolerance policy toward mandatory delistings, significantly increasing the likelihood of Changsheng Bio’s forced delisting.
Following the CSRC’s late‑night announcement of new delisting rules on Friday, the Shenzhen Stock Exchange also issued a statement over the weekend, vowing to resolutely implement the spirit of the delisting decision and rigorously enforce the principal responsibilities of listed companies. Industry insiders note that the regulators’ successive moves strongly evoke the case of Changsheng Bio, significantly raising the likelihood of its forced delisting.

Table of Contents
Table of Contents

Finance & Capital Markets
The China Securities Regulatory Commission has issued the “Decision on Amending the Several Opinions on Reforming, Improving, and Strictly Implementing the Delisting System for Listed Companies.”
The China Securities Regulatory Commission has released the 2018 classification results for securities companies.
The China Securities Regulatory Commission has published the second batch of the registration list for operators of regional equity markets nationwide.
The China Securities Regulatory Commission has imposed administrative penalties, in accordance with the law, on four insider trading cases.
The Shenzhen Stock Exchange officely implements the spirit of the delisting decision and rigorously fulfills its principal responsibility for delisting.

Corporate & Commercial
CSRC: 308 companies have had their IPOs and CDR issuances accepted; the backlog has been alleviated.
The Shenzhen Stock Exchange has imposed trading restrictions on the shares held by relevant shareholders of Changsheng Bio.
The Shenzhen Stock Exchange has stated it will adopt a zero-tolerance policy toward mandatory delistings, significantly increasing the likelihood of Changsheng Bio’s forced delisting.
Market valuations have returned to low levels, and institutions are optimistic about Hong Kong stocks in the third quarter.
The Jiangsu Provincial Department of Finance has allocated the first batch of 2018 provincial-level PPP pilot project incentive and subsidy funds.

Taxation
The draft individual income tax law has attracted significant attention, with over 130,000 comments received.
Increase the intensity of tax cuts to effectively reduce business costs.

Litigation & Arbitration
Hainan International Arbitration Court Officially Established and Launched
Gao Junfang, chairwoman of Changchun Changsheng, and 17 other individuals have been recommended for arrest.

Other
In the first-instance ruling on the Wang Laoji trademark dispute, Jiaduobao was ordered to pay 1.44 billion yuan.
In the first half of the year, Chinese enterprises invested US$7.68 billion in 55 countries along the Belt and Road.
Finance & Capital Markets
The China Securities Regulatory Commission has issued the “Decision on Amending the Several Opinions on Reforming, Improving, and Strictly Implementing the Delisting System for Listed Companies.”
Recently, the China Securities Regulatory Commission issued the “Decision on Amending the Several Opinions on Reforming, Improving, and Strictly Implementing the Delisting System for Listed Companies,” making revisions to the 2014 “Several Opinions on Reforming, Improving, and Strictly Implementing the Delisting System for Listed Companies” (hereinafter referred to as the “Delisting Opinions”).
The delisting regime for listed companies is a fundamental institutional pillar of the capital market. Since the issuance of the 2014 Delisting Opinions, a diversified set of delisting criteria—covering, among other things, mandatory delisting for material violations—has been preliminarily established, along with a relatively stable implementation mechanism. These developments are of great significance for further strengthening and improving the basic functions of the capital market and for ensuring that delisting of listed companies becomes market‑oriented, rule‑based, and routine. Building on the experience gained since the implementation of the Delisting Opinions and in accordance with the provisions of the Securities Law, the China Securities Regulatory Commission has revised the Delisting Opinions to further refine the framework for mandatory delisting due to material violations, enhance the practicality of the relevant rules, and reinforce the stock exchanges’ frontline regulatory responsibilities.
In accordance with the provisions of the Securities Law and practical needs, this amendment primarily encompasses the following three aspects. First, it refines the principal circumstances for mandatory delisting due to material violations, stipulating that if a listed company engages in fraudulent issuance, commits serious violations of information disclosure requirements, or otherwise perpetrates significant unlawful acts involving national security, public safety, ecological security, production safety, or public health and safety, the stock exchange shall, in strict compliance with the law, adopt the basic institutional requirement of making decisions to suspend or terminate the trading of the company’s shares. Second, it strengthens the stock exchange’s principal responsibility for implementing the delisting regime, specifying that stock exchanges must formulate rules governing the suspension and termination of listing for listed companies on the grounds of material violations. Third, it clarifies and enforces the relevant responsibilities of controlling shareholders, actual controllers, directors, supervisors, senior management, and other parties associated with companies subject to mandatory delisting for material violations, emphasizing their obligation to cooperate with the relevant authorities in carrying out delisting‑related tasks and to fulfill their corresponding duties.
This revision and improvement of the delisting regime is of great significance for further enhancing the functionality of the capital market, boosting the vitality of market entities, fostering a culture of rational investing, and establishing an effective mechanism that ensures survival of the fittest. For companies found to have committed serious violations—particularly those that gravely disrupt market order, severely harm the public interest, and generate substantial social repercussions—we will resolutely enforce mandatory delisting in accordance with the law.
Delisting of listed companies involves numerous aspects. To ensure the effective implementation of mandatory delisting for companies that have committed serious violations, relevant authorities will strengthen overall coordination and interagency collaboration, fully enforce the Securities Law, the Delisting Opinions, and other applicable regulations, and harness the positive role of the delisting regime. These efforts aim to safeguard market stability and earnestly protect the legitimate rights and interests of investors, particularly small and medium-sized investors.
It should be noted that the delisting of a listed company alters the manner in which its shares are traded and transferred; however, the company itself remains a joint-stock company. Accordingly, the relevant responsible parties—namely, the controlling shareholders, actual controllers, directors, supervisors, and senior management—must, in a spirit of accountability to employees and investors, faithfully discharge all duties necessary for the company’s continued normal operations and production following delisting.

The China Securities Regulatory Commission has released the 2018 classification results for securities companies.
In accordance with the Regulations on Categorized Supervision of Securities Companies, and following self-assessment by the securities companies, preliminary review by the local securities regulatory bureaus, re-examination by the Securities and Fund Institutions Supervision Department of the China Securities Regulatory Commission, as well as deliberation by the Expert Review Committee for the Categorization of Securities Companies—comprising representatives from the regulatory bureaus, self-regulatory organizations, and the securities companies themselves—the 2018 classification results for securities companies have been finalized.
The classification results for securities offices do not constitute an assessment of their creditworthiness or rating; rather, they represent a comprehensive evaluation conducted by the securities regulatory authorities in accordance with prudential supervisory requirements. This evaluation is based on the offices’ risk-management capabilities and takes into account their market competitiveness and compliance‑management standards, thereby reflecting the overall state of their compliance governance and risk control.
According to the Regulations on Categorized Supervision of Securities Companies, securities companies are classified into five major categories—A (AAA, AA, A), B (BBB, BB, B), C (CCC, CC, C), D, and E—comprising a total of 11 sub‑levels. Within the three major categories of A, B, and C, companies at each level are considered to be operating normally; the classification and sub‑level assignment merely reflect the relative standing of a company’s risk management capabilities and compliance‑management standards within the industry. Companies in categories D and E are those whose potential risks may exceed their capacity to absorb such risks or that have been subject to legally mandated risk‑resolution measures.
The CSRC, based on the classification results of securities offices, implements a differentiated regulatory policy that treats securities offices in different categories differently with respect to administrative licensing, allocation of regulatory resources, and the frequency of on-site and off-site inspections. The classification results are intended primarily for use by securities regulators; securities offices may not employ these results for commercial purposes such as advertising, publicity, or marketing.

The China Securities Regulatory Commission has published the second batch of the registration list for operators of regional equity markets nationwide.
　In accordance with the “Notice of the General Office of the State Council on Regulating the Development of Regional Equity Markets” (Guobanfa [2017] No. 11) and the “Provisional Measures for the Supervision and Administration of Regional Equity Markets” (CSRC Order No. 132), the list of operating institutions in regional equity markets is managed and publicly announced by the people’s governments of the respective provinces, and simultaneously filed with the China Securities Regulatory Commission. Since the public announcement on April 27, 2018, of the “First Batch of Filing Records for Operating Institutions of National Regional Equity Markets,” nine regions have, in compliance with the relevant requirements, filed information on their regional equity market operating institutions with this Commission. The specific list is as follows:
Region Name of the Regional Equity Market Operator
Tianjin Tianjin Binhai Over-the-Counter Securities Market Co., Ltd.
Zhejiang Zhejiang Equity Exchange Center Co., Ltd.
Shandong Qilu Equity Exchange Center Co., Ltd.
Henan Zhongyuan Equity Exchange Center Co., Ltd.
Hubei Wuhan Equity Custody and Trading Center Co., Ltd.
Guangdong Guangdong Equity Exchange Center Co., Ltd.
Hainan Hainan Equity Exchange Center Co., Ltd.
Shenzhen Shenzhen Qianhai Equity Exchange Center Co., Ltd.
Qingdao Qingdao Blue Ocean Equity Exchange Center Co., Ltd.

The China Securities Regulatory Commission has imposed administrative penalties, in accordance with the law, on four insider trading cases.
Recently, the China Securities Regulatory Commission (CSRC) imposed administrative penalties in accordance with the law on Cao Shibin for insider trading involving “International Medical,” ordering him to dispose of the illegally held securities, confiscating his illegal gains of approximately RMB 23,000, and imposing a fine of RMB 100,000. The CSRC also issued administrative penalties for two cases: Huang Bingwen’s disclosure of inside information and Zhong Qiong’s insider trading in “Dongfeng Shares,” as well as Zhang Lei’s insider trading in “Dongfeng Shares.” Specifically, Huang Bingwen was fined RMB 600,000; Zhong Qiong was ordered to dispose of the illegally held shares, had her illegal gains of approximately RMB 786,000 confiscated, and was fined approximately RMB 786,000; and Zhang Lei’s illegal gains of approximately RMB 356,000 were confiscated, and he was fined approximately RMB 356,000. Meanwhile, the Fujian Securities Regulatory Bureau imposed an administrative penalty on Huang Haoyun for insider trading involving “Guiren Bird,” fining him RMB 100,000. (For details of the administrative penalty decisions, please refer to the websites of the CSRC and the relevant local securities regulatory bureaus.)
All of the aforementioned insider‑trading cases occurred in the context of asset restructuring and mergers and acquisitions involving listed companies. Specifically, Cao Shibin, who served as the head of the Investment Development Department at Wangfujing Co., Ltd., was involved throughout the entire process—covering data collection, store site visits, and revisions to the framework agreement—related to Wangfujing’s proposed acquisition of 100% of the equity in Kaiyuan Commercial held by International Medical. He thus possessed material nonpublic information and traded “International Medical” during the sensitive period. Huang Bingwen, a foreign national, together with his sons, Huang Moujia and Huang Moupeng, constituted the de facto controllers of the listed company Dongfeng Co., Ltd. Zhong Qiong, a friend of Huang Bingwen, and Zhang Lei, a long-time confidant of Huang Moupeng, both traded “Dongfeng Co., Ltd.” after learning from Huang Bingwen about the inside information that Dongfeng intended to acquire a stake in the EPRINT Group and transform into a “cloud printing” business. Prior to the public disclosure of this inside information, Zhang Lei maintained frequent communications with Huang Moupeng and engaged in trading of “Dongfeng Co., Ltd.”, resulting in abnormal trading patterns. Meanwhile, Huang Haoyun participated in certain stages of the negotiations between Guiren Bird and Weikang Fitness, thereby gaining access to inside information regarding Guiren Bird’s plan to acquire 100% of Weikang Fitness’s equity. During the sensitive period for this inside information, he repeatedly purchased shares of “Guiren Bird” and subsequently sold all of them after the announcement of the transaction. These actions violated Articles 73 and 76(1) of the Securities Law, constituting either insider trading or the unauthorized disclosure of inside information.
In recent years, the mergers and acquisitions and restructuring sector of listed companies has remained a hotbed for insider trading. Insiders of listed companies and their related parties have exploited their informational advantages to engage in such misconduct, seriously undermining fair and equitable market order and infringing upon the legitimate rights and interests of the broad base of small and medium-sized investors—acts that must be officely and severely cracked down upon. In the cases mentioned above, Cao Shibin’s insider trading involving a major asset restructuring ultimately ended in failure, and Huang Haoyun’s insider trading concluded in losses; however, neither outcome diminishes the fact that the individuals concerned will nonetheless face strict punishment in accordance with the law. Furthermore, as an外籍 national participating in the domestic capital market, Huang Bingwen likewise bears legal responsibility for his unlawful conduct under Chinese law. With the continued expansion of foreign investors’ access to A‑share trading, it is foreseeable that an increasing number of overseas investors will enter the domestic capital market. While safeguarding their lawful rights and interests in accordance with the law, the Commission will also treat all market participants equally in its regulatory and enforcement efforts, promptly imposing administrative penalties in strict compliance with Chinese laws whenever violations are detected. The Commission will maintain unwavering oversight of insider trading, using robust regulatory and enforcement measures to send a clear warning to insiders of listed companies and other persons privy to material nonpublic information: exercise utmost prudence and self‑discipline. Through comprehensive, stringent, and law‑based regulation, we will provide a solid foundation for elevating the rule of law in the capital market.

The Shenzhen Stock Exchange officely implements the spirit of the delisting decision and rigorously fulfills its principal responsibility for delisting.
Recently, the China Securities Regulatory Commission issued the “Decision on Amending the Several Opinions on Reforming, Improving, and Strictly Implementing the Delisting System for Listed Companies” (hereinafter referred to as the “Decision”). The Decision further refines the provisions on mandatory delisting for serious violations of law, extending the scope of such delisting not only to fraudulent issuance and material violations of information disclosure requirements, but also to grave unlawful acts that jeopardize national security, public safety, ecological security, production safety, or public health. This broadens the purview of the delisting regime, ensuring comprehensive coverage with no regulatory gaps, thereby fully reflecting the principle and resolve of law-based, all‑encompassing, and stringent supervision. The measure is of great significance and far‑reaching impact, as it will help further strengthen the market’s foundational functions, invigorate market participants, bolster investor confidence, foster a culture of rational value investing, and cultivate a market ecosystem characterized by survival of the fittest and orderly entry and exit.
Over the years, the Shenzhen Stock Exchange has rigorously enforced delisting procedures for serious violations of law, resolutely delisting companies that meet the statutory criteria. In 2017, it made a decision to terminate the listing of Xintai Electric in accordance with the law and successfully carried out advance compensation payments, making Xintai Electric the first company to be forcibly delisted for fraudulent issuance. In 2018, it initiated mandatory delisting procedures—pursuant to law—for Jinya Technology and Yabait, both of which had been referred to public security authorities by the China Securities Regulatory Commission on suspicion of criminal offenses, thereby accumulating valuable experience and providing useful guidance for advancing the market‑based, rule‑of‑law‑driven, and normalized implementation of delisting. Earlier, under the unified deployment of the China Securities Regulatory Commission, the Shenzhen Stock Exchange, drawing on the provisions of the Securities Law and regulatory practice, began by clarifying the standards and procedures for enforcing mandatory delisting due to serious violations. It subsequently formulated the Measures for the Implementation of Mandatory Delisting of Listed Companies for Serious Violations (hereinafter referred to as the “Measures”) and publicly solicited comments from the public in early March 2018. Going forward, the Shenzhen Stock Exchange will resolutely implement the relevant provisions of the Securities Law and the Decision, revise and refine the Rules for the Listing of Stocks, the Measures, and related supporting rules, and clearly define arrangements for distinguishing between old and new cases. These revisions will be submitted to the China Securities Regulatory Commission for approval before being promulgated and put into effect. At the same time, the Exchange will earnestly fulfill its statutory duties as a frontline regulator, steadfastly assume responsibility for delisting, and strictly enforce the delisting regime—particularly with respect to companies whose serious violations gravely disrupt market order, severely harm public interests, and generate significant social repercussions. The Exchange will ensure that “for every such case, there is a corresponding delisting,” showing zero tolerance and no leniency, so as to purify the market environment and uphold the seriousness and authority of the delisting system.

Commercial & Corporate
CSRC: 308 companies have had their IPOs and CDR issuances accepted; the backlog has been alleviated.
As of July 26, the China Securities Regulatory Commission had accepted applications from 308 companies seeking an initial public offering or the issuance of Chinese Depositary Receipts (CDRs), of which 31 have passed review and 277 remain pending. Among the pending applications, 271 are undergoing normal review, while 6 have had their reviews suspended. In 2018, the pace of IPO reviews remained steady, and the backlog of pending IPO applications has eased.
Statistical data show that, on average, about 18 companies appeared before the review committee each month in 2018. January saw the highest number of IPO reviews, with 45 companies; April ranked second with 19; and May came in third with 16. The remaining months—February, March, and June—each hosted 12, 10, and 9 companies, respectively. According to a research report by New Era Securities, among companies currently awaiting IPO approval, those that have updated their pre-disclosure filings since 2018 have an average review‑feedback period of 309 days, while those that began updating their pre-disclosures from early 2017 onward have an average feedback period of 333 days.
In addition to routine review processes, the decline in the number of newly applying companies has also contributed to the reduction in the backlog of IPO applicants. As of July 26, the CSRC had received applications from 66 companies seeking their initial public offerings, a substantial year-on-year drop. This year, alongside rigorous, law-based, and comprehensive scrutiny, the CSRC’s February policy—requiring that companies whose IPOs were rejected must remain operational for at least three years before pursuing a restructuring‑and‑relisting—prompted many offices previously on the sidelines to withdraw. Public data show that the peak in terminated reviews occurred in March, with as many as 79 cases. By July 26, a total of 152 IPO applications had been terminated in 2018, compared with just 65 during the same period last year—a more than doubling year over year.
According to the schedule, four companies planning IPOs are set to undergo review this week: Jiangsu Fengshan Group Co., Ltd., Guangdong Marimei Biotechnology Co., Ltd., Shanghai Jingfeng Mingyuan Semiconductor Co., Ltd., and Jiangxi Jinli Permanent Magnet Technology Co., Ltd.

The Shenzhen Stock Exchange has imposed trading restrictions on the shares held by relevant shareholders of Changsheng Bio.
On July 23, Changsheng Bio‑Technology Co., Ltd. (hereinafter referred to as “Changsheng Bio” or the “Company”) was placed under investigation by the China Securities Regulatory Commission for suspected violations of information disclosure laws and regulations. On the same day, the Company announced that, should the regulatory authorities ultimately determine that it has engaged in material illegal conduct or refer the matter to public security organs in connection with the aforementioned investigation, its shares may be subject to a delisting risk alert, suspension of listing, or termination of listing, in accordance with the relevant provisions of the Shenzhen Stock Exchange’s Rules for Listing Stocks.
To ensure that the company’s relevant shareholders comply with the China Securities Regulatory Commission’s “Several Provisions on Share Reductions by Shareholders, Directors, Supervisors, and Senior Management of Listed Companies” and the Shenzhen Stock Exchange’s “Detailed Rules for the Implementation of Share Reductions by Shareholders, Directors, Supervisors, and Senior Management of Listed Companies,” the Shenzhen Stock Exchange has imposed trading restrictions on the shares held by Changsheng Bio’s major shareholders and its directors, supervisors, and senior management.
In addition, according to an announcement by the National Medical Products Administration, the company has been ordered to cease production, and it has disclosed that both its lyophilized human rabies vaccine and its DPT‑combined vaccine are currently out of production. The Shenzhen Stock Exchange will closely monitor developments in this matter; should the company experience circumstances—under Article 13.3.1 of the Shenzhen Stock Exchange’s Rules for Listing Stocks—that severely disrupt its production and business operations, the Exchange will impose additional risk alerts on the company’s stock trading.

The Shenzhen Stock Exchange has stated it will adopt a zero-tolerance policy toward mandatory delistings, significantly increasing the likelihood of Changsheng Bio’s forced delisting.
Following the CSRC’s late‑night announcement of new delisting rules on Friday, the Shenzhen Stock Exchange also issued a statement over the weekend, vowing to resolutely implement the spirit of the delisting decision and rigorously enforce the principal responsibilities of listed companies. Industry insiders note that the regulators’ successive moves strongly evoke the case of Changsheng Bio, significantly raising the likelihood of its forced delisting.
Late Friday night, the China Securities Regulatory Commission issued the “Decision on Amending the Several Opinions on Reforming, Improving, and Strictly Implementing the Delisting System for Listed Companies,” clearly stipulating that if a listed company engages in fraudulent issuance, material violations of information disclosure requirements, or other serious illegal acts involving national security, public safety, ecological security, production safety, or public health and safety, the stock exchange shall, in strict accordance with the law, make decisions to suspend or terminate the listing and trading of the company’s shares.
Following the release of the new regulations, the distinctly targeted “Five Safeties” framework has inevitably drawn comparisons to Changsheng Bio. Meanwhile, as the entity responsible for implementing the delisting regime, the stock exchanges’ timing in issuing corresponding supporting rules has also become a subject of intense market scrutiny.
On the afternoon of the 29th, the Shenzhen Stock Exchange issued a statement—without observing a weekend break—announcing that it would revise and refine the relevant supporting rules, clarify the arrangements for distinguishing between old and new matters, and promulgate and implement them after obtaining approval from the China Securities Regulatory Commission.
In March this year, the Shenzhen Stock Exchange issued the Measures for the Mandatory Delisting of Listed Companies for Material Violations and solicited public comments. The Measures specify six circumstances that trigger mandatory delisting for material violations, including other situations that the exchange determines based on factors such as the facts, nature, severity, and societal impact of the listed company’s unlawful conduct.
In addition, the Measures further strengthen enforcement of delisting for companies that have committed serious violations, streamline the procedures for implementing such delistings, and enhance delisting efficiency.
First, the suspension period for delisting due to material violations is shortened from 12 months to 6 months. Second, the resumption of listing for companies with material violations will be subject to strict scrutiny. Once such a company’s listing has been suspended, no consideration will be given to its remedial measures or compensation; upon expiration of the six-month period, its listing will be terminated directly. Third, the conditions for relisting of companies delisted for material violations are tightened: companies delisted for fraudulent issuance will be prohibited from applying for relisting—“delisted once, never relisted”; and for companies delisted for other material violations, the minimum interval before reapplying for relisting is extended from one year to five years.
To ensure the smooth implementation of the new rules, the Shenzhen Stock Exchange has made corresponding arrangements to address transitional matters before and after the issuance of the Measures.
Specifically, prior to the issuance of these Measures, if a listed company had already been determined to have committed a material violation or had been lawfully referred to the public security authorities and subject to a decision to terminate its listing, the original provisions shall apply. After the issuance of these Measures, if a listed company is subject to an administrative penalty or is found by a final judicial judgment to have engaged in unlawful conduct, regardless of when such conduct occurred, the new rules shall govern whether its actions constitute a ground for delisting due to material violations.
In other words, even if a listed company’s unlawful conduct occurred prior to the issuance of the new regulations, so long as, after the regulations took effect, the company is subject to an administrative penalty by the China Securities Regulatory Commission or receives a final and enforceable criminal judgment from a people’s court establishing the existence of unlawful facts and triggering the material‑violation criteria set forth in the Measures, its shares shall be delisted.
Industry insiders believe that, judging from the Shenzhen Stock Exchange’s statement on the 29th, the revised and improved Measures are expected to be issued in the near future. Under the new “cut‑off” provisions set forth in the Measures, Changsheng Bio is likely unable to avoid delisting.
In the new delisting rules released on Friday, in addition to the “five safeguards,” there are two other major revisions.

First, strengthen the stock exchanges’ principal responsibility for implementing the delisting regime by stipulating that they shall formulate rules governing the suspension and termination of listing for listed companies found to have committed material violations. Second, enforce the relevant liabilities of controlling shareholders, actual controllers, directors, supervisors, senior management, and other parties associated with companies subject to mandatory delisting due to material violations, emphasizing their obligation to cooperate with the relevant authorities in carrying out delisting-related tasks and to fulfill their corresponding duties.
On the 29th, the Shenzhen Stock Exchange stated that the new regulations further refine the provisions on mandatory delisting for serious violations. In addition to including fraudulent issuance and material violations of information disclosure as grounds for mandatory delisting, the rules now also extend this requirement to cover grave offenses in areas such as national security, public safety, ecological security, workplace safety, and public health—thereby broadening the scope of the delisting regime. This ensures comprehensive, all‑encompassing coverage of delisting for major illegal conduct, leaving no blind spots. The measures fully embody the principle and resolve of law‑based, rigorous, and stringent regulation, and they hold significant and far‑reaching implications for further strengthening the market’s fundamental functions, boosting the vitality of market participants, bolstering investor confidence, fostering a culture of rational value investing, and cultivating a market ecosystem characterized by survival of the fittest and orderly entry and exit.
In fact, since the beginning of this year, the trend toward normalized delisting in the A-share market has become even more pronounced, and a well-ordered market environment characterized by both entry and exit is gradually taking shape. The Shenzhen Stock Exchange has emphasized that it has consistently maintained strict oversight over the enforcement of delisting for serious violations, resolutely delisting companies that meet the statutory criteria. As an example, in 2017, the Exchange made a decision to terminate the listing of Xintai Electric in accordance with the law and successfully carried out advance compensation payments, making Xintai Electric the first company to be forcibly delisted for fraudulent issuance. In 2018, the Exchange successively initiated mandatory delisting procedures—pursuant to law—for Jinya Technology and Yabait, which had been referred to public security authorities by the China Securities Regulatory Commission on suspicion of criminal offenses, thereby accumulating valuable experience and providing useful guidance for advancing the market‑based, rule‑of‑law‑driven, and normalized implementation of delisting.
The Shenzhen Stock Exchange stated that, in the next phase, it will earnestly fulfill its statutory duties as a frontline regulator, steadfastly assume responsibility for delisting, and rigorously enforce the delisting regime. In particular, for companies that commit serious violations—whether by gravely disrupting market order, severely harming public interests, or causing significant social repercussions—the Exchange will resolutely ensure that “for every such case, there is a corresponding delisting,” showing zero tolerance and taking no leniency, thereby purifying the market environment and upholding the seriousness and authority of the delisting system.

Market valuations have returned to low levels, and institutions are optimistic about Hong Kong stocks in the third quarter.
Many investors still vividly recall the robust bull market in Hong Kong stocks in 2017, and it was precisely that year’s sharp rally that left them optimistic about 2018. However, after the Hang Seng Index (28,705.98, -98.30, -0.34%) hit a record high of 33,484 points at the end of January, it has since been mired in persistent volatility and a downward trend. Yet, amid widespread market weakness, some analysts have begun to argue that “the rebound seen in the third quarter represents the most promising window for bullish positioning in the second half of the year.” Several fund management offices also told a reporter from the Daily Economic News that they largely concur with this view.
From 33,484 points at the beginning of January this year to a monthly low of 27,746, the Hang Seng Index posted a maximum decline of 14.87%, with many well-known stocks also experiencing substantial losses. Although the current outlook for the Hong Kong stock market remains uncertain, many institutions remain broadly aligned in their expectations for a rebound.
Zhang Yidong of Industrial Securities stated that the conditions for a rebound in Hong Kong stocks are now in place. First, the recent implementation of deleveraging has seen a clear improvement in both intensity and pace, which will help mitigate the risks stemming from the sudden tightening of credit. As a result, aggregate financing growth is likely to stabilize or even pick up, significantly reducing the likelihood of systemic financial risks. Second, Hong Kong stock valuations have once again fallen to historically low levels, with dividend yields rising markedly; undervalued stocks and high‑yielding equities are once again drawing mainland capital southward. Third, Hong Kong‑listed companies continue to engage in large‑scale share buybacks, with July’s repurchases set to hit a record high since 2007. Nevertheless, Zhang Yidong maintains his “rebound” outlook, noting that policy easing does not signal the end of deleveraging and that medium‑term risks remain.
Guo Chengdong, Director of the Overseas Investment Department at Wan Jia Fund, also told a reporter from the Daily Economic News, “Overall, we believe that after the Hong Kong stock market has absorbed the impact of negative factors in the second half of the year, coupled with improvements in monetary and fiscal policies, market valuations are likely to return to reasonable levels. We expect the Hong Kong stock market to follow a pattern of initial weakness followed by a rebound in the second half.”
Reporters have also observed in the market that, despite the overall Hong Kong stock market having been rather subdued recently, there have still been standout individual stocks and sectors, such as the education sector.

The Jiangsu Provincial Department of Finance has allocated the first batch of 2018 provincial-level PPP pilot project incentive and subsidy funds.
Recently, the Jiangsu Provincial Department of Finance issued the “Notice on Allocating the First Batch of 2018 PPP Project Subsidy Funds” (Document No. Su Cai Jin [2018] No. 69), allocating RMB 59.67 million in subsidy funds to six provincial-level PPP pilot projects, including the Community Service Center in the Hechang Area of Wuxi Taihu New City.
In accordance with the Measures for the Administration of Subsidy Funds for Public‑Private Partnerships (PPP) (Sufin Gui [2016] No. 25) and the Notice on Standardizing the Management of the Project Database of the Comprehensive Information Platform for Public‑Private Partnerships (PPP) (Caiban Jin [2017] No. 92), as well as other relevant funding management measures and the latest regulatory requirements, the Provincial Department of Finance has formulated the “Key Review Points for Application Materials for Subsidy Funds for Provincial‑Level PPP Pilot Projects.”
In accordance with 11 review criteria—covering such matters as whether the submitted documentation is complete, whether the implementation plan has been filed at the provincial level and the government procurement procedures have been completed within the prescribed timeframe, whether a PPP project contract has been signed, whether the project company has obtained its business license, whether the PPP Project Comprehensive Information Platform has been accurately and properly populated, and whether each shareholder of the project company has contributed the full amount of the project’s capital on time as stipulated in the contract—the Provincial Department of Finance conducted a formal review and a verification of the authenticity of the application materials for nine projects submitted by eight cities and counties.
Upon review, three projects were found to be ineligible for the disbursement of incentive and subsidy funds due to reasons such as the private-sector partner’s failure to contribute the full amount of equity capital on time as stipulated in the PPP contract, or its failure to complete project procurement within the first full year following designation as a pilot project. These cases involve a total of RMB 17.135 million in incentive and subsidy funds. Additionally, two projects were subject to a reduction of RMB 3.784 million in incentive and subsidy funds because the amounts claimed exceeded the policy‑specified limits.
Taxation TAXATATION
The draft individual income tax law has attracted significant attention, with over 130,000 comments received.
On the 28th, the deadline for public consultation on the draft amendment to the Individual Income Tax Law expired. According to the website of the National People’s Congress of China, more than 130,000 comments were received over the past month. This clearly demonstrates the high level of public attention and participation in the individual income tax reform.
The core principle of the individual income tax reform is to pursue fairness. This revision of the Individual Income Tax Law embodies the people-centered approach and is particularly aimed at addressing the principal social contradiction. The most significant highlight of the draft is that it takes a substantive step toward “comprehensive and categorized taxation,” consolidating previously separately taxed income—wages and salaries, labor compensation, manuscript fees, and royalties—into a single taxable base. At the same time, while raising the tax threshold, it introduces special additional deductions for expenses such as children’s education, continuing education, and major medical expenses.
“This revision of the Individual Income Tax Law represents significant breakthroughs in many respects, advancing China’s personal income tax reform by a major step,” said Liang Ji, a researcher at the Chinese Academy of Fiscal Sciences. However, he added, the reform still faces numerous difficulties and challenges.
For example, the personal income tax reform has raised the bar for tax administration capabilities. Enhancing these capabilities can be pursued in two ways: first, by establishing a mechanism that encourages taxpayers to proactively file and pay their taxes; second, by putting in place a system to oversee the payment of individual taxes. Linking tax compliance to personal housing purchases, employment, and children’s education, and incorporating individuals’ tax‑payment records into their credit reporting systems, will help foster taxpayers’ voluntary and proactive compliance.
“This round of personal income tax reform has multifaceted implications, some of which are far-reaching,” said Yue Ximing, a professor at the School of Finance and Public Administration of Renmin University of China. By consolidating labor‑derived income—such as wages and salaries, labor services, manuscript fees, and royalties—and subjecting it to comprehensive taxation, the reform will play a significant role in addressing the previous inequities in tax burdens arising from differences in income sources. Moreover, this reform will substantially enhance the efficiency and effectiveness of tax administration. However, from the perspective of the tax structure, China’s tax revenue remains heavily reliant on consumption taxes, while both the number of individual income taxpayers and the share of personal income tax in total tax revenue remain relatively low. As a result, the income‑distribution‑adjusting function of personal income tax is difficult to realize, a problem that warrants close attention. Personal income tax reform should be approached with an eye toward social equity and the overall tax structure, seeking to avoid treating personal income tax in isolation.
Furthermore, in order to close tax loopholes and safeguard the state’s tax interests, this draft bill, drawing on the anti‑avoidance provisions of the Corporate Income Tax Law, grants tax authorities the power to make tax adjustments using reasonable methods with respect to such tax‑avoidance practices as individuals transferring assets in a manner that does not comply with the arm’s-length principle, engaging in tax avoidance in offshore tax havens, or implementing unreasonable commercial arrangements to obtain improper tax benefits.
“This revision of the individual income tax represents a major breakthrough and a true revolution, resolving longstanding issues that had long eluded solution. In particular, the draft introduces anti‑avoidance provisions to prevent individuals from evading personal income tax through various means—measures that are absolutely essential,” said Liu Jianwen, professor at Peking University Law School and president of the Tax and Fiscal Law Research Association of the China Law Society. He added that closing these loopholes in the individual income tax will better uphold the solemnity of the law and promote greater fairness.

Increase the intensity of tax cuts to effectively reduce business costs.
In the first half of the year, China’s economy grew by 6.8% year on year, reflecting a generally favorable outlook. At the same time, external pressures on the Chinese economy have intensified. While China continues to deepen its opening-up, certain countries, driven by their own interests, are undermining the trade rules that have long benefited the majority of nations worldwide, thereby to some extent curtailing the role of external demand in boosting economic growth. Against this backdrop, China has proactively expanded domestic demand, helping to sustain stable economic growth.
In 1998 and 2008, China launched proactive fiscal policies on two occasions, both of which were closely linked to expanding domestic demand. In 1998, the focus was primarily on boosting investment, while in 2008, “structural tax cuts” were introduced, with a policy intensity far greater than in 1998. The shift from a moderately tight fiscal stance in 1998 to a proactive fiscal policy represented a major turning point, officely embedding the concept of using fiscal measures to expand domestic demand in public consciousness. In 2008, the proactive fiscal policy played an irreplaceable role in swiftly stabilizing market confidence. As for the 2008 tax cuts, because they were framed as “structural tax reductions” and interpreted as involving both cuts and increases, they remained subject to persistent debate over whether they truly amounted to tax reductions or tax hikes—so much so that even the 2012 pilot program to replace business tax with value-added tax was branded as a tax-cut initiative. Today, China’s ongoing proactive fiscal policy is a continuation of the 2008 approach; however, the term “structural tax cuts” has gradually faded, with “comprehensive tax reductions” increasingly becoming the prevailing narrative.
Taxation is closely linked to corporate costs. All tax and fee expenditures incurred by offices prior to profit distribution are counted as part of their costs. Of course, the extent to which these expenses translate into cost varies depending on the market conditions for the goods the office produces and sells. Some offices, as suppliers, enjoy strong pricing power; even under strict tax enforcement, their tax burden remains relatively limited. In practice, however, most enterprises lack significant pricing power, so for them, the lighter the tax burden, the better. From the outset, the pilot program to replace business tax with value-added tax was explicitly tied to reducing the tax burden on businesses. Since offices directly bear a substantial share of tax liabilities, tax‑reduction policies should deliver tangible benefits to them. With both domestic and international economic conditions remaining complex, there is no reason to abandon an expansionary fiscal policy, nor to phase out tax‑cut measures. The overarching theme of tax reduction must remain unchanged. To better implement an active fiscal policy, the scale of tax cuts should be further expanded.
In 2018, tax and fee reductions are expected to exceed RMB 1.1 trillion, a target that is likely to be surpassed. At its executive meeting on July 23, the State Council called for a more proactive fiscal policy and emphasized “focusing on tax and fee cuts,” addressing at least two major taxes: corporate income tax and value-added tax. The policy of raising the additional deduction rate for enterprise R&D expenses to 75% has been extended from technology‑based SMEs to all enterprises; preliminary estimates suggest this measure could reduce taxes by RMB 65 billion annually, falling under the corporate income tax reduction category. Meanwhile, the RMB 113 billion in VAT credit refunds already earmarked for advanced manufacturing, modern services, and other sectors is slated for near‑completion by the end of September, helping to lower financing costs for advanced manufacturers and modern service providers.
China’s economy grew 6.8% year-on-year in the first quarter and 6.7% in the second, showing a slight deceleration. The trends in fiscal and tax revenues also suggest that the economy is facing more challenges than initially anticipated. Nevertheless, although the pace of tax revenue growth has slowed, the broadening tax base continues to support further tax cuts. Increasing tax relief measures offers clear advantages over expanding government spending. In recent years, certain expenditure‑based incentive and subsidy policies have yielded notable results, yet there remains considerable room for improvement—for example, the suite of subsidies introduced to promote the production and integrated utilization of new energy sources. By contrast, tax reductions can more directly help businesses lower their costs. The robust growth in tax revenues during the first half of the year provides a stronger foundation for such measures. Moreover, the process of consolidating the value-added tax rates from three brackets to two could be accelerated; within the year, another rate cut—reducing both the 16% and 10% brackets by one percentage point each—would be feasible.
Increasing the scale of tax cuts can help more businesses reduce their costs. By working together to weather the challenges, both the government and enterprises can unleash greater economic vitality, ultimately fostering sustained economic prosperity. Against the backdrop of significant downward pressure on the economy, efforts to expand tax relief should be maintained.

Litigation & Arbitration
Hainan International Arbitration Court Officially Established and Launched
On July 29, the unveiling ceremony and press conference of the Hainan International Arbitration Court were held today at the Penghui International Building in Haikou. Xiao Jie, Member of the Standing Committee of the Hainan Provincial Party Committee and Secretary of the Political and Legal Affairs Commission, attended the ceremony and, together with Shi Wen, Director of the Hainan Arbitration Commission, officially unveiled the Hainan International Arbitration Court.
Shi Wen, Director of the Hainan Arbitration Commission, stated that the internationalization of Hainan arbitration has received high attention from the Ministry of Justice and strong support from the Hainan Provincial Party Committee and the provincial government. The official establishment of the Hainan International Arbitration Court represents a decision made by the provincial Party Committee and the provincial government after comprehensive deliberation, taken from the overarching perspective of Hainan’s development as a free trade zone and in light of the new landscape of high‑level opening-up. This move aligns with the central government’s strategic decision to support Hainan’s comprehensive deepening of reform and opening-up, and it is fully commensurate with the practical needs of Hainan’s efforts to build a free trade zone and a free port. According to Shi Wen, the inauguration of the Hainan International Arbitration Court marks only the first step; the more substantive aspect lies in institutional restructuring. The establishment of a corporate governance framework centered on a board of directors—pioneered by the Shenzhen International Arbitration Court nationwide and now followed by the Hainan International Arbitration Court—is a significant milestone.
Speaking about the next phase of institutional reform at the Hainan International Arbitration Court, Shi Wen stated that, drawing on the experience of Shenzhen’s arbitration‑institution reforms, the Court will remain rooted in Hainan while pressing ahead with further innovation and reform. First, by officially launching the Hainan International Arbitration Court, it will underscore its international orientation. Second, by adopting a governance framework centered on a board of directors, it will reinforce its neutrality. The board will include no fewer than one‑third foreign members, and individuals from overseas and other provinces will account for more than half of its total membership, thereby fully reflecting the institution’s international character and openness, as well as the requirements of the Arbitration Law regarding institutional independence. This approach will instill strong confidence among domestic and foreign parties in the neutrality and fairness of Hainan’s international arbitration, positioning Hainan as a trusted “preferred venue” for dispute resolution. In addition, the establishment of two specialized branches—the Maritime Arbitration Center and the Financial Arbitration Center—will highlight the distinctive features of the Hainan Free Trade Zone. These two centers will help foster the prosperity of Hainan’s maritime economy, trade, and port‑and‑shipping sectors, advance the development and utilization of marine resources, and support the construction of islands and reefs in the South China Sea. At the same time, they will efficiently resolve financial disputes, mitigate financial risks, and provide a robust legal framework to underpin Hainan’s efforts to become a regional—and ultimately an international—financial hub.
Shi Wen stated that the Hainan International Arbitration Court will also achieve standardized management through institutional innovation. It will invite a number of renowned international arbitration experts to assist in drafting and promptly implementing the court’s arbitration rules. At the same time, it will revise and refine systems related to staff performance appraisal, arbitrator management, and other mechanisms critical to case quality and efficiency, ensuring they align with the demands of an increasingly internationalized arbitration landscape and establishing an operational framework governed by clear rules and procedures. Finally, through personnel‑driven innovation, the court will continuously enhance the quality of its arbitration services. It will establish an open talent‑attraction mechanism: following the restructuring, leveraging the policy advantage of the “One Million Talents to Hainan” initiative, it will conduct nationwide open recruitment to appoint high‑caliber professionals—possessing both ethical integrity and legal expertise, as well as outstanding professional competence—to serve as president and vice presidents of the Hainan International Arbitration Court; it will also publicly recruit heads of internal departments and branch offices, along with case‑handling secretaries, thereby comprehensively elevating the level of arbitration support services. In addition, to meet the needs of Hainan Free Trade Zone development, the court will optimize the composition of its arbitrator pool, adopting a “lean‑but‑strong” strategy under total‑number control over the next five years. Foreign arbitrators will account for at least 30% of the total, while maintaining an appropriate contingent of senior arbitrators from outside the province, and raising the entry requirements for provincial arbitrators to ensure the overall quality of the arbitration roster.

Gao Junfang, chairwoman of Changchun Changsheng, and 17 other individuals have been recommended for arrest.
According to an official WeChat post by the Changchun New Area Public Security Bureau, since July 23, the public security organs of Changchun City have conducted investigations and, on the whole, established the facts indicating that Changchun Changsheng Biotechnology Co., Ltd. is suspected of committing illegal and criminal acts in the production of lyophilized human rabies vaccine.
On July 29, in accordance with Article 79 of the Criminal Procedure Law of the People’s Republic of China, the Public Security Bureau of Changchun New Area submitted a request to the procuratorial authorities for approval of the arrest of 18 criminal suspects, including Gao Moufang, Chairperson of Changchun Changsheng Biotechnology Co., Ltd., on suspicion of the crime of producing and selling substandard drugs.
At present, the case is under trial.
Other
In the first-instance ruling on the Wang Laoji trademark dispute, Jiaduobao was ordered to pay 1.44 billion yuan.
Baiyunshan (35.8, -0.50, -1.38%) (600332, SH) announced on the afternoon of the 27th that, in the trademark infringement case involving six entities affiliated with Jiaduobao Group and Guangzhou Pharmaceutical Group’s registered “Wang Laoji” trademark, its controlling shareholder, Guangzhou Pharmaceutical Group Co., Ltd. (hereinafter referred to as Guangzhou Pharmaceutical Group), has received the first-instance Civil Judgment from the Guangdong Provincial Higher People’s Court. The Guangdong High Court ruled that the six companies associated with Jiaduobao Group must, within ten days from the date the judgment takes legal effect, compensate Guangzhou Pharmaceutical Group for related economic losses and reasonable rights‑protection expenses, totaling RMB 1.441 billion.
In 2014, Guangzhou Pharmaceutical Group first filed an infringement lawsuit against six companies affiliated with the Jiaduobao Group, all of which shared the same legal representative, Zhang Shurong, seeking RMB 1 billion in damages. In January 2015, Guangzhou Pharmaceutical Group increased its claim to RMB 2.93 billion. At present, this ruling is a first-instance judgment. A spokesperson for Guangzhou Pharmaceutical’s Wanglaoji brand stated: “Wanglaoji respects the court’s decision. The court’s finding of Jiaduobao’s infringement serves to further protect the time-honored Chinese brand ‘Wanglaoji,’ while also sending a clear warning against low‑cost illegal practices.”
According to the First-Instance Judgment issued by the Guangdong High People’s Court, Guangdong Jiaduobao Beverage Food Co., Ltd. (hereinafter referred to as “Guangdong Jiaduobao”), Zhejiang Jiaduobao Beverage Co., Ltd., Jiaduobao (China) Beverage Co., Ltd., Fujian Jiaduobao Beverage Co., Ltd., Hangzhou Jiaduobao Beverage Co., Ltd., and Wuhan Jiaduobao Beverage Co., Ltd. are jointly ordered to compensate Guangzhou Pharmaceutical Group for economic losses and reasonable rights‑protection expenses in the total amount of RMB 1.44 billion. In addition, the court ruled that the case filing fee of RMB 14.693 million shall be borne equally by the plaintiff and the defendant.
At present, the Guangdong High People’s Court has ordered compensation totaling RMB 1.44 billion, representing the economic losses suffered by Guangzhou Pharmaceutical Group from May 2, 2010, to May 19, 2012, due to the infringement of the registered trademark “Wang Laoji.” Guangdong Jiaduo Bao is designated as the primary compensator, while the remaining five companies bear joint and several liability for compensation. As this ruling is a first-instance judgment, the Guangdong High People’s Court stated in its decision that, should either party disagree with the verdict, an appeal may be filed with the court within fifteen days from the date of service of the judgment, accompanied by a copy of the appeal submitted to the Supreme People’s Court. Meanwhile, Baiyunshan announced that it expects this judgment to have no impact on the listed company’s current or subsequent-period profits.

 
In the first half of the year, Chinese enterprises invested US$7.68 billion in 55 countries along the Belt and Road.
According to the Ministry of Commerce website, in the first half of 2018, Chinese enterprises made direct investments totaling US$7.68 billion in 55 countries along the Belt and Road, a year-on-year decrease of 15%, accounting for 12.3% of the total during the same period. The majority of these investments were directed toward Singapore, Laos, Malaysia, Vietnam, Pakistan, Indonesia, Thailand, and Cambodia, among other countries.
In the field of overseas contracted projects, Chinese enterprises signed 1,922 new contracts in 61 countries along the Belt and Road, with a total contract value of US$47.79 billion, accounting for 44.8% of China’s total new overseas contracted project contracts during the same period—a year-on-year decrease of 33.1%. Meanwhile, the realized turnover reached US$38.95 billion, representing 53.5% of the overall total for the period, up 17.8% year on year.

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