JC Master Legal News Issue 837

Key Takeaways for This Issue

The People’s Bank of China and the China Securities Regulatory Commission Join Forces as Credit Rating Agencies Come Under “Tight Regulation”

Credit rating agencies are now facing a wave of stringent regulatory oversight. Recently, the People’s Bank of China and the China Securities Regulatory Commission jointly issued Announcement No. 14 of 2018 (hereinafter referred to as the “Announcement”), which sets out regulations aimed at gradually harmonizing the qualification requirements for credit rating activities in the interbank bond market and the exchange‑traded bond market, strengthening supervision of credit rating agencies and enhancing information sharing among regulators, and encouraging these agencies to refine their internal governance, standardize rating methodologies, and improve the quality of their ratings.

The State Council Executive Meeting outlined plans to systematically roll out the “separation of licenses and business permits” reform nationwide, continuing to address issues such as the mismatch between obtaining a license and being able to operate.

On September 12, Premier Li Keqiang of the State Council presided over an executive meeting of the State Council, which outlined plans to roll out the “separation of licenses and business permits” reform nationwide in an orderly manner, further addressing the issue of “licensed to enter but unable to operate.” The meeting also decided to further reduce industrial product production license requirements by more than one-third and streamline approval procedures, thereby easing the burden on market entities. In addition, the meeting heard a report on progress in streamlining certification requirements and called for intensified efforts to eliminate the frustrations and difficulties faced by the public when conducting official business.

The implementation of the new individual income tax law will proceed in three phases.

The State Taxation Administration recently issued the “Notice on Effectively Implementing and Carrying Out Policies During the Transitional Period of Individual Income Tax Reform,” specifying that the implementation of the new Individual Income Tax Law will be divided into three phases.

Jiangsu has established a mechanism for constructive interaction between prosecutors and lawyers to safeguard lawyers’ professional rights.

The longstanding difficulties faced by lawyers in practicing their profession—namely, obtaining information, accessing case files, and gathering evidence—are expected to become a thing of the past in Jiangsu Province. On the 11th, the Provincial People’s Procuratorate and the Provincial Department of Justice jointly issued the “Opinions on Establishing a Mechanism for Constructive Interaction Between Prosecutors and Lawyers in Criminal Proceedings.”

The National Health Commission’s “Three Determinations” plan has been released, and the Family Planning Department has been completely abolished.

On the evening of September 10, according to the China Institutional Establishment Website, the Regulations on the Functional Allocation, Internal Structure, and Staffing of the National Health Commission—the so‑called “Three Determinations” plan—were officially released.

Table of Contents

Table of Contents

Finance & Capital Markets

The People’s Bank of China and the China Securities Regulatory Commission Join Forces as Credit Rating Agencies Come Under “Tight Regulation”

The China Securities Regulatory Commission has clarified the conditions under which a company may issue shares to acquire minority equity interests.

In just 15 days, the Financial Stability and Development Committee has twice called for capital market reforms, signaling a commitment to stabilizing the A-share market.

CSRC: Strengthening the Collection of Client Trading Terminal Information by Futures Operating Institutions

The China Securities Regulatory Commission is studying ways to advance the participation of QFII and other investors in commodity futures.

The New Third Board is advancing financing reforms, providing support to small and micro enterprises in two key areas.

Local governments have quietly introduced policies to reward companies listed on the Innovation Board of the New Third Board.

Corporate & Commercial

The State Council Executive Meeting outlined plans to systematically roll out the “separation of licenses and business permits” reform nationwide, continuing to address issues such as the mismatch between obtaining a license and being able to operate.

The CPC Central Committee and the State Council have issued the “Guiding Opinions on Strengthening Asset–Liability Constraints for State-Owned Enterprises.”

All projects from the first three batches of 1.46 trillion yuan PPP demonstration projects have been fully implemented.

Seven trust companies have been fined for illegally raising debt, and several transaction‑management‑type projects failed to pass regulatory scrutiny.

The Jiangsu Provincial Equity Exchange has set a minimum investment threshold of RMB 100,000, filling a policy gap and potentially serving as a model for others.

Taxation

The implementation of the new individual income tax law will proceed in three phases.

Officials plan to introduce eight rounds of real estate tax proposals this year; experts say a review is likely in two years.

Litigation & Arbitration

Jiangsu has established a mechanism for constructive interaction between prosecutors and lawyers to safeguard lawyers’ professional rights.

Responding to Judicial Needs in the Internet Era and Promoting Comprehensive Governance of Cyberspace: The Beijing Internet Court Officially Established

Other

The National Health Commission’s “Three Determinations” plan has been released, and the Family Planning Department has been completely abolished.

The China Banking and Insurance Regulatory Commission is rigorously investigating the illegal flow of credit funds into the housing market, with several banks having been fined.

Finance & Capital Markets

The People’s Bank of China and the China Securities Regulatory Commission Join Forces as Credit Rating Agencies Come Under “Tight Regulation”

Credit rating agencies are now facing a wave of stringent regulatory oversight. Recently, the People’s Bank of China and the China Securities Regulatory Commission jointly issued Announcement No. 14 of 2018 (hereinafter referred to as the “Announcement”), which sets out regulations aimed at gradually harmonizing the qualification requirements for credit rating activities in the interbank bond market and the exchange‑traded bond market, strengthening supervision of credit rating agencies and enhancing information sharing among regulators, and encouraging these agencies to refine their internal governance, standardize rating methodologies, and improve the quality of their ratings.

Industry experts note that the issuance of this announcement represents a key institutional measure to advance the harmonization of credit rating regulation in the bond market. It will not only enable regulatory authorities to strengthen oversight of bond issuers and rating agencies, but also help elevate the quality of ratings and services provided by credit rating agencies.

Specifically, the announcement states that the People’s Bank of China, the China Securities Regulatory Commission, as well as their respective branches and self-regulatory organizations, are authorized to conduct on-site and off-site inspections and self-regulatory investigations of credit rating agencies. When necessary, they may carry out joint investigations. Any violations of laws, regulations, or self-regulatory rules will be subject to administrative penalties or disciplinary measures in accordance with the law. At the same time, a sound mechanism for information sharing among rating regulators and self-regulatory bodies will be established, and a market‑oriented, investor‑focused evaluation system for credit rating agencies will be gradually standardized.

As evident from the foregoing, regulatory authorities are further refining China’s credit‑based regulatory framework, strengthening oversight mechanisms, enhancing unified supervision of the credit rating industry, elevating the quality of rating agencies, and addressing the fragmentation between the interbank and exchange‑traded bond markets.

As is well known, the outlook of a company—whether it is promising and its risks manageable—is encapsulated in the ratings issued by credit rating agencies, serving as an important reference for many investors. Accordingly, credit rating agencies, as key intermediaries in the debt‑financing market, should adhere to the fundamental principles of independence, objectivity, and impartiality, thereby fulfilling their proper role as “gatekeepers” of the capital market.

However, in recent years, China’s credit rating market has repeatedly encountered disruptions; particularly since the beginning of this year, several rating agencies have been subject to ongoing regulatory sanctions.

In early March 2018, the China Securities Regulatory Commission (CSRC) publicly issued warning letters and orders to rectify to rating agencies including CCXI, United Credit Ratings, Pengyuan Credit Rating, and Shanghai New Century. In June, the CSRC, the People’s Bank of China, and the National Association of Financial Market Institutional Investors launched a joint inspection, focusing on prominent issues such as inflated ratings, rating bubbles, and the failure to adequately disclose credit risks at securities rating agencies. On August 17, the National Association of Financial Market Institutional Investors and the CSRC each suspended Dagong International’s market business for debt financing instruments and its securities rating business, respectively, for a period of one year.

According to an announcement issued on September 5 by the National Association of Financial Market Institutional Investors, there are a total of 10 credit rating agencies among its member institutions. However, since the beginning of this year, four rating agencies have received warning letters and orders for corrective action, while one has had its business suspended—highlighting the pervasive irregularities plaguing the industry, as evidenced by the fact that half of these cases involve such measures.

Industry experts note that, at present, credit rating agencies vary widely in quality, underscoring the need for regulators to impose stricter requirements on their technical frameworks and professional practices, thereby continuously refining the institutional framework governing these agencies. Going forward, stringent oversight of rating agencies is set to become the new norm.

The China Securities Regulatory Commission has clarified the conditions under which a company may issue shares to acquire minority equity interests.

On September 10, the China Securities Regulatory Commission provided further clarification on the conditions governing listed companies’ issuance of shares to acquire minority equity interests, specifying that the minority stakes acquired must demonstrate significant synergies with the listed company’s existing core business. Furthermore, upon completion of the transaction, the listed company must maintain a distinct core business and possess the requisite capacity for sustained operations.

In accordance with the Measures for the Administration of Major Asset Restructuring of Listed Companies, when a listed company issues shares to acquire assets, it must comply with five requirements, one of which stipulates that the company must fully explain and disclose that the assets acquired through the issuance of shares are operating assets with clear ownership and that the transfer of ownership can be completed within the agreed-upon timeframe.

This time, the China Securities Regulatory Commission (CSRC) has provided clarifications on issues related to “operating assets.” The CSRC’s Department of Listed Company Supervision explained that when a listed company issues shares to acquire corporate equity, it should, in principle, obtain controlling interest in the target enterprise upon completion of the transaction. If, for compelling reasons, only a minority stake is acquired, the following conditions must be met simultaneously: First, the minority equity must exhibit significant synergies with the listed company’s existing core business, or belong to the same industry as, or to an upstream or downstream sector closely related to, the primary asset being acquired; moreover, the combined injection of such equity through this transaction should help strengthen the listed company’s independence and enhance its overall quality. Second, upon completion of the transaction, the listed company must maintain a clearly defined core business and the corresponding capacity for sustained operations, with no situation where net profit is predominantly derived from investment income outside the scope of the consolidated financial statements.

In addition, the CSRC has clarified that, where the operating entity corresponding to a minority equity interest is a financial institution, it must comply with the relevant regulations of the financial regulatory authorities and other competent bodies; furthermore, for the most recent fiscal year, the three indicators—operating revenue, total assets, and net assets—associated with such equity interest may not exceed 20% of the corresponding consolidated‑statement figures of the listed company for the same period. Where a major asset restructuring of a listed company involves the acquisition of equity interests, it shall likewise satisfy the aforementioned conditions.

According to reports, in recent years, the China Securities Regulatory Commission (CSRC) has steadfastly upheld comprehensive, stringent, and law-based regulation while deepening market-oriented reforms of mergers and acquisitions and restructuring. Addressing areas where market‑based checks and balances remain relatively weak, the CSRC has refined its regulatory framework, tightened oversight of restructuring and listing transactions, and taken decisive action against irregular practices such as “deceptive” and “herd‑following” restructurings, thereby curbing speculative shell‑trading. These measures have helped foster a well‑regulated market environment, encouraged a return to rational valuation standards, and laid a solid foundation for expediting review processes and enhancing service delivery. At present, the CSRC is working to improve review efficiency and, guided by high‑quality M&A and restructuring projects involving listed companies, is promoting the stable and sound development of the capital market.

In just 15 days, the Financial Stability and Development Committee has twice called for capital market reforms, signaling a commitment to stabilizing the A-share market.

On September 7, the Financial Stability and Development Committee of the State Council held its third meeting to assess the current economic and financial landscape and to deliberate on key priorities for the next phase. The meeting underscored the need to advance reform and opening-up in the financial sector in a pragmatic manner, ensure the effective implementation of measures already introduced, and promptly explore new initiatives. Capital market reforms should be steadily advanced, with each measure rolled out as it matures.

This marks the second time in 15 days that the Financial Stability and Development Committee of the State Council has issued a statement on capital market reform. At the special meeting on preventing and defusing financial risks held on August 24, it was emphasized that further deepening capital market reform requires a problem‑oriented approach, focusing on pressing issues to better support the development of the real economy.

“The third meeting of the Financial Stability and Development Committee of the State Council sent a clear signal of stability for the A-share market, which will help foster the long-term, healthy, and stable development of China’s capital markets,” said Tian Weidong, Director of the Research Institute at Kaiyuan Securities.

Deepening reform can be advanced on multiple fronts.

In advancing capital market reforms, regulators have introduced a series of measures: reforming the IPO system and the delisting regime, further opening up to the outside world, and rigorously cracking down on illegal and non‑compliant activities…

Chen Li, Director of the Research Institute at Chuancai Securities, stated that, at the current operational level, the regulatory authorities’ reform agenda is primarily focused on identifying and addressing gaps across the various business lines of market participants. The aim is to standardize trading practices, thereby reducing the likelihood of systemic risks while safeguarding the existing market’s size and vitality.

As for the current state of the capital market, Chen Li believes that regulatory reform should be implemented on three fronts: first, further advancing internal efforts to identify and address gaps; second, after a period of stress testing stemming from the opening-up of foreign investment, establishing and refining robust risk‑monitoring systems and agile feedback mechanisms; and third, while avoiding stifling market dynamism, rigorously cracking down on speculative activities to safeguard the long-term stability of the capital market.

At the institutional level, Chen Li believes that, domestically, building on the refinement of a multi-tiered capital market, the systems for listing and trading have largely been fleshed out at the detailed regulatory level, while the delisting regime will continue to be further improved. Internationally, related frameworks—such as the launch of the Shanghai–London Stock Connect—will remain under active development.

In addition, to combat illegal trading and maintain market stability, the information disclosure regime for equity reforms and major asset restructurings, as well as the disciplinary and accountability mechanisms, will be further refined. Moreover, detailed rules governing share buybacks by listed companies—measures that promote market stability—will be promptly updated and introduced as appropriate.

Tian Weidong believes that, judging from the steps and processes currently under consideration, advancing capital market reform can be focused on five key areas: vigorously supporting technology‑innovation enterprises in issuing and listing; guiding mergers and acquisitions and restructuring back to their core functions; providing innovative offices with diversified equity‑financing channels; actively promoting the bond market’s role in fostering independent innovation in critical sectors; and accelerating the opening up of the capital market to the outside world.

Xu Yang, Chief Macro Analyst at Dingdian Finance, stated that accelerating capital market reforms aims to guard against financial risks and safeguard investors’ rights and interests.

“Improving the quality of listed companies and broadening the sources of market funding will become the two main pillars of reform,” said Xu Yang. He went on to elaborate: On the one hand, it is necessary to normalize new‑stock issuances, enhance the quality of newly listed offices, further reform the delisting regime, raise the cost of corporate misconduct, and crack down on illegal practices such as sudden earnings reversals and related‑party transactions. On the other hand, we need to refine the share‑repurchase mechanism for listed companies, expand access for international investors and facilitate the integration of global capital, and accelerate the entry of long‑term funds—such as pension funds—into the market, thereby attracting more capital into A‑shares.

Recently, the China Securities Regulatory Commission, in collaboration with relevant departments, has drafted the “Amendment to the Company Law of the People’s Republic of China,” proposing revisions to the provisions on share repurchases under the Company Law.

Tian Weidong stated that, based on past experience in the capital markets, share buybacks by listed companies have played a positive role in stabilizing the market. “This draft amendment proposes to refine the decision-making procedures for implementing share repurchases, establish a treasury‑stock system, and clarify that shares of the company repurchased under specific circumstances may be held as treasury stock. If adopted, this measure will provide A‑shares with an important source of capital to help stabilize the market.”

Supply-side structural reform of services

For the capital market, how to promote its sound development, better support supply-side structural reform and high-quality economic growth, and more effectively serve the national innovation-driven development strategy constitutes a major challenge. It tests the capital market’s capacity to underpin China’s economy.

“China’s economy is vast, its economic dynamism is strengthening, and its influence on the global economy is growing ever larger. Going forward, capital market reforms should be guided by supply-side structural reform tailored to the new realities,” said Hu Xiaohui, Chief Investment Advisor at Lianchu Securities.

As China’s economy enters a stage of high-quality development, the drivers, modes, and structure of economic growth are undergoing profound transformations. New technologies, emerging industries, new business forms, and innovative models are constantly emerging, placing ever‑higher demands on the capital market’s ability to provide effective services. In the industry’s view, how the capital market can best serve these enterprises is a critical issue that must be given due attention.

In this regard, Hu Xiaohui cited an example: “In Shenzhen, the number of innovative companies across the eight major 5G‑based application subsectors far exceeds that in Silicon Valley. Yet, such innovative offices typically remain unprofitable in the short term.”

“How to raise capital through the financial system is a critical issue in the new context and a reform that the institutional framework urgently needs to address,” said Hu Xiaohui.

High-tech innovative enterprises invest heavily in R&D and therefore require robust support from the capital markets. Industry experts contend that only by attracting strategic investors and accessing capital markets to secure financing and enhance corporate governance can these companies achieve leapfrog growth. Meanwhile, the participation of new‑economy offices helps foster a more open, inclusive, and diversified capital market, while also advancing supply‑side structural reform and accelerating the development of new drivers of growth.

Zuo Jianming, head of the CSI Jiaotong Shared Finance Research Institute, stated that, in terms of reform, as a top-level institutional design, he hopes the Securities Law will soon pass its third reading and be put into effect. To significantly increase the share of direct financing, it is necessary to tackle two key challenges: restoring the pricing function of corporate bond financing, regulating arbitrage opportunities in A-share secondary offerings, and promptly addressing the bottlenecks inherent in the current market-maker system on the New Third Board.

The pace of opening up to the outside world is accelerating.

The opening-up of the capital market to foreign investors is also a key focus of the industry.

In fact, with respect to the capital markets, in line with the guiding principle of “acting sooner rather than later and faster rather than slower,” the China Securities Regulatory Commission is comprehensively accelerating the pace of opening up to the outside world.

“Reform and opening-up, though they refer to two distinct directions—reform leaning inward and opening-up emphasizing the external—are, in fact, an organic whole,” said Zuo Jianming.

He also noted that, at present, both the stock and bond markets have seen very low foreign ownership levels for many years—partly due to financial‑security considerations and a series of quota restrictions, but more importantly, because of a shift in underlying mindset.

“Only by shifting the starting point can we effectively dismantle institutional barriers,” said Zuo Jianming.

Tian Weidong believes that, in further opening up to the outside world, it is necessary to continue optimizing the trading mechanisms of the Shanghai–Hong Kong Stock Connect and the Shenzhen–Hong Kong Stock Connect; to expedite preparatory work for the Shanghai–London Stock Connect and strive to launch it within the year; to actively support the inclusion of A-shares in the FTSE Russell International Index; to revise the regulatory frameworks governing QFII and RQFII; and to promote the opening of additional listed futures contracts to overseas traders.

“The FTSE Russell International Index is also a globally influential benchmark; if A-shares were included with a substantial weighting, the resulting inflows would exceed the incremental capital brought to A-shares by the MSCI index, while also enhancing the A-share market’s standing within global capital markets—particularly in emerging‑market indices,” said Tian Weidong.

CSRC: Strengthening the Collection of Client Trading Terminal Information by Futures Operating Institutions

On September 14, Gao Li, spokesperson for the China Securities Regulatory Commission (CSRC), stated that, in order to further implement the look-through regulatory requirements for the futures market and guide relevant market participants in properly carrying out information collection and access‑authentication procedures for client trading terminals, the CSRC has officially issued the “Announcement on Further Strengthening Matters Related to Information Collection from Client Trading Terminals of Futures Operating Institutions,” which supplements the regulatory requirements set forth in the 2013 “Regulations on the Management of Client Information, Including Information from Client Trading Terminals, by Securities and Futures Operating Institutions” (CSRC Announcement [2013] No. 30).

The content of this announcement primarily covers the following three aspects:

First, it clarifies members’ management of clients. It specifies the responsibilities of futures companies in overseeing their clients’ trading activities and requires them to ensure that all client‑initiated trading instructions are routed directly into their information systems. Second, it ensures that members have access to complete and accurate client information. The regulations mandate that futures companies implement access‑authentication procedures for their trading and settlement software, as well as for the trading terminal software used by clients, thereby guaranteeing that such software can reliably collect and transmit data in a truthful, accurate, and comprehensive manner. Third, it designates the China Futures Market Monitoring Center as the entity responsible for receiving client‑terminal information. The Center is tasked with collecting this information and sharing it with the futures exchanges. At the same time, supporting technical standards have been developed to guide futures companies in collecting client‑terminal data in accordance with these requirements.

The China Securities Regulatory Commission is studying ways to advance the participation of QFII and other investors in commodity futures.

Recently, Fang Xinghai, Vice Chairman of the China Securities Regulatory Commission, stated at the 2018 Third China (Zhengzhou) International Futures Forum that, going forward, China will actively and orderly advance the opening-up of its futures market, intensify efforts to enact a Futures Law to strengthen the legal framework underpinning futures trading, and expand the range of internationally accessible contract varieties. In particular, the commission will proactively facilitate the admission of eligible futures contracts to overseas traders, with all mature commodity futures contracts eventually being opened to international investors. Meanwhile, the use of QFII and RQFII schemes to invest in commodity futures is also being actively studied and advanced.

This forum was themed “New Ideas, New Journey, New Achievements: The Futures Market’s Role in Building a Modernized Economic System.” Fang Xinghai delivered a speech titled “Accelerating the Opening-Up of the Futures Market.” He stated that, going forward, the China Securities Regulatory Commission will, in line with the country’s overall plan for opening up the financial sector, adhere to a policy that balances both “bringing in” and “going out,” with an emphasis on “bringing in” in the near term. By aligning with prevailing trends, the Commission will proactively and orderly advance the internationalization of China’s futures market.

First, we will accelerate the enactment of the Futures Law to strengthen the legal framework underpinning the futures market. Financial markets are governed by rules; international investors have a strong demand for high‑standard regulatory frameworks. The China Securities Regulatory Commission fully recognizes the critical importance of a robust legal system in advancing the opening-up of the futures market. We will intensify efforts to enact the Futures Law, enhance legal safeguards for the fundamental systems governing futures trading, address investor concerns, and lay a solid legal foundation for the development and internationalization of the futures market.

Second, we will expand the range of internationally accessible futures contracts and enhance the global influence of China’s futures prices. Over the past two years, the pace of new contract launches has steadily accelerated, with a total of 58 futures and options products now listed, further enriching the market’s toolkit. Moving forward, we will actively facilitate the admission of eligible overseas traders to these contracts, ensuring that all mature commodity futures are eventually opened to international investors. At present, preparations for opening PTA futures and No. 20 standard rubber futures to foreign participation are progressing smoothly and are expected to yield results shortly. Meanwhile, we are also actively studying and advancing the inclusion of commodity futures in the QFII and RQFII investment frameworks.

Third, we will refine trading‑related rules and regulations to better serve global investors. An open market requires complementary international standards. Building on the existing, well‑functioning regulatory framework, we will urge all exchanges to prioritize research into international norms, drawing on the best practices of mature markets in areas such as account‑opening procedures, trading hours, margin requirements, default‑handling mechanisms, and domestic–foreign fund transfers. This will further enhance the applicability and soundness of our rules, providing overseas traders with more convenient and efficient services.

Fourth, we will strengthen cross-border regulatory and enforcement cooperation to safeguard market stability. At present, the China Securities Regulatory Commission has signed 68 bilateral memoranda of understanding on regulatory cooperation with securities and futures regulators from 62 countries and regions, laying a solid foundation for cross-border regulatory and enforcement collaboration. Recently, the CSRC and the Hong Kong Securities and Futures Commission concluded a dedicated memorandum of cooperation on the regulation of the futures market, establishing arrangements regarding the launch of cross-border products involving both markets and the allocation of regulatory responsibilities in extreme market conditions. In line with the needs of opening up the futures market to the outside world, we will maintain close communication with other relevant regulatory authorities to further upgrade and refine our regulatory cooperation memoranda.

Fifth, we will encourage futures exchanges to expand international cooperation and explore new models of openness. We will support exchanges in building on their existing overseas presence, guided by market demand, to assess the feasibility of establishing additional overseas offices, including setting up delivery warehouses abroad, and to help and facilitate futures companies in jointly expanding into international markets. Adhering to the principles of proactive yet orderly progress and achieving tangible results, and on the basis of strengthened regulatory cooperation, we will support Chinese futures exchanges in engaging in diverse forms of collaboration with their overseas counterparts—such as mutual product listing and cross‑ownership of equity—thereby continuously deepening mutually beneficial partnerships and better serving China’s overall diplomatic strategy.

The New Third Board is advancing financing reforms, providing support to small and micro enterprises in two key areas.

Recently, according to the National Equities Exchange and Quotations System, the New Third Board—China’s primary platform for serving small, medium, and micro enterprises—is currently deepening its reforms. With a focus on enhancing the market’s financing capabilities, it aims to meet the needs of high-quality companies for efficient, large‑scale fundraising while continuing to reduce financing costs for small, medium, and micro enterprises.

At present, the initial phase of building scale on the New Third Board has been completed, and both the underlying design principles and the institutional effects have been thoroughly tested, laying a solid foundation and creating favorable conditions for further deepening reform. First, a robust corporate base has been established: with over ten thousand companies exhibiting significant diversity—ranging from start-ups to mature enterprises, spanning emerging business models and traditional industries—and substantial variations in individual stock liquidity, this has provided valuable experience for refining reforms to better address the diversified needs of small, medium, and micro‑enterprises. Second, a strong institutional framework is in place: the New Third Board was created within the broader context of China’s multi‑tiered capital market reform and development; it not only represents an experimental endeavor but also embodies the outcomes of that reform, such as mechanisms for small‑scale, rapid, and flexible financing, as well as internal tiered governance. These systems have stood the test of the market and earned widespread recognition. Third, risk‑control capabilities are well‑established: over its five years of operation, the New Third Board has maintained stable performance, officely safeguarding against systemic risks. This reflects the market’s resilience and serves as a solid foundation for advancing further reforms.

From a market-wide perspective, against the backdrop of China’s steady progress in advancing supply-side structural reform, companies listed on the New Third Board—representing innovative, entrepreneurial, and growth-oriented small and micro enterprises—have continued to achieve stable earnings growth through sustained innovation and development. In particular, high‑tech manufacturing has upheld independent innovation to elevate its position in the industrial value chain; high‑tech services have persistently driven the upgrading of the industrial structure; and new business forms and models in the consumer sector have accelerated their expansion—all underscoring the robust vitality of China’s small and medium-sized private economy. As the primary platform within China’s capital market for serving small and micro enterprises, the New Third Board will continue to focus on enhancing its financing functions, thereby further bolstering the dynamism and momentum of private enterprises’ innovation and development.

Statistics show that, in the first half of 2018, companies listed on the New Third Board collectively generated operating revenue of RMB 976.839 billion, up 16.13% year over year, and reported net profits of RMB 46.44 billion, an increase of 4.99% compared with the same period last year. Among them, real‑economy enterprises maintained robust growth, with revenue and net profit rising 16.55% and 7.51%, respectively, year over year. The share of highly profitable offices expanded: companies with revenues exceeding RMB 50 million accounted for 36.65%, a year‑on‑year increase of 3.92 percentage points; those with net profits above RMB 10 million represented 14.60%, up 1.09 percentage points from the prior year. Furthermore, 4,580 companies—42.86% of the total—recorded simultaneous growth in both revenue and net profit, while 764 offices—7.15% of the sample—experienced net‑profit growth of more than 30% and posted net profits exceeding RMB 10 million.

A spokesperson for the National Equities Exchange and Quotations System pointed out that small, medium, and micro enterprises, owing to their inherent characteristics—small scale, strong dependency, and weak risk resilience—are facing significant challenges in accessing financing and achieving growth. This is particularly true against a backdrop of heightened global macroeconomic uncertainty, substantial difficulties in domestic economic restructuring, and declining risk appetite among investors. According to data from the semi‑annual reports: first, payment collection among small and micro listed companies has slowed, with accounts receivable turnover days increasing by four days year over year in the first half of this year—far more than the pace observed among large and medium‑sized enterprises. Second, constrained access to financing has driven up both financial costs and leverage ratios among small and micro offices. At the end of the first half, current liabilities accounted for 88.17% of total liabilities among non‑financial small and micro listed companies. The short‑term nature of these liabilities, coupled with limited direct financing channels, has led to rising financial costs and higher leverage; at the end of the first half, the asset‑liability ratio of non‑financial small and micro listed companies was 0.17 percentage points higher than at the end of 2017, while the share of financial expenses in revenue for micro‑cap companies increased by 3.84 percentage points year over year.

“The next step for the New Third Board will be to prioritize enhancing its market‑based financing capabilities—on the one hand, by meeting the growing demand of high‑quality listed companies for efficient, large‑scale funding; on the other, by continuously refining the existing financing and issuance framework, diversifying market‑based financing instruments, and steadily reducing financing costs for small, medium, and micro enterprises, thereby helping them achieve breakthroughs in innovation,” the spokesperson revealed.

Local governments have quietly introduced policies to reward companies listed on the Innovation Board of the New Third Board.

Recently, based on publicly available information, local governments have been quietly introducing policies to incentivize companies listed on the Innovation Layer of the New Third Board. Given that some local policies and application deadlines are time‑limited, please refer to the relevant announcement or consult your local regulatory authority.

Guangdong Province

The “Several Policy Measures of Guangdong Province on Reducing Costs for Manufacturing Enterprises and Supporting the Development of the Real Economy (Revised Edition)” (hereinafter referred to as the “New Ten Measures”) stipulates that private enterprises successfully listed on the New Third Board will receive a reward of RMB 500,000, while those advancing to the Innovation Layer of the New Third Board will receive an additional reward of RMB 300,000.

Foshan City

According to information released by “Nanhai Release” in Foshan City, Guangdong Province, Nanhai District has increased its incentives for companies listing on the New Third Board and has introduced additional rewards for those advancing to the Innovation Layer. Companies receive a 1.5 million yuan reward upon listing, with an additional 2 million yuan upon entering the Innovation Layer. Furthermore, after listing on the New Third Board, offices are eligible for tiered rewards ranging from 500,000 to 2.5 million yuan, based on their cumulative fundraising amount.

Guangzhou

Development Zone

In the Guangzhou Development Zone, enterprises listed on the highest tier of the New Third Board (Note: the “Innovation Layer”) are awarded RMB 500,000. For companies already listed within the zone that successfully raise capital through private placements or other methods on the New Third Board, a reward is granted at a rate of 1‰ of the actual funds raised, with an annual cap of RMB 200,000.

Guangzhou Nansha

Development Zone

Companies listed and traded on the New Third Board will receive a reward of RMB 1.5 million, while those that advance to the Innovation Layer will receive an additional reward of RMB 2 million.

Shenzhen City

According to information from the Shenzhen Municipal Commission of Economy, Trade and Information Technology’s “2019 Innovation and Development Cultivation and Support Program for Private and Small and Medium-sized Enterprises,” private and small and medium-sized enterprises that have successfully listed on the New Third Board will receive a reward of up to RMB 500,000; those that advance to the Innovation Layer of the New Third Board will receive an additional reward of up to RMB 300,000.

Dongguan City

Dongguan City’s “Measures to Further Support the Development of Corporate Listings” provide a one-time reward of RMB 200,000 to enterprises that successfully list on the National Equities Exchange and Quotations System, and an additional one-time reward of RMB 300,000 to those that advance to the Innovation Layer. (Responsible departments: Municipal Financial Work Bureau, Municipal Finance Bureau.)

Fujian

Xiamen City

The “Opinions of the Xiamen Municipal People’s Government on Promoting Corporate Listings” stipulate that, to encourage enterprises to list and raise capital on the New Third Board and regional equity trading markets, the Xiamen Municipal People’s Government will grant a one-time reward of RMB 300,000 to non‑listed joint-stock companies that legally list and trade on the Basic Tier of the National Equities Exchange and Quotations for Small and Medium‑sized Enterprises (New Third Board); a one-time reward of RMB 500,000 to those that legally list and trade on the Innovation Tier of the New Third Board; and a one-time reward of RMB 200,000 to Basic‑Tier listed companies upon their first reclassification into the Innovation Tier.

Nanping City

Opinions of the Nanping Municipal People’s Government on Further Promoting Corporate IPOs: Enterprises designated as pre-IPO candidates that, in accordance with the law, are listed and traded on the Basic Tier of the National Equities Exchange and Quotations for Small and Medium‑Sized Enterprises (hereinafter referred to as the “New Third Board”) shall receive a one‑time reward of RMB 500,000; those that, in accordance with the law, are listed and traded on the Innovation Tier of the New Third Board shall receive a one‑time reward of RMB 700,000; and, upon a Basic‑Tier listed company’s first reclassification into the Innovation Tier, it shall receive a one‑time reward of RMB 200,000.

Zhejiang

Taizhou

Taizhou’s “Opinions on Promoting the Healthy Development of Small and Micro Enterprises” stipulate that small and micro enterprises listed on the National Equities Exchange and Quotations for Small and Medium-sized Enterprises (the New Third Board) will receive a one-time financial reward of RMB 300,000; those listed for the first time in the Innovation Layer will receive an additional one-time financial reward of RMB 300,000.

Tiantai

Enterprises that successfully list on the New Third Board will receive a one-time reward of RMB 1 million. For those that enter the Innovation Layer for the first time, a one-time reward of RMB 300,000 will be granted. Starting from the year following their listing on the New Third Board and within three years thereafter, if the enterprise raises cumulative equity financing of at least RMB 10 million annually, with more than 80% of such investments directed toward enterprises located in Tiantai County, it will be eligible for rewards of RMB 200,000, RMB 300,000, or RMB 400,000, depending on whether the annual fundraising amount is RMB 20 million or less, between RMB 20 million and RMB 50 million, or RMB 50 million or more, respectively.

Beijing

Haidian District

The “Haidian District Special Fund Application Guidelines for Promoting the Innovative Development of Science and Technology Finance” stipulate that enterprises listed on the Innovation Board of the New Third Board will be supported in maintaining compliant operations, with a subsidy of RMB 100,000 per enterprise per year. Furthermore, listed companies are encouraged to raise capital through private placements, the issuance of preferred shares, and other methods; they will receive financial support equal to 1% of their financing amount from the previous year, with a maximum subsidy of RMB 500,000 per enterprise.

Commercial & Corporate

The State Council Executive Meeting outlined plans to systematically roll out the “separation of licenses and business permits” reform nationwide, continuing to address issues such as the mismatch between obtaining a license and being able to operate.

On September 12, Premier Li Keqiang of the State Council presided over an executive meeting of the State Council, which outlined plans to roll out the “separation of licenses and business permits” reform nationwide in an orderly manner, further addressing the issue of “licensed to enter but unable to operate.” The meeting also decided to further reduce industrial product production license requirements by more than one-third and streamline approval procedures, thereby easing the burden on market entities. In addition, the meeting heard a report on progress in streamlining certification requirements and called for intensified efforts to eliminate the frustrations and difficulties faced by the public when conducting official business.

The meeting noted that, in accordance with the arrangements of the CPC Central Committee and the State Council, efforts to streamline administration, delegate power, improve regulation, and optimize services will be deepened. The “separation of licenses and business permits” reform—already piloted in the Shanghai Free Trade Zone and other areas—will be rolled out nationwide in an orderly manner, addressing the issue of “permission granted but operations restricted.” This will help foster a better business environment, further invigorate market vitality, and strengthen momentum for development. The meeting decided that, in line with the principle of fully and effectively delegating to the market what should be left to it and of ensuring that government oversight is robust and well‑implemented where necessary, starting November 10 this year, the first batch of over one hundred enterprise‑related administrative approval items nationwide will undergo “post‑permit reduction of certificates.” Specifically, approvals for matters that are unnecessary to require, can be effectively regulated by market mechanisms, or are appropriately managed through industry self‑regulation will be directly abolished or replaced by a filing system, while oversight during and after market operations will be strengthened. For approval items that cannot yet be eliminated but whose non‑compliant conduct can be corrected through ongoing and ex post supervision, a notification‑and‑commitment system will be implemented: market entities make commitments, and once they meet the prescribed conditions, they may obtain operating authorization; if discrepancies are found, the approval decision will be revoked in accordance with the law, and penalties will be imposed more severely. As for approval items involving public health and safety—where the notification‑and‑commitment approach is unsuitable—entry‑related services will be optimized by categorizing and streamlining application materials and procedures, shortening approval timelines, and enhancing transparency, thereby removing barriers for entrepreneurs and innovators seeking to enter the market. The meeting emphasized that, in advancing the “separation of licenses and business permits” reform, while relaxing market access, greater resources must be devoted to innovation and to strengthening ongoing and ex post supervision, with a focus on ensuring fair and impartial regulation.

The meeting decided that, while ensuring product quality and safety and upholding impartial regulation, the number of industrial product production licenses will be further reduced and approval procedures streamlined. First, an additional 14 categories of industrial product production licenses will be abolished, bringing the total number of product categories subject to license management down from 38 to 24. For certain products—such as those related to public health and safety or environmental protection—that have had their licensing requirements lifted, these may be transitioned to mandatory certification; a positive list will be drawn up and publicly announced, with the costs of such mandatory certification borne, in principle, by the government budget. Supportive measures will be adopted to encourage enterprises to pursue voluntary certification, thereby fostering brand building and market expansion. Second, for the remaining production licenses, approval procedures will be simplified. Pre‑issuance product inspections previously conducted by the licensing authority will be replaced by enterprises submitting compliant test reports at the time of application. With respect to provincially‑issued licenses—excluding those for hazardous chemicals—on‑site inspections will be deferred; once enterprises submit the requisite documentation and make commitments regarding quality and safety, they may obtain the license. Third, the “one enterprise, one license” system will be implemented, under which a single license will cover all product categories manufactured by a given enterprise. The meeting called for the effective fulfillment of regulatory responsibilities, strengthened post‑licensing oversight, and efforts to elevate the quality and upgrade the competitiveness of “Made in China.”

The meeting noted that, building on the initial progress made in streamlining proof‑requiring procedures, all regions and departments should prioritize, in the next phase of reform, those entities that continue to demand such documentation, thereby reducing the number of proof‑required items at the source. When citizens seek administrative services, no proof shall be requested unless explicitly mandated by laws or regulations; for any documents that must be submitted beyond what is prescribed by law, the requesting agency shall compile a detailed list, which must be approved by the judicial administration department. For matters where submission of proof is indispensable, a notification‑and‑commitment system shall be implemented. Any practice of arbitrarily demanding unnecessary documentation must be officely rectified, and the difficulties and pain points encountered by the public in accessing services must be effectively addressed.

The CPC Central Committee and the State Council have issued the “Guiding Opinions on Strengthening Asset–Liability Constraints for State-Owned Enterprises.”

Recently, the General Office of the CPC Central Committee and the General Office of the State Council issued the “Guiding Opinions on Strengthening Asset–Liability Constraints for State-Owned Enterprises” and circulated a notice requiring all regions and departments to conscientiously implement these guidelines in light of their specific circumstances.

The full text of the “Guiding Opinions on Strengthening Asset–Liability Constraints for State-Owned Enterprises” is as follows:

To thoroughly implement Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era and the spirit of the 19th National Congress of the Communist Party of China, to carry out the arrangements made at the Central Economic Work Conference, the National Financial Work Conference, and the first meeting of the Central Financial and Economic Affairs Commission, to strengthen asset‑liability constraints on state-owned enterprises, reduce their leverage ratios, promote the strengthening, optimization, and expansion of state capital, enhance the resilience of economic development, and improve the quality of economic growth, the following guiding opinions are hereby put forward.

I. General Requirements

(1) Overall Objectives. Strengthening asset‑liability constraints on state-owned enterprises is a key measure in the battle to prevent and defuse major risks. By establishing and improving mechanisms for such constraints, reinforcing oversight and management, we will ensure that highly leveraged SOEs swiftly bring their asset‑liability ratios back to reasonable levels. By the end of 2020, the average asset‑liability ratio of SOEs will be reduced by approximately 2 percentage points compared with the end of 2017, after which their asset‑liability ratios will generally remain at the average level observed among peer enterprises of similar size and industry.

(II) Basic Principles

— Adhere to a combination of comprehensive coverage and categorized management. All industries and all types of state-owned enterprises are brought under the asset‑liability constraint management system. At the same time, based on the asset‑liability characteristics of each industry, industry‑specific standards for asset‑liability constraints are established. Prioritize regulatory focus: for SOEs that exceed the prescribed thresholds, taking into account their stage of development and conducting a holistic assessment of their financial indicators and business prospects, appropriate risk‑mitigation measures will be implemented according to the level of risk. Strictly cap the asset‑liability ratios of SOEs in sectors with overcapacity, while exercising prudent flexibility in setting asset‑liability ratios for SOEs operating in strategic emerging industries, innovation‑driven sectors, and other areas that support economic transformation and upgrading.

— Uphold the principle of combining the improvement of internal governance with the strengthening of external constraints. Enhancing debt‑asset constraints for state-owned enterprises should be closely integrated with deepening SOE reform, establishing a modern corporate system, and optimizing corporate governance structures, so as to put in place sound, long‑term mechanisms. At the same time, external constraints on SOE debt and assets should be reinforced through measures such as tightening performance assessments, improving the accuracy and transparency of corporate financial reporting, and appropriately limiting debt financing and investment.

— Uphold the combination of improving quality and efficiency with policy support. All relevant parties should take proactive measures, further clarifying, in line with the overall objectives, the targets, timelines, and approaches for reducing the asset‑liability ratios of highly leveraged state-owned enterprises, and ensure timely completion within set deadlines. State-owned enterprises must prioritize quality and efficiency, strengthen their internal capabilities, and enhance their capital base through expanded operations, while rigorously preventing the loss of state assets and steadily lowering their debt‑to‑asset ratios. At the same time, a favorable policy and institutional framework should be established to facilitate this reduction, with improvements to capital‑supplementation mechanisms, expanded equity financing, support for unlocking the value of existing assets, and the prudent and orderly implementation of debt restructuring and market‑based debt‑for‑equity swaps.

II. Classification and Determination of Benchmark Indicators for Asset–Liability Constraints of State-Owned Enterprises

State-owned enterprises’ debt‑asset constraints are based on the asset‑liability ratio as the primary indicator, with sector‑specific and enterprise‑type‑based classification management that is dynamically adjusted. In principle, the benchmark for the asset‑liability ratio is the average of all large‑scale enterprises in the same industry from the previous year; a threshold 5 percentage points above this benchmark serves as the early‑warning line for the current year, while a threshold 10 percentage points above it constitutes the key‑supervision line. For state‑owned enterprise groups, the early‑warning and key‑supervision thresholds for consolidated financial statements may be determined by the relevant state‑asset administration authorities, taking into account the composition of core businesses, the level of development, and the requirements of classified supervision. As for enterprises in special sectors such as postal services or railways, or in industries where statistical data are unavailable, their early‑warning and key‑supervision thresholds shall be set by the competent state‑asset administration authorities, in accordance with national policy orientations, industry conditions, and with reference to international best practices.

For central enterprises whose investor responsibilities are exercised by the State-owned Assets Supervision and Administration Commission of the State Council, the management of asset‑liability ratios will continue to be governed by existing requirements, with further adjustments and refinements made in practice. As for state‑owned financial enterprises, asset‑liability constraints will be implemented in accordance with the current regulatory framework and standards.

III. Improving the Self-Regulatory Mechanism for State-Owned Enterprises’ Assets and Liabilities

(1) Reasonably set the asset–liability ratio and the asset–liability structure. State-owned enterprises shall, in accordance with the relevant early‑warning thresholds and key regulatory targets for the asset–liability ratio, comprehensively consider factors such as market prospects, capital costs, profitability, and asset liquidity, strengthen capital‑structure planning and management, and appropriately determine their asset–liability ratios and structures to maintain financial soundness and competitiveness.

(2) Strengthen day-to-day management of asset–liability constraints. The management of state-owned enterprises shall perform their duties with loyalty and diligence, prudently conduct debt financing, investment, expenditures, external guarantees, and other business activities, prevent the excessive accumulation of interest-bearing liabilities and contingent liabilities, and ensure that the asset–liability ratio remains at an appropriate level. At the annual board of directors or shareholders’ meeting, a special report on the enterprise’s asset–liability position and its future asset–liability plan shall be provided, and such matters shall be submitted to the board of directors or the shareholders’ meeting for deliberation in accordance with standard corporate governance procedures. When an enterprise is likely to face, or has already entered, a material financial distress, it shall promptly and proactively inform relevant creditors of the situation, engage in lawful and compliant negotiations with them, and handle related debts in a prudent and categorized manner.

(3) Strengthen the asset‑liability constraints imposed by state‑owned enterprise groups on their subsidiaries. State‑owned enterprise groups shall, based on the industry in which each subsidiary operates and other relevant factors, and in accordance with the prescribed asset‑liability ratio targets for state‑owned enterprises, appropriately set the target asset‑liability ratios for their subsidiaries. Furthermore, they shall integrate these asset‑liability constraints into the group’s performance‑evaluation system to ensure rigorous compliance by the subsidiaries. In addition, state‑owned enterprise groups should further enhance the independence of their subsidiaries in terms of assets, finances, and operations, thereby reducing the transmission of risks between parent and subsidiary entities, as well as among subsidiaries.

(4) Strengthen the capacity for endogenous capital accumulation. State-owned enterprises must officely embrace the new development philosophy, centering on enhancing the quality and efficiency of development, focusing on elevating their management and operational standards, further clarifying and concentrating on their core businesses to streamline operations and bolster resilience, boosting productivity through innovation, strengthening corporate profitability, and improving returns on assets and equity, thereby providing a sustained source of endogenous capital for enterprise growth.

IV. Strengthening the External Constraints on the Assets and Liabilities of State-Owned Enterprises

(1) Establish a scientific and standardized corporate asset–liability monitoring and early-warning system. Relevant state‑owned asset management authorities shall develop such a system, with the asset–liability ratio as its core indicator and supplemented by metrics related to corporate growth, profitability, and debt‑repayment capacity. For state‑owned enterprises whose asset–liability ratios exceed the early‑warning threshold or the key‑supervision threshold, the relevant authorities shall conduct a comprehensive analysis of industry characteristics, stage of development, the structure of debt types—including interest‑bearing and operating liabilities—along with the maturity structure of short‑term versus medium‑ and long‑term liabilities, as well as key financial indicators such as earnings before interest and taxes (EBIT), interest coverage ratio, current ratio, quick ratio, and net cash flow from operating activities. On this basis, they shall scientifically assess the enterprises’ debt risk profiles and, according to the degree of risk, compile separate lists of enterprises requiring focused attention and those subject to enhanced supervision, while maintaining continuous monitoring of their debt‑risk conditions.

(2) Establish a mechanism for high‑debt enterprises to reduce their asset‑liability ratio within a specified timeframe. For state‑owned enterprises included on the list of key supervised entities, the relevant state‑asset management authorities shall set clear targets and deadlines for lowering their asset‑liability ratios and oversee their implementation. Such enterprises shall refrain from undertaking domestic or overseas investments that would further increase their leverage; major investment projects must undergo a dedicated approval process, high‑risk business activities must be strictly managed, and all types of operating expenses must be substantially curtailed. In accordance with market‑based and rule‑of‑law principles, and in conjunction with business restructuring and efforts to enhance quality and efficiency, enterprises should actively pursue effective debt reduction through measures such as optimizing their debt structure, raising equity financing, implementing market‑oriented debt‑to‑equity swaps, and initiating bankruptcy proceedings in compliance with the law.

(3) Improve assessment and guidance on asset–liability constraints. Relevant state‑owned asset management authorities shall strengthen ongoing oversight and inspection, making the effectiveness of deleveraging and debt reduction a key component of corporate performance assessments and evaluations. For enterprises included on the list of those subject to heightened attention and focused supervision, their asset–liability ratios shall be incorporated into annual business performance evaluations, fully leveraging the guiding role of these assessments to ensure that enterprises implement and comply with asset–liability management requirements.

(4) Strengthen coordinated constraints on highly indebted enterprises by financial institutions. For state-owned enterprises whose asset‑liability ratios exceed the early‑warning threshold, relevant financial institutions shall enhance information sharing on loan portfolios, thoroughly ascertain off‑balance‑sheet financing, external guarantees, and other hidden liabilities, conduct a comprehensive and prudent assessment of their credit risks, and, based on the risk profile, appropriately determine loan terms such as interest rates, collateral requirements, and guarantees. For state-owned enterprises listed on the key‑monitoring list or with asset‑liability ratios exceeding the key regulatory threshold, new debt financing should, in principle, be arranged through joint credit underwriting by financial institutions, with the credit limits jointly determined to prevent disorderly competition and excessive lending, thereby strictly controlling the issuance of new debt financing. For state-owned enterprises included on the key‑regulation list, financial institutions shall, in principle, refrain from extending new debt financing.

(5) Strengthen the joint punitive mechanism for corporate financial misconduct. Enhance oversight and auditing of the authenticity and transparency of corporate financial reporting. The heads of state-owned enterprises shall bear full responsibility for the accuracy of their financial statements, ensuring that assets are not falsely reported and liabilities are not concealed, and that financial information is truthful and reliable. Accounting offices and other professional intermediaries must issue audit reports in strict compliance with accounting standards, objectively and accurately reflecting the enterprise’s asset and liability position. Further develop the social credit system, refine the joint punitive mechanism for corporate financial misconduct, include enterprises, intermediary institutions, and relevant responsible individuals that violate laws or regulations on the list of untrustworthy entities, and hold them strictly accountable in accordance with laws and regulations, while imposing more severe penalties.

V. Supporting Measures to Strengthen Debt and Asset Constraints on State-Owned Enterprises

(1) Clarify the boundaries between government debt and corporate debt. Resolutely curb local governments from increasing implicit debt through corporate borrowing. It is strictly prohibited for local governments and their departments to raise debt—whether in violation of laws and regulations or through disguised means—via state-owned enterprises; likewise, state-owned enterprises are forbidden from providing financing to local governments or assisting them in raising debt in disguised forms in breach of laws and regulations. State-owned enterprises that illegally provide financing or assist local governments in raising debt in disguised ways shall bear corresponding legal liabilities. Mobilize various funds and assets through multiple channels, and proactively yet prudently resolve existing stockpiles of local government implicit debt incurred in the form of corporate debt, while safeguarding the legitimate rights and interests of state-owned enterprises. Further improve mechanisms to protect the legitimate rights and interests of state-owned enterprises as they participate in national or local development strategies and undertake public services. Governments at all levels and social organizations must rigorously implement policies aimed at alleviating the burden on enterprises; under normal circumstances, they may not compel state-owned enterprises to assume public‑interest expenditure obligations that should be borne by the government or social organizations. If a state-owned enterprise voluntarily undertakes such responsibilities, it must strictly follow the relevant decision‑making procedures. Accelerate the separation and transfer of “three utilities and one service” functions to relieve state-owned enterprises of their social‑service burdens and help address longstanding historical issues.

(II) Support state-owned enterprises in revitalizing existing assets and optimizing their debt structure. Encourage SOEs to leverage leasing‑contracting, collaborative utilization, resource reallocation, asset swaps, or sales to circulate idle assets, enhance asset utilization efficiency, and improve resource allocation. Promote the consolidation of internal resources by integrating and streamlining assets related to core businesses into the main business segment, thereby raising the utilization rate of existing assets and boosting operational performance. Strengthen centralized fund management and internal liquidity coordination to enhance the efficiency of capital use. Support SOEs in unlocking the market value of intangible assets such as land‑use rights, exploration rights, and mining rights. Actively facilitate SOEs’ lawful and compliant securitization activities, based on the principles of true sale and bankruptcy remoteness, using property‑rights such as accounts receivable and lease‑related claims, as well as real estate assets like infrastructure and commercial properties, as underlying assets. Advance debt restructuring among SOEs to reduce inefficient asset occupation and accelerate capital turnover. Subject to controllable risks, encourage SOEs to tap the bond market to increase the share of direct financing and further optimize their debt structures.

(3) Improve the multi-channel capital‑supplementing mechanism for state-owned enterprises. On the premise of enhancing operational efficiency, further refine the mechanism by which retained earnings of SOEs are used to replenish capital. In conjunction with optimizing the strategic layout of the state‑owned economy, implement dynamic management of state capital—allowing it to both enter and exit sectors—so that capital withdrawn from industries suffering from overcapacity can be redirected to bolster SOEs in urgently needed sectors and areas. Fully leverage the role of state‑capital operating budget funds: after gradually addressing legacy issues and related reform costs, channel more of these funds into key industries and critical areas that are vital to national security and the lifeline of the national economy. Make full use of state‑capital investment and management companies to attract social capital and convert it into equity. Actively advance mixed‑ownership reform, encouraging SOEs to bring in private capital through equity transfers, capital increases and share expansions, joint ventures, and other forms of cooperation. Encourage SOEs to tap multi‑tiered capital markets for equity financing, guide them to raise equity‑based funds via private equity investment funds, and expand the scale of equity financing. Support SOEs in conducting financing through a combination of equity and debt instruments, as well as coordinated investment‑loan arrangements, to effectively manage debt risks. Furthermore, encourage SOEs to create the conditions for market‑oriented debt‑to‑equity swaps by proactively undertaking restructuring and transformation.

4. Actively promote the merger and restructuring of state-owned enterprises. Support the cultivation of high-quality SOEs through mergers and restructurings, and encourage SOEs to undertake cross-regional mergers and restructurings. Strengthen efforts to foster joint restructuring among SOEs in industries characterized by low industry concentration and intense homogeneous competition. Encourage various types of investors to participate in SOE mergers and restructurings via equity investment funds, venture capital funds, industrial investment funds, and other such vehicles.

(5) Implement bankruptcy proceedings for state-owned enterprises in accordance with the law and relevant regulations. Fully leverage the critical role of corporate bankruptcy in resolving debt disputes, equitably safeguarding the rights of all stakeholders, and optimizing resource allocation. Support state-owned enterprises in carrying out bankruptcy liquidation, in compliance with the law, for “zombie subsidiaries” that are beyond recovery and have lost any prospects for survival or development. For subsidiaries that meet the criteria for bankruptcy but still possess potential for future growth, facilitate debt restructuring through court‑approved reorganization procedures or by way of voluntary negotiations between creditors and the state-owned enterprise. As for local government financing platform companies that are severely insolvent and unable to meet their obligations, implement bankruptcy reorganization or liquidation in accordance with the law, resolutely preventing the “too big to fail” phenomenon and averting the accumulation of risks that could give rise to systemic instability. At the same time, ensure effective measures are in place to maintain social stability in connection with corporate bankruptcies.

VI. Strengthening the Organization and Implementation of Asset–Liability Constraints for State-Owned Enterprises

(1) Clarify the responsibilities of all relevant parties. State-owned enterprises are the primary entities responsible for implementing asset–liability constraints. They shall, in accordance with the requirements of these Guiding Opinions, set clear targets for controlling their asset–liability ratios, deepen internal reforms, strengthen self‑discipline, effectively guard against debt risks, and rigorously prevent the loss of state assets, thereby ensuring the sustainable operation of the enterprise. Relevant financial institutions shall, based on the asset–liability profiles and operational conditions of state-owned enterprises, prudently assess their debt‑financing needs, strike an appropriate balance between equity and debt financing, enhance post‑loan management, undertake debt restructuring, and assist enterprises in promptly preventing and resolving debt risks. For state-owned enterprises and their principal persons in charge that fail to implement these Guiding Opinions effectively or engage in imprudent business practices resulting in persistently excessive asset–liability ratios, the competent authorities shall intensify accountability measures. For state-owned enterprises found to have falsified information in implementing these Guiding Opinions, the relevant authorities shall impose strict and severe penalties on their principal persons in charge and any personnel directly responsible.

(2) Establish mechanisms for inter-departmental information sharing and public oversight and accountability. Relevant state‑owned asset management authorities shall submit to the Office of the Inter‑ministerial Joint Conference on Actively and Prudently Reducing Corporate Leverage (hereinafter referred to as the “Joint Conference”) a list of enterprises designated for focused attention and key regulatory oversight, along with their debt‑risk profiles. The Joint Conference Office will then circulate this information to relevant departments, providing the necessary baseline data to support their work. Furthermore, state‑owned asset management authorities at all levels shall publicly disclose, through channels such as “Credit China,” the early‑warning thresholds and key regulatory thresholds for corporate asset‑liability ratios, as well as any enterprise financial information required to be made public in accordance with applicable regulations, thereby subjecting such information to public scrutiny.

(3) Strengthen organizational coordination for implementing asset‑liability constraints on state-owned enterprises. Relevant state‑asset management departments at all levels shall, in accordance with the targets and constraint standards for reducing the asset‑liability ratios of state‑owned enterprises set forth in these Guiding Opinions, break down and assign responsibilities, refine implementation requirements, enhance guidance, and conduct rigorous performance assessments; they shall promptly report relevant developments to the Joint Conference Office. Audit authorities at all levels shall, in accordance with the law, independently carry out audit oversight to ensure that asset‑liability constraints on state‑owned enterprises are effectively implemented. Relevant financial regulatory authorities shall, pursuant to these Guiding Opinions, further clarify applicable rules and strengthen business guidance and oversight of financial institutions. When reporting on state‑asset management to the standing committees of the people’s congresses at their respective levels, governments at all levels shall also report on the asset‑liability status of state‑owned enterprises and the progress made in controlling their asset‑liability ratios. The Joint Conference shall reinforce organizational leadership, overall coordination, inspection and supervision, and accountability mechanisms to ensure that efforts to reduce the asset‑liability ratios of state‑owned enterprises yield tangible results. Major issues shall be reported promptly to the CPC Central Committee and the State Council.

All projects from the first three batches of 1.46 trillion yuan PPP demonstration projects have been fully implemented.

On September 14, the Ministry of Finance released the “Notice on Rectification of the First Three Batches of PPP Demonstration Projects,” which stated that, following a comprehensive review and cleanup, all projects in the first three batches have now been implemented, with a total investment of RMB 1.46 trillion.

According to a responsible official from the Ministry of Finance’s PPP Center, launching project demonstrations and establishing model projects is a key strategy for advancing public‑private partnership (PPP) initiatives. Since 2014, when the selection of PPP demonstration projects was first introduced, the Ministry of Finance has consistently adhered to the principles of high standards, genuine demonstration, and dynamic oversight—ensuring both entry and exit while maintaining ongoing monitoring—to screen and manage these projects. Since the end of 2017, in conjunction with risk‑prevention efforts and local government debt management, the Ministry conducted a comprehensive review of the first three batches of demonstration projects, categorizing and addressing 173 of them; among these, 89 were required to implement corrective measures within a specified timeframe. To date, 77 projects have completed the required rectifications, achieving a compliance rate of 86.5%; six projects are currently implementing corrective measures or refining their remediation plans; two projects have been removed from the demonstration list due to procedural non‑compliance; and four projects have been delisted because they no longer adopt the PPP model or fail to meet its requirements, with their entries subsequently deleted from the national PPP Comprehensive Information Platform’s project database.

According to statistics, the first three batches of demonstration projects initially included 752 projects with a total investment of RMB 1.98 trillion. Following routine oversight and this round of centralized review, as of the end of July 2018, the number of projects in these three batches had been reduced to 612, with total investments amounting to RMB 1.46 trillion, covering 31 regions and 19 industries. All projects from the first three batches have now been fully implemented. Among them, 351 projects have commenced construction, totaling RMB 725.1 billion, representing a commencement rate of 57.4%; in the area of basic public services, 115 projects with a combined investment of RMB 119.8 billion have seen 57 projects start construction, accounting for RMB 65.6 billion in investment and a commencement rate of 49.6%, thereby strengthening efforts to address infrastructure gaps in culture, sports, healthcare, elderly care, education, tourism, and other sectors. In the ecological and environmental protection sector, 162 projects with a total investment of RMB 148.9 billion have seen 93 projects begin construction, involving approximately RMB 79.6 billion in investment and a commencement rate of 57.4%, providing robust support for the development of environmental protection initiatives.

An official stated that, going forward, the Ministry of Finance will continue to earnestly implement the decisions and arrangements of the CPC Central Committee and the State Council, resolutely win the tough battle of preventing and defusing risks, ensure rigorous and effective oversight, dare to enforce strict discipline, set benchmarks, and establish model examples.

First, establish a long-term oversight mechanism for demonstration projects. While the Ministry of Finance continues to strengthen its supervisory efforts and guide local authorities in setting up regular self-inspection systems, it will also implement a range of measures to conduct rolling audits and performance evaluations. It will uphold and refine the “entry‑and‑exit” management framework, leveraging the PPP Comprehensive Information Platform to monitor project operations, contract compliance, and the financial health of project companies in real time, thereby enabling early risk identification and proactive mitigation.

Second, adopt big data‑driven approaches to innovate management practices. By fully leveraging information technologies such as big data, artificial intelligence, cloud computing, and blockchain, establish a big data‑based regulatory service platform that spans regions, covers all industries, transcends administrative hierarchies, and supports end-to‑end lifecycle management. This will maximize the roles of government, market, and the public, ensure the authenticity and transparency of project information, enable dynamic oversight, and facilitate the transformation of government functions and the innovation of regulatory methods.

Third, we will intensify training and outreach efforts. To strengthen compliance awareness among all stakeholders, we will, in the next phase, align our training offerings with the specific needs of different regions and entities, optimizing the structure and expanding the volume of training provided. At the same time, we will focus on compiling case studies from projects in areas such as green environmental protection, poverty alleviation, and the Belt and Road Initiative, sharing best practices in public‑private partnership (PPP) implementation to effectively serve as models and provide leadership.

Seven trust companies have been fined for illegally raising debt, and several transaction‑management‑type projects failed to pass regulatory scrutiny.

Since the second half of 2016, the Ministry of Finance has conducted rigorous investigations into local governments’ illegal and non-compliant borrowing, a crackdown that has yet to cease. As providers of funding, financial institutions have inevitably been drawn into the fray. Following the disclosure by affected provinces of violations within their jurisdictions, the outcomes of disciplinary actions against financial institutions implicated in local governments’ unlawful borrowing are also being gradually made public.

On September 14, according to information posted on the Ministry of Finance’s website, the China Banking and Insurance Regulatory Commission issued feedback on the outcomes of its handling of cases involving eight financial institutions that provided financing to local governments in violation of laws and regulations. With the exception of the Chizhou Branch of the Bank of Communications, the remaining seven institutions were all trust companies.

However, according to available information, most of the trust schemes involved date back to before 2016 and had already been wound up prior to the public announcement; some projects were even terminated ahead of schedule following consultations. Against the backdrop of stringent regulatory scrutiny over local governments’ unauthorized borrowing, trust companies conducting government‑financing‑trust business are placing “compliance” at the forefront of their operations.

Most related projects have already been completed.

On September 14, the Ministry of Finance’s website published the document “The CBIRC Attaches Great Importance to Financial Risk Prevention and Handles Illegal and Non‑Compliant Conduct by Certain Financial Institutions in Accordance with Laws and Regulations.” The CBIRC stated that, in the earlier period, the Ministry of Finance had brought to its attention instances of certain financial institutions illegally and non‑compliantly providing financing to local governments. In response, the CBIRC attached great importance to these matters, ordered the relevant financial institutions to make rectifications within a specified timeframe, imposed penalties and held accountable certain financial institutions and the individuals responsible, and promptly reported the outcomes of its actions in recent days.

According to the China Banking and Insurance Regulatory Commission’s announcement, the cases covered a total of seven trust companies. Specifically, Guotong Trust, Wanxiang Trust, and Zhongjiang Trust were each fined RMB 700,000, RMB 200,000, and RMB 600,000, respectively. Meanwhile, Everbright Xinglong Trust, National Trust, Lujiazui Trust, and Zhongtai Trust were required to suspend their government‑related business for three months, conduct rigorous internal accountability, carry out comprehensive reviews of existing business, and implement corrective measures; they were also instructed to ensure strict compliance with relevant regulations going forward.

However, upon reviewing publicly available information and consulting with the relevant trust companies, it was found that most of the trust schemes implicated in the case originated prior to 2016, had already been wound up before the official announcement, and that some projects were terminated ahead of schedule following discussions. As for the three trust companies that were fined, the majority of the penalty details have already been made public on the website of the China Banking and Insurance Regulatory Commission.

Notably, in this round of accountability notices, some trust companies were found to have participated in transaction‑management‑type projects—projects for which they did not assume active management responsibilities—yet they nonetheless faced disciplinary measures. In early January this year, the General Office of Yunnan Province publicly reported that Everbright Xinglong Trust and three other trust companies had engaged in providing guarantees for local governments’ illegal or non‑compliant borrowing. At the time, Everbright Xinglong Trust stated that the projects cited in the notice were transaction‑management‑type trusts it had administered, for which the company bore no active management duties, limiting its role to standard trust functions such as account management and settlement and distribution. In the latest notice, Everbright Xinglong Trust was ordered to suspend government‑financing‑platform‑related trust schemes for three months and was required to conduct a comprehensive self‑inspection and rectification of all such non‑compliant transactions initiated after September 2014.

Also penalized for engaging in trust business involving local governments’ unauthorized borrowing is Wanxiang Trust. According to the notice, in February and April 2016, Wanxiang Trust established, respectively, the “Zixing No. 5 Transaction‑Management Collective Fund Trust Plan” and the “Zixing No. 8 Transaction‑Management Property‑Rights Trust Plan.” Despite being aware that the relevant debts were ultimately guaranteed by local governments, it nevertheless provided financing in violation of regulations at the instruction of the settlors. In other words, once a violation is known, neither the nature of the trust as transaction‑management nor the mere performance of ordinary trust duties constitutes grounds for exemption from liability.

“Based on the previous penalties imposed by the China Banking Regulatory Commission, trust companies that proactively solicit local governments to issue guarantee letters, commitment letters, or similar documents during the course of their business operations will undoubtedly find it difficult to escape liability. Moreover, in light of this latest notice, even channel‑based businesses that ‘were aware’ of the violations will also be held accountable,” said a legal professional at a trust company.

The list of penalties may continue to grow.

In fact, this marks the second time that the China Banking and Insurance Regulatory Commission has issued a public notice specifically highlighting financial institutions’ involvement in local governments’ illegal and non-compliant borrowing.

As early as the beginning of 2017, the Ministry of Finance rigorously investigated and publicly reported instances of illegal and non-compliant debt‑raising and guarantee activities, organized inspections into unlawful financing and guarantee practices by certain cities, counties, and financial institutions, and issued letters to 10 provincial governments, as well as to the former China Banking Regulatory Commission and the Ministry of Commerce, recommending that accountability be pursued in accordance with the law. Subsequently, the former China Banking Regulatory Commission announced the outcomes of its actions, imposing penalties and holding four financial institutions accountable; among them, only Shandong Trust, a trust company, was implicated, and it was required to conduct a thorough review of all outstanding business lines and promptly rectify any non‑compliant operations.

At the end of 2017, the Ministry of Finance issued the “Report on Resolutely Curbing Local Governments’ Illegal and Non‑Compliant Borrowing and Controlling the Growth of Implicit Debt,” explicitly identifying financial institutions’ complicity as one of the root causes of local governments’ unlawful borrowing. The Ministry stated that “some financial institutions mistakenly believe that local governments will neither default nor dare to default, fostering a ‘fiscal backstop’ illusion,” and consequently failed to rigorously assess the risks of government‑backed projects in accordance with market‑based principles, relaxed risk‑control requirements, and provided financing in violation of regulations on a large scale. The recent notice issued by the China Banking and Insurance Regulatory Commission serves precisely to provide a consolidated account of the circumstances involving the financial institutions implicated during that period.

In addition, it should be noted that the two rounds of public notices have not yet fully addressed instances in which trust companies have engaged in illegal or non-compliant borrowing or improperly accepted guarantee letters.

According to the briefing issued on September 14, trust companies’ involvement in local governments’ illegal borrowing was concentrated primarily in Jiangsu and Yunnan provinces. Earlier, Jiangsu and Yunnan had separately disclosed the rectification measures taken to address violations of laws and regulations related to debt‑guarantee practices by certain cities and counties within their jurisdictions, as well as the accountability measures imposed on the individuals responsible. Specifically, in Jiangsu, 32 projects were found to involve local governments and their subordinate departments engaging in illegal debt‑guarantee activities through trusts or asset‑management schemes, affecting 27 trust products and eight trust companies. Meanwhile, in Yunnan, disciplinary actions were mainly directed at four cities and counties that had engaged in unlawful debt‑guarantee practices via trust products.

In addition to the provinces of Chongqing, Shandong, Henan, Jiangsu, and Yunnan—already singled out in two roundups by the China Banking and Insurance Regulatory Commission—since 2017, Guizhou, Guangxi, Sichuan, Anhui, Hunan, and other regions have also disclosed the outcomes of their investigations into illegal and non-compliant borrowing within their jurisdictions, with a significant number of cases involving trust companies. The list of penalized trust companies may yet expand.

The obvious consequence of stricter regulation is that trust companies are placing “compliance” at the forefront of their government‑trust cooperation business. A risk‑control officer at one of the aforementioned trust offices stated: Against the backdrop of rigorous regulatory scrutiny into local governments’ unauthorized borrowing, trust companies now prioritize compliance in all government‑trust‑related activities, and risk‑control measures that involve violating regulations or accepting commitment letters from local governments have virtually disappeared.

The Jiangsu Provincial Equity Exchange has set a minimum investment threshold of RMB 100,000, filling a policy gap and potentially serving as a model for others.

According to relevant enterprises in Nanjing, Jiangsu Province’s financial regulators recently issued the “Notice on Regulating the Development of Financial Asset Trading Platforms” (hereinafter referred to as the “Notice”) to the financial offices of Nanjing, Wuxi, Suzhou, and Zhenjiang.

According to the obtained “Notice,” two key requirements stand out: First, financial asset exchanges must set an appropriate minimum investment threshold based on the risk profile of each product, with the minimum threshold for individual investors not falling below RMB 100,000. Second, they may not provide financing services to enterprises whose registered or operating locations are outside the province—except for receivables‑transfer transactions arising from supply‑chain finance where the core enterprise is based within the province—and they may not extend financing to specialized entities established within the province by such enterprises solely for the purpose of raising funds.

In this regard, Gao Caiye, an analyst at Wangdai Tianyan, stated that, against the backdrop of stringent regulation and deleveraging, preventing financial risks has become a top priority. The Jiangsu provincial financial regulators’ issuance of new rules for gold exchanges is intended to promptly mitigate emerging financial risks and ensure the industry’s sound development. “At present, measures such as requiring local institutions to serve local enterprises are already being piloted in other regions. If Jiangsu’s new regulatory framework proves effective in practice, more localities are likely to follow suit.”

Financing services shall not be provided to enterprises whose place of registration or place of business is located outside the province.

According to the notice, Jiangsu Province’s financial regulators have set forth six key requirements to standardize the development of financial asset trading venues: strictly defining the scope of business operations; rigorously implementing investor suitability management; tightly overseeing underwriters; strictly regulating business advertising and promotion; expediting integration with the registration and settlement system; strengthening local supervisory oversight; and enforcing penalties in a stringent manner. Each of these requirements is further broken down into multiple specific stipulations.

Regarding the issuance of this document at this juncture, Gao Caiye notes that China currently has at least 70 gold exchanges. Owing to unclear regulatory frameworks, violations have become frequent across regions, even resulting in serious repercussions—issues that have drawn the attention of supervisory authorities. In response, regulators have successively introduced a series of policies aimed at rectifying and standardizing these exchanges. Against the backdrop of stringent oversight and deleveraging, preventing financial risks has become a top priority. The Jiangsu financial regulator’s issuance of new rules for gold exchanges is intended to promptly mitigate financial risks, foster the industry’s sound development, and enable gold exchanges to deliver improved services.

Based on the document’s content, the first requirement is to strictly limit the scope of business operations, with specific stipulations including: refraining from engaging in activities involving financial products whose underlying assets are regulated by the People’s Bank of China, the China Banking and Insurance Regulatory Commission, or the China Securities Regulatory Commission (except those approved by the relevant financial regulatory authorities under the State Council); prohibiting the public offering of any equity interests as equal shares; and banning the conduct of conduit‑type business, among ten detailed requirements.

Most notably, “no financing services may be provided to enterprises whose registration or place of business is located outside the province (except for receivables‑transfer transactions arising from supply‑chain finance where the core enterprise is based within the province), nor may financing services be extended to specialized entities established within the province by such enterprises solely for the purpose of obtaining financing.” Will this have any impact on the operations of local financial exchanges?

In response, Zhou Zhihan, General Manager of the Kaijin Center, stated that this regulation will not have a significant impact on its existing operations. “The Kaijin Center has consistently conducted its business under the guidance of regulatory authorities, with project information reported to provincial and municipal financial offices as required. In‑province business has long accounted for the majority of the Center’s overall volume. Since the beginning of this year, the Kaijin Center has stepped up efforts to develop assets within Jiangsu Province, focusing primarily on serving upstream and downstream SMEs in the province’s supply chains, as well as listed companies and other state‑owned and private enterprises.”

Other analysts believe that, in the short term, this regulation will certainly have some impact, though not a substantial one. Typically, provincial-level financial exchanges primarily serve enterprises within their respective provinces; the new rules are more aimed at proactively mitigating risks and standardizing industry development.

Raising the investment threshold to RMB 100,000 may curb capital inflows into gold exchanges.

The Notice also sets forth stringent requirements for implementing investor suitability management, stipulating that financial asset trading venues shall issue products only to qualified investors. Qualified investors must meet one of the following criteria: they must be corporate legal persons or other organizations established in accordance with the law and having net assets of no less than RMB 10 million as of the end of the most recent year; or they must be natural persons who, over the past year, have held financial assets with a value of no less than RMB 500,000 and possess at least two years of experience investing in financial products or at least two years of experience working in the financial sector or related fields.

Among these requirements, the most noteworthy is that “financial asset trading venues shall, based on the risk profile of each product, set an appropriate minimum investment threshold, with the minimum threshold for individual investors not falling below RMB 100,000.” Previously, there had been no such explicit stipulation regarding investment thresholds.

“Raising the minimum investment threshold will undoubtedly influence investors’ decision-making and exclude those whose capital falls short of the threshold, thereby narrowing the pool of funding sources and reducing inflows into gold exchanges,” said Gao Caiye. However, he also noted that increasing the entry barrier helps prevent the previous situation in which retail investors could bypass proper risk assessments and access gold‑exchange products through certain channels, thus significantly mitigating risks. This approach is also aligned with the financial regulators’ stance of stringent oversight, aiming to steer the industry toward healthy development by setting clear, compliant standards for investors.

Regarding the increase in investment thresholds, Zhou Zhihan believes that the management of financial asset trading centers is similar to that of private equity funds, allowing them to serve only relatively high-net-worth clients who have registered as members. Raising the minimum investment threshold is a complementary measure under investor suitability management; a threshold of RMB 100,000 can, to some extent, screen out investors with lower risk tolerance. “Even before the launch of the Kaijin Center, the minimum investment threshold was already quite high, with most projects requiring an initial investment of RMB 50,000 or RMB 100,000. Following the issuance of the relevant guidelines, the Kaijin Center has, in compliance with these requirements, uniformly raised its minimum investment threshold to RMB 100,000.”

Commenting on the “Notice” issued by Jiangsu Province’s financial regulators, Zhao Runlong, CEO of Wanglibao, stated that the new regulation fills a previous policy gap, sets clear eligibility criteria for investors in local equity exchanges, and helps to standardize the equity‑exchange market. This new rule could also serve as a reference for other provinces and municipalities across China as they draft similar regulations for their own equity exchanges.

In Zhou Zhihan’s view, Jiangsu’s relatively stringent investor suitability requirements are also quite ahead of the curve nationwide. Given that regulators have consistently emphasized that gold exchanges should serve only registered, qualified investors, it is possible that other regions will introduce similar rules in the future. However, given the varying local circumstances, each jurisdiction is likely to proceed at its own pace.

Taxation TAXATATION

The implementation of the new individual income tax law will proceed in three phases.

The State Taxation Administration recently issued the “Notice on Effectively Implementing and Carrying Out Policies During the Transitional Period of Individual Income Tax Reform,” specifying that the implementation of the new Individual Income Tax Law will be divided into three phases.

An official from the State Taxation Administration stated that the implementation of the new tax law will proceed in three phases: First, a preparatory phase for transitional policies, running until October 1, 2018; second, a phase from October 1, 2018, to December 31, 2018, dedicated to implementing transitional measures and preparing for the rollout of the personal income tax system that combines comprehensive and classified approaches (hereinafter referred to as the “new tax system”); and third, starting January 1, 2019, the full‑scale implementation phase of the new tax system. This reform encompasses extensive and far‑reaching changes, with particularly tight timelines and heavy workloads in the preparatory stage for transitional policies. Tax authorities at all levels are urged to approach this task with a strong sense of political awareness and a holistic perspective, fully appreciate the profound significance of the personal income tax reform, strengthen organizational leadership, meticulously plan and deploy resources, and focus on three core priorities—policy communication, taxpayer services, and information technology development. They must also reinforce guidance to lower‑level agencies and enhance performance evaluation, resolutely ensure effective implementation of transitional policies, and guarantee that taxpayers fully benefit from the reforms.

Officials plan to introduce eight rounds of real estate tax proposals this year; experts say a review is likely in two years.

Recently, the Legislative Plan of the Standing Committee of the 13th National People’s Congress was released, listing the Real Estate Tax Law as a Category I item—draft laws that are relatively mature and slated for submission for deliberation during the current term. The submitting body or lead drafting agency is the Budget Committee of the NPC Standing Committee and the Ministry of Finance. Thus far this year, the authorities have mentioned the Real Estate Tax Law on eight occasions.

Huang Zhilong, Director of the Macroeconomic Research Center at Suning Institute of Finance, stated that the inclusion of the Real Estate Tax Law in Category I signifies that ten standalone tax laws—including the Real Estate Tax Law, the Value-Added Tax Law, and the Consumption Tax Law—have been designated as top priorities in the five-year tax legislation agenda and constitute essential legislative tasks that must be completed.

Zhang Yiqun, director of the Jilin Provincial Institute of Fiscal Science, stated that this news signals an acceleration in the legislative process for a property tax. Going forward, the government will be able to influence and intervene in the real estate market through fiscal measures and legal frameworks, thereby reducing the need for frequent administrative interventions. This approach will help safeguard the long-term stability and sustainable development of the real estate market.

Since the beginning of this year, authorities have repeatedly signaled their stance on the real estate tax law. On March 5, Premier Li Keqiang, in his government work report, called for the steady advancement of legislation on the real estate tax. On March 4 and March 7, Zhang Yesui, spokesperson for the First Session of the 13th National People’s Congress, and Shi Yaobin, then Vice Minister of Finance, respectively stated at press conferences that “work is being expedited to draft and refine the bill on the real estate tax.”

On March 11, the Work Report of the Standing Committee of the National People’s Congress stated that in 2018, legislative efforts would be further strengthened, the principle of tax legality would be implemented, and a real estate tax law would be studied and drafted. On March 25, Minister of Finance Liu Kun indicated that, in accordance with the principles of “legislation first, full authorization, and phased implementation,” work on the enactment and implementation of the real estate tax would be advanced. On April 27, the Standing Committee of the National People’s Congress released its 2018 legislative work plan, under which the real estate tax law would be scheduled for deliberation in 2018 or in subsequent years, depending on circumstances. On July 16, Mao Shengyong, spokesperson for the National Bureau of Statistics, stated that relevant policies and measures related to the real estate tax would be accelerated.

“The real estate tax law could be submitted for deliberation as early as before the end of this year, after which it will be opened to public consultation and undergo a process of discussion and revision. According to the roadmap of China’s tax reform, 2020 represents a key milestone,” said Zhang Yiqun.

Huang Zhilong believes that, although the real estate tax law has been classified as a Category I item, this does not mean that its enactment can only be completed in the fifth year. Given the current pace of real estate regulation and local fiscal‑tax system reform, it is quite likely to be submitted for deliberation in 2020.

Zhang Yiqun pointed out that the real estate tax has a systemic and comprehensive impact on the real estate market, effectively setting off a chain reaction throughout the sector. Accelerating the legislative process for the real estate tax is a crucial step in China’s implementation of the principle of tax legality; it should be approached through coordinated research, phased implementation, and gradual progress to ensure effective adjustments.

“Property tax will become an important source of revenue for local governments in the future, with each region tailoring exemptions, tax rates, and collection mechanisms to its own fiscal circumstances. However, the impact of property‑tax implementation on real estate markets will vary across cities.” According to Huang Zhilong, in core first‑ and second‑tier cities, property tax may help reduce housing vacancy rates, but it should not be viewed as a panacea capable of curbing excessively high home prices. By contrast, in third‑, fourth‑, and fifth‑tier cities—where vacancy rates tend to be higher and rental markets remain underdeveloped—the introduction of property tax could exert downward pressure on housing prices.

Litigation & Arbitration

Jiangsu has established a mechanism for constructive interaction between prosecutors and lawyers to safeguard lawyers’ professional rights.

The longstanding difficulties faced by lawyers in practicing their profession—namely, obtaining information, accessing case files, and gathering evidence—are expected to become a thing of the past in Jiangsu Province. On the 11th, the Provincial People’s Procuratorate and the Provincial Department of Justice jointly issued the “Opinions on Establishing a Mechanism for Constructive Interaction Between Prosecutors and Lawyers in Criminal Proceedings.”

“Safeguarding lawyers’ professional rights is tantamount to protecting the rights and interests of clients,” said a responsible official from the Provincial People’s Procuratorate. To fully leverage the crucial role lawyers play in criminal proceedings—upholding clients’ legitimate rights and interests, ensuring case quality, and promoting judicial fairness—the “Opinions” further specify concrete measures to protect a range of rights guaranteed by law, including the right to information and the right to inspect case files, with the aim of ensuring these rights are effectively implemented.

Breaking the “difficulty of access to information”: Simultaneous dissemination of case information

When case procedures change without the defense counsel’s knowledge, it has long been a major source of frustration for lawyers with years of experience. “In recent years, the issue of ‘difficulty in obtaining information’ has improved significantly—particularly in Jiangsu, where the procuratorial organs have taken the lead nationwide in safeguarding lawyers’ right to be informed.”

In response to widespread concerns raised by lawyers regarding the untimely and inadequate provision of case information, the Provincial People’s Procuratorate has made procedural information and legal documents publicly available online, facilitating easy access for counsel. From January to August this year, procuratorial organs across the province published over 100,000 pieces of procedural information and more than 50,000 legal documents through the Case Information Disclosure Website. Furthermore, the Provincial Procuratorate’s case management big data platform includes a dedicated rights‑protection module that promptly issues reminders, early warnings, and follow-up notices to handling attorneys at each procedural stage. During the same period, procuratorial organs throughout the province transmitted nearly 136,000 items of procedural information to lawyers via the platform.

Jiang Yongliang, a member of the Party Leadership Group and Deputy Procurator-General of the Provincial People’s Procuratorate, stated that current regulations do not specify when or how lawyers should be notified of the procuratorial organ’s decision to approve or reject the arrest of a criminal suspect. Previously, at a province-wide symposium on legal practice convened by the Provincial People’s Procuratorate, many lawyers expressed their hope to be promptly informed of the procuratorial organ’s review and decision regarding the arrest of criminal suspects.

To this end, the Opinions stipulate that, at key stages such as review of arrest and approval of arrest, defense counsel may be notified concurrently. For example, in the stage of approving an arrest, if the procuratorial organ decides not to approve the arrest, it shall notify the defense counsel at the same time as serving the decision on the public security organ; if it approves the arrest, for suspects already in custody, the defense counsel shall be notified simultaneously with service of the decision on the public security organ, while for suspects not yet in custody, the defense counsel shall be notified within 24 hours of receipt of the public security organ’s execution acknowledgment.

Solving the “difficulty of exam paper review”: All case files will be converted into electronic format.

Reviewing case files is the foundation for lawyers to exercise their right of defense. “In the past, lawyers had to spend two or three days poring over thick paper dossiers; now that all case files have been digitized, we provide lawyers with free electronic‑file CDs, and they can obtain them in less than ten minutes,” said Wang Li, Deputy Chief Prosecutor of the Provincial People’s Procuratorate. She added that for cases transferred by investigative authorities—such as those involving review of arrest, approval of extensions to the period of investigative detention, and first‑instance public prosecutions—where the public security organs have failed to submit electronic case files, the procuratorial organs in our province uniformly scan, catalog, and create electronic versions on the very day of receipt, thereby promptly offering defense counsel efficient and convenient services for accessing and copying these electronic files.

According to reports, at the beginning of this year, the Provincial People’s Procuratorate deployed self-service robots—developed in-house—to 13 municipal procuratorates and the Wuzhong District Procuratorate in Suzhou, putting them into operation. These robots provide visiting lawyers and parties with self-service functions such as information retrieval and electronic case-file burning, while also supporting remote lawyer identity verification and off-site access to or burning of electronic case files for represented matters. This has greatly facilitated lawyers’ ability to conveniently access case files remotely at the nearest procuratorate. From January to August this year, lawyers used the self-service robots to query case information a total of 428 times, including 67 off-site queries, and to burn electronic case files 301 times.

In many cases, defense counsel do not become involved until the public prosecution stage; however, electronic case files have yet to be widely adopted by the courts, creating difficulties for lawyers in accessing the case materials. In response, the Opinions stipulate that, upon the initiation of public prosecution, for cases required to generate electronic case files, the case management department shall submit such electronic files to the court along with the case file, thereby facilitating lawyers’ access. If, after reviewing the electronic case file, a defense lawyer requests to verify the original paper file, this request shall be accommodated in accordance with the law.

Solving the “difficulty of gathering evidence”: All investigative and evidentiary procedures must be “archived with clear records.”

Under the Criminal Procedure Law, lawyers may petition the procuratorate or the court to collect and obtain evidence. However, in judicial practice, due to the lack of binding legal provisions, such requests are often ignored, resulting in the failure to effectively safeguard the rights and interests of the parties involved.

This Opinion clarifies that procuratorial organs shall, in accordance with the law, promptly process applications submitted by lawyers for the collection and retrieval of evidence. When a defense lawyer requests the collection or retrieval of evidence, the case-handling prosecutor shall handle such requests without delay and in compliance with the law; if the request is denied, the prosecutor shall provide the lawyer with a written explanation of the reasons for the denial. At the same time, procuratorial organs throughout the province shall establish a system for filing and maintaining records of lawyers’ applications to collect or retrieve evidence. The case-handling prosecutor shall set forth, in the case review report, the details of the defense lawyer’s application for the collection or retrieval of evidence and the outcome of its processing, and the application materials submitted by the lawyer shall be appended to the case file for record-keeping.

On September 11, the Provincial People’s Procuratorate also established a dedicated hotline to safeguard lawyers’ professional rights. When lawyers believe that public security organs, procuratorial organs, courts, or their staff have obstructed the lawful exercise of their litigation rights, they may file complaints or accusations with the procuratorial organ, which shall handle such matters in accordance with the law. With respect to complaints and appeals lodged by lawyers, the procuratorial organ shall promptly accept them and complete a review within ten days of receipt. If the allegations are substantiated, upon decision of the Chief Procurator, the relevant authorities, the pertinent departments of this procuratorate, or subordinate people’s procuratorates shall be promptly notified to take corrective measures, and the outcome of the handling shall be provided to the lawyer in writing.

At the same time, when the procuratorial organs identify violations of laws or disciplinary rules in the course of a lawyer’s practice, they shall address such matters through measures such as issuing warnings, notifying the judicial administrative authorities and the bar association, and referring relevant leads, so as to enable lawyers to better exercise their right of defense and effectively safeguard the legitimate rights and interests of criminal suspects and defendants.

Responding to Judicial Needs in the Internet Era and Promoting Comprehensive Governance of Cyberspace: The Beijing Internet Court Officially Established

In order to proactively address the new judicial demands of the internet era, deepen the comprehensive and coordinated reform of the judicial system, and promote the holistic governance of cyberspace, the Beijing Internet Court was officially inaugurated on the morning of September 10. Li Shaoping, a member of the Party Leadership Group and Vice President of the Supreme People’s Court, and Zhang Yankun, a member of the Standing Committee of the Beijing Municipal Party Committee and Secretary of the Political and Legal Affairs Commission, jointly unveiled the plaque, while Kou Fang, Secretary of the Party Leadership Group and Acting President of the Beijing Higher People’s Court, presided over the ceremony.

On July 6 this year, the Third Meeting of the Central Commission for Comprehensively Deepening Reform reviewed and approved the “Plan on Establishing the Beijing Internet Court and the Guangzhou Internet Court.” The Beijing Municipal Party Committee attached great importance to this initiative and called for further progress in setting up the Internet Courts. The Beijing Municipal People’s Congress and the Municipal Government have provided strong support for the construction of the Beijing Internet Court. The newly established Beijing Internet Court exercises centralized jurisdiction over specific types of internet-related cases that, under the current system, would ordinarily fall within the purview of grassroots people’s courts across the city. These include, but are not limited to: disputes arising from online shopping and service contracts; disputes over internet‑based financial loans and small‑amount loan contracts; disputes concerning ownership and infringement of internet‑related copyright; domain name disputes; tort liability disputes involving the internet; product liability disputes related to online purchases; public interest litigation brought by the procuratorial organs in internet‑related matters; administrative disputes arising from the administration of internet affairs; and other civil and administrative internet‑related cases designated for jurisdiction by higher-level people’s courts. Appeals or protests against judgments and rulings rendered by the Beijing Internet Court are heard respectively by the Beijing Intellectual Property Court and the Fourth Intermediate People’s Court of Beijing, which operates across administrative boundaries. At present, the court has a total of 38 rostered judges, with an average age of 40; 75.7% hold postgraduate degrees or higher, and the judges have, on average, 10 years of experience in adjudicative work.

In terms of its adjudication model, the Beijing Internet Court adheres to the principle of “online case handling for online cases,” enabling parties to complete all or part of the litigation process—filing a lawsuit, mediation, case registration, service of process, court hearings, judgment delivery, and enforcement—entirely online without having to visit the court. For cases where the parties do not consent to online proceedings or where the court determines that online handling is inappropriate, a hybrid approach combining offline and online procedures is employed. Furthermore, the Beijing Internet Court offers intelligent services such as automated litigation‑risk assessment, automatic generation of pleadings, and online access to case files, providing litigants with an efficient and convenient litigation experience.

A press conference was held following the unveiling ceremony. At the conference, An Fengde, a member of the Party Leadership Group, Vice President, and spokesperson of the Beijing Higher People’s Court, stated that establishing an Internet Court in Beijing is a major measure to thoroughly implement Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era and to deepen the comprehensive and coordinated reform of the judicial system. It also represents an objective necessity for advancing the national strategy of building a cyber power and safeguarding cybersecurity and public order. He emphasized that the court must fully demonstrate the innovativeness and cutting-edge nature of the reform in areas such as trial procedures, platform development, talent cultivation, and rule‑making. Zhang Wen, Secretary of the Party Group and President of the Beijing Internet Court, delivered a statement at the press conference and outlined the guiding principles behind the construction of the electronic litigation platform—“openness and inclusiveness, platform neutrality, data sharing, innovative upgrades, and secure controllability”—to the attending media.

Other

The National Health Commission’s “Three Determinations” plan has been released, and the Family Planning Department has been completely abolished.

On the evening of September 10, according to the China Institutional Establishment Website, the Regulations on the Functional Allocation, Internal Structure, and Staffing of the National Health Commission—the so‑called “Three Determinations” plan—were officially released.

The regulations stipulate that the National Health Commission is a constituent department of the State Council, at the ministerial level, and comprises 21 internal divisions, namely: the General Office, the Department of Personnel, the Department of Planning, Development and Informatization, the Department of Finance, the Department of Laws and Regulations, the Department of Institutional Reform, the Bureau of Disease Prevention and Control, the Bureau of Medical Administration and Healthcare Management, the Department of Primary-Level Health Services, the Office of Health Emergency Response (Emergency Command Center for Public Health Emergencies), the Department of Science, Technology and Education, the Bureau of Comprehensive Supervision, the Department of Drug Policy and Essential Medicines System, the Department of Food Safety Standards and Monitoring & Evaluation, the Department of Aging and Health, the Department of Maternal and Child Health, the Department of Occupational Health, the Department of Population Monitoring and Family Development, the Department of Publicity, the Department of International Cooperation (including the Hong Kong, Macao, and Taiwan Affairs Office), and the Bureau of Health Care.

According to reports, the three former internal departments related to family planning—the Department of Grassroots Guidance on Family Planning, the Department of Family Development in Family Planning, and the Department of Service and Management for Family Planning among the Floating Population—have all been abolished and reorganized into the new Department of Population Monitoring and Family Development. In addition, the Department of Aging and Health, the Department of Occupational Health, and the Bureau of Health Care have been newly established as internal departments.

According to the regulations, the administrative staffing of the National Health Commission totals 525 positions, including 10 positions for personnel of the two commissions, 4 mobile positions for dispatched personnel, and 29 positions for retired cadres. The Commission has one Director, four Deputy Directors, and 88 leadership positions at the department or bureau level, comprising one full-time Deputy Secretary of the Commission’s Party Committee, 10 Health and Wellness Supervisors, and 2 leadership positions in the Bureau for Retired Cadres.

According to the regulations, the primary responsibilities of the National Health Commission are:

(1) Organize the drafting of national health policies, formulate draft laws and regulations, policies, and plans for the development of the health sector, and develop departmental rules and standards, which shall then be implemented. Coordinate and plan the allocation of health resources, and provide guidance on the preparation and implementation of regional health planning. Develop and implement policies and measures to promote equal access, universal coverage, and convenient delivery of basic public health services, as well as to extend public resources to the grassroots level.

(2) Coordinate and advance the deepening of the reform of the medical and healthcare system, and formulate recommendations on major principles, policies, and measures for such reform. Organize the comprehensive reform of public hospitals, promote the separation of management from operation, improve the modern hospital management system, develop and implement policies and measures to diversify the providers and delivery models of public health and wellness services, and put forward proposals on pricing policies for medical services and pharmaceuticals.

(3) Formulate and implement disease prevention and control plans, the National Immunization Program, and intervention measures for public health issues that seriously endanger people’s health; establish lists of quarantine‑required infectious diseases and monitored infectious diseases. Assume responsibility for public health emergency response, and organize and guide the prevention and control of public health emergencies as well as medical and health rescue operations in response to various sudden public events.

4. Organize the formulation and coordinate the implementation of policies and measures to address population aging, and be responsible for advancing the development of an elderly health service system and the integration of medical and elderly care services.

(5) Organize the formulation of national drug policies and the national essential medicines system; conduct drug utilization monitoring, clinical comprehensive evaluations, and early warnings for drug shortages; propose recommendations on national essential medicines pricing policies; and participate in the development of the National Pharmacopoeia. Furthermore, organize food safety risk monitoring and assessment, and formulate and promulgate food safety standards in accordance with the law.

(6) Responsible for the supervision and administration of public health matters within its purview, including occupational health, radiation health, environmental health, school health, public‑place health, and drinking‑water health; responsible for overseeing the prevention and control of infectious diseases; and for improving and strengthening the comprehensive health‑and‑sanitation supervision system. Also takes the lead in implementing the obligations under the Framework Convention on Tobacco Control.

(7) Formulate and oversee the implementation of administrative measures for medical institutions and the medical services sector, and establish a system for evaluating and supervising medical services. In coordination with relevant departments, formulate and implement qualification standards for health‑related professional and technical personnel. Develop and enforce norms and standards for medical services, as well as codes of practice and service standards for health‑related professional and technical personnel.

(8) Responsible for family planning administration and service provision; conducts population monitoring and early warning; formulates policy recommendations related to population and family development; and refines family planning policies.

(9) Provide guidance on local health and wellness work, and oversee the development of primary-level medical and health services, the maternal and child health service system, and the general practitioner workforce. Promote innovation and technological advancement in the health and wellness sector.

(10) Responsible for the medical and health care of central-level beneficiaries, as well as for providing medical and health support for important Party and state meetings and major events.

(11) Administers the State Administration of Traditional Chinese Medicine, exercises delegated oversight over the China Association of the Elderly, and provides guidance on the operational work of the China Family Planning Association.

(12) To carry out other tasks assigned by the CPC Central Committee and the State Council.

(13) Functional Transformation. The National Health Commission should officely uphold the principles of “grand health” and “grand wellness,” advance the Healthy China Strategy, and harness reform and innovation as driving forces. Focusing on promoting health, transforming service models, strengthening primary-level healthcare, and reinforcing social safeguards, it should shift the paradigm from disease‑centered care to people‑centered health, thereby providing comprehensive, life‑cycle‑spanning health services to the public. First, greater emphasis should be placed on prevention and health promotion, with strengthened efforts to prevent and control major diseases, proactive responses to population aging, and a more robust health service system. Second, priority should be given to shifting the focus of work downward and channeling resources to the grassroots level, extending public health resources to the community, expanding coverage in rural areas, and tilting support toward remote regions and populations facing economic hardship. Third, continuous efforts must be made to enhance the quality and standard of services, advancing equal access, universal benefits, and convenient delivery of basic public health services. Fourth, coordinated progress should be made in deepening the reform of the medical and healthcare system, intensifying reforms of public hospitals, separating management from operation, and fostering diversification of providers and modalities in the delivery of public health services.

(14) Division of Responsibilities.

1. Division of responsibilities with the National Development and Reform Commission. The National Health Commission is responsible for conducting population monitoring and early warning, formulating fertility policies, and developing policy recommendations on population size, quality, structure, and distribution related to fertility. It also promotes the coordinated alignment of fertility policies with relevant economic and social policies, participates in the formulation of population development plans and policies, and implements the tasks outlined in the national population development plan. The National Development and Reform Commission, on the other hand, is tasked with organizing the monitoring and assessment of demographic changes and their trends, establishing a system for population forecasting and early warning, conducting population impact assessments of major policy decisions, improving mechanisms for advising on key population policies, and formulating national population development strategies. Additionally, it drafts population development plans and policies, and proposes policy recommendations aimed at achieving coordinated and sustainable development among population, economy, society, resources, and the environment, while promoting the long-term balanced development of the population in an integrated manner.

2. Division of responsibilities with the Ministry of Civil Affairs. The National Health Commission is responsible for formulating policies and measures to address population aging and integrate medical and elderly care services; it undertakes overall coordination, provides guidance and supervision, and promotes the development of elderly‑related initiatives, while also managing elderly health matters such as the prevention and treatment of age‑related diseases, medical care for older adults, and mental health and supportive care services. The Ministry of Civil Affairs is tasked with coordinating, guiding, and supervising elderly‑care services; it drafts plans, regulations, policies, and standards for building an elderly‑care service system and oversees their implementation, and it is responsible for elderly welfare programs and assistance for seniors facing particular difficulties.

3. Division of responsibilities with the General Administration of Customs. The National Health Commission is responsible for the overall prevention and control of infectious diseases and for emergency response to public health emergencies, and it compiles a list of infectious diseases subject to border health quarantine monitoring. The National Health Commission and the General Administration of Customs shall establish and improve mechanisms for cooperation in responding to infectious disease outbreaks and public health emergencies at ports of entry, mechanisms for the notification and exchange of information on such outbreaks and emergencies, and mechanisms for reporting and coordinated handling of imported cases at ports of entry.

4. Division of responsibilities with the State Administration for Market Regulation. The National Health Commission is responsible for food safety risk assessment and, in collaboration with the State Administration for Market Regulation and other relevant departments, formulates and implements food safety risk monitoring plans. When the National Health Commission identifies, through food safety risk monitoring or upon receiving reports, that a food product may pose a safety hazard, it shall promptly organize inspections and conduct a food safety risk assessment, and promptly notify the State Administration for Market Regulation and other relevant departments of the assessment results. For foods determined to be unsafe, the State Administration for Market Regulation and other relevant departments shall immediately take appropriate measures. In the course of its supervisory and administrative duties, if the State Administration for Market Regulation and other relevant departments deem that a food safety risk assessment is necessary, they shall promptly submit recommendations to the National Health Commission.

5. Division of responsibilities with the National Healthcare Security Administration. The National Health Commission, the National Healthcare Security Administration, and other relevant departments shall strengthen the alignment of systems and policies in the areas of healthcare, medical insurance, and pharmaceuticals; establish mechanisms for communication and consultation; coordinate efforts to advance reforms; and enhance the efficiency of healthcare resource utilization and the level of medical security.

6. Division of responsibilities with the National Medical Products Administration. The National Medical Products Administration, in collaboration with the National Health Commission, shall organize the National Pharmacopoeia Commission and formulate the National Pharmacopoeia, and establish mechanisms for mutual reporting of serious adverse drug reactions and adverse events involving medical devices, as well as joint response mechanisms.

The China Banking and Insurance Regulatory Commission is rigorously investigating the illegal flow of credit funds into the housing market, with several banks having been fined.

According to reports, in August the China Banking and Insurance Regulatory Commission issued 418 penalties against banks, totaling approximately RMB 131.39 million in fines and confiscations, and held 265 individuals accountable. Among these, the five major state-owned banks received 46 penalties, while joint-stock banks were hit with 14. From a sector‑specific perspective, real estate‑related lending emerged as a key focus of regulatory scrutiny, with several banks penalized for allowing personal credit funds to flow illegally into the housing market.

Taking the Ningbo Branch of China Construction Bank as an example, in August it was fined RMB 200,000 for personal loan funds being improperly channeled into the stock and real estate markets. Additionally, Chongqing Rural Commercial Bank was fined RMB 500,000 for directing loan proceeds—via construction offices—into the real estate sector. Furthermore, the Head Office Business Department of China CITIC Bank was ordered to make corrections and was fined RMB 800,000 for serious violations of prudential operating rules in the management of individual housing mortgage loans and individual business loans, as well as for severe breaches of prudential conduct‑management standards.

Huang Zhilong, director of the Macroeconomic Research Center at Suning Institute of Finance, stated that despite stringent regulatory controls this year, personal credit funds have continued to flow into the housing market, indicating that, amid a broader environment of asset scarcity, real estate remains a relatively high-quality investment. The likelihood of easing housing-market regulations in the near term is quite low.

Zhao Yayun, a researcher at the HouSheng Think Tank, stated that housing loans remain a low-risk, high-yield business with strong demand. With the real economy—particularly manufacturing—struggling to generate profits, banks find it difficult to resist such incentives. Judging from the recent stringent inspections by the China Banking and Insurance Regulatory Commission, future property-market regulation will, in addition to continuing price controls, focus on curbing the flow of credit funds into the housing sector.

Earlier, the People’s Bank of China released data showing that as of the end of June 2018, the outstanding balance of real estate loans nationwide stood at RMB 35.78 trillion, up 20.4% year on year—a growth rate 0.1 percentage point higher than at the end of the previous quarter. In the first half of the year, such loans increased by RMB 3.54 trillion, accounting for 39.2% of the total increase in all types of loans during the same period—0.1 percentage point higher than at the end of the previous quarter.

Huang Zhilong believes that, overall, the outstanding balance of real estate loans continues to grow at a relatively high pace, indicating that the real estate sector remains a favored client segment for financial institutions. The real estate market benefits from ample collateral and guarantees, resulting in a comparatively high level of asset safety. However, judging by both the growth rate of real estate loans and their share of total lending, regulatory pressures on the sector remain substantial.

Zhao Yayun stated that, judging from real estate loan data, housing market regulations have had a measurable impact. By curbing the rapid rise in home prices, these measures have even led to price declines in some cities. The resulting weakness in housing prices has attracted substantial buyer interest, indirectly underscoring the effectiveness of the regulatory policies—though it also suggests that future efforts to manage the market will become increasingly challenging.

On August 29, the China Banking and Insurance Regulatory Commission held a video conference on banking and insurance supervision, emphasizing the need to further refine differentiated real estate credit policies and strictly prohibit the illegal flow of funds from “down-payment loans” and consumer loans into the real estate market.

Zhao Yayun recommends that regulations be introduced for small offices engaged in down-payment loans, such as refusing legal protection for unregistered property mortgages, thereby increasing these companies’ risks and operational challenges and compelling them to exit the market. Consumer loans must be managed strictly in accordance with established procedures, and borrowers who divert funds for purposes other than those specified should be placed on a list of discredited individuals.

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