JC Master Legal News Issue 839

Key Takeaways for This Issue

The China Securities Regulatory Commission is advancing look-through supervision to precisely crack down on regulatory violations, and the northbound look-through mechanism under the Shanghai–Shenzhen–Hong Kong Stock Connect is set to be implemented.

To further advance law-based, comprehensive, and stringent regulatory oversight, fully leverage the frontline supervisory functions of stock exchanges, and foster exchange and cooperation between domestic and international exchanges, the 2018 International Symposium on Frontline Securities Exchange Regulation, co-hosted by the Shenzhen and Shanghai Stock Exchanges, was held at the Shenzhen Stock Exchange on September 21. At the event, Vice Chairman Li Chao of the China Securities Regulatory Commission stated that the Commission will continue to push forward capital market reform and opening-up with greater vigor, in line with the principles of marketization, rule of law, and internationalization, while expanding both domestic and cross-border cooperation.

The State Council has issued a document to unleash consumption potential, with new growth drivers guiding the allocation of capital.

The “Several Opinions on Improving the Mechanisms and Systems for Promoting Consumption and Further Unleashing Residents’ Consumption Potential,” recently issued by the CPC Central Committee and the State Council, calls for building more mature, segmented consumer markets and fostering new growth drivers in consumption. Focusing on upgrading residents’ consumption in areas such as food, clothing, housing, transportation, and services, the document seeks to overcome deep-seated institutional and systemic barriers, meet consumers’ tiered and diversified needs, ensure that basic consumption remains affordable, accessible, and safe, cultivate mid- to high-end consumer markets, and develop a number of robust, highly leveraged new growth points in consumption.

Premier Li Keqiang presided over an executive meeting of the State Council, calling for the thorough and effective implementation of previously decided tax and fee reduction measures, and outlining plans to boost targeted investment in key sectors and weak links.

According to the Chinese Government Website, Premier Li Keqiang presided over an executive meeting of the State Council on September 18, calling for the thorough and effective implementation of previously decided tax and fee reduction measures and ensuring the stability of existing social security contribution collection policies. The meeting also outlined plans to increase targeted investment in key sectors and weak links, thereby boosting domestic demand, promoting structural optimization, and improving people’s livelihoods, while adopting measures to stimulate foreign trade growth and facilitate customs clearance.

The Supreme People’s Court has issued a five-year work plan: to comprehensively incorporate the core socialist values into judicial interpretations.

Recently, the Supreme People’s Court issued the “Work Plan for Fully Integrating the Core Socialist Values into Judicial Interpretations (2018–2023)” (hereinafter referred to as the “Plan”), implementing the central government’s requirements to incorporate the core socialist values into the rule of law and making specific arrangements for judicial interpretation work. Serving as guiding principles for the Supreme People’s Court’s initiation, amendment, and repeal of judicial interpretations over the next five years, the Plan aims to foster and practice the core socialist values, standardize adjudicative criteria and standards, and ensure that the people can feel fairness and justice in every judicial case.

The State Council Information Office has released the white paper “China’s Position on China-U.S. Economic and Trade Frictions.”

On the 24th, the State Council Information Office released the white paper “China’s Position on China-U.S. Economic and Trade Frictions,” aiming to set the record straight on the facts of China-U.S. economic and trade relations, clarify China’s policy stance on these frictions, and promote a reasonable resolution of the issues.

Table of Contents

Table of Contents

Finance & Capital Markets

The China Securities Regulatory Commission is advancing look-through supervision to precisely crack down on regulatory violations, and the northbound look-through mechanism under the Shanghai–Shenzhen–Hong Kong Stock Connect is set to be implemented.

China’s first industrial‑goods options have officially been listed for trading.

CSRC: Listed companies must prevent and eliminate illegal and non-compliant practices that harm investors.

The China Securities Regulatory Commission will refine the capital market framework to support the “Four New” initiatives.

The China Securities Regulatory Commission will impose strict penalties on underwriting offices engaging in ultra-low pricing and kickback practices in corporate bond offerings.

The New Third Board is currently studying ways to refine the information disclosure requirements for changes in corporate equity.

Private placements on the New Third Board show marked divergence, with the pharmaceutical sector achieving an issuance coverage rate exceeding 10%.

Corporate & Commercial

The State Council has issued a document to unleash consumption potential, with new growth drivers guiding the allocation of capital.

The “Guidelines on Due Diligence for Trust Companies’ Fiduciary Duties” Have Been Officially Released.

The China Securities Association supports securities offices in withdrawing from relevant analyst ranking events.

China Banking and Insurance Regulatory Commission: Further increase funding support for small and micro enterprises and private enterprises.

The financial sector is ushering in a new landscape of opening-up, with the removal of foreign‑ownership caps in industries such as insurance and securities imminent.

Regulation of more than 10,000 local financing platforms is being tightened; bankruptcy will dismantle the practice of guaranteed repayment.

Jiangsu Province’s local government bonds were issued for the first time through a tender on the Shenzhen Stock Exchange, with both the issuance and subscription sizes setting new market records.

Taxation

Premier Li Keqiang presided over an executive meeting of the State Council, calling for the thorough and effective implementation of previously decided tax and fee reduction measures, and outlining plans to boost targeted investment in key sectors and weak links.

Li Keqiang: Policies to significantly reduce the tax and fee burden on enterprises are under consideration.

A “combination punch” of tax incentives for corporate restructuring is boosting mixed-ownership reform.

Litigation & Arbitration

The Supreme People’s Court has issued a five-year work plan: to comprehensively incorporate the core socialist values into judicial interpretations.

The Supreme People’s Court, in conjunction with the Ministry of Public Security, the Ministry of Justice, and the China Banking and Insurance Regulatory Commission, has issued operational guidelines to jointly promote the online integrated handling of compensation disputes arising from road traffic accidents.

Other

The State Council Information Office has released the white paper “China’s Position on China-U.S. Economic and Trade Frictions.”

The General Office of the State Council has issued the “Opinions on Improving the National Essential Medicines System.”

Finance & Capital Markets

The China Securities Regulatory Commission is advancing look-through supervision to precisely crack down on regulatory violations, and the northbound look-through mechanism under the Shanghai–Shenzhen–Hong Kong Stock Connect is set to be implemented.

To further advance law-based, comprehensive, and stringent regulatory oversight, fully leverage the frontline supervisory functions of stock exchanges, and foster exchange and cooperation between domestic and international exchanges, the 2018 International Symposium on Frontline Securities Exchange Regulation, co-hosted by the Shenzhen and Shanghai Stock Exchanges, was held at the Shenzhen Stock Exchange on September 21. At the event, Vice Chairman Li Chao of the China Securities Regulatory Commission stated that the Commission will continue to push forward capital market reform and opening-up with greater vigor, in line with the principles of marketization, rule of law, and internationalization, while expanding both domestic and cross-border cooperation.

Li Chao pointed out that, at present, the global economy remains in a phase of divergent adjustment: major advanced economies are tightening monetary policy, trade and economic tensions are escalating, some emerging economies are facing difficulties, and global capital markets remain unsettled. Under these circumstances, all market participants should pay close attention to the market and work together to safeguard it.

As the organizer, operator, and regulator of the market, a stock exchange is built upon a foundation of institutional rules, operational procedures, and technological systems. The account‑holding framework, the membership participation model, and the trade‑clearing and settlement mechanisms all directly shape the methods and effectiveness of oversight—particularly in an environment where markets are evolving rapidly and innovation is advancing at breakneck speed. Accordingly, it is essential to continuously adapt to changing circumstances, refine regulatory practices, and strengthen the underlying infrastructure. In terms of frontline supervision, China has adopted certain distinctive approaches, while also benefiting from the experience of other regulatory authorities through open and constructive learning.

Li Chao stated that, one year ago, at the Shanghai conference, we reached a broad consensus on strengthening frontline supervision at stock exchanges. Although countries differ significantly in their national conditions, market structures, and regulatory frameworks, they all place great emphasis on frontline oversight. This seminar, themed “Building the Foundations of Frontline Supervision,” is precisely grounded in this very consideration.

Li Chao stated that, since last year, the China Securities Regulatory Commission has implemented a series of measures to strengthen the foundational infrastructure for frontline regulatory oversight. First, it has advanced穿透式监管 (penetrative supervision). In China, securities accounts are held directly, with each investor assigned a unique account number and centrally custodied, providing a solid underpinning for frontline supervision. Notably, through the joint efforts of mainland China and Hong Kong, the northbound penetrating‑supervision mechanism under the Stock Connect programs is about to be put into effect. By assigning identification codes to northbound investors, this mechanism seamlessly integrates penetrative supervision with the indirect holding system.

Second, strengthen members’ oversight of clients’ trading activities. Members both possess the advantage of understanding their clients and bear the corresponding obligation. Many countries have well-established practices in this area that are worth emulating. Li Chao stated, “Over the past two years, we have taken measures such as revising regulations, upgrading our systems, conducting training sessions, and carrying out on-site inspections to ensure that members effectively fulfill their client‑management responsibilities and fortify the first line of defense. To further enhance the role of members, starting in June this year, we have launched an extensive training program aimed at providing comprehensive training to all heads of branch offices at more than 10,000 securities offices nationwide within two years.”

Third, accelerate the development of regulatory technology. With the rapid advancement of new technologies such as big data, cloud computing, and artificial intelligence, capital markets have become increasingly complex, creating greater opportunities to enhance regulatory tools and capabilities.

Li Chao stated, “We have formulated and are implementing a comprehensive regulatory technology development plan, leveraging technological tools to monitor market risks, profile listed companies and investors, detect abnormal trading activities across borders, exchanges, and accounts, and precisely crack down on illegal and non-compliant conduct.”

Li Chao pointed out that China’s capital market is, in itself, a product of reform and opening-up. In less than 30 years, it has established the basic framework of a multi-tiered capital market, with its ability to serve the real economy steadily strengthening. Experience has shown that only by steadfastly advancing reform and opening-up can the capital market remain vibrant.

Since the beginning of this year, China’s capital markets have seen a comprehensive acceleration in reform and opening-up. Measures include: refining the share‑repurchase regime for listed companies; piloting employee stock‑ownership plans; substantially relaxing foreign‑ownership caps on securities, futures, and fund management offices; expanding the daily quotas under the Shanghai–Hong Kong and Shenzhen–Hong Kong Stock Connect programs; further easing restrictions on foreign investors opening securities accounts; successfully launching crude oil futures; and actively preparing for the Shanghai–London Stock Connect, among other initiatives.

Li Chao emphasized, “China’s capital market remains a developing market, with ample room for growth as well as the challenges that come with it. We will continue to advance the reform and opening-up of the capital market with greater resolve, in line with the principles of marketization, rule of law, and internationalization, while expanding cooperation both domestically and internationally. The global economy calls for cooperation; financial systems across countries need to work together; and capital markets worldwide likewise require collaboration.”

At the meeting, the exchanges engaged in in-depth discussions on how to better fulfill their frontline regulatory roles and shared their respective experiences in areas such as refining the look-through regulatory framework, enhancing the role of members in trade supervision, and advancing technology-driven regulation.

The participating exchanges believe that the rapidly evolving market landscape places increasingly stringent demands on their frontline regulatory capabilities. Strengthening foundational infrastructure is of paramount practical significance for enhancing and refining these regulatory functions, making it both urgent and essential to analyze and discuss transparent oversight, member‑based supervision, and technology‑driven regulation as an integrated whole. Transparent oversight represents a crucial tool in line with the evolving trends in securities market regulation; it is imperative to fully leverage the role of members and forge synergies with the exchanges to bolster regulatory effectiveness. At present, cutting-edge technologies such as big data, cloud computing, machine learning, and artificial intelligence are flourishing. Exchanges should place greater emphasis on and embrace technological innovation, enhance their capacity for technology‑enabled regulation, diversify their regulatory tools, and strengthen information sharing and cross‑border regulatory cooperation. By doing so, they can jointly prevent and mitigate market risks, uphold market fairness, efficiency, and transparency, and safeguard the legitimate rights and interests of investors.

Going forward, the Shenzhen and Shanghai Stock Exchanges will continue to fulfill their frontline regulatory responsibilities, steadily increase investment in regulatory infrastructure, strengthen systematic research on cutting-edge regulatory issues, draw extensively on the successful experiences and best practices of other exchanges, further refine their regulatory frameworks, enhance their supervisory capabilities, improve regulatory effectiveness, and optimize mechanisms for regulatory cooperation. In doing so, they will ensure the stable functioning of the market and provide a sound market environment for domestic and international investors participating in China’s capital markets.

Representatives from the China Securities Regulatory Commission, the World Federation of Exchanges, relevant leaders and heads of departments and institutions in Shenzhen, as well as representatives from the Shenzhen Stock Exchange, the Shanghai Stock Exchange, the Bombay Stock Exchange, the Bursa Malaysia, Deutsche Börse, Euronext, Hong Kong Exchanges and Clearing Limited, the Korea Exchange, the London Stock Exchange Group, the Luxembourg Stock Exchange, and NASDAQ—totaling 11 exchanges—attended the seminar and delivered remarks.

China’s first industrial‑goods options have officially been listed for trading.

At 9:00 a.m. on September 21, China’s first industrial‑goods options—copper options—were officially listed and began trading on the Shanghai Futures Exchange (hereinafter referred to as SHFE). Luo Hongsheng, Director of the Futures Regulation Department of the China Securities Regulatory Commission, attended the listing ceremony and read a congratulatory message from Fang Xinghai, Vice Chairman of the CSRC. Zheng Yang, Director of the Shanghai Municipal Financial Services Office; Shang Fushan, Vice President of the China Nonferrous Metals Industry Association; and Jiang Yan, Chairman of the SHFE, each delivered remarks and jointly launched the trading of copper options. Yan Shaoming, Deputy Director of the Futures Regulation Department of the CSRC, read out the CSRC’s official reply approving the Shanghai Futures Exchange to commence copper options trading. The listing ceremony was presided over by Xi Zhiyong, General Manager of the SHFE.

In his congratulatory message, Fang Xinghai, Vice Chairman of the China Securities Regulatory Commission, pointed out that the official launch and operation of copper options represent a concrete step taken by the CSRC to implement the spirit of the 19th National Congress of the Communist Party of China and to fulfill the CPC Central Committee and the State Council’s call to “steadily expand the range of futures and options products.” Moreover, copper options mark the first-ever expansion of China’s options offerings from the agricultural sector into the industrial domain. The copper industry plays a pivotal role in China’s industrial system and in the bulk commodities market. As one of the most mature products on China’s futures market, copper futures, the introduction of copper options is of great significance for enhancing risk management capabilities among copper‑industry enterprises, fostering coordinated development between exchange‑traded and over‑the‑counter markets, and strengthening the pricing influence of China’s copper futures market—thereby further consolidating the Shanghai Futures Exchange’s position as one of the world’s three major copper pricing centers.

In his congratulatory address, Fang Xinghai stated that, following the launch of copper options, the China Securities Regulatory Commission will remain guided by market demand and continue to develop futures and options products that meet the needs of the real economy and are supported by favorable market conditions. The Commission will actively advance the listing of commodity futures on pulp, red dates, ethylene glycol, No. 20 rubber, and other commodities, as well as commodity options on natural rubber, cotton, corn, and more, thereby continually enriching the diversity of the futures market’s product lineup. He emphasized that exchanges must further enhance the quality of their existing contracts by comprehensively optimizing them across all dimensions—contract terms, detailed rules, warehouse networks, and more—to improve market efficiency and better facilitate the full realization of market functions. At the same time, exchanges should fortify the first line of defense in market supervision and risk prevention, intensify regulatory enforcement, strengthen their capacity to detect and address violations, and refine the targeting and effectiveness of risk‑management measures, ensuring the safe and sound operation and healthy development of the futures and options markets.

In his address, Zheng Yang stated that the launch of copper options will provide enterprises and institutions across the relevant industrial chain with a more diversified and flexible array of financial derivatives. This development is of great significance for enhancing the price-discovery function of the futures market, strengthening China’s pricing capabilities in the futures arena, and bolstering the reach and global influence of Shanghai as an international financial center.

Shang Fushan stated that the launch of copper options is an important measure to refine the structure of the nonferrous metals derivatives market, align with industry trends in risk management, and meet the diversified hedging needs of a broad range of producers, consumers, and trading enterprises. It will help enhance market functions, strengthen China’s role and standing in the international pricing system for nonferrous metals, and bolster Chinese nonferrous metal companies’ risk management capabilities, market competitiveness, and level of internationalization.

In his acceptance speech, Jiang Yan stated that the launch of copper options marks the inaugural step of the Shanghai Futures Exchange’s “one core, two wings” product diversification strategy—specifically, the derivatives‑innovation wing—thereby further enriching the exchange’s product lineup. Building on the overarching goal of “enhancing, refining, and strengthening commodity futures,” this development has enabled the simultaneous advancement of other derivatives, such as commodity futures options, as well as a warehouse receipt trading platform. Guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era and under the overarching principles of the 19th National Congress of the Communist Party of China, the Shanghai Futures Exchange will remain steadfast in its commitment to serving the real economy, comprehensively strengthen its frontline regulatory responsibilities, effectively manage market risks, safeguard investors’ legitimate rights and interests, and ensure the stable and sound operation of the market.

More than a hundred guests from Shanghai, relevant national ministries and commissions, nonferrous metals industry associations and enterprises, CSRC-affiliated institutions, overseas exchanges, SHFE member offices, margin‑depository banks, market organizations, and the media attended the ceremony.

CSRC: Listed companies must prevent and eliminate illegal and non-compliant practices that harm investors.

The “2018 Sixth Session of the Chairpersons and General Managers Training Program for Listed Companies (Pharmaceutical Industry Special)” was recently held, co‑hosted by the Listed Company Supervision Department of the China Securities Regulatory Commission and the China Association of Public Companies. With the theme “Decoding Pharmaceutical Industry Regulatory Policies to Support Compliance‑Driven Development,” the program aimed to convey regulatory guidance and enhance corporate governance and standardized operations. In response to recent risk events in the pharmaceutical sector, it brought together experts and industry leaders to interpret relevant policies on the sector’s orderly development and quality‑and‑safety management, thereby helping listed pharmaceutical companies achieve compliant growth and fulfill their environmental protection responsibilities.

Leaders from the Listed Companies Supervision Department of the China Securities Regulatory Commission attended the opening ceremony and, in their address, outlined the overall state of listed companies and the regulatory framework. They also expressed expectations for chairpersons and general managers of listed companies regarding recent high-profile issues that have drawn widespread public attention. They urged listed companies to work hand in hand with regulatory authorities and the Listed Companies Association to jointly foster the healthy and stable development of the stock market; called on chairpersons and general managers to set a positive example by enhancing shareholder value and increasing the corporate value of their companies, thereby elevating their own personal standing; and emphasized the need for listed companies to resolutely prevent any illegal or non-compliant practices that harm investors and to officely uphold the bottom line of averting systemic risks in the market.

To support the standardized development of the pharmaceutical industry and fulfill environmental protection responsibilities, this session of the training program has invited experts from the Pharmacopoeia Commission of the National Medical Products Administration and the Ministry of Ecology and Environment to deliver specialized lectures under the “Ministry‑Direct Channel” segment.

Meanwhile, to bolster compliance awareness within the pharmaceutical industry, the training program’s “Strong Nation Night Talk” session featured a special presentation by Wang Zhile, a researcher at the Research Institute of the Ministry of Commerce and Director of the Beijing New Century Institute for Multinational Corporations, on the topic “Strengthening Compliance Awareness to Promote Sustainable Corporate Development.” He emphasized that conducting business with integrity and in full compliance is a company’s primary responsibility, and expressed his hope that Chinese enterprises will proactively enhance their commitment to compliant operations.

In addition, experts from the CSRC’s Department of Listed Company Supervision, the Department of Issuance Supervision, and the CSRC’s Administrative Penalty Committee delivered presentations to the attending entrepreneurs on topics such as M&A and restructuring of listed companies, regulation of refinancing, and recent cases of violations. During the breakout discussion sessions, they engaged in in-depth exchanges with the participants on issues including asset integration in M&A and restructuring, cross-border M&A, and refinancing policies.

The pharmaceutical industry is vital to the health and well-being of the people, and its development is a pressing need for improving livelihoods. To advance this sector, we must be guided by the spirit of the 19th National Congress of the Communist Party of China, uphold the new development philosophy, and remain committed to a people-centered approach. The Listed Companies Association will also closely monitor the latest developments in the pharmaceutical industry, promptly inviting relevant government departments and successful entrepreneurs to interpret and share pertinent policies and best practices, thereby supporting the sound and sustainable growth of listed pharmaceutical companies.

The China Securities Regulatory Commission will refine the capital market framework to support the “Four New” initiatives.

Recently, Yan Qingmin, Vice Chairman of the China Securities Regulatory Commission (CSRC), stated at the 2018 Beijing CBD International Financial Forum that, going forward, the CSRC will continue to deepen reform and opening-up in the capital market, refine institutional mechanisms to support new technologies, new industries, new business forms, and new models—collectively referred to as the “Four New”—and integrate the industrial development, technological innovation, and financial services ecosystems. The goal is to foster high-quality integration between industry and finance, with a focus on bolstering independent innovation in key sectors, strengthening support for priority areas and leading enterprises, and advancing high‑quality development.

Yan Qingmin stated that in recent years, the China Securities Regulatory Commission has undertaken proactive efforts to fully leverage the functions of the capital market and promote the integration of industry and finance. The key lesson learned is that it is essential to uphold the “five characteristics”:

First is adaptability. Finance is the lifeblood of the real economy, and serving the real economy is its fundamental mission. Whether financial services can meet the needs of the real economy and deliver high‑quality support is the ultimate criterion for assessing the success of integrating industry and finance. Finance must neither outpace the real economy—leading to a drift from the real sector to the virtual one and self‑indulgence—nor lag behind it, thereby becoming an impediment to economic development. The China Securities Regulatory Commission has consistently upheld the principle that capital markets must serve the real economy, guided by major national policies and strategic plans. It has comprehensively strengthened foundational institutional frameworks, leveraged the direct financing function of capital markets, channeled social capital toward high‑quality enterprises, and worked diligently to enhance the quality of listed companies.

Second, innovation. In the integration of industry and finance, it is essential both to uphold financial services that support technological innovation and to strengthen support for new technologies, new industries, new business forms, and new models; and to innovate financial services by developing new products and delivery mechanisms that meet the needs of the real economy. The China Securities Regulatory Commission has leveraged the strengths of the capital market to actively support efforts in technological innovation.

Third is complementarity. In the process of fostering the integration of industry and finance, various financial markets, institutions, and instruments should leverage their respective strengths to complement one another and work in synergy. For a long time, China’s financing structure has been dominated by indirect financing; although direct financing has seen some growth in recent years, its share remains relatively low. The China Securities Regulatory Commission has earnestly implemented the spirit of the 19th National Congress of the Communist Party of China, and while striving to raise the level of direct financing, it has also emphasized the capital market’s comprehensive role in serving real‑economy enterprises.

Fourth, inclusiveness. At present, the difficulties and high costs of financing remain pressing challenges for small and medium-sized enterprises, making financial support for their development a critical task. In the new era, the integration of industry and finance should focus on broadening the scope of financial services and prioritizing inclusiveness.

Fifth, risk management. The CSRC has consistently adhered to the overarching principle of seeking progress while maintaining stability, fully recognizing that “stability” is the foundation and prerequisite for deepening capital market reform and opening-up, and that a stable market environment is indispensable for leveraging the capital market’s strengths to foster closer integration between industry and finance.

The China Securities Regulatory Commission will impose strict penalties on underwriting offices engaging in ultra-low pricing and kickback practices in corporate bond offerings.

Recently, the Corporate Bond Supervision Department of the China Securities Regulatory Commission issued the “Q&A on Routine Supervision of Corporate Bonds (No. 7),” clarifying that it will continue to refine the issuance‑related regulatory framework and strengthen ongoing and post‑issuance oversight. Specifically, it will conduct special on-site inspections of corporate bond projects characterized by excessively low underwriting fees or questionable professional standards. For underwriters found to have deficiencies in their professional practices or engaged in improper commitments or other violations, strict disciplinary measures will be imposed in accordance with relevant regulations. At the same time, the department reiterated its office prohibition against issuers and underwriters offering rebates or other forms of compensation to investors.

Regarding the situation in which certain underwriting institutions in the exchange‑traded bond market charge underwriting fees significantly below the standard rate, a responsible official from the relevant department of the China Securities Regulatory Commission stated that the CSRC had already clarified the applicable regulatory requirements in its “Q&A on Routine Supervision of Corporate Bonds (No. 4),” issued on August 16, 2016. Specifically, pricing for corporate bond underwriting fees and other commercial activities such as soliciting and executing underwriting engagements must adhere to market‑based and law‑based principles. Underwriting institutions are required to exercise due diligence and strictly comply with professional conduct standards and regulatory rules. The CSRC pays close attention to practices within the industry that undermine fair competition and disrupt market order, and will handle such violations rigorously in accordance with relevant provisions. The public and the media are also encouraged to continue monitoring any illegal or non‑compliant behavior. In line with Article 11 of the Anti-Unfair Competition Law and Article 38 of the Measures for the Administration of the Issuance and Trading of Corporate Bonds (hereinafter referred to as the “Measures”), the CSRC will continue to refine its issuance‑related regulatory framework, strengthen ongoing and post‑event supervision, and guide and urge underwriting institutions to conduct their business in a fair, honest, and diligent manner.

First, we will focus on the professional quality of underwriting institutions and strengthen oversight of the issuance and underwriting process. For corporate bond offerings with excessively low underwriting fees or questionable professional standards, we will conduct targeted on-site inspections to verify whether the underwriters have carried out adequate and appropriate due diligence and whether the issuer’s information disclosures are true, accurate, and complete. Underwriters found to have deficiencies in their professional practices, or engaged in other violations such as making unlawful commitments, will be subject to strict disciplinary action in accordance with applicable regulations.

Second, continue to strengthen the self-regulatory oversight of the Securities Association. The Securities Association exercises lawful self-regulation over unfair competitive practices in underwriting fees, and, based on the receipt, compilation, and analysis of information related to corporate bond underwriting, it issues regular special reports, makes industry-wide public announcements, provides individualized notifications, conducts on-site interviews, and carries out self-regulatory inspections—measures that serve to warn the industry and promote its sound and compliant development.

Third, we will study and refine the evaluation indicators in the securities offices’ classification assessment that are relevant to corporate bond business, and guide the Securities Association of China in developing an implementation plan for classified management of securities offices’ corporate bond underwriting activities, thereby using policy incentives to positively steer underwriting institutions toward orderly competition.

Can issuers and underwriting institutions return fees to investors? A responsible official from the relevant department of the China Securities Regulatory Commission (CSRC) emphasized that, pursuant to Article 38 of the Administrative Measures, it is strictly prohibited for issuers and underwriting institutions to return fees to investors. The applicable regulations are clear and must be rigorously enforced. For issuers or underwriting institutions, as well as their responsible personnel, who violate these provisions, the CSRC will, in accordance with Article 58 of the Administrative Measures, impose regulatory measures such as ordering corrective action, conducting regulatory talks, issuing warning letters, requiring public explanations, mandating participation in training, requiring periodic reporting, designating individuals as unsuitable candidates, and temporarily suspending the acceptance of documents related to administrative licensing. Where administrative penalties are warranted by law, such penalties shall be imposed in accordance with the Securities Law, the Administrative Penalty Law, and other relevant laws and regulations, as well as the CSRC’s pertinent rules. If criminal offenses are suspected, the cases shall be referred to the judicial authorities for prosecution in accordance with the law. In particular, where an underwriting institution commits serious violations, the CSRC may, pursuant to Article 63 of the Administrative Measures, impose a regulatory measure suspending the acceptance of documents pertaining to its securities underwriting business for a period of three to twelve months.

In addition, in July of this year, the China Securities Regulatory Commission (CSRC) issued the “Regulations on Integrity in the Conduct of Securities and Futures Operating Institutions and Their Staff” and the “Opinions on Strengthening Risk Prevention and Control over Integrity in Investment Banking Activities, Including the Engagement of Third Parties by Securities Offices.” With respect to institutions and individuals that violate these regulations, the CSRC will, in accordance with the law, impose administrative regulatory measures, administrative penalties, or bans from the securities market. Where criminal offenses are suspected, such cases will be referred to the supervisory and judicial authorities for prosecution, and the perpetrators will be held criminally liable.

The New Third Board is currently studying ways to refine the information disclosure requirements for changes in corporate equity.

On September 21, a spokesperson for the National Equities Exchange and Quotations System addressed two key information-disclosure issues: First, in the context of agreed transfers involving specific matters, investors and their concert parties that intend to reach or exceed the threshold for disclosing changes in equity interests must promptly file an equity‑interest change report prior to applying to the National Equities Exchange and Quotations Company for approval of such transfers. Second, to further clarify and refine the information‑disclosure requirements governing changes in equity interests and acquisitions by listed companies, the National Equities Exchange and Quotations Company is currently drafting relevant regulations.

On December 22, 2017, the National Equities Exchange and Quotations Company issued the “Detailed Rules for Stock Transfers on the National SME Share Transfer System,” revising the trading regime. In June 2018, the National Equities Exchange and Quotations Company, in collaboration with China Securities Depository & Clearing Corporation, promulgated the “Provisional Measures for the Agreement-Based Transfer of Shares of Listed Companies on the National SME Share Transfer System” and simultaneously released the corresponding operational guidelines.

The spokesperson stated that when investors and their concert parties transfer shares through after-hours agreement-based transfers, they must promptly disclose a report on changes in equity interests upon reaching 10% of the listed company’s outstanding shares, or whenever their holdings subsequently reach additional multiples of 5% of the outstanding shares. In the case of agreement-based transfers for specific matters, if an investor and its concert parties intend to meet or exceed the threshold for disclosing changes in equity interests, they must timely file a report on such changes prior to submitting an application to the National Equities Exchange and Quotations Company for the relevant agreement‑based transfer.

Regarding information disclosure issues related to changes in persons acting in concert, a spokesperson stated that, in practice, if the number of a listed company’s de facto controllers decreases without any new de facto controllers being added, and the company’s largest shareholder remains unchanged, the listed company shall disclose an announcement on the change in de facto controllers within two transfer days from the date the fact occurs. To further clarify and refine the information disclosure requirements for equity changes and acquisitions by listed companies, the National Equities Exchange and Quotations Company is currently drafting relevant regulations and will release them to the market at an appropriate time.

Private placements on the New Third Board show marked divergence, with the pharmaceutical sector achieving an issuance coverage rate exceeding 10%.

Since the beginning of this year, amid a sluggish market environment, the New Third Board has exhibited a pronounced trend of divergence in private placements. Statistics show that from January to August, 1,032 listed companies on the New Third Board completed 1,059 equity offerings, raising a total of RMB 44.605 billion, with an average fundraising amount of RMB 42.12 million per deal. Financing activity on the market is characterized by emerging trends, including capital inflows concentrating among high-quality listed offices, a positive correlation between fundraising size and corporate profitability, and an increasing share of participation by existing shareholders and institutional investors.

Against the backdrop of China’s economic transformation and upgrading, as well as deleveraging in the financial sector, investor behavior has become more cautious, leading to a year-on-year decline in the financing volume on the New Third Board; however, stock issuance valuations have remained broadly stable.

In the first eight months of this year, companies in hot emerging sectors demonstrated strong fundraising capabilities. The New Third Board has actively supported the financing and growth of innovative enterprises that embody new technologies, new industries, new business forms, and new models. Analyzing by major industry categories, among non-financial listed companies, the top ten sectors accounted for 56% of all equity offerings. Notably, companies in the software and information technology services sector conducted over 100 financings, while pharmaceutical manufacturing offices achieved an industry‑wide offering coverage rate exceeding 10%. With an average single‑round funding size of RMB 67.16 million, this sector ranked first across all industries, underscoring its exceptional fundraising strength.

In terms of industry‑wide fundraising, listed companies in the software and information technology services sector, the electrical machinery and equipment manufacturing sector, and the pharmaceutical manufacturing sector each raised more than RMB 2 billion. Listed offices operating in key priority areas under the “Made in China 2025” initiative—such as electrical machinery and equipment manufacturing, pharmaceutical manufacturing, computer, communications, and other electronic equipment manufacturing, special‑purpose equipment manufacturing, chemical raw materials and chemical products manufacturing, and automobile manufacturing—rank among the top ten industries by total funding raised, demonstrating significantly stronger overall financing capacity than other sectors.

Since the beginning of this year, the listed companies that have terminated their stock offerings have been predominantly from traditional industries or declining sectors. The industry‑specific differentiation in the financing capabilities of listed companies is pronounced. From January to August 2018, the largest share of financing rounds—accounting for 52% of all such transactions during the period—was conducted by companies whose pre‑issuance annual net profits were RMB 10 million or less, underscoring the New Third Board’s role as a market‑based financing platform for small and micro enterprises in their early stages that have yet to achieve substantial profitability. With the exception of high‑quality pharmaceutical manufacturers like Junshi Biosciences, which, despite significant losses and no current profitability, enjoy promising growth prospects and can secure sizable funding, the overall scale of financing raised by listed companies generally correlates positively with their pre‑issuance annual net profit levels. As net profit levels rise, the average size of each financing round also increases: among the 48 companies with annual net profits between RMB 50 million and RMB 100 million, the average financing amount per round exceeds RMB 110 million; meanwhile, the nine companies with annual net profits exceeding RMB 100 million boast an average financing amount of as much as RMB 410 million per round.

Compared with the same period last year, the average financing amount for loss-making enterprises declined, while the average financing amount for profitable enterprises increased to varying degrees, indicating that the market is better able to meet the financing needs of profitable offices.

Meanwhile, data show that from January to August 2018, among the subscribers to equity offerings by listed companies, the ratio of subscriptions by existing shareholders to those by new shareholders rose from 2:5 in the same period last year to 1:2, while the corresponding ratio of subscription amounts improved from 1:4 to 2:5, indicating a higher share of internally generated financing. Among external investors, the participation rate of individual investors declined compared with the same period last year, whereas the participation rate of institutional investors increased. The ratio of subscription amounts between external individual and institutional investors stood at 1:4, with institutions serving as the primary source of raised capital. Notably, 35 listed companies participated in the issuance and subscription activities of 35 listed offices, with an average subscription amount of RMB 60 million per transaction—up more than 70% from the level in the same period last year (RMB 35.2 million).

Commercial & Corporate

The State Council has issued a document to unleash consumption potential, with new growth drivers guiding the allocation of capital.

The “Several Opinions on Improving the Mechanisms and Systems for Promoting Consumption and Further Unleashing Residents’ Consumption Potential,” recently issued by the CPC Central Committee and the State Council, calls for building more mature, segmented consumer markets and fostering new growth drivers in consumption. Focusing on upgrading residents’ consumption in areas such as food, clothing, housing, transportation, and services, the document seeks to overcome deep-seated institutional and systemic barriers, meet consumers’ tiered and diversified needs, ensure that basic consumption remains affordable, accessible, and safe, cultivate mid- to high-end consumer markets, and develop a number of robust, highly leveraged new growth points in consumption.

Xu Hongcai, Deputy Chief Economist at the China Center for International Economic Exchanges, stated that consumption has become the primary driver of economic growth. As China’s economy transitions from rapid expansion to a stage of high-quality development, residents’ expectations for the quality of their spending on food, clothing, and everyday goods will continue to rise. With basic needs now largely met, future shifts in the consumption structure are poised to profoundly reshape investment flows and industrial patterns.

The “Opinions” propose continuously upgrading and enhancing consumption of physical goods. In the areas of housing and transportation, vigorous efforts will be made to develop the housing rental market, particularly long-term rentals. Drawing on and scaling up the experience gained from pilot programs, we will accelerate the cultivation and expansion of the housing rental market in large and medium-sized cities experiencing net population inflows. Legislative work on housing rentals will be expedited to safeguard the legitimate rights and interests of all stakeholders. We will strengthen the construction and renovation of urban infrastructure—including water supply, sewage treatment, waste management, and heating systems in northern regions—and step up age‑friendly upgrades, such as installing elevators in older urban residential communities. Efforts will be made to promote the optimization and upgrading of automobile consumption. Strict oversight of vehicle product quality will be enforced, and a robust mechanism for holding manufacturers accountable for quality issues will be put in place. The development of a shared, resource‑efficient, and socially oriented automotive distribution system will be encouraged, and policies restricting the relocation of used cars will be comprehensively lifted. Fiscal and tax incentives, including exemption from vehicle acquisition tax and purchase subsidies for new energy vehicles, will be effectively implemented. The aftermarket—such as motor racing—will be actively developed. Furthermore, the construction of urban parking facilities and charging stations for new energy vehicles will be intensified.

Gao Feng, spokesperson for the Ministry of Commerce, stated that China’s consumer market continued to maintain a steady growth trend in August. In particular, online retail sales of physical goods posted robust expansion. According to data from the National Bureau of Statistics, during the first eight months of the year, nationwide online retail sales of physical goods increased by 28.6% year on year, accounting for 17.3% of total retail sales of consumer goods—up 3.5 percentage points from the same period last year. In August, among the retail formats closely monitored by the Ministry of Commerce, the growth rates of online retail, shopping malls, and supermarkets accelerated by 1.3, 1, and 0.4 percentage points, respectively, compared with the previous month.

“As the national economy continues to maintain an overall stable and steadily improving growth trajectory, and as a series of policies and measures to boost consumption are being accelerated and implemented, the steady development of the consumer market is expected to persist,” Gao Feng stated.

The “Guidelines on Due Diligence for Trust Companies’ Fiduciary Duties” Have Been Officially Released.

The “Guidelines on Due Diligence for Trust Companies’ Fiduciary Duties” (hereinafter referred to as the “Guidelines”), formulated under the auspices of the China Trustee Association, have been officially released. This marks the first-ever set of specific measures in the trust industry aimed at ensuring that trust companies faithfully discharge their fiduciary responsibilities, and it also represents an important step by the Association to further strengthen self-regulatory oversight within the sector.

The Guidelines comprise ten chapters (64 articles), covering the following areas: General Provisions; Due Diligence and Approval Management; Product Marketing and Trust Establishment; Operational Management; Contract Standardization; Termination and Liquidation; Information Disclosure; Business Innovation; Self-Regulatory Management; and Supplementary Provisions.

The Guidelines were developed in accordance with four principles. First, they embody the principle of “seller’s due diligence and buyer’s own responsibility”; second, they are primarily based on existing rules, supplemented by a few innovative provisions; third, they emphasize broad applicability; and fourth, they combine mandatory and discretionary norms.

The Guidelines are primarily based on the “One Law and Two Regulations” as well as other regulatory provisions governing the trust industry, draw upon the supervisory frameworks applicable to asset management activities in other types of financial institutions, and extensively incorporate relevant provisions from international trust laws and regulations.

The development of the Guidelines commenced in July 2015. Under the guidance of the Trust Department of the former China Banking Regulatory Commission, experts from regulatory authorities, trust companies, and the legal profession were invited to participate. Through a series of specialized seminars and other methods, the document underwent repeated deliberation and revision. Throughout this process, the views of judicial and arbitration bodies were thoroughly solicited, and reasonable suggestions from member institutions were widely sought and incorporated. In addition, the Guidelines were revised and refined in line with the spirit of the “Guiding Opinions on Regulating Asset Management Business of Financial Institutions,” ultimately resulting in the finalized version. The Guidelines have been reviewed and approved by the Association’s Members’ Congress.

The Guidelines, as an industry self-regulatory framework guiding the business conduct of trust companies, serve as a valuable supplement to national laws and regulations, the rules and normative documents issued by banking regulatory authorities, and the internal rules and regulations of trust companies.

The promulgation and implementation of the Guidelines are of significant practical importance for further standardizing the business conduct of trust companies, clarifying the due‑diligence requirements for their fiduciary duties, encouraging trust companies to conscientiously fulfill their responsibilities as trustees, and safeguarding the legitimate rights and interests of all parties to trust arrangements.

The China Securities Association supports securities offices in withdrawing from relevant analyst ranking events.

On September 21, the Securities Association of China (SAC) stated that, in light of the negative public sentiment and unfair competitive practices observed in the current New Fortune Analyst Selection, which have seriously undermined the event’s integrity, fairness, and professionalism, 30 securities offices have decided to withdraw from participating in the selection. Additionally, some individuals from these offices who had entered the competition under their personal names have also announced their withdrawal. The SAC expressed its support for and commended the proactive efforts of the relevant securities offices to safeguard the professional reputation of securities analysts and uphold the industry’s credibility.

The China Securities Association believes that their proactive efforts to uphold integrity, resist unethical practices, and cultivate a positive public image—while conscientiously fulfilling their social responsibilities—will help strengthen the ethical conduct of securities analysts, purify the industry’s operating environment, rally positive momentum for the market’s healthy development, and promote the professionalization of securities research.

Recently, the China Securities Regulatory Commission issued the “Regulations on Integrity in the Conduct of Securities and Futures Operating Institutions and Their Staff,” requiring all securities offices to assume primary responsibility, strengthen oversight and management of their employees’ ethical conduct, and safeguard the sound development of the capital market. To further standardize the professional conduct of securities analysts, enhance the management of their integrity, and foster a cleaner industry environment, the Asset Management Association of China released on September 3 the “Notice on Strengthening the Management of Securities Analysts’ Participation in Relevant Evaluation Activities.” The notice mandates that securities offices tighten controls over analysts’ involvement in such evaluations, reinforce the cultivation of analysts’ professional ethics, continuously elevate their professional standards, jointly protect the reputation of the analyst profession, uphold market fairness and impartiality, better serve investors, and promote the healthy development of the capital market.

A relevant official from the China Securities Association stated that, going forward, the Association will continue to support and encourage securities offices to proactively resist evaluation activities that involve conflicts of interest or lack fairness, thereby jointly safeguarding the industry’s interests. At the same time, the official called on all participating parties to strengthen integrity and self-discipline and to enhance their sense of social responsibility.

China Banking and Insurance Regulatory Commission: Further increase funding support for small and micro enterprises and private enterprises.

On the 21st, the China Banking and Insurance Regulatory Commission held its first press conference since the issuance of its “Three-Designation” plan. Spokesperson Xiao Yuanqi stated that the CBIRC has consistently attached great importance to this work. Since the beginning of this year, it has conducted thorough surveys on the financing practices of small and micro enterprises and private offices, thoroughly examined the issues at hand, and implemented corresponding measures, achieving some positive results—primarily in the following areas.

First is to revitalize existing assets. By starting with the optimization of existing resources, this approach is reflected in three key actions: “squeeze,” “free up,” and “tap.”

“Squeezing” means reallocating credit resources to small and micro enterprises and private offices. Specifically: first, by drawing from large enterprises that have been over‑credited—many of which suffer from multiple lines of credit and excessive lending, thereby tying up an undue share of credit resources—and redirecting a portion of these excess funds to small and micro businesses and private enterprises; second, by weeding out “zombie enterprises,” requiring banking and insurance institutions to resolutely exit such entities and cease extending credit; and third, by reclaiming funds tied up in conduit arrangements. Since last year, a key focus of the China Banking and Insurance Regulatory Commission in standardizing market order has been to reduce reliance on conduits, squeezing out the capital diverted from the real economy into speculative activities, and channeling those funds instead to support the real economy.

“Teng” means freeing up more credit resources to support private enterprises and small and micro businesses. First, banks are stepping up the disposal of non‑performing assets—through cash recovery, write‑offs, bulk transfers, and other measures—to remove these bad loans from their balance sheets, thereby creating additional lending capacity. This newly available space is then channeled into small and micro enterprises, private offices, as well as manufacturing and high‑tech strategic industries. For example, from January to August, banking institutions disposed of over RMB 800 billion in non‑performing assets, unlocking substantial new lending room. Second, this “teng” is achieved through debt‑to‑equity swaps: by converting corporate loan commitments into equity stakes held by the implementing companies, banks free up corresponding credit capacity. To date, the total value of debt‑to‑equity agreements has reached RMB 1.7 trillion.

“Digging” means unlocking the potential of banking and insurance institutions. By pursuing efficiency through improved management and by enhancing the operational and managerial capabilities of banks and insurers themselves, we can tap into internal reserves and revitalize existing capital.

Second, we must make effective use of new resources. Specific measures include: First, unblock the transmission mechanism of monetary and credit policies, channeling funds that have been stuck within the financial system to the real economy—particularly to small and micro enterprises and private offices—at the fastest possible pace and at reasonable costs. Second, integrate internal resources, especially capital, and direct banking and insurance funds as much as possible toward small and micro enterprises and private businesses. In terms of quantity, this means increasing their share; in terms of cost, it involves implementing preferential internal transfer pricing (FTP) to reduce expenses, particularly for small and micro enterprises and private offices. Third, we must enhance the efficiency of capital utilization, ensuring that funds are deployed where they can deliver the greatest impact—directly to areas where the real economy has genuine needs. In particular, we should tilt resources toward enterprises that are temporarily facing difficulties but possess promising growth prospects, as well as those currently affected by trade tensions, thereby improving the overall efficiency of capital deployment.

Third, we have combined short-term window guidance with the development of medium- and long-term mechanisms. On the one hand, for small and micro enterprises, we have set the “two increases and two controls” targets. The “two increases” mean that the growth rate of loans to small and micro enterprises should not be lower than the overall loan growth rate, and the number of borrowing entities should not fall below the level of the same period last year. This year, the growth rate of loans to small and micro enterprises exceeded the average loan growth rate by 0.3 percentage points, and the number of such borrowers remained at least on par with the previous year—both objectives have been achieved. As for the “two controls,” the first is to keep costs reasonably in check; we have asked large and medium-sized banks to take the lead in demonstrating a “leading‑goose effect,” setting their own interest-rate targets for small and micro enterprises, and working to reduce costs. The other control involves managing risks and maintaining the quality of loan portfolios. For enterprises temporarily facing difficulties, we have instructed banking institutions not to arbitrarily withdraw loans, tighten credit, or cut off lending, but instead to provide support, fostering a “community of shared destiny” between banks and enterprises and helping them overcome their challenges. This approach relies on regulatory window guidance.

On the other hand, the China Banking and Insurance Regulatory Commission places great emphasis on establishing long-term mechanisms to stabilize—and even expand—credit support for small and micro enterprises as well as private offices. These two mechanisms are the joint credit‑granting framework and the creditors’ committee system. By setting up a joint credit‑granting mechanism, banks jointly assess and deliberate on a company’s financing needs, then provide appropriate funding, thereby preventing reckless expansion, particularly into unfamiliar or non‑core business areas. This helps enterprises maintain prudent leverage levels and avoid exacerbating debt burdens. Meanwhile, the creditors’ committee primarily assists companies temporarily facing difficulties by fostering coordinated action among creditors, enabling them to help the enterprise navigate its challenges. As you may have seen in the news, several large private enterprises and state‑owned offices have leveraged this mechanism to undertake restructuring and negotiate creditor agreements, achieving a successful turnaround and seeing their operations steadily improve.

In addition, the China Banking and Insurance Regulatory Commission (CBIRC) is committed to helping banks establish a long-term mechanism that encourages them to “dare to lend, be willing to lend, and be able to lend.” The “dare to lend” component calls for banks to put in place mechanisms for due‑diligence exemption from liability and error‑correction tolerance. Many small and micro enterprises lack collateral, have unstable cash flows, and possess relatively weak risk‑resilience, leading some bank employees—particularly credit officers—to feel apprehensive about taking on such risks. At the same time, loans to small and micro enterprises tend to carry higher default rates; typically, their non‑performing loan ratios exceed the overall average by several percentage points. Fearing accountability, some bank staff develop a reluctance to extend credit. To address these concerns, the CBIRC has mandated that banks strengthen the development of systems for due‑diligence exemption and error‑correction tolerance, ensuring that such frameworks are clear and unambiguous, revising unreasonable provisions, and expediting the formulation of any missing policies.

The so‑called “ability to lend” means having sufficient resources—such as credit lines and capital—directed toward small, micro, and private enterprises, enabling banks to extend loans. At the same time, it requires that bank employees possess the expertise to identify new growth opportunities, recognize these small and micro enterprises as well as private offices, and provide them with tailored services.

The so‑called “willingness to lend” primarily hinges on the design of incentive mechanisms. These mechanisms involve a thorough review, streamlining, and revision of the performance‑evaluation system, ensuring that employees engaged in small‑and‑micro enterprise and private‑sector lending—whether in risk management or other areas—are treated on an equal footing with their counterparts in other financial lines of business, receiving incentives commensurate with the effort they invest and the responsibilities they shoulder. Lending to small and micro enterprises is, by nature, more demanding: individual loan sizes tend to be modest, unlike those for large corporations, which are typically much larger. Moreover, such businesses are often scattered across streets and neighborhoods, even in rural fields, requiring credit officers to conduct on‑site visits and extensive fieldwork. The time, energy, and costs involved are substantial; therefore, it is essential to foster their motivation and initiative, and the performance‑evaluation framework must be designed to safeguard this objective.

The financial sector is ushering in a new landscape of opening-up, with the removal of foreign‑ownership caps in industries such as insurance and securities imminent.

On September 20, Premier Li Keqiang of the State Council stated, in response to questions from Chinese and foreign business leaders attending the 2018 Summer Davos Forum in Tianjin, “I am confident that, within three years, eligible foreign enterprises will be granted full‑license, full‑equity operating qualifications in China’s financial sector.”

Premier Li Keqiang stated that the financial services sector is a rather unique field, with its degree of openness closely tied to a country’s stage of development and its regulatory capacity. As the world’s second-largest economy, China regards maintaining financial stability as essential not only for itself but also for the global economy. Accordingly, we are officely committed to both further opening up the financial services sector and ensuring that this process proceeds in an orderly manner. Over the next few years, China will comprehensively open its financial services industry. At present, we have already lifted foreign‑ownership caps in the banking sector; in the coming years, we will extend this liberalization to the insurance and securities sectors, removing ownership restrictions for qualified enterprises as well. We stand ready to grant pre‑entry national treatment to foreign investors seeking to enter China’s financial sector.

Xu Yang, Chief Macro Analyst at Dingdian Finance, stated that lifting restrictions on the scope of joint‑venture securities operations and allowing full foreign participation in securities‑related businesses will enhance market competition and enable China’s securities industry to more effectively absorb international best practices and improve service quality. For investors, the entry of high‑caliber offices will diversify securities‑related products while reducing transaction costs.

In August this year, the China Banking and Insurance Regulatory Commission issued the “Decision on Abolishing and Amending Certain Regulations,” which removed restrictions on foreign ownership caps in Chinese-funded banks and financial asset management companies, thereby implementing a unified equity‑investment ratio regime for both domestic and foreign investors. Officials from the relevant departments of the CBIRC have stated that significantly easing market access and expanding the opening-up of the service sector are key components of the new pattern of comprehensive opening-up adopted at the 19th National Congress of the Communist Party of China, with further liberalization of foreign access to the financial sector serving as the top priority in advancing the opening-up of China’s service industry.

Xu Yang stated that lifting shareholding‑ratio restrictions in the banking sector has been a gradual, step‑by‑step process. On this basis, regulators have introduced a series of measures to mitigate potential risks, which, from another perspective, indicates that China’s financial institutions now possess robust risk‑resilience and competitive strength. Similarly, the opening up of the securities industry will also require a phased approach. First, the approval process for relevant business licenses should be accelerated to enable foreign‑owned securities offices to commence operations promptly; second, market‑access standards must be refined to ensure that foreign‑invested securities offices benefiting from policy incentives have clearer equity structures and enjoy strong reputations and solid performance records.

Regulation of more than 10,000 local financing platforms is being tightened; bankruptcy will dismantle the practice of guaranteed repayment.

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,” which stipulates that local government financing platform companies that are severely insolvent and unable to meet their debt obligations shall undergo 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 trigger systemic instability. Experts believe this signals that a number of non-compliant local government financing platforms may soon be subject to bankruptcy proceedings.

Data show that China currently has 11,567 local government financing platform companies. For a long period, these platforms have shouldered the responsibility of raising funds on behalf of local governments, enabling them to issue bonds, obtain bank loans, and secure non-standard financing from financial institutions. Moreover, such platforms operate at the provincial, prefectural, county, and even lower administrative levels.

Experts contend that local government financing platforms—initiated by local governments, collateralized by state-owned assets such as land, and backed by implicit guarantees from the local governments themselves—pose significant hidden risks that must be promptly identified, mitigated, and eliminated.

It is worth noting that, in recent years, the central government has maintained a stringent regulatory stance in response to illegal borrowing by local financing platform companies. For instance, the Ministry of Finance previously released case studies on unauthorized debt issuance and subsequent disciplinary actions in Guangxi, Yunnan, Ningbo, and Anhui—each involving such financing platform entities.

Break the implicit guarantee of principal and interest repayment for financing platforms.

Huang Zhilong, Director of the Macroeconomic Research Center at Suning Institute of Finance, stated that by allowing local financing platforms to default, policymakers aim to dismantle the implicit guarantee of principal and interest repayment that has long been tied to local governments. This move will also encourage financial institutions to more rigorously assess and manage the financial risks associated with these platforms, assigning appropriate risk premiums based on their varying profitability. The central government’s policy stance is designed to isolate risks among different financing platforms, thereby preventing contagion and averting systemic financial instability.

Tang Chuan, Research Director at the 360 Financial PPP Research Center, stated that this approach leverages bankruptcy as a tool to completely remove local financing platforms that lack both market‑based operational capabilities and profitability from the market, thereby preventing further allocation of financial resources to service their existing debts. In other words, by forcibly liquidating enterprises with no prospect of survival, it seeks to achieve more efficient overall resource allocation within the public sector. It is expected that relevant detailed policies will also be introduced next year.

“Overall, there have been defaults on local government financing vehicle (LGFV) bonds, but most have since been repaid,” said a securities analyst who asked not to be named. However, once an LGFV defaults, the knock-on effects can be substantial: at worst, it could push up bond‑financing rates across the entire province’s LGFV sector—making it harder to raise capital and driving yields higher.

Huang Zhilong believes that, once bankruptcy occurs, the resulting repercussions would be readily apparent, shattering financial institutions’ and markets’ belief in the implicit guarantee of principal and interest payments by local governments and local financing platforms, with far‑reaching implications for the region.

“The forced bankruptcy and liquidation of zombie enterprises is a crucial component of supply-side structural reform aimed at reducing excess capacity and deleveraging, and it is an essential measure for optimizing the allocation of capital and resources,” Tang Chuan noted. However, he added that the inevitable result of weeding out these zombie offices will be the loss of employment for millions of workers, posing the most significant social challenge. That said, the central government has already announced the establishment of a special fund to provide subsidies and rewards for industrial restructuring, with measures to support displaced workers; meanwhile, reemployment‑related social services are being steadily expanded across regions. Moving forward, relevant authorities will need to further introduce and implement policies to mitigate the social pain caused by the cleanup of zombie enterprises.

Advance market-oriented transformation

Since last year, amid stringent oversight of local government debt, efforts to “close the back door” have tightened considerably. As a result, many local financing platforms have found themselves in a difficult position, akin to “mice trapped in a bellows,” facing mounting pressure and experiencing very slow progress in their market‑oriented transformation. Against this backdrop, numerous localities are moving forward with the market‑based restructuring of their financing platforms.

On September 17, Hunan Province convened a special provincial government meeting to lay out plans for the market‑oriented transformation of financing platform companies. The meeting emphasized the need to develop debt‑resolution strategies and schemes to strip these platforms of their financing functions, ensuring an uninterrupted flow of funds and adhering to the principles of “no new debt, compliance with regulations, and stable operations.” It called for a phased, category‑specific acceleration of the market‑oriented transformation, with immediate steps including liquidating and deregistering some entities, consolidating and reorganizing others, transitioning selected platforms to market‑based operations, and bringing remaining entities into compliance—all to ensure that, on schedule, all financing platform companies are fully transformed into market‑oriented corporate entities.

Huang Zhilong argues that advancing the market‑oriented transformation of financing platforms hinges on clearly separating these platforms from local governments’ fiscal systems. At the same time, as financing platforms gradually transition toward corporate and enterprise‑based structures, they must generate stable cash‑flow revenues to sustain their debt obligations and ensure smooth day‑to‑day operations.

“The market‑oriented transformation of financing platforms will not happen overnight. The process should begin by stabilizing the operations and profit growth of well‑qualified enterprises, followed by advancing their marketization through mixed‑ownership reform and a business development model that delivers shared benefits to all stakeholders,” said Tang Chuan.

At its executive meeting held on July 23, the State Council proposed guiding financial institutions to meet the reasonable financing needs of financing platform companies in accordance with market-oriented principles, while ensuring that funding is not cut off and projects under construction are not left unfinished. Tang Chuan stated that this measure will help prevent local state-owned enterprises from suffering potential losses in funds and assets due to defaults on their business operations.

Tang Chuan believes that mixed‑ownership reform is a pivotal step for local financing platforms to achieve market‑oriented transformation as state‑owned enterprises. It is essential to adhere to the principle of “actively advancing mixed‑ownership reform and encouraging state‑owned enterprises to attract private capital through equity transfers, capital increases and share expansions, and joint ventures and partnerships.” Moreover, by engaging in business collaborations with private offices, state‑owned enterprises can better absorb the market‑driven operational practices of the private sector, thereby ensuring that the market‑oriented transformation of financing platform companies proceeds more steadily and aligns with market demands.

Jiangsu Province’s local government bonds were issued for the first time through a tender on the Shenzhen Stock Exchange, with both the issuance and subscription sizes setting new market records.

On September 21, Jiangsu Province successfully issued RMB 74.02 billion in local government bonds through the Ministry of Finance’s Shenzhen Stock Exchange government bond issuance system for the first time. The underwriting syndicate’s bid size exceeded RMB 1 trillion for the first time, while both the issuance and subscription volumes set new market records.

This tender issued a total of four tranches of Jiangsu provincial local government bonds, including RMB 5.9 billion of 3-year land‑reserve special bonds, RMB 43.6 billion of 5-year land‑reserve special bonds, RMB 2.3 billion of 7-year toll‑road special bonds, and RMB 22.22 billion of 5-year shantytown‑redevelopment special bonds. The subscription multiples were 40.93, 11.12, 22.86, and 11.40, respectively, with winning interest rates of 3.76%, 3.90%, 4.06%, and 3.90%, respectively.

Based on the subscription results, all underwriters collectively submitted bids totaling RMB 1.03235 trillion, with an average overall book‑building multiple of 13.95 times. Brokerage‑type underwriters were particularly active, submitting bids worth RMB 274.14 billion, or 26.55% of the total bid amount, and winning allocations of RMB 5.26 billion, equivalent to 7.11% of the issuance size.

It is reported that, in order to provide targeted support for local economic development, the Shenzhen Stock Exchange has launched a strategic cooperation initiative titled “New Financial Hub” in Jiangsu Province. The successful issuance of Jiangsu Province’s local government bonds on the Shenzhen Stock Exchange represents a significant milestone in the enhanced collaboration between the two parties. This move helps implement the State Council’s directives to accelerate the issuance and deployment of special-purpose local government bonds, ensures adequate financing for key sectors in Jiangsu, and further leverages these bonds to stabilize investment, expand domestic demand, and address critical infrastructure gaps. Moving forward, the Shenzhen Stock Exchange will continue to capitalize on its strengths, offering local governments a premier platform for issuing local government bonds and delivering comprehensive, end-to-end market‑oriented services.

Taxation TAXATATION

Premier Li Keqiang presided over an executive meeting of the State Council, calling for the thorough and effective implementation of previously decided tax and fee reduction measures and outlining plans to boost targeted investment in key sectors and weak links.

According to the Chinese Government Website, Premier Li Keqiang presided over an executive meeting of the State Council on September 18, calling for the thorough and effective implementation of previously decided tax and fee reduction measures and ensuring the stability of existing social security contribution collection policies. The meeting also outlined plans to increase targeted investment in key sectors and weak links, thereby boosting domestic demand, promoting structural optimization, and improving people’s livelihoods, while adopting measures to stimulate foreign trade growth and facilitate customs clearance.

The meeting emphasized that, amid the current complex and volatile international environment, further invigorating China’s market vitality requires a key measure: intensifying efforts to streamline administration, cut taxes, and reduce fees. Tax and fee reduction measures must be earnestly implemented, with rigorous inspections and verifications of their execution; any delays or compromises are strictly prohibited, as is any unilateral action. In line with the State Council’s established directive to “overall not increase the burden on enterprises,” the existing social security contribution collection policies must remain stable during institutional reforms. Relevant departments should strengthen oversight and strictly prohibit the centralized retroactive collection of enterprises’ historical arrears; violations must be resolutely corrected, and any illegal or disciplinary breaches in the administration and collection process must be officely investigated and punished. At the same time, work should be expedited to formulate proposals for lowering social security contribution rates, to be implemented in tandem with the reform of the collection system.

The meeting noted that, since the beginning of this year, the growth rate of fixed‑asset investment in China has slowed, with infrastructure investment in some regions declining year on year. It is essential to implement the directives of the CPC Central Committee and the State Council, focusing on addressing weak links and expanding effective investment. In line with the principle of avoiding both excessive reliance on investment and outright neglect of it, while preventing sharp fluctuations, we must stabilize investment and maintain steady growth—this is also a key measure for deepening supply‑side structural reform and boosting employment. We should align closely with national plans and major strategies, stepping up infrastructure development and backbone transport networks in deeply impoverished areas such as the “Three Regions and Three Prefectures,” particularly railways and highways in the central and western regions, trunk waterways, hub and feeder airports, and critical agricultural infrastructure like large‑scale water conservancy projects. At the same time, we must prioritize key ecological and environmental protection projects, technological upgrading and modernization, and public‑service facilities in areas such as elderly care. Efforts should be accelerated to advance preparatory work for projects, expedite their commencement, and establish mechanisms for building project pipelines and ensuring continuous rolling implementation. Financial institutions should be guided to support the construction of projects aimed at addressing weak links, while local governments are urged to promptly allocate funds raised through special bonds to these priority initiatives. Public‑private partnership projects should be advanced in an orderly manner, actively attracting private capital to participate in development.

To further expand opening-up and maintain steady growth in imports and exports, the meeting decided on the following measures: First, to advance trade facilitation at a higher level, this year we will reduce by another one-third the overall customs clearance times for both imports and exports, as well as the number of import‑export regulatory documents, while also lowering clearance fees. We will streamline approval procedures at the import‑export stage, and by November 1 this year, in principle all regulatory documents that previously required on‑site verification at ports will be processed through an integrated online system, with cross‑checking conducted during the clearance process. We will promote joint, one‑stop inspections by customs, border control, and maritime authorities, and implement paperless clearance for goods transported by rail. For bulk resource commodities such as imported mineral products, we will adopt a “release first, inspection later” approach. A fast‑track “green channel” will be established for agricultural and sideline products. We will review and standardize enterprise‑related charges, publishing by year’s end a publicly available list of government‑imposed port fees; no fees may be levied outside this list. Second, we will further reduce costs for import‑export enterprises by refining export tax rebate policies, accelerating the processing of export tax refunds, lowering the rate of export inspections, expanding coverage of export credit insurance, and encouraging financial institutions to increase financing backed by export credit insurance policies and by pledging export tax refund accounts. We will also step up credit support for foreign‑trade enterprises, particularly small, medium, and micro‑sized offices. In addition, we will encourage and support enterprises in diversifying their markets and expanding imports of raw materials needed by domestic industries.

Li Keqiang: Policies to significantly reduce the tax and fee burden on enterprises are under consideration.

According to the Chinese Government Website, Premier Li Keqiang stated in his opening address at the 2018 Summer Davos Forum in Tianjin on September 19 that the Chinese government is formulating policies to substantially reduce the tax and fee burden on enterprises, treating both domestic and foreign‑registered companies operating in China equally.

Premier Li Keqiang stated that to make proactive fiscal policy even more vigorous, it is essential to further reduce the burden on enterprises through tax and fee cuts, thereby boosting market vitality. This requires not only resolutely implementing the tax and fee reduction measures already introduced but also formulating policies aimed at substantially lowering the tax and fee burden on businesses.

Premier Li Keqiang stated that the personal income tax reform must ensure that the public genuinely feels a reduction in their tax burden and an increase in their disposable income. With consumption now serving as the primary driver of China’s economic growth, it is essential to further broaden channels for people to boost their incomes and continuously strengthen their purchasing power. The new Individual Income Tax Law is set to take effect soon, introducing, for the first time, six special additional deductions—covering expenses such as children’s education, continuing education, major medical expenses, interest on ordinary housing loans, housing rent, and expenses for supporting elderly parents. The sole objective is to enable more people to benefit more equitably from the personal income tax reform.

When addressing the “private sector,” Premier Li Keqiang reafofficeed that China will unswervingly uphold the principle of “two unwavering commitments,” further implement and refine policies and measures to support the development of the private sector, resolutely remove all unreasonable barriers hindering its growth, and intensify efforts to ensure the timely and effective implementation of government‑pledged measures to broaden market access for private enterprises.

Premier Li Keqiang stated that in recent years, the Chinese government has adopted a range of measures to address the challenges of difficult and expensive financing faced by small, medium, and micro enterprises, the vast majority of which are private offices. Private enterprises not only contribute more than 50 percent of the nation’s tax revenue but also underpin China’s largest share of employment.

Premier Li Keqiang stated that the recent fluctuations in the RMB exchange rate have been relatively moderate, and some have even suggested that China deliberately engineered these moves—yet this view is entirely unfounded. A one-way depreciation of the RMB would do more harm than good for China, and Beijing will never resort to devaluing the currency to boost exports. China remains committed to a market‑based approach to exchange‑rate reform; far from engaging in competitive devaluation, it will instead create the conditions necessary for exchange‑rate stability. With a solid economic foundation, a balanced balance of payments, and ample foreign-exchange reserves, the RMB exchange rate is fully capable of maintaining basic stability at an appropriate and equilibrium level.

Premier Li Keqiang pointed out that the world today stands at a “crossroads,” with both calls for globalization and forces pushing against it. However, we are encouraged to see that the former reflects the broader will of the people. Despite the various imperfections in the process of globalization, its overarching trend is irreversible. In international cooperation, China has consistently upheld the principles of mutual respect, mutual accommodation, and equal partnership, officely safeguarding the fundamental norms of multilateralism and free trade. We remain convinced that no unilateralist measures can ultimately resolve the underlying issues.

A “combination punch” of tax incentives for corporate restructuring is boosting mixed-ownership reform.

The “Opinions on Several Policies for Deepening Pilot Programs of Mixed-Ownership Reform,” issued by eight departments including the National Development and Reform Commission and the Ministry of Finance, stipulate that enterprises undergoing mixed-ownership reform should scientifically design their reform pathways and make full and effective use of existing national tax preferential policies for corporate restructuring and reorganization.

“Mixed‑ownership reform is the primary focus of deleveraging in state‑owned enterprises. As efforts to reduce leverage continue to gain momentum, the pace of mixed‑ownership reform is accelerating across the board. The joint issuance of this document by eight government departments underscores the high priority attached to this initiative,” said Yang Qinqin, a senior researcher at the Ruisi Financial Research Institute. She added that fiscal and tax‑related support policies represent a key lever for advancing mixed‑ownership reform. By offering measures such as deferred payments, installment contributions, tax deductions, exemptions, and preferential treatment, these policies can effectively lower the costs of restructuring and reorganization, facilitate the integration of critical business segments along industrial and value chains, and promote deeper collaboration between state‑owned enterprises and private capital—thereby enhancing operational efficiency and delivering mutually beneficial outcomes.

The opinion states that, for corporate restructuring activities such as equity (asset) acquisitions, mergers, spin-offs, debt restructurings, and debt‑to‑equity swaps that meet the conditions stipulated in tax laws, enterprises may enjoy the preferential policy of deferred corporate income tax payment in accordance with tax regulations. When an enterprise makes investments using non‑monetary assets, it may, as prescribed, avail itself of the policy allowing corporate income tax to be paid in installments over a period of five years. Furthermore, corporate debt losses that satisfy the statutory requirements may be deducted when calculating taxable income for corporate income tax purposes. During corporate restructuring, if an enterprise transfers all or part of its tangible assets, together with related receivables, liabilities, and workforce, to other entities or individuals through methods such as mergers, spin-offs, sales, or exchanges, the transfer of goods, real estate, and land use rights involved—provided they comply with the relevant provisions—shall be exempt from value-added tax. Additionally, for land appreciation tax, deed tax, and stamp duty arising from corporate restructuring and reform, eligible taxpayers may benefit from applicable preferential policies.

This year, the fiscal and tax authorities have successively issued documents stipulating that, from January 1, 2018, to December 31, 2020, deed tax will be exempted in nine distinct scenarios, including corporate restructuring, institutional restructuring, corporate mergers, and the conversion of creditor’s rights into equity. Furthermore, from January 1, 2018, to December 31, 2020, the policy on land value-added tax applicable to enterprises during restructuring and reorganization will remain in effect.

Analysts note that in recent years, a series of tax‑incentive policies introduced by the state have supported corporate restructuring and reorganization, broadening the scope of such tax benefits. As a result, the tax framework governing these transactions has steadily improved, signaling that companies will be able to avail themselves of an expanding array of tax concessions during restructuring and reorganization. These new preferential measures continue to bolster corporate restructuring activities, particularly among enterprises with robust demand.

LITIGATION & ARBITRATION

The Supreme People’s Court has issued a five-year work plan: to comprehensively incorporate the core socialist values into judicial interpretations.

Recently, the Supreme People’s Court issued the “Work Plan for Fully Integrating the Core Socialist Values into Judicial Interpretations (2018–2023)” (hereinafter referred to as the “Plan”), implementing the central government’s requirements to incorporate the core socialist values into the rule of law and making specific arrangements for judicial interpretation work. Serving as guiding principles for the Supreme People’s Court’s initiation, amendment, and repeal of judicial interpretations over the next five years, the Plan aims to foster and practice the core socialist values, standardize adjudicative criteria and standards, and ensure that the people can feel fairness and justice in every judicial case.

The report to the 19th National Congress of the Communist Party of China explicitly called for fostering and practicing the core socialist values. In May this year, the CPC Central Committee formally issued to the entire society the “Plan for Integrating Core Socialist Values into Legislative and Amendment Work on the Rule of Law,” stipulating that judicial interpretations must be promptly revised and improved in accordance with the requirements of these core values. Following thorough research and in line with the directives set forth in the central document and the recommendations of the National People’s Congress regarding the review of relevant judicial interpretations, the Supreme People’s Court has formulated the aforementioned Plan.

The Plan consists of seven sections and emphasizes that it should be guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, uphold the principle of governing the country in all respects according to law, adhere to the socialist core value system, ensure Party leadership and judicial service to the people, and follow five guiding principles: problem orientation, value‑driven guidance, and coordinated advancement. It calls for integrating the socialist core values into every stage of judicial interpretation work—project initiation, drafting, argumentation, revision, supplementation, and repeal—so as to ensure that judicial interpretations are clearly oriented, meet explicit requirements, and are backed by robust measures, thereby providing solid institutional safeguards for advancing the rule of law in all respects.

The Plan calls for vigorously promoting the core socialist values of patriotism, dedication, civility, and harmony in judicial interpretations. It mandates revising and improving judicial interpretations concerning the rights to reputation and honor, while strengthening guidance on disputes involving these rights in cases involving heroes and martyrs; revising and refining judicial interpretations on marriage and family disputes to further optimize methods of adjudicating family matters and related working mechanisms, thereby effectively upholding the traditional family virtues of the Chinese nation; intensifying efforts to protect the rights and interests of minors, preventing and punishing school violence and other such phenomena, and fostering their healthy development; and revising and perfecting judicial interpretations on labor dispute cases to safeguard workers’ legitimate rights and interests in accordance with the law and to promote the survival and development of enterprises.

The Plan emphasizes the need to vigorously promote the core socialist values of equality, justice, democracy, and the rule of law in judicial interpretations. It calls for revising and improving judicial interpretations of relevant procedural laws to ensure equal protection of the litigation rights of all parties; further refining the system of judicial protection of property rights to strengthen such protection; promptly studying and perfecting adjudicatory rules in cases involving expropriation and requisition, so as to safeguard the legitimate rights and interests of those whose property is subject to such measures; timely issuing judicial interpretations on the application of law in disputes over personal information rights to protect these rights; further revising and improving judicial interpretations pertaining to criminal offenses involving wild animals and nationally protected plant species; and revising and enhancing enforcement-related judicial interpretations to reinforce the principles of fair, good‑faith, and civilized enforcement.

The Plan stipulates that judicial interpretations should vigorously promote the core socialist values and moral principles of justice, friendliness, and mutual assistance. It calls for the timely issuance of criteria for determining excessive self‑defense, principles for imposing penalties, and standards for applying the law to disputes involving acts of bravery, so as to encourage legitimate self‑defense and safeguard the lawful rights and interests of those who act with courage in the face of injustice. In addition, the Opinions on the People’s Courts’ International Judicial Assistance shall be revised and improved to further reflect the humanistic concern inherent in the administration of justice.

The Plan emphasizes the need to vigorously promote the socialist core values of honesty and trustworthiness in judicial interpretations. It calls for the timely formulation and promulgation of judicial interpretations on the application of relevant provisions of the General Provisions of the Civil Law, as well as the further revision and improvement of judicial interpretations of the Contract Law, thereby fostering a contractual spirit throughout society that upholds integrity and respects rules. Additionally, it urges the revision and refinement of judicial interpretations pertaining to criminal offenses such as the production and sale of counterfeit or substandard goods and crimes endangering food and drug safety, so as to safeguard market order. The Plan also advocates the prompt issuance of judicial interpretations on preventing and punishing fraudulent litigation, thus encouraging parties to engage in litigation with integrity. Furthermore, it calls for the revision and improvement of adjudicatory rules governing contract disputes in which the government is a party, along with the timely promulgation of related judicial interpretations, to help the government honor its commitments and uphold its credibility. Finally, the Plan seeks the revision and enhancement of judicial interpretations on enforcement matters, with a view to advancing the development of a social credit system.

The Plan calls for vigorously promoting the core socialist values and development principles of prosperity, openness, innovation, and green development in judicial interpretations. It mandates revising and improving judicial interpretations on crimes that disrupt the socialist market economy to foster its sound development; revising and refining judicial interpretations pertaining to agricultural cases to support and safeguard the rural revitalization strategy; amending judicial interpretations on real estate disputes to ensure the effective implementation of national real estate policies; enhancing judicial interpretations on financial crimes and financial disputes to uphold national financial security and mitigate financial risks; revising judicial interpretations on bankruptcy law to underpin supply-side structural reform; strengthening judicial interpretations on intellectual property disputes to impose stricter penalties for IP infringements and advance the innovation-driven development strategy; improving judicial interpretations on environmental and resource disputes to bolster judicial protection of the ecological environment and contribute to building a Beautiful China; and revising judicial interpretations on maritime cases to support and safeguard China’s strategy of becoming a strong maritime nation.

The Plan stipulates that organizational leadership must be strengthened and working mechanisms refined, with compliance with the requirements of the core socialist values serving as a key criterion in the initiation and review of judicial interpretations. Public awareness-raising and education should be intensified, ensuring that the drafting and formulation of judicial interpretations become a process of promoting and disseminating the core socialist values.

The Supreme People’s Court, in conjunction with the Ministry of Public Security, the Ministry of Justice, and the China Banking and Insurance Regulatory Commission, has issued operational guidelines to jointly promote the online integrated handling of compensation disputes arising from road traffic accidents.

To further standardize the “online integrated data processing” of disputes over compensation for damages arising from road traffic accidents, the Supreme People’s Court, the Ministry of Public Security, the Ministry of Justice, and the China Banking and Insurance Regulatory Commission recently jointly issued, in the name of the general offices of the four departments, the “Work Standards for Online Integrated Data Processing of Road Traffic Accident Damage Compensation Disputes (Trial)” (hereinafter referred to as the “Standards”). The Standards comprise 45 articles and primarily set forth the overarching guiding principles, working mechanisms, division of responsibilities, information sharing, business procedures, and organizational safeguards for the online integrated handling of road traffic disputes. They shall take effect as of October 1, 2018.

Efficient and convenient for the people

Online Rapid Resolution of Traffic Disputes

The Regulations stipulate that the online integrated handling of road traffic dispute cases shall adhere to the correct political orientation, uphold a people-centered approach, and promote co-construction, co-governance, and shared benefits. It calls for innovating diversified dispute-resolution mechanisms and leveraging big data to establish a coordinated, interconnected working framework among the people’s courts, public security organs, mediation organizations, insurance institutions, and appraisal agencies. This framework will enable information sharing and online processing across claims calculation, mediation, appraisal, litigation, and claim settlement, thereby achieving end-to-end, rapid, and信息化-based resolution of compensation disputes arising from road traffic accidents.

According to the Regulations, upon the occurrence of a dispute, the parties may directly access the online integrated platform for road traffic dispute resolution to use tools such as the claims calculator, or they may file an application for mediation or initiate litigation online. When a mediation organization receives a mediation application from the parties, or when it is directed by the traffic management department of the public security organ or the people’s court to initiate mediation on behalf of the parties, it shall conduct online mediation through the platform, thereby maximizing the utilization of platform resources and effectively resolving disputes.

The Regulations stipulate that the online integrated handling of road traffic dispute cases shall establish a pre‑assessment mechanism, enabling mediation organizations to legally arrange for parties to apply for online expert appraisal during the mediation stage. It also encourages exploring the integration of the online integrated platform for road traffic disputes with mobile applications, thereby facilitating the streamlined resolution of compensation disputes arising from road traffic accidents.

Shared data

A coordinated mechanism has been established among multiple departments.

The Regulations require that people’s courts, traffic management departments of public security organs, judicial administrative organs, insurance regulatory authorities, and insurance industry associations, in light of actual circumstances, establish a communication and coordination mechanism for the online integrated handling of road traffic dispute cases and institute a joint‑meeting system. They shall also set up an information‑sharing mechanism, promote interconnection and interoperability among information systems, achieve multi‑departmental and multi‑stage information sharing, and ensure the orderly operation of the online integrated platform for handling road traffic disputes.

It is understood that the people’s courts are responsible for the development and maintenance of the online integrated platform for handling road traffic dispute cases, while the traffic management departments of public security organs, judicial administrative authorities, insurance regulatory agencies, and the insurance industry all collaborate to ensure seamless system integration, thereby jointly safeguarding the platform’s smooth operation and enabling information sharing and streamlined processing.

The Regulations set forth in detail seven categories of information—such as the identities of the parties involved and details of traffic accidents—that are to be uploaded by the people’s courts, the traffic management departments of public security organs, judicial administrative authorities, insurance regulatory agencies, mediation organizations, and insurance companies to the online integrated platform for handling road traffic dispute cases, thereby facilitating information sharing.

Mediation First

Insurance company “one-click claims settlement”

The Regulations stipulate that online integrated handling of road traffic dispute cases shall establish a preliminary mediation mechanism. When handling road traffic accidents, the traffic management departments of public security organs, upon unanimous application by the parties involved, shall conduct mediation in accordance with the law for disputes over damage compensation. If the parties fail to apply for mediation as required or if no agreement is reached through mediation, they may be guided to use the online integrated platform for road traffic dispute resolution to initiate mediation. Upon accepting disputes over damage compensation arising from road traffic accidents, people’s courts, except in cases where mediation is inappropriate, shall guide the parties to engage in preliminary mediation prior to filing a case, thereby resolving disputes before litigation and reducing the costs associated with dispute resolution.

Under the Regulations, upon conclusion of a mediation agreement, judicial conofficeation, or completion of online litigation, the parties or the mediator may assist them in submitting an online claim for one‑click compensation from the insurance company through the Online Integrated Handling Platform for Road Traffic Disputes. If the insurance company fails to make timely payment within a reasonable period, the people’s court may, via the same platform, submit a judicial recommendation to the insurance regulatory authority, which shall then take appropriate regulatory measures in accordance with the law.

Other

The State Council Information Office has released the white paper “China’s Position on China-U.S. Economic and Trade Frictions.”

On the 24th, the State Council Information Office released the white paper “China’s Position on China-U.S. Economic and Trade Frictions,” aiming to set the record straight on the facts of China-U.S. economic and trade relations, clarify China’s policy stance on these frictions, and promote a reasonable resolution of the issues.

The white paper totals approximately 36,000 words and, aside from the preface, comprises six sections: mutually beneficial and win-win China–U.S. economic and trade cooperation; facts about China–U.S. economic and trade relations; the U.S. government’s protectionist trade practices; the U.S. government’s trade‑bullying behavior; the harm caused by the U.S. government’s improper measures to global economic development; and China’s position.

The white paper states that China is the world’s largest developing country, while the United States is the world’s largest developed country. Sino-U.S. economic and trade relations are of great significance to both countries and exert a pivotal influence on global economic stability and development.

The white paper points out that, given the differing stages of economic development and economic systems of China and the United States, trade and economic frictions are inevitable. The key lies in how to build mutual trust, promote cooperation, and manage differences. Over the years, the two governments, guided by the principles of equality, rationality, and mutually accommodating approaches, have established a series of communication and coordination mechanisms, including the U.S.-China Joint Commission on Commerce and Trade, the Strategic Economic Dialogue, the Strategic and Economic Dialogue, and the Comprehensive Economic Dialogue. Through tireless efforts, these mechanisms have ensured that China-U.S. economic and trade relations have overcome numerous obstacles over nearly four decades, continued to advance, and become both a stabilizing anchor and a driving force in the bilateral relationship.

The white paper states that since the inauguration of the new U.S. administration in 2017, under the banner of “America First,” the United States has abandoned fundamental principles of international engagement—such as mutual respect and equal-footed consultation—and pursued unilateralism, protectionism, and economic hegemony. It has leveled a series of false accusations against numerous countries and regions, particularly China, employed escalating tariffs and other measures to engage in economic intimidation, and sought to impose its own interests on China through maximum pressure.

The white paper states that, in the face of this situation, China, guided by the overarching interests of both countries and the global trading order, has adhered to the fundamental principle of resolving disputes through dialogue and consultation. With the utmost patience and sincerity, China has addressed U.S. concerns, adopted a spirit of seeking common ground while setting aside differences to manage disagreements appropriately, and overcome numerous challenges. Through multiple rounds of dialogues and consultations with the United States, China has put forward pragmatic solutions, making strenuous efforts to stabilize bilateral economic and trade relations. However, the United States has repeatedly reneged on its commitments and continued to escalate tensions, causing Sino‑U.S. economic and trade frictions to intensify rapidly. This has inflicted severe damage on the economic and trade relationship between the two countries—built up over many years through the concerted efforts of their governments and peoples—and has posed a grave threat to the multilateral trading system and the principles of free trade. To clarify the facts surrounding Sino‑U.S. economic and trade relations, articulate China’s policy stance on these frictions, and promote a reasonable resolution of the issues, the Chinese government has issued this white paper.

The white paper points out that China–U.S. economic and trade relations are vital to the well-being of both peoples, as well as to world peace, prosperity, and stability. For both China and the United States, cooperation is the only correct choice, and win-win outcomes are the key to a brighter future. China’s position is clear, consistent, and unwavering.

The General Office of the State Council has issued the “Opinions on Improving the National Essential Medicines System.”

On September 19, the General Office of the State Council issued the “Opinions on Improving the National Essential Medicines System” (hereinafter referred to as the “Opinions”).

The “Opinions” state that, since the launch of the latest round of healthcare reform, the establishment and implementation of the National Essential Medicines System have played a crucial role in improving the pharmaceutical supply‑guarantee system, ensuring basic access to medicines for the public, and alleviating the financial burden of medication on patients. At the same time, challenges remain, including insufficient alignment with clinical needs for essential medicines, a lack of incentive mechanisms to promote their use, disparities in quality and efficacy between generic and originator products, and an inadequate mechanism for ensuring stable supply.

The Opinions state that it is necessary to fully implement the spirit of the 19th National Congress of the Communist Party of China and the Second and Third Plenary Sessions of the 19th Central Committee, guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era. With people’s health as the central focus, we must strengthen the functional positioning of essential medicines—“emphasizing basic needs, meeting preventive and therapeutic requirements, ensuring supply, prioritizing use, guaranteeing quality, and reducing financial burdens”—to comprehensively advance the construction of a pharmaceutical supply‑guarantee system. Efforts should be concentrated on ensuring that medicines are safe and effective, reasonably priced, and adequately supplied, thereby alleviating the problem of high medical costs. Furthermore, we will promote seamless medication coordination between healthcare institutions at different levels, support the development of a tiered diagnosis and treatment system, and drive the transformation and upgrading of the pharmaceutical industry as well as supply‑side structural reform.

The “Opinions” set forth policy measures in five key areas, covering the selection, production, distribution, use, payment, and monitoring of essential medicines. First, dynamically adjust and optimize the national essential medicines list. Conduct regular assessments and dynamic updates to emphasize clinical value, give equal weight to both traditional Chinese medicine and Western medicine, meet major clinical needs such as common diseases, chronic conditions, and emergency care, and address the medication requirements of special populations like children and public health prevention and control efforts. Second, ensure reliable production and supply. Uphold the principle of centralized procurement and implement category‑based purchasing. Coordinate drug use across medical institutions at different levels, promote volume‑based centralized procurement within cities and counties, and drive down drug prices. For essential medicines prone to shortages, adopt measures such as market‑mediated determination of reasonable purchase prices, designated production, unified distribution, or inclusion in strategic reserves to guarantee supply. Third, ensure comprehensive availability and prioritize their use. Maintain the leading role of essential medicines and specify the proportion of essential medicines used in public medical institutions. Implement clinical‑use monitoring and conduct comprehensive clinical evaluations of drugs. Deepen reforms of medical insurance payment mechanisms, establish reimbursement standards for medicines under medical insurance, and guide rational diagnosis and treatment as well as appropriate medication use. Fourth, reduce the financial burden of medication on the public. Prioritize the inclusion of essential medicines in the medical insurance catalog according to established procedures, gradually raising the level of actual coverage. Encourage localities to explore effective ways to lower patient costs and minimize out-of-pocket drug expenses. Fifth, enhance quality and safety. Conduct random inspections covering all varieties of essential medicines, strengthen oversight and supervision of the production process, and reinforce quality‑and‑safety regulation. Give priority to including drug products that have passed consistency evaluations in the essential medicines list; progressively remove from the list those essential medicines that have not yet passed such evaluations.

The Opinions call for strengthened organizational leadership, with governments at all levels incorporating the implementation of the National Essential Medicines System into their performance‑assessment frameworks. They also emphasize the need to enhance supervision and evaluation by establishing and improving a robust system for monitoring and assessing the implementation of the essential medicines system, fully leveraging third‑party evaluations, and reinforcing the application of assessment outcomes. Furthermore, efforts should be intensified to publicize and guide stakeholders, provide clear policy explanations, and foster a favorable social environment for the effective implementation of the essential medicines system.

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