JC Master Legal News Issue 833

Key Takeaways for This Issue
The China Securities Regulatory Commission has issued the “Decision on Amending the Measures for the Administration of Securities Registration and Settlement” and the “Decision on Amending the Measures for the Administration of Equity Incentives for Listed Companies.”
To thoroughly implement the spirit of the 19th National Congress of the Communist Party of China, to fulfill the strategic requirements of the CPC Central Committee and the State Council for accelerating the development of a country strong in talent, and to advance the arrangements for further opening up the capital market, the China Securities Regulatory Commission, with the approval of the State Council, has officially issued the “Decision on Amending the Measures for the Administration of Securities Registration and Settlement” and the “Decision on Amending the Measures for the Administration of Equity Incentives for Listed Companies,” thereby further relaxing restrictions on eligible foreign nationals’ access to open A‑share securities accounts.

The Ministry of Finance has urged local governments to accelerate the issuance of special-purpose bonds.
To accelerate the issuance and utilization of local government special-purpose bonds (hereinafter referred to as “special bonds”) and to better leverage their role in stabilizing investment, expanding domestic demand, and addressing infrastructure shortcomings, the Ministry of Finance issued on August 14, 2018 the “Opinions on Doing a Good Job in the Issuance of Local Government Special-Purpose Bonds,” which calls for expediting the bond‑issuance process.

Small and micro enterprises have received nearly 100 billion yuan in tax relief over the first five months, as the scale of tax cuts for these businesses has been further expanded.
Small and micro enterprises are set to benefit once again from favorable policies. On August 15, the Ministry of Finance and the State Taxation Administration issued a notice stating that, from January 1, 2018, to December 31, 2020, the annual taxable income threshold for small and low-profit enterprises will be raised from RMB 500,000 to RMB 1 million. For such enterprises with an annual taxable income of RMB 1 million or less, their taxable income will be calculated at 50%, and they will pay corporate income tax at a rate of 20%.

The draft of the individual sections of the Civil Code is set to be submitted to the Standing Committee of the National People’s Congress for deliberation.
On the afternoon of the 17th, the Eleventh Chairpersons’ Meeting of the Standing Committee of the 13th National People’s Congress was held at the Great Hall of the People in Beijing. The meeting recommended that the Fifth Session of the Standing Committee of the 13th National People’s Congress deliberate the proposal submitted by the Chairpersons’ Meeting of the Standing Committee to consider the draft amendments to the various sections of the Civil Code.

The Political Bureau heard a report on the investigation into the vaccine-related case involving Changsheng Biotechnology Co., Ltd. in Changchun, Jilin, as well as the related accountability measures.
On August 16, the Standing Committee of the Political Bureau of the CPC Central Committee convened a meeting to hear a report on the investigation into the vaccine scandal involving Changsheng Biotechnology in Changchun, Jilin, as well as on related accountability measures. Xi Jinping, General Secretary of the CPC Central Committee, presided over the meeting and delivered an important speech.

Table of Contents
Table of Contents

Finance & Capital Markets
The China Securities Regulatory Commission has issued the “Decision on Amending the Measures for the Administration of Securities Registration and Settlement” and the “Decision on Amending the Measures for the Administration of Equity Incentives for Listed Companies.”
The China Securities Regulatory Commission will study and explore a streamlined, fast-track M&A regime for small-scale transactions.
The China Securities Regulatory Commission has established an expert database for administrative penalties.
The China Securities Regulatory Commission has suspended Dagong International’s securities rating business for one year.
The Shanghai Stock Exchange plans to adjust the stock closing trading mechanism starting August 20.

Corporate & Commercial
The Ministry of Finance has urged local governments to accelerate the issuance of special-purpose bonds.
Private equity funds enter the era of electronic signing; the first-ever signed transaction has been completed.
State Administration of Foreign Exchange: The effects of the policy of opening up to the outside world continue to emerge, with foreign capital continuing to flow in during July.
Following the National Reform Coordination Meeting, the “Double Hundred Initiative” was officially launched.

Taxation
Small and micro enterprises have received nearly 100 billion yuan in tax relief over the first five months, as the scale of tax cuts for these businesses has been further expanded.
Value-added tax is set to undergo a new round of reform, with experts recommending the elimination of the 10% tax rate bracket.
Half a year after the environmental protection tax was introduced, revenues have neared 10 billion yuan, and the effects of the green tax system are becoming increasingly evident.

Litigation & Arbitration
The draft of the individual sections of the Civil Code is set to be submitted to the Standing Committee of the National People’s Congress for deliberation.
The Supreme People’s Court has issued a notice requiring the proper adjudication of civil lending dispute cases to prevent and defuse various risks.
The Supreme People’s Court has released the first batch of 10 internet-related cases.

Other
The Political Bureau heard a report on the investigation into the vaccine-related case involving Changsheng Biotechnology Co., Ltd. in Changchun, Jilin, as well as the related accountability measures.
18 anti-cancer drugs have officially been included in the scope of medical insurance negotiations.

Finance & Capital Markets
The China Securities Regulatory Commission has issued the “Decision on Amending the Measures for the Administration of Securities Registration and Settlement” and the “Decision on Amending the Measures for the Administration of Equity Incentives for Listed Companies.”
To thoroughly implement the spirit of the 19th National Congress of the Communist Party of China, to fulfill the strategic requirements of the CPC Central Committee and the State Council for accelerating the development of a country strong in talent, and to advance the arrangements for further opening up the capital market, the China Securities Regulatory Commission, with the approval of the State Council, has officially issued the “Decision on Amending the Measures for the Administration of Securities Registration and Settlement” and the “Decision on Amending the Measures for the Administration of Equity Incentives for Listed Companies,” thereby further relaxing restrictions on eligible foreign nationals’ access to open A‑share securities accounts.
The main changes in this revision pertain to the following two aspects:
First, relevant provisions of the Measures for the Administration of Securities Registration and Settlement have been amended. Building on the existing scope of investors—namely, Chinese citizens, Chinese legal persons, and Chinese partnerships—the amendment adds “foreigners who meet the prescribed requirements” as one of the eligible investor categories. It also stipulates that the specific procedures for foreign investors to apply for opening a securities account shall be formulated by the securities registration and settlement institution and submitted to the China Securities Regulatory Commission for approval. Pursuant to this amendment, foreign natural persons currently working in China will now be permitted to open A‑share securities accounts.
Second, the Measures for the Administration of Equity Incentives for Listed Companies have been amended to expand the scope of eligible foreign‑national employees of domestic listed companies—from those who are employed within China to all foreign nationals.
The revised Measures for the Administration of Securities Registration and Settlement and the Measures for the Administration of Equity Incentives for Listed Companies will come into effect on September 15, 2018. At the same time, China Securities Depository & Clearing Corporation Limited will issue implementing rules governing the opening of A‑share securities accounts by foreign investors. In addition, the China Securities Regulatory Commission will promptly coordinate with relevant departments to ensure seamless alignment in areas such as taxation and foreign‑exchange management, thereby guaranteeing the orderly implementation of the aforementioned measures.

The China Securities Regulatory Commission will study and explore a streamlined, fast-track M&A regime for small-scale transactions.
“The CSRC will, as always, vigorously advance mergers and acquisitions and restructuring of listed companies, refine the ‘tiered review’ framework, and further shorten review timelines. We will fully leverage market mechanisms, study ways to streamline M&A and restructuring processes and regulatory frameworks, and concurrently improve the suspension‑and‑resumption system for listed companies and the stock exchange’s inquiry regime. We will also explore the establishment of a fast‑track, small‑scale M&A mechanism, harness technological tools to enhance the quality and efficiency of M&A and restructuring activities, and better serve the real economy,” said Chang Depeng, spokesperson for the CSRC, at the regular press conference held on the 17th.
Recently, Wanhua Chemical’s application for the absorption‑and‑merger of Wanhua Chemical has been approved by the M&A Review Committee. From the date of acceptance to the committee’s approval, the review process took only 12 days. Chang Depeng stated that the China Securities Regulatory Commission is officely implementing the directives of the CPC Central Committee and the State Council, attaching great importance to supporting the development of the real economy. In the new stage of economic development, it is leveraging the positive role of capital market mergers and restructurings, striving to enhance the quality of listed companies, providing concrete support for supply‑side structural reform, and proactively serving national strategies.
Chang Depeng stated that in recent years, the China Securities Regulatory Commission (CSRC) has steadfastly upheld comprehensive, law-based, and stringent regulation while deepening market-oriented reforms of mergers and acquisitions (M&A) and restructuring. By substantially abolishing or streamlining administrative approvals, more than 90% of M&A transactions no longer require CSRC review, thereby effectively boosting market vitality. At the same time, addressing areas where market‑based checks and balances remain relatively weak, the CSRC has refined its regulatory framework, tightened oversight of restructuring and listing activities, and taken strong measures to curb irregularities such as “deceptive” and “herd‑following” restructurings, curbing speculative “shell‑trading,” and fostering a well‑regulated market environment. These efforts have helped bring the market’s valuation system back to rationality and laid a solid foundation for expediting reviews and enhancing service delivery. In the first half of this year, M&A and restructuring activity in the A‑share market intensified, with listed companies completing 2,047 transactions—nearly matching last year’s full‑year total—valued at RMB 1.15 trillion, up 40.5% year over year.
Chang Depeng stated that the CSRC is currently working to enhance review efficiency, leveraging high-quality M&A and restructuring projects of listed companies to promote the stable and sound development of the capital market. Over its 17 years on the stock market, Wanhua Chemical has seen its net profit grow by a factor of 265, with total cash dividends amounting to RMB 13.897 billion—4.71 times the funds raised through its IPO. As a representative of state‑owned, high‑tech listed companies, Wanhua Chemical’s recent application for an absorption merger was swiftly reviewed and approved, underscoring the CSRC’s unwavering commitment to supporting M&A and restructuring activities among listed offices.

The China Securities Regulatory Commission has established an expert database for administrative penalties.
Recently, the China Securities Regulatory Commission, drawing on its extensive experience in inviting experts to participate in case deliberations, has established an expert pool for administrative penalties covering fields such as law, accounting, valuation, and finance. Legal scholars, renowned academics, senior government officials, and industry leaders—including Professor Ying Songnian, a tenured professor at China University of Political Science and Law—have been among the first to join this expert pool.
At a regular press conference held on the 17th, China Securities Regulatory Commission (CSRC) spokesperson Chang Depeng stated that, as the capital market evolves at a rapid pace, illegal activities are becoming increasingly sophisticated, their numbers continue to rise, and their manifestations are growing ever more complex. The establishment of an expert pool for administrative penalties will help ensure that expert opinions are fully solicited and that expert expertise is leveraged to better address the intricate issues encountered in administrative enforcement, thereby continuously enhancing law-based governance and elevating the professionalism, authority, and public trust in regulatory enforcement. The CSRC will make effective use of its expert resources, persist in enforcing the law comprehensively and rigorously in accordance with the law, continually purify the market environment, and effectively curb the occurrence of illegal and non-compliant conduct.

The China Securities Regulatory Commission has suspended Dagong International’s securities rating business for one year.
Recently, the Beijing Securities Regulatory Bureau, in collaboration with the China Securities Industry Association, conducted a special on-site inspection of Dagong International Credit Rating Co., Ltd. (hereinafter referred to as Dagong International).
At a regular press conference held on the 17th, China Securities Regulatory Commission (CSRC) spokesperson Chang Depeng stated that on-site inspections revealed the following issues at Dagong International: First, Dagong International improperly used official seals interchangeably with those of affiliated companies, resulting in ineffective internal control mechanisms and chaotic internal management; second, while providing credit rating services to multiple issuers, it simultaneously offered advisory services and charged exorbitant fees, thereby violating the principle of independence; third, certain senior executives and members of the review committee did not meet the required qualifications; and fourth, for some rating projects, supporting documentation was missing, and model calculations contained data omissions. These issues contravene relevant provisions of the Interim Measures for the Administration of Credit Rating Business in the Securities Market (CSRC Order No. 50 of 2007, hereinafter referred to as the “Interim Measures”).
In accordance with the Provisional Measures, the Beijing Securities Regulatory Bureau intends to order Dagong International to undertake rectification within a one-year period, during which it shall refrain from accepting any new securities rating business and replace senior management personnel who no longer meet the required qualifications. At present, the Beijing Securities Regulatory Bureau has completed the notification procedure for administrative regulatory measures, and related follow-up work is being advanced in compliance with the law.
Chang Depeng stated that, going forward, the China Securities Regulatory Commission will continue to implement the CPC Central Committee and the State Council’s series of measures aimed at ensuring the sound development of the bond market, enforce comprehensive and stringent regulation in accordance with the law, and intensify efforts to investigate and impose penalties for all types of illegal and non-compliant conduct by securities rating agencies. Securities rating agencies must adhere to the principles of independence, objectivity, fairness, and consistency; develop sound rating methodologies and robust quality‑control systems; establish and improve firewall mechanisms; and clearly delineate the functions of their internal departments. Departments engaged in securities rating business must remain independent from other business units and affiliated companies, rigorously prevent conflicts of interest, continuously purify the market environment, refine internal control frameworks, and enhance their capacity to serve the capital markets.
Chang Depeng stated that the China Securities Regulatory Commission will continue to strengthen regulatory coordination with the People’s Bank of China, thoroughly implement the spirit of the inter‑ministerial coordination mechanism for corporate credit bonds, further promote connectivity between the interbank market and the exchange‑traded bond market, continuously enhance regulatory collaboration, effectively safeguard the legitimate rights and interests of investors and the public interest, and foster the sound and orderly development of the credit rating industry.

The Shanghai Stock Exchange plans to adjust the stock closing trading mechanism starting August 20.
On August 6, the Shanghai Stock Exchange issued five revised business rules, including the “Shanghai Stock Exchange Trading Rules,” proposing to adjust the stock closing trading mechanism effective August 20. Under the new arrangement, the closing price will be determined through a three-minute call auction, with the closing call auction session running from 14:57 to 15:00.
Following the release of the rules, on August 16, a relevant official from the Shanghai Stock Exchange addressed several issues of concern to investors in response to reporters’ questions.
Regarding the question of whether the market data displayed during the closing call auction phase is the same as that in the continuous trading phase, and what specific information is included, the aforementioned official explained that the closing call auction display differs from the continuous trading phase and is identical to the opening call auction—namely, it includes the security code, security abbreviation, previous close price, virtual reference price for the call auction, virtual matched volume, and virtual unmatched volume.
Bond, bond repurchase, fund, and other trading products do not employ a closing auction; therefore, the market data display during the period from 14:57 to 15:00 will remain unchanged.
In response to the question of whether orders can be canceled during the closing auction phase, the aforementioned official explained that, prior to this adjustment, stock trades could both be placed and canceled during the continuous auction phase—including from 2:57 p.m. to 3:00 p.m. Following the adoption of the closing auction, orders may be submitted during the closing auction phase but cannot be canceled.
“This means that, during the closing auction phase, neither orders submitted during that phase nor previously submitted orders that have not yet been executed may be canceled,” said the official.
He also stated that other trading products, such as bonds, bond repurchase agreements, and funds, do not employ a closing auction; therefore, orders may still be submitted and canceled during the period from 14:57 to 15:00.
So, are market‑price orders accepted during the closing call auction? In response, the aforementioned official explained that market‑price orders are not permitted during the closing call auction phase; they are only applicable during the continuous trading session, which is subject to price limits.
Previously, some investors were accustomed to placing market orders just before the market closed in order to execute trades as quickly as possible. In response, the official specifically cautioned investors that, following the implementation of the closing auction mechanism on August 20, the SSE trading system will no longer accept market orders during the closing auction phase; only limit orders will be permitted. If investors submit market orders during this period, their orders will be deemed invalid, potentially causing them to miss out on trading opportunities at the close.

Commercial & Corporate
The Ministry of Finance has urged local governments to accelerate the issuance of special-purpose bonds.
To accelerate the issuance and utilization of local government special-purpose bonds (hereinafter referred to as “special bonds”) and to better leverage their role in stabilizing investment, expanding domestic demand, and addressing infrastructure shortcomings, the Ministry of Finance issued on August 14, 2018 the “Opinions on Doing a Good Job in the Issuance of Local Government Special-Purpose Bonds,” which calls for expediting the bond‑issuance process.
An official from the Ministry of Finance stated that the issuance of special-purpose bonds should be accelerated. Fiscal authorities at all levels, in coordination with the competent departments responsible for the projects corresponding to these bonds, should expedite preparatory work and issue bonds as project readiness permits—launching one batch once it is sufficiently mature. Provincial-level fiscal authorities should appropriately manage the pace of bond issuance, carefully planning the schedule for the remaining months of this year, particularly August and September, to speed up the process. This year, the issuance of local government bonds (hereinafter referred to as “local bonds”) will not be subject to quarterly balance‑sheet requirements; by the end of September, the cumulative proportion of newly issued special-purpose bonds should, in principle, reach at least 80%, with the remaining quota primarily allocated for issuance in October.
“Enhance the market‑based nature of special bond issuance,” said a responsible official. Provincial finance departments should, based on factors such as the scale of special bond issuance and market conditions, select appropriate methods—such as tendering (including flexible tendering) or public underwriting—to organize the issuance process. Underwriting institutions shall determine their bid prices by comprehensively considering yields on government bonds and policy‑oriented financial bonds of comparable maturities, as well as secondary‑market valuations of local government bonds; local finance departments must not exert influence over underwriters through fiscal deposits or other means to artificially suppress pricing. Any instances of non‑market‑based interference in the pricing of local government bond issuances, once verified, will be publicly reported by the Ministry of Finance.
Relevant authorities have proposed streamlining the bond‑issuance process. Provincial finance departments shall, no later than seven working days prior to issuance, coordinate with the issuing venue on the timing of local government bond offerings—including general bonds and special‑purpose bonds—and, in principle, the issuing venue shall conoffice such arrangements on a first‑come, first‑served basis. All issuing venues are required to enhance communication to avoid multiple provinces scheduling local‑government bond issuances during overlapping time windows, thereby preventing concentrated, simultaneous offerings; where coordination by the Ministry of Finance is necessary, timely contact should be established with the Ministry. For bond issuances whose timing has already been filed with the Ministry of Finance prior to the issuance of this notice, bonds shall be issued according to the previously agreed schedule. Localities may, within their respective provinces, conduct pooled issuances of identical types of special‑purpose bonds from different cities and counties, thereby improving issuance efficiency. The Ministry of Finance will no longer impose restrictions on the maturity‑structure ratios of special‑purpose bonds; local governments shall, based on project implementation needs and market demand, determine appropriate maturities for such bonds. When the bond‑issuance venue is located outside Beijing, the Ministry of Finance authorizes the provincial finance department of the issuing region, no later than three working days before issuance, to issue a written notice to the local fiscal oversight office, designating an observer to attend the issuance site.
“Simplify the bond information disclosure process.” Relevant officials have mandated that provincial finance departments promptly disclose information related to local government bond issuances on their own official websites and platforms such as the China Bond Information Network, and no longer submit for filing with the Ministry of Finance the information disclosure documents that are required to be made public. Provincial finance departments shall assume responsibility for the compliance and completeness of these disclosure documents, rigorously enforce the accountability of the project‑responsible authorities and city‑ and county‑level entities associated with special‑purpose bonds, and urge them to develop sound plans ensuring that project financing is self‑sustaining and that revenues adequately cover expenditures. The status of information disclosure will serve as an important reference in the Ministry of Finance’s assessment of local government bond issuance practices across regions.
Relevant authorities have called for accelerating the disbursement and utilization of special bond funds. Fiscal departments at all levels should promptly allocate and deploy revenues from special bonds, expedite fund disbursements, prevent prolonged retention of these funds in the treasury, and ensure that the benefits of special bond financing are realized as soon as possible. Where conditions permit, local governments may, prior to the issuance of local government bonds, reallocate existing budgetary allocations for bond‑financed projects by drawing on treasury reserves to accelerate project implementation, with the corresponding funds subsequently replenished once the bonds are issued.

Private equity funds enter the era of electronic signing; the first-ever signed transaction has been completed.
Industry insiders say that electronic signing for private equity funds will significantly enhance operational efficiency, marking the establishment of another cornerstone in the industry’s move toward standardized development.
Private equity funds are transitioning from paper-based to electronic contracting. Recently, the first privately‑funded product to utilize electronic signing—issued through the China Securities Inter‑Institutional Quotation System (referred to as “CSIS”)—has been successfully filed with the Asset Management Association of China, marking a significant step toward the digitalization of private‑fund contracts in China. Industry insiders note that electronic contracting will substantially enhance operational efficiency, reduce costs, and make practices such as forged seals and dual‑track contracts far more difficult to execute. This development underscores another critical milestone in the industry’s drive toward standardized and transparent operations.
Recently, with the witnessing of the Asset Management Association of China, the First Research Institute of the Ministry of Public Security, China Securities Depository & Clearing Corporation, the Beijing Internet Association’s Electronic Data Forensic Center, and relevant custodian institutions, the CSI Quotation Private Fund Electronic Signing System was officially launched. On the day of its launch, the manager and custodian of the first private fund completed their signing; subsequently, in line with the product’s issuance schedule, the manager engaged with investors and proceeded to execute contract signings through the CSI Private Fund Electronic Signing System. The private‑fund product has since been successfully filed with the Asset Management Association of China. Relevant departments of the China Securities Regulatory Commission also attended the launch of this electronic signing service for private funds.
The first application of the CSI Private Equity Fund electronic signing platform was for a contract‑type securities investment fund. The fund manager is Ningbo Meigang Investment Management Center (Limited Partnership), the custodian is CITIC Securities, and the initial investor is an individual client of Meigang Investment. The entire signing process took approximately forty minutes. “For this inaugural signing, clients were required to register online, undergo authentication, and execute the digital signature—compared with simply signing a paper contract, this did involve a familiarization period. However, after we communicated with them, they quickly agreed,” said Chen Long, CEO of Meigang Investment.
According to reports, the CSI Private Equity Fund Electronic Signing System, developed and operated by CSI Quotation, provides end-to-end online contract signing and management services for all parties involved in private equity funds, meeting the signing needs throughout the entire lifecycle of such funds. Ge Weiping, General Manager of CSI Quotation, stated that the company will continue to develop and refine the electronic signing system, offering professional services to stakeholders in the private equity industry while also supporting regulatory collaboration for supervisory authorities and self-regulatory organizations. CSI Quotation is committed to building an independent, compliant, and efficient infrastructure for the private equity sector, thereby fostering industry growth and serving all types of participants across the private equity landscape.
According to data from the Asset Management Association of China, as of June 30, 2018, the registered assets under management (AUM) stood at RMB 2.54 trillion for private securities investment funds, RMB 7.20 trillion for private equity investment funds, and RMB 0.75 trillion for venture capital funds; other private funds held RMB 2.12 trillion, bringing the total AUM to RMB 12.52 trillion. Previously, the traditional paper‑based contract‑signing process was inefficient and costly, with risks such as “dual‑track contracts” and the use of forged seals. Industry experience indicates that completing multi‑party circulation and signing a conventional paper contract typically takes 7 to 10 days, whereas online contract signing can be finalized within a single day, significantly reducing time costs.
How can electronic signing be used to standardize the execution of private equity fund contracts? Zhang Haiping, Director of the Private Equity Business Department at China Securities Quote, explained: In accordance with regulatory requirements, China Securities Quote has established stringent准入 thresholds, mandating that participating private equity fund managers and custodians meet the conditions for lawful and compliant operations. Only those who satisfy the relevant provisions are issued the corresponding digital certificates. Investors, too, undergo real-name authentication to ensure the authenticity and validity of their identities. Furthermore, the China Securities Private Equity Electronic Signing System provides a comprehensive identity‑verification framework, offering a technical means to facilitate compliance reviews of users’ signing qualifications.
Relevant industry experts state that electronic signing systems, through the design of processes such as participant identity verification and signing procedures, ensure the integrity of electronic evidence. Moreover, by leveraging blockchain encryption and other technologies, they safeguard the authenticity of electronic data, enabling the presentation of valid electronic evidence in the event of disputes and thereby reducing business risks for all parties involved in the contract.

State Administration of Foreign Exchange: The effects of the policy of opening up to the outside world continue to emerge, with foreign capital continuing to flow in during July.
According to a notice posted on the website of the State Administration of Foreign Exchange on August 17, the agency recently released data for July 2018 on banks’ foreign-exchange settlement and sales, as well as on banks’ handling of foreign‑related receipts and payments on behalf of clients. In response to questions from reporters regarding recent cross‑border capital flows, a spokesperson for the State Administration of Foreign Exchange stated that China’s foreign‑exchange market continues to enjoy overall stability in supply and demand, with market participants engaging in foreign‑related transactions in a rational and orderly manner. The effects of the country’s opening-up policies remain evident, as overseas capital continues to flow in and both corporate and individual foreign‑exchange purchases remain steady.
The aforementioned spokesperson noted that China’s foreign-exchange market has maintained overall stability in supply and demand, with market participants engaging in cross-border transactions in a rational and orderly manner. First, the balance of foreign-exchange reserves has remained broadly stable while registering a slight increase. As of the end of July, it stood at USD 3.1179 trillion, up by USD 5.8 billion from the end of June. Second, both banks’ net foreign-exchange settlement‑sale deficits and cross-border current‑account imbalances narrowed year on year. In July, banks recorded a net deficit of USD 9.4 billion in foreign-exchange settlement and sale, down 39% from the same period last year; among this, the net deficit in agency settlement and sale for clients was USD 400 million, indicating a more balanced pattern between enterprises’ and individuals’ foreign-exchange purchases and sales. Meanwhile, non‑bank entities, including domestic enterprises, posted a cross-border current‑account deficit of USD 12.0 billion, a 45% year‑on‑year decline. Third, market participants’ willingness to convert foreign currency into RMB increased month on month, and the foreign‑exchange sales rate edged up. In July, the ratio of bank customers’ foreign‑exchange settlements to their foreign‑currency earnings reached 73%, up 5 percentage points from the previous month—the highest level since July 2015—while the ratio of bank customers’ foreign‑exchange purchases to their foreign‑currency expenditures stood at 67%, an increase of 3 percentage points, though still relatively low compared with recent years.
The spokesperson stated that the effects of the policy of opening up to the outside world continue to be evident, with foreign capital continuing to flow in and corporate and individual foreign‑exchange purchases remaining stable. On the one hand, cross‑border capital inflows under direct investment, securities investment, and other categories have generally increased. In July, foreign‑related receipts under direct investment totaled US$34.5 billion, up 46% year on year and up 87% cumulatively since the beginning of the year; under securities investment, such receipts reached US$23.0 billion, a 160% year‑on‑year increase and a 150% cumulative rise so far this year. Against this backdrop, foreign‑exchange settlement under both direct and securities investment has also shown year‑on‑year growth. On the other hand, foreign‑exchange purchases by market entities across major channels have remained broadly stable. In July, corporate outbound direct investment and investment‑income‑related foreign‑exchange purchases both declined year on year, while individuals’ net foreign‑exchange purchases fell by 12% year on year and 13% month on month.
The spokesperson noted that, since the beginning of this year, volatility in international financial markets has risen markedly. However, supported by the overall stability of China’s domestic economy and the steady advancement of opening-up, cross-border capital flows have remained broadly stable and essentially balanced, while the renminbi exchange rate has become more flexible. Looking ahead, China’s economic fundamentals—characterized by strong resilience, robust adaptability, and ample policy room—remain unchanged and will continue to underpin the stable functioning of the foreign-exchange market. At the same time, China remains steadfast in its commitment to reform and opening-up; as related measures are steadily implemented and the framework for managing cross-border capital flows continues to improve, both the dynamism and stability of such flows will further strengthen, helping to safeguard an autonomous balance of payments and enabling the economy to adapt to evolving market conditions.

Following the National Reform Coordination Meeting, the “Double Hundred Initiative” was officially launched.
On August 17, the Office of the State Council Leading Group for State-Owned Enterprise Reform convened a video conference to launch and deploy the “Double Hundred Action” for SOE reform. At the meeting, Xiao Yaqing, Director of the Office of the State Council Leading Group for SOE Reform and Director of the State-owned Assets Supervision and Administration Commission, announced that the “Double Hundred Action” has officially been launched. The key highlights of this meeting are as follows:
I. Comprehensive Implementation of State-Owned Enterprise Reform
Xiao Yaqing stated that launching the “Double Hundred Initiative” is not about establishing yet another set of standalone pilot programs; rather, it aims to take the “1+N” policy framework as its guiding principle and build on the outcomes of previous individual pilot projects, thereby comprehensively expanding and applying reform policies and pilot‑tested practices. This will help forge a new landscape for state‑owned enterprise reform—one characterized by a tiered, in‑depth, and fully implemented approach, progressing from the top‑level “1+N” design through the “Ten Reform Pilots” to the “Double Hundred Initiative.”
II. Prioritize support for the restructuring and IPOs of “Double-Hundred” enterprises in the commercial sector.
Xiao Yaqing stated that it is essential to effectively accelerate the transformation of operating mechanisms at “Double-Hundred Enterprises,” enhance the functions of state capital, and improve the efficiency of its allocation and operation. It is necessary to advance mixed‑ownership reform in a proactive yet prudent manner, tailored to different levels and categories, adhering to strategies that are region‑specific, industry‑specific, and enterprise‑specific—favoring wholly owned status where appropriate, controlling stakes where suitable, and minority participation where feasible. Priority support should be given to commercial “Double-Hundred Enterprises” whose core businesses operate in highly competitive industries and sectors, encouraging them to develop a mixed‑ownership economy through measures such as restructuring and going public.
III. Expanding the Employee Stock Ownership Pilot Program by Selecting “Double-Hundred Enterprises” as Priority Candidates
Xiao Yaqing pointed out that “Double-Hundred Enterprises” must implement a mechanism of “strong incentives and stringent constraints,” ensuring that employees’ wages are raised where they should be and lowered where they ought to be.
For Category‑I “Double‑Hundred Enterprises” in the commercial sector, a more flexible total‑wage management approach is implemented in accordance with the principle of tiered administration, granting them greater autonomy in wage allocation.
For “Double-Hundred Enterprises” with sound business needs—particularly those requiring adjustments to their total payroll for R&D and innovation investments, the recruitment of specialized high‑end talent, and related incentive measures—more robust policy support may be provided.
In principle, all “Double Hundred Enterprises” may, in light of their own strategic development plans and human resources strategies, draw on benchmarking practices from both domestic and international markets to select one or more medium- to long-term incentive mechanisms. These mechanisms should be tailored to different employee groups—such as senior executives, research personnel, and technical core staff—establishing systems that share risks and align interests over the medium to long term. It is hoped that local SASACs and central enterprise groups will guide the “Double Hundred Enterprises” in thoroughly and systematically studying existing medium- to long-term incentive policies, and in effectively leveraging a range of incentive approaches and tools, including equity incentives for state‑controlled listed companies, equity‑based and dividend‑linked incentives for state‑owned technology offices, and employee stock ownership schemes in state‑controlled mixed‑ownership enterprises—rather than adopting a one‑size‑fits‑all approach centered solely on employee stock ownership. Of course, relevant authorities are currently reviewing and refining related policies based on earlier pilot experiences, and when expanding the scope of employee stock ownership pilots in the next phase, priority will be given to selecting enterprises from among the “Double Hundred Enterprises.”
Tianfeng Securities believes that, from a capital markets perspective, the advancement of the “Double Hundred Plan” is poised to serve as a key catalyst for the next wave of state-owned enterprise reform. In previous policy-driven cycles, leading stocks have delivered strong performance, and with this year marking the 40th anniversary of China’s reform and opening-up, the theme of SOE reform is likely to attract further policy support.

Taxation TAXATATION
Small and micro enterprises have received nearly 100 billion yuan in tax relief over the first five months, as the scale of tax cuts for these businesses has been further expanded.
Small and micro enterprises are set to benefit once again from favorable policies. On August 15, the Ministry of Finance and the State Taxation Administration issued a notice stating that, from January 1, 2018, to December 31, 2020, the annual taxable income threshold for small and low-profit enterprises will be raised from RMB 500,000 to RMB 1 million. For such enterprises with an annual taxable income of RMB 1 million or less, their taxable income will be calculated at 50%, and they will pay corporate income tax at a rate of 20%.
On August 15, Liu Zhe, Director of the New Supply Economics Research Center at the Wanbo Institute, stated that the recently introduced tax‑reduction policies for small and micro enterprises have to some extent eased their tax burden. However, the number of tax items and various administrative fees applicable to these businesses remains substantial. In particular, the VAT and corporate income tax rates, when compared with the profitability and tax‑bearing capacity of small and micro enterprises, continue to impose significant pressure on their operations and reinvestment.
Liu Zhe argues that an appropriate tax burden for small and micro enterprises is not static. When offices enjoy strong profitability, their capacity to bear taxes increases; conversely, if tax policy lags significantly behind changes in corporate profitability, it can lead to operational difficulties and even force businesses to exit production. In recent years, costs such as labor, land, and raw materials have risen sharply, while small and micro enterprises have limited pricing power, resulting in shrinking profit margins and a declining ability to shoulder tax burdens. Under these circumstances, it is essential to promptly reduce the tax burden on small and micro enterprises to offset the impact of rising input costs—such as raw materials and labor—and to sustain their normal production, operations, and capacity for reinvestment.
In fact, since 2013, the State Council has not only implemented targeted tax reductions for small and micro enterprises on multiple occasions but has also steadily expanded the scope of eligible entities. For example, the annual taxable income threshold for small and micro enterprises qualifying for the preferential policy of halving corporate income tax has been raised from RMB 30,000, RMB 60,000, and RMB 500,000 to the current level of RMB 1 million. It can be said that the successive implementation of a series of tax and fee reduction measures has created a more favorable policy environment for all types of market entities, including small and micro enterprises.
According to the latest data, from January to May this year, tax preferential policies supporting the development of small and micro enterprises have resulted in tax reductions totaling RMB 94.3 billion, an increase of 25% year on year.
Vice Minister of Finance Liu Wei revealed that, going forward, in addition to further tax cuts, the government will also help address financing challenges faced by small and micro enterprises and accelerate the establishment of a national financing guarantee fund. It will ensure an initial capital contribution of no less than RMB 60 billion, coordinate with provincial-level financing guarantee and reinsurance institutions, and support the growth and expansion of the financing guarantee sector, thereby increasing the scale of financing guarantee services for small and micro enterprises.

Value-added tax is set to undergo a new round of reform, with experts recommending the elimination of the 10% tax rate bracket.
The “Division of Key Tasks for the National Video and Teleconference on Deepening the ‘Delegation, Regulation, and Service’ Reform and Transforming Government Functions,” recently issued by the General Office of the State Council, stipulates that the Ministry of Finance and the State Taxation Administration are responsible for effectively implementing existing tax‑reduction and fee‑cutting measures—such as expanding the scope of small and micro enterprises eligible for the preferential policy of halving corporate income tax—and for studying further reforms to the value‑added tax system. In response, experts have stated that deepening VAT reform requires further reductions in VAT rates and a simplification of the rate structure, recommending the elimination of the 10% tax bracket.
“Value-added tax is China’s largest tax category and exerts the most profound influence on enterprises’ production and operational decisions as well as on the functioning of the market economy,” said Shi Wenpo, an associate researcher at the Chinese Academy of Fiscal Sciences. “The comprehensive rollout of the pilot reform to replace business tax with value-added tax has eliminated inconsistencies between the tax regimes for goods and services and the embedded double taxation. However, the current VAT system still has certain imperfections, necessitating further deepening of reforms to enhance the neutrality of the tax system and to establish a unified, equitable tax environment that supports the development of all industries and enterprises.”
Effective May 1 this year, China will reduce the value-added tax rate for industries such as manufacturing from 17% to 16%, and lower the rate for sectors including transportation, construction, and basic telecommunications services, as well as for goods like agricultural products, from 11% to 10%. At the same time, the threshold for small-scale VAT taxpayers will be standardized. The annual sales thresholds for small-scale taxpayers in the industrial and commercial sectors will be raised from RMB 500,000 and RMB 800,000, respectively, to RMB 5 million. Furthermore, enterprises already registered as general taxpayers will be permitted, for a specified period, to re-register as small-scale taxpayers, enabling more businesses to benefit from the preferential tax treatment of lower tax rates. In addition, eligible enterprises in advanced manufacturing sectors such as equipment manufacturing, modern service industries including research and development, and power grid companies will receive a one-time refund of any outstanding input VAT credits that remain undeducted over a defined period.
Shi Wenpo proposed the following three “remedies” for deepening VAT reform:
First, further reduce the value-added tax rate and streamline the number of tax brackets. On the premise of maintaining a relative balance between fiscal revenue and expenditure, and in conjunction with reforms to the fiscal expenditure system, it would be appropriate to consider a moderate reduction in the standard VAT rate and the elimination of the 10% bracket. This would, on the one hand, enhance the neutrality and fairness of the VAT and mitigate the distortions that an excessive number of tax rates impose on taxpayers’ decision‑making; on the other hand, it would help lower the tax burden embedded in the prices of goods and services, thereby easing the tax burden on businesses and households and improving the consumption environment.
Second, further refine the VAT input‑credit chain. Promptly review and standardize transitional preferential policies such as simplified taxation to strengthen the VAT credit chain and prevent downstream enterprises from facing increased tax burdens due to disruptions in the chain. Taking into account fiscal revenue, economic conditions, and other relevant factors,适时 include loan services and similar items within the scope of deductible inputs, thereby expanding the VAT credit system and reducing the tax burden on taxpayers.
Third, we will refine the management system for small-scale taxpayers. At present, China’s threshold for small-scale VAT taxpayers is an annual taxable sales volume of RMB 5 million or less. While this threshold exempts the vast majority of small and medium-sized enterprises from the standard VAT regime, significantly reducing their tax burden and compliance costs, it also undermines the integrity of the VAT input‑output credit chain, potentially leading to double taxation and inequitable tax burdens among taxpayers. Therefore, the management system for small-scale taxpayers should be further improved: for those whose annual taxable sales exceed the threshold, a sector‑specific VAT rate should be applied. At the same time, subject to effective oversight, they should be permitted to issue special VAT invoices at the applicable standard rates for their respective sectors to buyers who are general taxpayers, thereby enabling input‑tax credit.

Half a year after the environmental protection tax was introduced, revenues have neared 10 billion yuan, and the effects of the green tax system are becoming increasingly evident.
According to the latest data from the State Taxation Administration, since the Environmental Protection Tax Law came into effect on January 1 this year, tax, finance, and ecological environment authorities at all levels across the country have worked in close coordination, ensuring the orderly and smooth administration of the environmental protection tax. The green tax system is beginning to deliver tangible results in promoting green development. In the second quarter, taxpayers reported environmental protection tax revenues totaling RMB 5.22 billion, an increase of RMB 760 million compared with the first quarter, representing a 17% quarter-on-quarter growth. In the first half of the year, environmental protection tax revenues amounted to RMB 9.68 billion, up RMB 1.75 billion, or 22.1%, from the same period last year when measured on a comparable basis against the previous pollutant discharge fee.
As the environmental protection tax was largely inherited from the pollutant discharge fee system, its revenue in the first half of the year continued to reflect the characteristics of the former fee. By sector, revenue was concentrated in industries such as steel, thermal power, cement, petroleum, and chemicals.
According to Sun Qun, Deputy Director-General of the Property and Behavioral Tax Department of the State Taxation Administration, by leveraging the positive incentive mechanism of the environmental protection tax, its guiding role in pollution control and emission reduction has begun to take effect. This is primarily reflected in three key areas: first, promoting clean production and reducing pollutant emissions; second, encouraging centralized treatment to enhance pollution-control efficiency; and third, fostering comprehensive resource utilization to improve the overall effectiveness of pollution management.
According to data from the State Taxation Administration, in the first half of the year, the on-time filing rate among environmental protection tax payers in China reached 99.9%, and the number of such taxpayers increased by more than 16,000 in the second quarter compared with the first quarter. Meanwhile, tax authorities collected additional taxes from 13,000 taxpayers who submitted abnormal returns, playing a positive role in plugging loopholes that could lead to revenue losses and ensuring that tax revenues are collected promptly and in full. Going forward, the tax authorities will continue to enhance the quality and efficiency of tax collection and administration, safeguard the smooth operation of the tax system, and further leverage the green benefits of the environmental protection tax.

LITIGATION & ARBITRATION
The draft of the individual sections of the Civil Code is set to be submitted to the Standing Committee of the National People’s Congress for deliberation.
The 11th Chairpersons’ Meeting of the Standing Committee of the 13th National People’s Congress was held at the Great Hall of the People in Beijing on the afternoon of the 17th, chaired by Chairman Li Zhanshu. The meeting decided that the Fifth Session of the Standing Committee of the 13th National People’s Congress will be convened in Beijing from August 27 to 31.
The Chairpersons’ Meeting has recommended that the Fifth Session of the Standing Committee of the 13th National People’s Congress deliberate the draft E-Commerce Law, the draft Soil Pollution Prevention and Control Law, the draft amendment to the Individual Income Tax Law, and the draft amendment to the Criminal Procedure Law; consider the proposal submitted by the Chairpersons’ Meeting of the NPC Standing Committee to submit the draft individual parts of the Civil Code for deliberation; and review the State Council’s proposals to submit the draft Law on Cultivated Land Occupation Tax and the draft Law on Vehicle Acquisition Tax, among others.

The Supreme People’s Court has issued a notice requiring the proper adjudication of civil lending dispute cases to prevent and defuse various risks.
Recently, the Supreme People’s Court issued the “Notice on Lawfully and Properly Adjudicating Private Lending Cases” (hereinafter referred to as the “Notice”), requiring people’s courts at all levels to fully leverage the evaluative, educational, and guiding functions of civil and commercial adjudication, properly handle disputes arising from private lending, and prevent and defuse various risks.
The Notice points out that, in recent years, new types of crimes—such as “routine loan” fraud—have repeatedly surfaced in society, disguising themselves as private lending while illegally appropriating property through such methods as “artificially inflating debts,” “fabricating evidence,” “maliciously creating defaults,” and “charging exorbitant fees.” These offenses gravely infringe upon the legitimate rights and interests of the public, disrupt the order of the financial market, and undermine social harmony and stability.
The Notice emphasizes the need to strengthen scrutiny of the facts and evidence underlying loan transactions. Given that perpetrators of “routine loan” fraud and similar crimes often exhibit characteristics of knowledge‑based offenses, people’s courts, when adjudicating civil lending disputes, must, in addition to reviewing cases in accordance with the relevant provisions of the Supreme People’s Court’s Regulations on Several Issues Concerning the Application of Law in the Trial of Civil Lending Cases, also comprehensively assess the true nature of the loan by taking into account factors such as the source of funds and prevailing transaction practices. Where there are reasonable grounds to suspect illegal or criminal conduct, and where an agent is unable to clarify the factual circumstances of the case, the parties themselves should be summoned to appear in court to undergo questioning regarding the relevant facts. Furthermore, investigative and evidentiary efforts should be appropriately intensified to ascertain the factual truth.
The Notice emphasizes the need to strictly distinguish between private lending activities and criminal offenses such as fraud. It calls for heightened vigilance regarding criminal schemes like “routine loan” fraud, strengthened efforts to differentiate between legitimate private lending and such criminal conduct, and prompt, lawful handling of any leads or evidence indicating suspected illegal or criminal activity. Where private lending itself involves unlawful or criminal behavior, the court shall dismiss the lawsuit and refer any relevant clues or materials to the public security authorities or the procuratorial organs. If a criminal judgment finds that the lender has committed crimes such as “routine loan” fraud, the people’s courts shall, through the trial supervision procedure, promptly rectify any final judgments previously rendered in ordinary private‑lending disputes.
The Notice emphasizes the need to strictly adhere to the statutory interest rate cap in accordance with the law. The judicial red line governing statutory interest rates must be rigorously enforced. Any arrangements that, by means of “interest,” “penalty clauses,” “service fees,” “brokerage fees,” “security deposits,” “late‑payment charges,” or other similar mechanisms, either directly exceed or circumvent the statutory interest rate ceiling shall not be upheld under the law. Where a lender claims that a substantial loan principal was paid in cash, and the borrower counters that such cash payment represented exorbitant interest deducted in advance by the lender, greater scrutiny must be applied to evidence concerning the source of the alleged cash disbursement and the manner of its delivery, so as to determine, in accordance with the law, both the amount of the loan principal and the fact of any excessive interest withheld. If trading platforms, counterparties, transaction structures, or other entities are found to be engaging in usury under the guise of “innovation,” effective measures—such as issuing judicial recommendation letters—must be promptly adopted to resolutely curb such practices.
The Notice requires the establishment of a mechanism for preventing and resolving disputes arising from private lending. In guarding against and defusing various risks associated with private lending, people’s courts must closely align their work with the overarching priorities of the Party and the state, rely officely on the leadership of Party committees and the support of local governments, explore innovations in adjudicatory mechanisms, enhance synergistic effects, and endeavor to establish a cross‑departmental, comprehensive governance framework. Furthermore, efforts to promote legal awareness should be intensified to foster a positive social climate; judicial experience must be carefully summarized, and investigative research strengthened.

The Supreme People’s Court has released the first batch of 10 internet-related cases.
On August 16, the Supreme People’s Court released its first batch of typical cases involving the internet. The ten cases announced cover a variety of matters, including disputes over small‑amount loan contracts in the internet sphere. According to the Supreme People’s Court, while adhering to the legislative intent and ensuring the correct interpretation and application of relevant laws and regulations, these cases also fully reflect the principle of respecting the unique characteristics of the internet sector. As such, they have played a valuable role in guiding the consistent adjudication of emerging types of internet‑related cases.
The ten typical cases released this time encompass a wide range of disputes, including small‑loan contract disputes, online shopping contract disputes, online service contract disputes, privacy‑rights disputes, and intellectual‑property and competition disputes in the internet sphere. Among them, the case of Chongqing Alibaba Small Loan Co., Ltd. v. Chen Zhuangqun concerning a small‑loan contract dispute established the validity of pre‑litigation agreed‑upon service of process, which serves the interests of both parties, enriches the forms of the service‑address conofficeation system, and complements the post‑litigation completion of a service‑address conofficeation form, thereby providing an effective means to address the longstanding challenge of “difficult service.” In Xu Ruiyun v. Jing Ziqiao and Zhejiang Taobao Network Co., Ltd. regarding an online shopping contract dispute, it was clarified that imported food must comply with China’s national food‑safety standards; operators who violate these standards by selling imported food shall bear corresponding legal liabilities. Furthermore, in Zhejiang Taobao Network Co., Ltd. v. Xu Wenqiang et al. over an online service contract dispute, it was held that both e‑commerce platform operators and merchants contracted to operate on the platform have a statutory obligation to conduct business in compliance with the law; moreover, to safeguard their own commercial reputation, platform operators are entitled to hold sellers of counterfeit goods accountable for breach of contract in accordance with the law. Lastly, in Pang Lipeng v. China Eastern Airlines Corporation Limited and Beijing Quna Information Technology Co., Ltd. concerning a privacy‑rights dispute, it was determined that when airlines or online ticketing platforms fail to take adequate preventive measures, resulting in the leakage of consumers’ personal information, they must bear corresponding tort liability. Finally, in Nanjing Shangju Decoration Engineering Co., Ltd. v. Nanjing Feiriqiang Decoration Engineering Co., Ltd. over copyright infringement and false‑advertising disputes, it was ruled that website plagiarism harms the economic interests of the operating enterprise; since a website integrates text, images, audio, and other elements into multimedia through source‑code programming and presents such content via computer output devices, when the selection of materials, the mode of presentation, and the arrangement of content on the website’s layout meet certain requirements of originality, the entire website may be protected as a compilation work.
The Supreme People’s Court has emphasized that, with the advent of the “Internet Plus” era, internet‑based thinking and technologies have become deeply embedded in all aspects of social life. Today, new business models such as e‑commerce, the sharing economy, and internet finance are evolving at a rapid pace, leading to a sharp increase in internet‑related litigation. A steady stream of novel case types is emerging, posing fresh challenges to the adjudication and enforcement work of the people’s courts. Building a comprehensive, multi‑dimensional, and integrated judicial system is a crucial mission for the people’s courts. To this end, the courts must closely monitor and proactively study emerging case categories, promptly distill judicial experience, and swiftly address the new circumstances and issues arising from economic and social development under the “Internet Plus” paradigm, thereby providing robust judicial safeguards for the sound economic and social progress in the internet‑related sphere.

Other
The Political Bureau heard a report on the investigation into the vaccine-related case involving Changsheng Biotechnology Co., Ltd. in Changchun, Jilin, as well as the related accountability measures.
On August 16, the Standing Committee of the Political Bureau of the CPC Central Committee convened a meeting to hear a report on the investigation into the vaccine scandal involving Changsheng Biotechnology in Changchun, Jilin, as well as on related accountability measures. Xi Jinping, General Secretary of the CPC Central Committee, presided over the meeting and delivered an important speech.
The meeting noted that since the outbreak of this vaccine‑related incident, General Secretary Xi Jinping has attached great importance to the matter, issuing important instructions on multiple occasions. He has called for an immediate investigation to establish the facts, strict accountability, and rigorous legal action, while officely safeguarding the safety bottom line and making every effort to protect the legitimate interests of the people and maintain overall social stability. Under the strong leadership of the CPC Central Committee, the State Council has convened numerous meetings to deliberate on the issue and dispatched investigative teams to conduct inquiries. To date, the circumstances of the case and the performance of duties by relevant departments and officials have been largely clarified.
The meeting emphasized that vaccines are vital to the health of the people, as well as to public health and national security. This case involving substandard vaccines is a grave incident of illegal and unethical conduct: vaccine manufacturers pursued profit at all costs, violated national drug standards and Good Manufacturing Practices, falsified production and testing records, and local governments and regulatory authorities failed in their duties and oversight; moreover, certain officials engaged in dereliction of duty. The circumstances are extremely serious, the nature of the offense is heinous, and the resulting adverse effects have been severe. This case has not only exposed numerous systemic loopholes, such as inadequate supervision, but also revealed institutional deficiencies in the production, distribution, and use of vaccines. We must draw profound lessons from this tragedy, apply these lessons more broadly, impose strict penalties to restore order, eliminate deep-rooted problems, and accelerate the establishment of a long-term mechanism for the regulation of vaccines and pharmaceuticals. We must resolutely safeguard the bottom line of public safety and officely protect the health of the vast majority of the people.
The meeting emphasized the need to improve laws, regulations, and institutional frameworks; clarify and enforce regulatory responsibilities; strengthen on-site inspections of production processes; urge enterprises to fulfill their principal responsibilities; establish a quality‑and‑safety traceability system; and implement a product‑risk reporting regime. For high‑risk, highly specialized vaccines and pharmaceuticals, regulatory jurisdiction must be clearly defined: building on local, jurisdiction‑based management, dedicated inspection agencies should be dispatched to conduct oversight. Capacity‑building for the regulatory workforce must be intensified, with efforts accelerated to establish and refine a professional, specialized inspection corps for vaccines and pharmaceuticals. The cost of illegal conduct must be raised: unlawful enterprises driven by greed and disregard for rules, as well as individuals who dare to undermine moral and ethical standards, must be severely punished—subject to harsh sentencing and zero tolerance. Those involved in criminal or unlawful acts that endanger public safety, particularly in the vaccine and pharmaceutical sectors, must be met with strict legal penalties, including hefty fines and lifetime bans from the industry. Furthermore, cadre development must be strengthened to encourage accountability and proactive action, ensuring that duties are earnestly fulfilled, while holding those who neglect or abuse their responsibilities strictly accountable.
The meeting called on Party committees and governments at all levels to implement the important instructions of General Secretary Xi Jinping, deeply recognize the sensitivity and significance of pharmaceutical safety, draw profound lessons from past incidents, fulfill their regulatory responsibilities, and uphold the bottom line of vaccine quality and safety. It also emphasized the need to improve the follow-up mechanisms for handling problematic vaccines, ensure timely booster and catch-up vaccinations, carry out compensation procedures in a prudent and orderly manner, and establish long-term, robust systems for vaccine management.
The meeting agreed to remove Jin Yuhui (Vice Governor of Jilin Province, who oversaw food and drug regulation in the province from April 2017) from his post, to order Li Jinxiu (Vice Chairman of the Jilin Provincial Committee of the Chinese People’s Political Consultative Conference, who served as Vice Governor in charge of food and drug regulation from December 2015 to April 2017) to resign, and to require Liu Changlong (Mayor of Changchun, who served as Acting Mayor in September 2016 and has been Mayor since October 2016), Bi Jingquan (Secretary of the Party Leadership Group and Deputy Director of the State Administration for Market Regulation, who served as Director of the former State Food and Drug Administration from February 2015 to March 2018) to resign taking responsibility. The meeting also called on Jiang Zhiying (Member of the Standing Committee of the Jilin Provincial Party Committee and Secretary of the Yanbian Korean Autonomous Prefecture Party Committee, who served as Deputy Secretary of the Changchun Municipal Party Committee and Mayor from March 2012 to May 2016) and Jiao Hong (Director of the National Medical Products Administration) to conduct thorough self‑criticism. In addition, accountability was pursued for 35 cadres not under central management, and it was decided that the Central Commission for Discipline Inspection and the National Supervisory Commission would initiate disciplinary review and investigation into Wu Zhen (former Deputy Director of the State Food and Drug Administration and former Deputy Director of the National Health and Family Planning Commission, responsible for pharmaceutical and chemical registration, supervision, and inspection). The meeting instructed the Jilin Provincial Party Committee and Provincial Government, as well as the National Medical Products Administration, to submit comprehensive self‑criticism reports to the CPC Central Committee and the State Council.

18 anti-cancer drugs have officially been included in the scope of medical insurance negotiations.
Recently, with the widespread popularity of the film “Dying to Survive,” high-priced anti-cancer drugs have drawn significant attention. The plight of cancer patients who cannot afford or access imported “life-saving” medications is deeply distressing. To ensure that more patients can gain timely and unimpeded access to these life-saving treatments, a series of favorable policies are being steadily implemented.
On August 17, the National Healthcare Security Administration issued the “Notice on the Scope of Drugs Subject to the 2018 Special Negotiation for Inclusion in Basic Medical Insurance Coverage for Anti-Cancer Medications” (hereinafter referred to as the “Notice”). The Notice stated that, in accordance with the requirements of the State Council, the National Healthcare Security Administration swiftly advanced the special negotiation process for including anti-cancer drugs in the basic medical insurance scheme. It convened more than 70 experts from 20 provinces nationwide and, after undergoing multiple stages—including review, selection, and voting—and following written consultations with various companies regarding their willingness to engage in price negotiations, ultimately conofficeed 18 drug varieties from 12 enterprises, officially adding them to the scope of this special negotiation.
According to the Notice, the drugs included in this round of negotiations are all characterized by high clinical value, strong innovation, and substantial patient benefits. They cover a wide range of conditions, including renal cell carcinoma, non-small cell lung cancer, melanoma, colorectal cancer, chronic myeloid leukemia, hepatocellular carcinoma, and multiple myeloma, among others.
Among the drugs subject to this round of special negotiations for inclusion in the national medical insurance catalog, 16 are products from multinational pharmaceutical companies, while the remaining two are manufactured by domestic offices: Anlotinib Hydrochloride Capsules from Zhengda Tianqing and Pegaspargase Injection from Hengrui Medicine (600276).
The price negotiation for the aforementioned drugs will be completed by the end of September.
On August 4, a spokesperson for the National Healthcare Security Administration stated that the agency is taking multiple measures to accelerate efforts to reduce the prices of anti-cancer drugs. The Administration has convened experts to identify a list of drugs eligible for negotiation through review and selection processes, and is currently conofficeing companies’ willingness to engage in talks. The next steps will include preparing negotiation materials, conducting expert assessments, and carrying out the formal negotiation process. The negotiations are expected to be completed by the end of September.
National-negotiated drugs refer to medications for which the medical insurance agency negotiates prices with pharmaceutical companies, ultimately setting the reimbursement rates. This approach helps lower drug prices and reduce the financial burden on patients.
How significant is the price reduction? Between 2015 and 2017, a total of 18 anti‑cancer drugs across two rounds were included in the national medical insurance catalog through negotiation, covering a wide range of cancers including lung cancer, gastric cancer, breast cancer, colorectal cancer, lymphoma, and multiple myeloma. The average price cut for these negotiated drugs reached 44%, with some reaching as high as 70%. However, Huatai Securities notes that this round of centralized procurement does not involve pricing negotiations for items on the medical insurance list; nonetheless, it is estimated that the National Healthcare Security Administration continues to encourage manufacturers to pass on tax incentives to patients. Price reductions for individual products have slowed, generally ranging from 3% to 5%.
Betta Pharmaceuticals (300558) recently announced that it has committed to adjusting the listed prices of its icotinib hydrochloride tablets (trade name: Kemina) across all provinces, reducing them from the previous levels of RMB 66.62 per tablet and RMB 1,399.00 per box to RMB 64.05 per tablet and RMB 1,345.05 per box. The company will submit applications to provincial drug procurement agencies by September 1, 2018, to implement these price adjustments, which will remain in effect until December 31, 2019. This marks the second price reduction for Kemina.
However, Everbright Securities noted that the price reductions for drugs not included in the national reimbursement drug list could be even more substantial, reaching around 50%.

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