JC Master Legal News Issue 840

Key Takeaways for This Issue

The CSRC has established a “small‑amount, fast‑track” channel for mergers and reorganizations, applicable in two scenarios.

On October 8, the China Securities Regulatory Commission (CSRC) issued the “Questions and Answers on the Applicable Scenarios for the ‘Small-Amount, Fast-Track’ Review Procedure in M&A and Restructuring.” The CSRC stated that it has recently officially launched a “small‑amount, fast‑track” review mechanism for M&A and restructuring transactions. This mechanism applies to two specific scenarios; however, in cases subject to the “small‑amount, fast‑track” review, the independent financial advisor is required to verify the relevant circumstances and provide a clear opinion.

The State Council Executive Meeting has adopted measures to improve the export tax rebate policy and accelerate the processing of tax refunds.

On October 8, Premier Li Keqiang of the State Council presided over an executive meeting of the State Council, where measures were adopted to refine the export tax rebate policy and accelerate the processing of rebates, thereby easing the burden on enterprises and sustaining steady growth in foreign trade. The meeting also outlined plans to advance urban dilapidated‑area renovation, further improving living conditions for those facing housing difficulties.

The State Taxation Administration has finalized a timetable to standardize tax compliance in the film and television industry.

The State Taxation Administration recently issued the “Notice on Further Regulating Tax Order in the Film and Television Industry,” stating that, in accordance with the deployment and arrangements of the Central Publicity Department and four other departments to address issues in the film and television sector, and building on the continued effective implementation of the SAT’s requirements for strengthening tax collection and administration in this industry, the authorities will, in light of recent cases in which tax authorities have uncovered tax evasion by high-income professionals in the sector, further standardize tax collection and administration within the industry and promote its sound development, in line with relevant provisions of the Law on the Administration of Tax Collection and its implementing rules.

The Hangzhou Internet Court has launched its judicial blockchain, enabling end-to-end recording of electronic data, ensuring full‑chain trustworthiness, and providing notarization by all network nodes.

Recently, the Hangzhou Internet Court held a press conference to announce the official launch of its judicial blockchain platform. This makes it the first court in China to leverage blockchain technology to resolve disputes.

The State Council has issued the Implementation Plan for Improving the Mechanisms and Systems to Promote Consumption.

October 11 — The General Office of the State Council recently issued the “Implementation Plan for Improving the Mechanisms and Systems to Promote Consumption (2018–2020)” (hereinafter referred to as the “Plan”), which outlines measures to swiftly address the most direct, salient, and pressing institutional and systemic barriers hindering household consumption, thereby further unlocking consumers’ spending potential.

Table of Contents

Table of Contents

Finance & Capital Markets

The CSRC has established a “small‑amount, fast‑track” channel for mergers and reorganizations, applicable in two scenarios.

Regulatory rules for the Shanghai–London Stock Connect have been issued, clarifying the review and approval system for CDRs.

CSRC: Proceeds from restructuring can bolster liquidity and repay debt.

The Shenzhen Stock Exchange has standardized disclosure requirements for hot‑topic matters, officely supporting market‑driven share buybacks and increases in holdings.

China Securities Regulatory Commission: Supports relevant countries and enterprises in issuing “Belt and Road” bonds on the Shenzhen and Shanghai stock exchanges.

The Chairman of the China Securities Regulatory Commission convened a symposium to solicit opinions and suggestions on the stable development of the capital market.

New Third Board disclosure emphasizes differentiation, with industry-specific tiering requirements that are more distinctive.

The New Third Board is positioned as a core platform for financing small, medium, and micro enterprises.

Corporate & Commercial

The State Council Executive Meeting has adopted measures to improve the export tax rebate policy and accelerate the processing of tax refunds.

The People’s Bank of China and the China Banking Regulatory Commission have established regulatory frameworks for “dual anti‑” measures in the internet finance sector.

Jiangsu plans to subsidize green bonds by 30%.

The State Council has issued the “Notice on Rolling Out the ‘Separation of Licenses and Permits’ Reform Nationwide.”

A national symposium on state-owned enterprise reform was held in Beijing, calling for solid progress in six key areas.

Taxation

The State Taxation Administration has finalized a timetable to standardize tax compliance in the film and television industry.

The Ministry of Finance is considering a large-scale tax cut, with experts recommending a five-year reduction of 5 trillion yuan in tax burdens.

China will consider continuing to extend individual income tax preferential measures to non-residents, including residents of Hong Kong, Macao, and Taiwan.

Litigation & Arbitration

The Hangzhou Internet Court has launched its judicial blockchain, enabling end-to-end recording of electronic data, ensuring full‑chain trustworthiness, and providing notarization by all network nodes.

Lawyers’ Evidence-Gathering Efforts Gain a Powerful New Tool: Hunan Provincial High People’s Court Issues Specialized Work Procedures

Other

The State Council has issued the Implementation Plan for Improving the Mechanisms and Systems to Promote Consumption.

Shanghai Free Trade Zone Implements a Negative List for Cross-Border Trade in Services

Finance & Capital Markets

The CSRC has established a “small‑amount, fast‑track” channel for mergers and reorganizations, applicable in two scenarios.

On October 8, the China Securities Regulatory Commission (CSRC) issued the “Questions and Answers on the Applicable Scenarios for the ‘Small-Amount, Fast-Track’ Review Procedure in M&A and Restructuring.” The CSRC stated that it has recently officially launched a “small‑amount, fast‑track” review mechanism for M&A and restructuring transactions. This mechanism applies to two specific scenarios; however, in cases subject to the “small‑amount, fast‑track” review, the independent financial advisor is required to verify the relevant circumstances and provide a clear opinion.

In recent years, as merger and acquisition (M&A) and restructuring activities in the securities market have become increasingly vigorous, a growing number of small‑scale transactions—characterized by modest deal sizes and limited share issuances—have emerged. To align with the new stage of economic development, further invigorate market dynamism, and fully leverage the critical role of M&A and restructuring in serving the real economy, the China Securities Regulatory Commission has earnestly implemented the spirit of the 19th National Congress of the Communist Party of China and the State Council’s “delegation, regulation, and service” reform agenda. In response to small‑scale transactions that do not constitute major asset restructurings, the Commission has introduced an expedited review mechanism for such deals, whereby they are reviewed directly by the Listed Companies’ M&A and Restructuring Review Committee, thereby streamlining administrative approvals and shortening the review process.

The “Questions and Answers on the Applicable Scenarios for the ‘Small-Amount, Fast-Track’ Review of M&A and Restructuring,” issued by the Listing Department of the China Securities Regulatory Commission, clarifies that when a listed company issues shares to acquire assets, if the transaction does not constitute a major asset restructuring and meets one of two conditions, it may be subject to the “small‑amount, fast‑track” review. Upon receipt, the CSRC will directly refer the matter to the M&A and Restructuring Committee for deliberation. These conditions include: (1) the cumulative transaction value over the most recent 12 months does not exceed RMB 500 million; or (2) the cumulative number of shares issued in the most recent 12 months does not exceed 5% of the listed company’s total share capital prior to this transaction, and the cumulative transaction value over the most recent 12 months does not exceed RMB 1 billion.

“Cumulative transaction amount” refers to the transaction value of asset acquisitions financed through the issuance of shares; “cumulative shares issued” refers to the shares issued in connection with such asset acquisitions. Transactions involving the issuance of shares to acquire assets that do not fall under the “small‑amount, fast‑track” review procedure are exempt from inclusion in the cumulative calculation.

In recent years, the China Securities Regulatory Commission (CSRC) has significantly streamlined and eliminated administrative approvals; today, more than 90% of M&A transactions no longer require CSRC review, thereby effectively boosting market vitality. At the same time, addressing areas where market-based oversight remains relatively weak, the CSRC has refined its regulatory framework, tightened oversight of restructuring and listing activities, and taken strong enforcement action against irregularities such as “deceptive” and “herd‑following” restructurings, curbing speculative “shell‑trading.” These measures have helped foster a well‑regulated market environment, encouraged a return to rational valuation standards, and laid a solid foundation for expediting reviews and enhancing service delivery.

Since the beginning of this year, M&A and restructuring activity in the A-share market has been exceptionally robust. As of the end of July, listed companies had completed 2,377 M&A and restructuring deals, up 87% year over year, with a total transaction value of RMB 1.36 trillion, a 38% increase compared with the same period last year. Among these, listed companies in strategic emerging industries accounted for RMB 408 billion in M&A deal value, representing 30% of the market’s total. These M&A and restructuring activities have not only injected fresh momentum into listed offices but have also laid a solid foundation for the stable and healthy development of the capital market.

In addition, the Listing Department of the China Securities Regulatory Commission has clarified that two scenarios are not eligible for the “small‑amount, fast‑track” review process: (1) when the accompanying fundraising is used to pay the cash consideration in this transaction; or (2) when the amount of accompanying fundraising exceeds RMB 50 million; and (3) when the entity is classified as subject to prudent review under the “tiered review” framework.

While advancing market-oriented reforms of mergers and reorganizations, the China Securities Regulatory Commission will further strengthen regulatory oversight, enhance accountability for intermediary institutions—including financial advisors, asset appraisers, auditors, and legal counsel—fully leverage their role as gatekeepers in the capital markets, reinforce market‑based incentive and constraint mechanisms, intensify inspection and enforcement efforts, and resolutely investigate and prosecute all types of illegal and non‑compliant activities in accordance with the law.

Going forward, the China Securities Regulatory Commission will further enhance its service standards, improve regulatory effectiveness, deepen regulatory reforms, and continue to refine M&A and restructuring procedures and oversight mechanisms. It will fully leverage the role of market forces to better serve the real economy.

Regulatory rules for the Shanghai–London Stock Connect have been issued, clarifying the review and approval system for CDRs.

On October 12, the China Securities Regulatory Commission officially issued the “Regulatory Provisions on the Shanghai–London Stock Connect Depositary Receipt Business (Trial)” (hereinafter referred to as the “Shanghai–London Stock Connect Regulatory Provisions”). According to reports, the Shanghai Stock Exchange and China Securities Depository & Clearing Corporation have formulated supporting business rules in accordance with these provisions to ensure the smooth implementation of the Shanghai–London Stock Connect. The relevant business rules have been made public for public comment effective October 12.

The “Regulations on the Supervision of the Shanghai–London Stock Connect” comprise thirty articles, with the following key provisions: First, it clarifies the review and approval regime for the issuance of CDRs under the Shanghai–London Stock Connect, setting out requirements for relevant approval procedures, the list of submission documents, sponsor‑led due diligence, accounting and auditing arrangements, and a cap on the number of CDRs that may be approved. Second, it establishes the framework for cross‑border conversion of CDRs, specifying the conditions for domestic securities offices to engage in such conversions, as well as the related assets and investment activities. Third, it defines ongoing regulatory requirements for CDRs, providing differentiated arrangements for quarterly reports, major asset restructurings, and other matters. Fourth, it lays out the regulatory framework for overseas GDR issuances by domestic listed companies, setting forth conditions for GDR issuance, pricing, the lock‑up period for redemption, and the eligibility of foreign securities offices and depositaries participating in cross‑border GDR conversions. Fifth, it strengthens regulatory enforcement and clarifies the legal liabilities of relevant market participants.

The business rules formulated by the Shanghai Stock Exchange comprise “one measure” and “three guidelines,” namely the “Provisional Measures for the Listing and Trading of Depositary Receipts under the Interconnectivity between the Shanghai Stock Exchange and the London Stock Exchange (Draft for Comments),” as well as the “Guidelines on the Pre‑Review of the Listing of Chinese Depositary Receipts under the Interconnectivity between the Shanghai Stock Exchange and the London Stock Exchange (Draft for Comments),” the “Guidelines on the Cross‑Border Conversion Business of Depositary Receipts under the Interconnectivity between the Shanghai Stock Exchange and the London Stock Exchange (Draft for Comments),” and the “Guidelines on the Market‑Making Business of Chinese Depositary Receipts under the Interconnectivity between the Shanghai Stock Exchange and the London Stock Exchange (Draft for Comments).”

A relevant official from the Shanghai Stock Exchange stated that the Shanghai–London Stock Connect initiative aims to promote connectivity between the capital markets of China and the United Kingdom. The draft business rules currently under public consultation cover numerous aspects, including issuance, listing, trading, cross-border conversion, and ongoing supervision, and involve a range of domestic and overseas market participants, thereby exhibiting certain specificities and complexities.

The Shanghai Stock Exchange stated that, in the next phase, it will revise and refine the business rules related to the Shanghai–London Stock Connect based on feedback from all market participants, and will formally release the updated rules to the market after completing the requisite decision-making and approval procedures.

On the same day, China Securities Depository & Clearing Corporation Limited drafted the “Detailed Rules for the Registration and Settlement of Depositary Receipts under the Interconnectivity Arrangement between the Shanghai Stock Exchange and the London Stock Exchange (Trial) (Draft for Public Comment)” and publicly sought comments from all market participants. The deadline for submitting comments is October 19, 2018.

CSRC: Proceeds from restructuring can bolster liquidity and repay debt.

On October 12, the Listed Companies Supervision Department of the China Securities Regulatory Commission issued the “Questions and Answers on the Issuance of Shares by Listed Companies to Acquire Assets While Raising Supporting Funds (Revised in 2018).” The proceeds from such supporting financing may be used to replenish working capital for both the listed company and the target asset and to repay debt, subject to certain proportional limits.

The “Opinions on the Application of Articles 14 and 44 of the Measures for the Administration of Major Asset Restructurings of Listed Companies—Securities and Futures Legal Application Opinion No. 12” stipulates: “When a listed company issues shares to acquire assets while simultaneously raising accompanying funds, if the amount of such accompanying funds does not exceed 100% of the transaction price of the assets to be acquired, the entire transaction shall be reviewed by the M&A and Restructuring Review Committee.”

With respect to the calculation of the transaction price for the proposed asset acquisition, the clarification states that the “transaction price for the proposed asset acquisition” refers to the price paid in this transaction through the issuance of shares to acquire the assets, excluding the portion of the transaction price attributable to cash‑based capital contributions made by the counterparty to the target assets during the six months preceding the suspension of trading and throughout the suspension period. However, this exclusion does not apply where, prior to the listed company’s board of directors’ first resolution on the major asset restructuring, such cash contributions had already been allocated to specific, reasonable purposes.

Where a listed company’s controlling shareholder, actual controller, or their concerted actors seeks to consolidate control by subscribing for accompanying fundraising or acquiring equity interests in the target assets, the relevant guidance stipulates that, when determining whether such transactions fall within the scope of Article 13 of the Measures for the Administration of Major Asset Restructuring of Listed Companies, any shares subscribed for in connection with the accompanying fundraising shall be excluded from the calculation of whether control has changed. However, this exclusion does not apply if the parties have put in place concrete and feasible arrangements regarding the funding required for the subscription and the lock-up period for the acquired shares, thereby ensuring timely and full subscription and precluding any disguised transfer of shares after acquisition.

If the controlling shareholder, the actual controller, or any persons acting in concert with them of a listed company acquired equity interests in the target assets within six months prior to the suspension of trading for this transaction or during the suspension period, the shares of the listed company subscribed with such equity interests shall be excluded from the calculation when determining whether there has been a change in control. However, this exclusion shall not apply where, prior to the board of directors of the listed company’s first resolution on a major asset restructuring, the aforementioned parties had already obtained equity interests in the target assets by fully paying their capital contributions and making full consideration payments.

In addition, the guidance requires independent financial advisors to conduct a special due diligence review to determine whether the aforementioned entities subscribed for the corresponding shares of the accompanying fundraising in full and on time, whether they engaged in disguised transfers of such shares after acquisition, and whether they withdrew their capital contributions after obtaining equity interests in the target assets.

With respect to the use of proceeds from the accompanying fundraising, the response clarifies that, given the ancillary nature of the funds raised, such proceeds may be used to pay the cash consideration in this M&A transaction, cover transaction-related taxes and fees, personnel‑placement costs, and other M&A integration expenses, as well as to fund the construction of ongoing projects at the target asset. They may also be used to replenish working capital for the listed company and the target asset and to repay debt. However, the portion of the accompanying funds allocated to replenishing working capital and repaying debt shall not exceed 25% of the transaction value, nor more than 50% of the total amount raised.

Pursuant to Article 46 of the Measures for the Administration of Major Asset Restructurings of Listed Companies, if a specific investor has held the equity interests in the assets used to subscribe for shares issued in this offering for less than 12 months, the shares of the listed company acquired through such asset‑based subscription shall be subject to a 36‑month lock‑up period, commencing from the date the share issuance is completed.

The clarification states that, when a listed company issues shares to acquire equity interests in another entity, the “period of continuous ownership” shall be calculated from the date on which the relevant registration procedures for the specific investor’s shareholding have been completed with the company registration authority. If the specific investor makes full payment of its capital contribution after the completion of such registration procedures, the period of continuous ownership shall be calculated from the date of such full payment.

The Shenzhen Stock Exchange has standardized disclosure requirements for hot‑topic matters, officely supporting market‑driven share buybacks and increases in holdings.

Recently, the Shenzhen Stock Exchange issued the “Announcement Format for Share‑Increase Plans and Implementation by Major Shareholders, Directors, Supervisors, and Senior Management of Listed Companies” (hereinafter referred to as the “Increase‑Share Announcement Format”) and the “Announcement Format for Share‑Repurchase Plans and Implementation by Listed Companies” (hereinafter referred to as the “Repurchase Announcement Format”). These measures aim to continuously standardize information‑disclosure requirements for market‑sensitive issues, strengthen regulatory constraints on listed companies, major shareholders, directors, supervisors, and other relevant parties, and effectively safeguard the legitimate rights and interests of investors.

A relevant official from the Shenzhen Stock Exchange stated that share repurchases undertaken by listed companies to stabilize stock prices, reward investors, and optimize capital structure, as well as additional purchases of the company’s shares by major shareholders, directors, supervisors, and senior management based on confidence in the company’s operations and development and a rational assessment of its valuation, are conducive to bolstering market confidence and promoting the sound development of the market. The Shenzhen Stock Exchange supports eligible listed companies, along with their major shareholders, directors, supervisors, and senior management, in conducting share repurchases and additional share acquisitions in compliance with applicable laws and regulations.

The newly issued “Format for Share‑Increase Announcements” applies to situations where controlling shareholders, major shareholders, directors, supervisors, and other relevant parties of listed companies voluntarily disclose their plans to increase their shareholdings. It sets out specific disclosure requirements across four key areas: the basic information of the entity planning the increase, the main contents of the increase plan, risks associated with its implementation, and the progress of its execution. The “Format for Share‑Repurchase Announcements” is applicable to listed companies conducting share repurchases from the public through centralized bidding, clearly defining disclosure obligations regarding the repurchase proposal, deliberation procedures, and implementation progress.

The aforementioned official stated that listed companies, along with their shareholders, directors, supervisors, and senior management, should act within their means when formulating share repurchase and additional‑purchase plans, conduct a prudent assessment of feasibility, and faithfully fulfill their obligations of honesty and good faith. They must refrain from engaging in deceptive practices—such as misleading additional purchases or repurchases—that could harm investors’ interests.

China Securities Regulatory Commission: Supports relevant countries and enterprises in issuing “Belt and Road” bonds on the Shenzhen and Shanghai stock exchanges.

Recently, the first seminar on capital markets in countries along the Belt and Road, organized by the China Securities Regulatory Commission, was successfully held at the Shenzhen Stock Exchange.

According to reports, this seminar represents a concrete step to strengthen capital market cooperation and exchanges among countries along the Belt and Road, and constitutes a proactive effort to lay a solid foundation for advancing subsequent bilateral and multilateral collaboration. More than 20 participants—including representatives from the securities and futures regulatory authorities of Mongolia, Russia, Laos, Cambodia, Thailand, Malaysia, Bangladesh, and other countries, as well as key personnel from relevant departments and units within the China Securities Regulatory Commission—attended the event to share their experiences in market regulation and insights on development strategies. Officials from the International Cooperation Department of the China Securities Regulatory Commission and from the Shanghai and Shenzhen Stock Exchanges also took part in the seminar.

An official from the International Cooperation Department of the China Securities Regulatory Commission stated that, in recent years, the CSRC has consistently adhered to Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, earnestly implemented the spirit of the 19th National Congress of the Communist Party of China, and steadily advanced the opening-up of the capital market. The Commission has continuously strengthened practical cooperation with capital markets along the Belt and Road countries, actively promoted initiatives to leverage the capital market in supporting Belt and Road development, and explored various forms of exchange and collaboration—such as equity partnerships, mutual product listings, connectivity, information sharing, and personnel exchanges—to provide high-quality financial services for Belt and Road projects, achieving significant progress in this regard. Moving forward, the CSRC will further harness the role of the capital market, following the principle of “steady progress and pragmatic implementation,” strengthen financial safeguards, vigorously advance the internationalization of stock exchanges, encourage more robust enterprises to expand overseas through cross-border mergers and acquisitions, steadily open up international markets, enhance the global competitiveness of domestic offices, support high‑quality Chinese companies listed abroad in participating in M&A and restructuring activities in the domestic market, and facilitate the issuance of Belt and Road‑related bonds by relevant countries and enterprises on the Shenzhen and Shanghai stock exchanges.

A relevant official from the Shenzhen Stock Exchange stated that, in recent years, the Exchange has earnestly implemented the relevant directives of the China Securities Regulatory Commission, proactively and systematically advanced cooperation and development with capital markets along the Belt and Road, facilitated the flow of capital, and explored mechanisms for cross-border investment and financing services supporting technological innovation, thereby fostering deep integration between the Belt and Road’s distinctive industries and innovative capital. Moving forward, the Shenzhen Stock Exchange will continue to align with the overarching principles of opening-up and development in the capital market, work in concert with all stakeholders, jointly explore new pathways and platforms for Belt and Road–related capital market cooperation, and strive to build an internationally leading center for the formation of innovative capital.

A relevant official from the Shanghai Stock Exchange stated that, in recent years, under the unified guidance of the China Securities Regulatory Commission, the Exchange has undertaken initiatives across multiple fronts—including equity cooperation, capital market connectivity, information and data sharing, and explorations of business collaboration—to provide concrete support for the Belt and Road Initiative. Moving forward, the Shanghai Stock Exchange will continue to actively foster communication, exchanges, and cooperation with stock exchanges along the Belt and Road, striving to achieve mutual benefit and win-win outcomes among these institutions and jointly promote the development of capital markets in the participating regions.

During the three-day seminar, representatives from national regulatory authorities engaged in in-depth discussions on cutting-edge topics such as capital market innovation and development, frontline supervision, cross-border enforcement cooperation, technology‑system governance, investor education, bond markets, futures markets, and securities registration and settlement systems. They shared insights into their respective countries’ capital market developments and regulatory practices, offering recommendations to advance the Belt and Road Initiative. The seminar’s agenda was closely aligned with current realities and at the forefront of regulatory practice, serving as an effective platform for communication and mutual learning, and earning unanimous praise from all participants.

The Chairman of the China Securities Regulatory Commission convened a symposium to solicit opinions and suggestions on the stable development of the capital market.

On October 14, Liu Shiyu, Secretary of the CPC Committee and Chairman of the China Securities Regulatory Commission, visited the Beijing Dongzhimen South Street Branch of CITIC Securities Co., Ltd. to conduct a field inspection and convened an investor symposium to solicit their views and suggestions on the reform, development, and stability of the capital market.

A total of 15 representatives from private equity funds and individual investors attended the meeting. Participants analyzed, from multiple perspectives, the underlying reasons behind the substantial decline and mounting pressure in the A-share market since the beginning of this year, concluding that the most pressing priority is to bolster market confidence by deepening reforms and further opening up both domestically and internationally. They recommended elevating the strategic importance of the stock market, advancing state‑owned enterprise reform, promoting a mixed‑ownership system, enhancing the quality of listed companies, improving foundational systems—including trading mechanisms—reducing taxes and offering incentives to support the development of private equity funds, encouraging long‑term investment, cultivating institutional investors, and facilitating the entry of long‑term capital into the market. Moreover, macroeconomic policymakers, regulatory authorities, and market participants alike should strengthen their countercyclical mindset to foster the stable and sound development of the capital market.

Liu Shiyu stated that the CSRC has always attached great importance to feedback from the front lines of the market, and the opinions and suggestions put forward today are highly valuable for enriching and refining the comprehensive package of measures aimed at deepening reform and opening up in the capital market.

The China Securities Regulatory Commission will remain guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, thoroughly study and grasp the spirit of the 19th National Congress of the Communist Party of China, and resolutely implement the decisions and arrangements of the CPC Central Committee and the State Council. It will steadfastly uphold the principles of market‑orientation, rule of law, and internationalization, continue to deepen reform and expand opening-up in the capital market, and introduce measures as they mature. The Commission will ensure that the CPC Central Committee’s “six stabilizations” requirements for economic and financial work are fully put into practice, and integrate all measures for capital market reform and opening-up, along with rigorous, law‑based, and comprehensive regulatory efforts, with efforts to bolster and restore market confidence. Upholding the “two unwavering commitments,” the Commission will strengthen innovation across institutions and tools to provide effective support for the development of private enterprises.

China’s stock market boasts hundreds of millions of small and medium-sized investors, a hallmark of the Chinese model. The China Securities Regulatory Commission will remain steadfast in its mission to safeguard the legitimate rights and interests of investors, particularly small and medium-sized investors, and strive to foster an open, fair, just, and transparent capital market environment.

Officials from several securities offices and responsible officials from relevant departments of the China Securities Regulatory Commission attended the symposium.

New Third Board disclosure emphasizes differentiation, with industry-specific tiering requirements that are more distinctive.

On October 12, the National Equities Exchange and Quotations Company announced that, going forward, it will continue to deepen its differentiated information disclosure requirements, further advance the development of industry-specific disclosure frameworks, and refine the disclosure standards for annual and interim reports.

Since the beginning of this year, the implementation of differentiated information disclosure on the New Third Board has accumulated practical experience in further improving the information disclosure regime for listed companies, with positive results. First, it has enhanced the timeliness and effectiveness of information disclosure; second, it has increased the adequacy of disclosures; and third, it has strengthened the role of information disclosure as a regulatory tool, thereby boosting the efficiency of frontline supervision.

Going forward, the National Equities Exchange and Quotations Company will continue to deepen its differentiated information disclosure requirements and, based on thorough research, advance the following initiatives: First, in tandem with the refinement of the tiered system, it will further streamline disclosure standards for each tier, gradually establishing a multi‑level information disclosure regulatory framework that is investor‑oriented, aligns risk and return, and rests on a robust foundational framework. Second, it will further develop industry‑specific disclosure regimes and optimize the disclosure requirements for annual and ad hoc reports. Third, it will actively promote technology‑driven regulation and strengthen the review of information disclosures.

The New Third Board is positioned as a core platform for financing small, medium, and micro enterprises.

The New Third Board will assume the historic mission of serving small, medium, and micro enterprises in the new stage of high-quality economic development. Recently, Xie Geng, Chairman of the National Equities Exchange and Quotations Company, wrote that, as China enters a new phase of pursuing high-quality economic growth, addressing the capital constraints faced by small, medium, and micro enterprises in driving innovation and breakthroughs has become increasingly urgent. To this end, it is essential to deepen reforms further, enhance the financing capabilities of the New Third Board, facilitate channels for venture capital to invest early and in smaller‑scale ventures, and establish a diversified, interconnected financing system tailored to these enterprises. Such measures will foster positive interactions between finance and the real economy, helping to consolidate the foundations of the economy and ensure its steady, long-term progress.

On October 11, Peng Hai, chief analyst for the New Third Board at United Securities, stated that boosting both the momentum and quality of economic growth is a massive, systemic undertaking that requires reforms across all fronts. A key aspect of this effort is “shifting away from the current debt‑centric financing structure, increasing the share of equity financing, enhancing economic competitiveness, and injecting vitality to drive the economy forward.”

“The New Third Board, as a major hub for small and medium-sized enterprises and private offices, serves the needs of SMEs and micro‑enterprises, which aligns with the objective requirements of the new stage of high‑quality economic development,” said Peng Hai.

Comparable to the “midfield” of the capital markets.

“As the ‘midfield’ of the multi-tiered capital market, the New Third Board’s mission to serve small and medium-sized enterprises remains unchanged,” said Lu Binbin, a thematic strategy researcher at Guangzheng Hengsheng, on October 11. He noted that this positioning has been repeatedly reafofficeed by senior officials at the National Equities Exchange and Quotations Company, while numerous reform measures targeting the New Third Board—such as allowing public mutual funds to invest—have been highlighted by the State Council, the People’s Bank of China, the China Securities Regulatory Commission, and other authorities. These developments underscore that the New Third Board’s role in supporting SMEs—and its overall reform direction—has not changed.

At present, the New Third Board has gradually forged a viable pathway for serving small and medium-sized enterprises (SMEs) and micro‑enterprises, becoming the primary platform in the capital market for this purpose. Within the existing legal framework and market infrastructure, to address the challenge of aligning standardized services offered by the centralized market with the diverse, customized needs of SMEs and micro‑enterprises, the New Third Board has established inclusive listing admission criteria, enabling any enterprise that meets the requirements to access the market. As of October 11, there were 10,934 listed companies, including 932 on the Innovation Layer and 10,002 on the Basic Layer.

At the same time, the New Third Board adheres to market‑based principles and leverages the market’s role in resource allocation. It has established a diversified trading and financing framework tailored to the needs of small, medium, and micro enterprises. Recognizing the substantial differences among listed companies in terms of liquidity conditions and funding requirements, the New Third Board currently offers multiple trading mechanisms—such as market making, call auctions, and after‑hours block trades—to meet the diverse needs of different types of offices. Meanwhile, it has begun to develop a direct financing system that encompasses various instruments, including common stock, preferred stock, and innovation‑and‑entrepreneurship bonds.

Over the past five years, the New Third Board has evolved into an important component of China’s multi-tiered capital market. Through reform and innovation, it has progressively forged a viable pathway for serving small, medium, and micro enterprises, achieving notable progress in addressing the challenges of difficult and costly financing faced by these businesses.

Further enhance financing capabilities.

However, in recent years, the New Third Board market has been characterized primarily by structural adjustments and diversifying demand. There is an urgent need to promptly revise and refine its institutional framework in response to evolving market conditions, thereby better addressing the capital‑market needs of small, medium, and micro enterprises as they pursue innovation and growth.

Xie Geng has put forward a series of recommendations to further address the financing challenges faced by small, medium, and micro enterprises, including enhancing the financing capabilities of the New Third Board market; streamlining the fundraising‑investment‑management‑exit cycle for venture capital to support early‑stage and small‑scale investments; and establishing a diversified, coordinated financing framework tailored to SMEs.

According to reports, 2017 was the year for refining market‑based pricing, while the primary focus in 2018 was on enhancing the market’s financing functions.

Xie Geng stated that the New Third Board, as China’s core platform for supporting the financing and development of small, medium, and micro enterprises, has undertaken proactive efforts to foster their access to capital. Moving forward, the National Equities Exchange and Quotations Company will focus on enhancing the market’s financing capabilities and continue to deepen reforms: first, by facilitating large‑scale, highly efficient equity financings on the New Third Board for high‑quality, innovation‑driven listed companies with strong market recognition, thereby fully leveraging their role as model issuers; second, by refining existing mechanisms for private placements and M&A restructuring to improve the efficiency of capital allocation; and third, by expanding the range of financing instruments and exploring the issuance of convertible corporate bonds and preferred shares convertible into common stock on the New Third Board, thus meeting the diversified financing needs of small, medium, and micro enterprises.

Accelerate the introduction of public mutual funds.

Xie Geng stated that efforts should be accelerated to attract diversified institutional investors, including public mutual funds, to invest in the New Third Board; the scope of financial investors with trading needs should be appropriately expanded; market liquidity should be effectively enhanced; the New Third Board’s pricing capabilities and risk-management standards should be improved; and the fundraising‑investment‑management‑exit cycle for venture capital on the New Third Board should be streamlined.

Lu Binbin argues that, from the perspective of direct financing, difficulties in investment exits have dampened the willingness of financial investors to commit capital, directly constraining the inflow of new funds into the New Third Board market. These exit challenges stem partly from this year’s more cautious and stringent IPO review process, which has made it harder for companies to gain approval, and partly from low secondary‑market liquidity on the New Third Board, which has long failed to provide investors with viable exit pathways. From the New Third Board’s own standpoint, addressing these exit hurdles hinges on revitalizing market liquidity. To achieve this, the board could lower investor准入 thresholds and attract a broader, more diversified investor base; at the same time, further refining its tiered structure would help create a liquidity‑driving “demonstration effect.” Accelerating the entry of public mutual funds and other diversified institutional investors, while appropriately expanding the pool of financial investors with active trading needs, would help draw more participants into the market.

Commercial & Corporate

The State Council Executive Meeting has adopted measures to improve the export tax rebate policy and accelerate the processing of tax refunds.

On October 8, Premier Li Keqiang of the State Council presided over an executive meeting of the State Council, where measures were adopted to refine the export tax rebate policy and accelerate the processing of rebates, thereby easing the burden on enterprises and sustaining steady growth in foreign trade. The meeting also outlined plans to advance urban dilapidated‑area renovation, further improving living conditions for those facing housing difficulties.

The meeting noted that implementing export tax rebates is consistent with World Trade Organization rules. Further refining the export tax rebate policy and accelerating the processing of rebates will help deepen supply-side structural reform, reduce costs for the real economy, and enable China to respond to the current complex international environment while sustaining stable growth in foreign trade. The meeting decided that, effective November 1, 2018, in line with the principle of structural adjustment and in accordance with international practice, the current export tax rebate rates—15% and certain 13% rates—will be raised to 16%; the 9% rate will be increased to 10%, with some items rising to 13%; and the 5% rate will be raised to 6%, with some items increasing to 10%. Meanwhile, rebate rates for high‑energy‑consumption, highly polluting, resource‑intensive products, as well as those subject to capacity‑reduction tasks, will remain unchanged. The tax system will be further simplified, reducing the number of rebate rate brackets from seven to five. In addition, the meeting agreed to expedite rebate processing by streamlining procedures and shortening turnaround times for export enterprises with high credit ratings and strong tax compliance records; fully implementing paperless rebate filing; and enhancing the efficiency of rebate reviews. Rebate services will be optimized to help enterprises promptly gather documentation and file claims, ensuring rapid, nationwide, end-to-end electronic refund processing. Comprehensive foreign‑trade service providers will be encouraged to offer agency services for small and medium‑sized enterprises seeking export tax rebates. Fraudulent claims for export tax rebates will be officely cracked down upon. By adopting these measures, the average processing time for export tax rebates will be shortened from the current 13 working days to 10 working days by the end of this year.

The meeting noted that shantytown renovation is both a major project for improving people’s livelihoods and a key driver of development. In line with the directives of the CPC Central Committee and the State Council, over recent years, all regions and relevant departments have vigorously advanced this initiative, enabling more than 100 million residents in dilapidated housing areas to move into modern apartments. From January to September this year, nationwide shantytown renovation projects commenced on 5.34 million units, accounting for over 92% of the annual target, thereby playing a multifaceted and significant role in enhancing living conditions for those facing housing difficulties, addressing developmental shortcomings, and expanding effective demand. Looking ahead, it is essential to remain committed to a people-centered development philosophy and further emphasize the residential function of housing. First, in accordance with the new three-year shantytown renovation plan outlined in this year’s Government Work Report, local authorities should be urged to accelerate project commencement, step up construction of supporting infrastructure, strengthen oversight of engineering quality and safety, ensure equitable allocation, and guarantee timely completion of the year’s renovation targets. Second, strict adherence to defined scope and standards is required, prioritizing the redevelopment of rundown, disordered, and substandard slums within old urban districts, as well as state-owned industrial, mining, forestry, and reclamation area slums. Local conditions should guide adjustments and refinements to the policy of monetary compensation for relocation; cities and counties experiencing insufficient inventories of market‑ready housing and mounting upward pressure on home prices must promptly phase out preferential policies for such arrangements. Third, local governments must rigorously assess their fiscal capacity and scientifically set their 2019 shantytown renovation targets. The level of central government financial subsidies should remain unchanged, while the issuance of special-purpose bonds by local governments for shantytown renovation should be steadily expanded. For newly launched renovation projects, financial support measures should be swiftly formulated and implemented, and any reckless borrowing or other illegal and non‑compliant practices under the guise of shantytown renovation must be strictly prohibited. Land designated for shantytown redevelopment should be secured within new land‑use plans, and through a variety of approaches—including demolition and reconstruction, renovation and expansion, and rebuilding—more residents facing housing difficulties can be helped to move into new homes at an early date.

The People’s Bank of China and the China Banking Regulatory Commission have established regulatory frameworks for “dual anti‑” measures in the internet finance sector.

To standardize anti‑money laundering and counter‑terrorist financing efforts among internet finance institutions and effectively prevent money laundering and terrorist financing, on October 10 the People’s Bank of China, the China Banking and Insurance Regulatory Commission, and the China Securities Regulatory Commission jointly issued the Measures for the Administration of Anti‑Money Laundering and Counter‑Terrorist Financing by Internet Finance Institutions (Trial) (hereinafter referred to as the “Measures”), which regulate these activities across such aspects as scope of application, basic obligations, and supervisory responsibilities.

Clearly define the scope of application. This Measures applies to institutions that have been approved or filed with the competent authorities and are legally engaged in internet finance business within the territory of the People’s Republic of China.

Establishing fundamental obligations. First, institutions shall establish and improve internal control mechanisms for anti‑money laundering and counter‑terrorist financing. Such institutions shall adopt a risk‑based approach and, in accordance with laws, regulations, rules, normative documents, and industry standards, formulate and refine their internal control systems for anti‑money laundering and counter‑terrorist financing.

Second, conduct effective customer identification. Financial institutions shall, in accordance with applicable laws, regulations, rules, normative documents, and industry standards, collect the requisite identifying information and, by leveraging information or data obtained through reliable channels and in a trustworthy manner, take reasonable measures to verify customers’ true identities and to determine and, as appropriate, adjust their risk ratings. Where previously obtained customer identification information is found to be questionable, customers shall be re-identified.

Third, submit reports on large-value and suspicious transactions. Financial institutions shall implement the reporting regime for large-value and suspicious transactions, establish and improve systems for monitoring such transactions, formulate customized transaction‑monitoring criteria and customer‑behavior‑monitoring frameworks, and report suspicious transactions based on reasonable suspicion.

Fourth, conduct monitoring of terrorism‑related lists. Financial institutions shall implement real-time monitoring of such lists; if they have reasonable grounds to suspect that a customer, its counterparty, funds, or other assets are associated with any listed entity or individual, they must promptly file a suspicious transaction report and, in accordance with the law, impose freezing measures on the relevant funds or assets.

Fifth, maintain customer identification records and transaction records. Financial institutions shall properly safeguard the information, data, and materials generated in the course of anti‑money laundering and counter‑terrorist financing activities, ensuring that each transaction can be fully reconstructed and that such activities are traceable.

Establishing regulatory responsibilities. The Measures stipulate that financial institutions shall, in accordance with the law, submit to on-site inspections, off-site supervision, and anti‑money laundering investigations conducted by the People’s Bank of China and its branches, and shall, in accordance with the law, cooperate with the supervisory and administrative authorities under the State Council responsible for financial regulation and their subordinate agencies.

Jiangsu plans to subsidize green bonds by 30%.

Recently, relevant departments in Jiangsu Province have proposed issuing the “Implementation Opinions on Deepening Green Finance to Promote High-Quality Ecological and Environmental Development” (hereinafter referred to as the “Implementation Opinions”), which will provide a 30% interest subsidy for green bonds and green asset-backed securities (ABS), thereby advancing green finance.

The “Implementation Opinions” stipulate that asset securitization may be carried out on the future revenue rights of completed environmental infrastructure, including urban sewage treatment, waste disposal, and industrial solid-waste management. Relevant departments will provide interest subsidies of up to 30% of the issuance rate. For non-financial enterprises that successfully issue green bonds, a subsidy of 30% of the annual actual interest paid will be granted, with a duration of two years; the maximum annual subsidy per bond shall not exceed RMB 2 million.

In addition to bond and ABS issuers, green bond and ABS guarantors will also be eligible for preferential treatment. According to the “Implementation Opinions,” relevant authorities will grant incentives to third-party guarantee institutions that provide guarantees for green bonds, including Yangtze River ecological restoration bonds issued by non-financial enterprises, at a rate of RMB 300,000 per bond, with annual incentives for any single guarantor capped at RMB 6 million.

Relevant authorities will provide risk compensation to third-party guarantee institutions that have not provided guarantees for green credit to small and medium-sized enterprises. For such institutions, where the guarantee limit is RMB 10 million or less (inclusive), a risk compensation of up to 1% will be granted based on the quarterly average balance of their guaranteed business.

In addition, the “Implementation Opinions” stipulate that, for third-party guarantee institutions providing guarantees for green pooled bonds issued by small and medium-sized enterprises, a risk compensation will be granted—upon occurrence of indemnification—at 30% of the actual loss incurred, with a maximum compensation of RMB 3 million per bond.

In addition, the relevant authorities will grant a one-time reward of RMB 200,000 to companies that receive notification from the securities regulatory bureau conofficeing their filing for guidance, a one-time reward of RMB 400,000 upon receipt of the China Securities Regulatory Commission’s acceptance notice for an initial public offering application, and a one-time reward of RMB 2 million to enterprises that successfully complete an IPO.

The State Council has issued the “Notice on Rolling Out the ‘Separation of Licenses and Permits’ Reform Nationwide.”

With the approval of Premier Li Keqiang, the State Council recently issued the “Notice on Rolling Out the ‘Separation of Licenses and Permits’ Reform Nationwide” (hereinafter referred to as the “Notice”).

The Notice states that it is necessary to uphold Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era as the guiding principle, follow the decisions and arrangements of the CPC Central Committee and the State Council, and, with a focus on streamlining administration, delegating power, improving regulation, and optimizing services, implement the requirements of the “separation of licenses and business permits” reform. This entails further clarifying the relationship between government and market, comprehensively reforming approval procedures, streamlining business-related licenses and permits, strengthening comprehensive oversight during and after the event, innovating government management approaches, and creating a stable, fair, transparent, and predictable market access environment, thereby fully unleashing market vitality and promoting high-quality economic development.

Effective November 10, 2018, a “separation of licenses and business permits” reform was implemented nationwide for the first batch of 106 enterprise-related administrative approval items, adopting four approaches: direct cancellation of approvals, conversion of approvals to filing requirements, implementation of notification-and-commitment procedures, and optimization of market access services.

The Notice clarifies the key elements of the reform. First, it specifies the reform approaches: Among the enterprise‑related administrative approval items included in the first batch of the “separation of licenses and business permits” reform, two—namely, the qualification accreditation for private‑purpose entry‑exit intermediary agencies—are being abolished, allowing market entities to commence relevant business activities immediately upon obtaining a business license; one item—the administrative license for the first import of non‑special‑use cosmetics—is being changed to a filing requirement, enabling market entities to engage in related operations after submitting the required filing materials; 19 items, including the approval for establishing film‑showing entities, will adopt an “inform and commit” system, under which competent authorities process applications on the spot when applicants certify that they meet the approval criteria and submit the requisite documentation; and more than 80 items, such as the business operation license for foreign‑invested travel agencies, will see optimized access‑to‑market services, with streamlined application materials and enhanced registration and approval efficiency to address the pain points and challenges most concerning market entities.

Second, we will coordinate and advance the reforms of “separating licenses from business permits” and “integrating multiple certificates into one.” By clearly delineating the functions of licenses and business permits, we will enable more market entities to operate simply by holding a business license, thereby addressing the issue of “approved for entry but not for operation” and truly enabling market entities to conduct business nationwide with a single license and a unified code.

Third, we will strengthen ongoing and post‑event supervision. We will accelerate the establishment of a new regulatory framework that is underpinned by information collection and sharing, relies on public disclosure of information, and places credit‑based regulation at its core. We will uphold the principle of “whoever approves also supervises, whoever is in charge also supervises” to prevent regulatory vacuums. We will develop a nationwide, unified mechanism for “double‑random” inspections and corresponding institutional standards, and explore the formulation of performance‑based regulatory benchmarks.

Fourth, we must accelerate the aggregation and sharing of information. We will further enhance the national and provincial credit information-sharing platforms and the National Enterprise Credit Information Publicity System, enabling the aggregation and sharing of basic information on market entities, relevant credit information, and information on violations and non‑compliance, as well as business‑process coordination, across a broader scope and at a deeper level.

The Notice requires the people’s governments of all provinces, autonomous regions, and municipalities directly under the central government to strengthen overall coordination, enforce accountability at every level, and ensure the proactive yet prudent implementation of the “separation of licenses and business permits” reform. All localities and departments are to tailor measures to their specific circumstances, refine reform initiatives and mid‑term and post‑event regulatory measures for each particular reform item, and submit these specific measures for record‑keeping and public disclosure by November 10, 2018.

A national symposium on state-owned enterprise reform was held in Beijing, calling for solid progress in six key areas.

The National Symposium on State-Owned Enterprise Reform was held in Beijing on October 9. Liu He, Member of the Political Bureau of the CPC Central Committee, Vice Premier of the State Council, and Head of the State Council Leading Group for State-Owned Enterprise Reform, attended the meeting and delivered a speech. State Councilor Wang Yong, Deputy Head of the State Council Leading Group for State-Owned Enterprise Reform, presided over the session.

The meeting called for the thorough implementation of General Secretary Xi Jinping’s important thoughts on state‑owned enterprise reform, a precise assessment of the new domestic and international developments shaping the reform and development of SOEs, and a strategic recognition of the central role of deepening SOE reform in the new era. It emphasized the paramount importance of bolstering the vitality of micro‑level market entities, adhered to the overarching principle of seeking progress while maintaining stability, and, in line with the requirements of improving corporate governance, strengthening incentives, focusing on core businesses, and enhancing efficiency, advanced SOE reform in a pragmatic and bold manner, guided by the approach of “better to cut off one finger than injure all ten.”

First, we must prioritize the development of a modern state‑owned enterprise system with Chinese characteristics. It is essential to clearly delineate the powers and responsibilities of all corporate governance bodies, fully leverage the leadership core role of Party committees (Party leading groups), ensure that the board of directors lawfully exercises its authority over major decision‑making, personnel selection and appointment, and remuneration allocation, safeguard the operational autonomy of the management team, and accelerate the establishment of a corporate governance structure that achieves effective checks and balances.

Second, we will give high priority to advancing mixed‑ownership reform. We must effectively transform corporate operating mechanisms, strengthen internal checks and incentives, safeguard the legitimate rights and interests of property rights across all forms of ownership, and ensure asset valuation is conducted in a scientifically sound manner. By developing a mixed‑ownership economy, we will enhance the efficiency of state‑capital allocation, while at the same time providing robust support to and stimulating the growth of the non‑public sector, so that capital from all forms of ownership can leverage each other’s strengths, complement one another, and achieve shared development.

Third, we will place particular emphasis on establishing market‑oriented operating mechanisms. We will implement a tenure system and contract‑based management for managerial teams, and, in accordance with the principles of “market‑driven recruitment, contract‑based management, differentiated compensation, and market‑based exit,” establish a professional manager system. We will accelerate reforms to the total‑wage management system, comprehensively leverage medium- and long‑term incentive measures such as employee stock ownership, listed‑company shareholding plans, and equity‑based profit sharing in technology‑focused enterprises, thereby fully mobilizing the enthusiasm of cadres and employees at all levels within the enterprise. We will give full play to the role of entrepreneurs, effectively implement the “three distinctions,” provide strong support and encouragement to state‑owned entrepreneurs who take responsibility and act decisively, boldly appoint those who are eager to pursue reform, committed to building their careers, and skilled in business management, and promote the growth and strengthening of the ranks of state‑owned entrepreneurs by identifying and nurturing young talent with vision, drive, and potential.

Fourth, we will place a strong emphasis on advancing supply-side structural reform. State-owned enterprises must continue to reduce excess capacity in sectors such as steel, coal, and coal-fired power, while promptly addressing longstanding debts and legacy issues. They should accelerate structural adjustment and transformation, intensify efforts in independent innovation, and speed up the pace of high-quality development. In addition, they must adopt a multi-pronged approach to deleverage and reduce debt, and resolutely defuse all types of financial risks.

Fifth, we will place particular emphasis on advancing the reform of the authorized‑operation system. We will carefully select pilot projects and intensify reforms in organizational structure, operating models, and management mechanisms, so as to ensure that the pilot programs for state‑owned capital investment and operation companies yield tangible results.

Sixth, we will place particular emphasis on strengthening the oversight of state-owned assets. We will adhere to the principle of prioritizing productive forces, enhance our services to market entities, elevate our professional capabilities and standards, and further improve the targetedness, effectiveness, and systemic nature of regulatory efforts.

Taxation TAXATATION

The State Taxation Administration has finalized a timetable to standardize tax compliance in the film and television industry.

The State Taxation Administration recently issued the “Notice on Further Regulating Tax Order in the Film and Television Industry,” stating that, in accordance with the deployment and arrangements of the Central Publicity Department and four other departments to address issues in the film and television sector, and building on the continued effective implementation of the SAT’s requirements for strengthening tax collection and administration in this industry, the authorities will, in light of recent cases in which tax authorities have uncovered tax evasion by high-income professionals in the sector, further standardize tax collection and administration within the industry and promote its sound development, in line with relevant provisions of the Law on the Administration of Tax Collection and its implementing rules.

An official from the State Taxation Administration stated that in recent years, China’s film and television industry has grown rapidly, generally maintaining a positive momentum. At the same time, it has also revealed such problems as exorbitant actor fees, “yin-yang contracts,” and tax evasion, which undermine social fairness and justice, tarnish the industry’s image, and hinder its sound development.

Relevant authorities have instructed tax authorities at all levels to thoroughly understand and accurately implement the requirements issued by the Publicity Department of the CPC Central Committee and four other departments for addressing issues in the film and television industry, and to earnestly carry out efforts to standardize tax compliance within the sector. They are to take full account of the industry’s unique characteristics, adhere to the principles of prudent progress and phased implementation, effectively rectify existing tax‑related problems, strengthen taxpayers’ awareness of lawful tax obligations, further refine tax administration measures, and promote the healthy development of the film and television industry.

Beginning in October 2018 and concluding by the end of July 2019, efforts to standardize tax compliance in the film and television industry will be advanced in stages, including self-inspection and self-correction, enforcement of corrective measures, targeted inspections, and final summarization and refinement.

Effective October 10, 2018, tax authorities across the country have notified local film and television production companies, talent agencies, entertainment offices, celebrity studios, and other enterprises, as well as high-income professionals in the industry, to conduct self‑examinations and rectify any issues related to their tax filings since 2016. Any film and television enterprises or individuals who, by the end of December 2018, thoroughly carry out self‑examination and self‑correction and voluntarily pay any outstanding taxes will be exempt from administrative penalties and fines.

Relevant officials stated that tax authorities at all levels should proactively assist and guide film and television enterprises and high-income professionals within their jurisdictions in conducting self‑examination and self‑correction. Dedicated consultation lines will be established on the 12366 taxpayer service hotline, and dedicated personnel will be assigned at tax service halls or tax authorities to address inquiries related to self‑examination and self‑correction and to handle relevant administrative procedures. During the taxpayer’s self‑examination and self‑correction process, no on-site inspections will be conducted.

From January to the end of February 2019, tax authorities, based on taxpayers’ self‑examinations and self‑corrections, provided targeted reminders and guidance to encourage relevant taxpayers to further rectify their situations, while also strengthening advisory and support services. Taxpayers who, following such reminders, voluntarily correct their non‑compliant conduct may, in accordance with the law, receive lighter or reduced administrative penalties; for cases involving minor violations, administrative penalties may be waived altogether.

From March to the end of June 2019, tax authorities, in conjunction with self-inspections and self-corrections as well as follow-up enforcement efforts, conducted targeted inspections of certain film and television enterprises and practitioners that refused to make corrections, and imposed strict penalties in accordance with the law.

By the end of July 2019, in light of the salient issues identified during efforts to standardize tax administration in the film and television industry, we will draw broader lessons from these cases, refine management measures, and establish a sound, long-term mechanism for tax administration in the sector. At the same time, we will further strengthen internal tax control mechanisms to effectively prevent and mitigate risks associated with tax enforcement.

Relevant officials stated that, in the course of standardizing tax compliance within the film and television industry, any violations of laws or disciplinary rules by tax authorities or tax personnel, as well as widespread tax evasion accompanied by dereliction of duty, will be rigorously investigated and dealt with in accordance with applicable regulations and disciplinary provisions.

The Ministry of Finance is considering a large-scale tax cut, with experts recommending a five-year reduction of 5 trillion yuan in tax burdens.

Recently, Finance Minister Liu Kun called for the full implementation of existing tax and fee reduction policies, while also expediting the study of larger-scale tax cuts and more substantial fee reductions, so that enterprises can operate with a lighter burden and pursue development with greater confidence.

“Based on the practical needs of China’s economic development and the aspiration to improve the people’s quality of life, implementing larger‑scale tax and fee reductions is both an inevitable choice and an intrinsic requirement for boosting domestic demand, expanding consumption, and increasing investment—particularly among private enterprises,” said Zhang Yiqun, Director of the Jilin Provincial Institute of Fiscal Science.

Regarding how to implement larger‑scale tax and fee reductions, Huang Zhilong, Director of the Macroeconomic Research Center at Suning Institute of Finance, suggests that the scale of tax cuts over the next five years could be clearly defined—for example, a total of 5 trillion yuan in tax reductions over the next five years—providing businesses with a well‑articulated expectation of relief. At the same time, reforms should focus on reshaping the tax system: for instance, shifting from the current structure dominated by indirect taxes to one centered on direct taxes such as personal income tax, corporate income tax, and property tax, while gradually reducing the share of indirect taxes like value‑added tax and consumption tax. Concurrent with these tax reforms, it is essential to ensure that the overall macro‑tax burden remains stable while trending downward.

Zhang Yiqun stated that, based on an analysis of specific future measures to cut taxes and fees, the focus will be on boosting effective supply and guiding the expansion of rational consumption. Further reforms of the individual income tax are needed; the transition from three to two VAT rates is expected. Adhering to the principle of easing the tax burden on enterprises and applying the lower rate rather than the higher one, merging the three VAT rates into two would generate tax reductions amounting to trillions of yuan in a single move, significantly lightening the tax burden on businesses. Moreover, a simplified tax structure would streamline administrative procedures, further reducing both the tax burden on enterprises and the costs associated with tax collection.

Zhang Yiqun believes that there is still room to further reduce corporate income tax rates, particularly for technology‑focused enterprises. For instance, the corporate income tax rate could be lowered from its current 25% to 20%. This would not only help ease the tax burden on businesses but, more importantly, by reducing corporate income taxes, it would directly boost corporate profits, enhance business vitality, and encourage greater investment and industrial transformation.

Huang Zhilong also recommends reducing the corporate income tax rate from its current 25% to 20%. At the same time, he suggests lowering both the rate and the overall level of employer contributions to social security, thereby effectively easing the burden on businesses.

Zhang Lianqi, a member of the Standing Committee of the National Committee of the Chinese People’s Political Consultative Conference and managing partner at Ruihua Certified Public Accountants, recently proposed that, by the end of 2020, the corporate income tax rate be temporarily reduced from 25% to 20%. At the same time, Hong Kong, Macao, and Taiwan residents holding a residence permit who have resided in mainland China for at least 183 days would be exempt from personal income tax. In addition, social security contribution rates would be cut by 5 percentage points.

Zhang Yiqun stated that, although China has already entered an aging society and ensuring the timely and full payment of pensions has become a critical task for social stability in some regions, simply raising pension contribution rates without implementing standardized collection and management practices will leave even the largest funding base unable to close the growing gap between revenue and expenditure. Therefore, it is essential to reduce social security contribution rates, alleviate the burden on enterprises and society, and bolster business vitality.

China will consider continuing to extend individual income tax preferential measures to non-residents, including residents of Hong Kong, Macao, and Taiwan.

The newly revised Individual Income Tax Law has adjusted the threshold for determining resident taxpayers in China from a full year to 183 days. Officials from the Ministry of Finance and the State Taxation Administration recently stated that, in order to maintain policy stability, the next step in implementing the new Individual Income Tax Law will be to consider continuing preferential arrangements for non-resident individuals, including those from Hong Kong, Macao, and Taiwan.

The responsible official stated that the current Regulations for the Implementation of the Individual Income Tax Law provide special preferential provisions regarding the taxation of non-residents. Specifically, individuals who do not have a domicile in China but reside in the country for more than one year but no more than five years may pay individual income tax only on the portion of their income derived from sources outside China that is paid by entities or individuals within China; the portion paid abroad is not subject to individual income tax in China.

China’s Ministry of Finance, the State Taxation Administration, the National Development and Reform Commission, and the Ministry of Commerce have also issued a notice expanding the scope of the policy that exempts withholding income tax on direct investments made by foreign investors using distributed profits. Under this policy, withholding income tax will no longer be levied on profits distributed by Chinese resident enterprises to foreign investors when such profits are used for direct investment within China; the scope of this exemption has been broadened from encouraged‑type foreign‑invested projects to encompass all projects and sectors that are not prohibited to foreign investment.

Litigation & Arbitration

The Hangzhou Internet Court has launched its judicial blockchain, enabling end-to-end recording of electronic data, ensuring full‑chain trustworthiness, and providing notarization by all network nodes.

Recently, the Hangzhou Internet Court held a press conference to announce the official launch of its judicial blockchain platform. This makes it the first court in China to leverage blockchain technology to resolve disputes.

Judicial blockchain ensures the trustworthiness of electronic data across its entire lifecycle—generation, storage, dissemination, and use. The blockchain comprises a three-tier architecture: first, the blockchain application layer, which enables users to record their actions end-to-end on the chain—for example, by submitting electronic contracts, documenting rights‑protection proceedings, or logging service‑process details as digital evidence; second, the full‑chain capability layer, offering services such as real‑name authentication, electronic signatures, timestamps, data notarization, and end-to-end blockchain‑based trust; and third, the judicial consortium layer, a permissioned blockchain that connects notary offices, CA/RA authorities, forensic appraisal centers, and courts, with each entity serving as an on-chain node. Through this comprehensive structure, judicial blockchain addresses the generation, storage, dissemination, and utilization of electronic data throughout its entire lifecycle on the internet, particularly ensuring end-to-end trustworthiness at the point of creation.

In online activities, electronic data continues to face numerous challenges at the time of its creation, such as fragmentation, incompleteness, and loss; evidence stored on the infringer’s devices may be forged or tampered with; and the timestamps of electronic evidence can be reset by machines, rendering it legally inadmissible. All these issues can prevent plaintiffs from pursuing their claims to the end. Consequently, the generation of electronic data is often referred to as the “last mile” in internet‑related litigation.

“Blockchain technology is the optimal technical solution for bridging this ‘last mile.’” According to a responsible official at the Hangzhou Internet Court, the court’s judicial blockchain can address data‑generation authentication by capturing six dimensions—time, location, parties involved, and events before, during, and after—thereby achieving end-to-end recording of electronic data, ensuring trustworthiness across the entire chain, and enabling witnessing by every node.

Lawyers’ Evidence-Gathering Efforts Gain a Powerful New Tool: Hunan Provincial High People’s Court Issues Specialized Work Procedures

To fully leverage the role of lawyers in civil litigation in lawfully investigating and collecting evidence, safeguard parties’ exercise of their procedural rights, and ensure that people’s courts accurately ascertain the facts, the Hunan Higher People’s Court, in accordance with the Civil Procedure Law of the People’s Republic of China and other relevant laws and judicial interpretations, and taking into account practical considerations, has formulated and promulgated the “Work Procedures for Implementing the Lawyer Investigation Order in Civil Trials and Enforcement Proceedings (Trial Implementation),” which entered into force on October 1 of this year.

The Regulations provide a detailed exposition of the nature, scope of application, application requirements, review and issuance procedures, and other related aspects of the lawyer’s investigation order. A lawyer’s investigation order is a legal document that, when a party or their litigation agent is unable to independently collect evidence due to objective reasons, may be issued upon written application by the case‑handling attorney, approved by the court hearing the case, and used by the designated attorney to request specific natural persons, legal entities, or non‑legal organizations to investigate and gather particular evidence.

The Regulations stipulate that evidence sought through a lawyer’s investigation order may only pertain to materials preserved by natural persons, legal persons, or non‑legal person organizations and already existing in tangible form prior to the application. However, such an order shall not apply where the evidence involves state secrets, personal privacy, trade secrets, or other similar matters. An attorney may submit an application for an investigation order during the prosecution, trial, or enforcement stages of a case, accompanied by supporting documents such as the application and the client’s power of attorney. The application must specify relevant details, including the case number. Upon receipt of the application, the collegiate bench, the single judge, or the enforcement judge shall review it and issue the investigation order within five working days. The order shall indicate the case number, the lawyer’s investigation order number, and other requisite information, with a maximum validity period of fifteen days.

The Regulations clarify the legal efficacy of attorney‑issued investigation orders, the legal liabilities of natural persons, legal entities, and unincorporated organizations obligated to assist in investigations, as well as the duties of attorneys. They further stipulate that if an attorney‑representing party engages in abusive conduct, such as forging or falsifying an attorney‑issued investigation order, the issuing court may impose disciplinary measures. The application of attorney‑issued investigation orders in the civil component of criminal proceedings is likewise governed by these Regulations. The document also includes sample forms for the application for and issuance of investigation orders, along with templates for the order itself and its acknowledgment, together with detailed guidelines for its proper use. With its comprehensive content and clear provisions, the Regulations help parties enhance their ability to present evidence.

Other

The State Council has issued the Implementation Plan for Improving the Mechanisms and Systems to Promote Consumption.

October 11 — The General Office of the State Council recently issued the “Implementation Plan for Improving the Mechanisms and Systems to Promote Consumption (2018–2020)” (hereinafter referred to as the “Plan”), which outlines measures to swiftly address the most direct, salient, and pressing institutional and systemic barriers hindering household consumption, thereby further unlocking consumers’ spending potential.

The Plan comprehensively implements the spirit of the 19th National Congress of the Communist Party of China and the Second and Third Plenary Sessions of the 19th CPC Central Committee, guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era. In line with the requirements of high-quality development and in response to emerging trends in the upgrading and transformation of residents’ consumption, it focuses on fostering sound consumer expectations and strengthening the fundamental role of consumption in economic growth. The Plan underscores the need to rely on reform and innovation to remove institutional and systemic barriers, actively cultivate niche markets in key consumption sectors, create a favorable overall consumption environment, continuously enhance residents’ purchasing power, and better meet the people’s growing aspirations for a better life.

The Plan sets out six key tasks to be implemented from 2018 to 2020.

First, further relax market access in the service consumption sector. This includes introducing and implementing policies and measures to promote the upgrading and quality improvement of rural tourism; expanding the scope of pilot programs for developing cultural and creative products at cultural and heritage institutions; expediting the formulation of regulatory measures for services following the abolition of event‑approval requirements; appropriately increasing the planned allocation of space for large medical equipment in privately operated healthcare facilities; abolishing licensing requirements for establishing elderly care institutions; launching pilot and demonstration projects to standardize domestic‑service practices; and hosting high‑level Sino‑foreign cooperative educational institutions and programs, among other policy initiatives.

Second, we will refine the policy framework to promote the upgrading of the physical consumption structure. Key measures include vigorously developing the housing rental market, expanding and strengthening green consumption, fostering innovation in intelligent vehicles, and accelerating the commercial deployment of fifth-generation (5G) mobile communication technology.

Third, we will accelerate the development of product and service standards in key areas. This includes gradually expanding the scope of the “same line, same standard, same quality” initiative for both domestic and export products—from the food and agricultural sectors to consumer goods and other fields—and strengthening policy measures such as the formulation of standards for consumer products and services.

Fourth, we will establish and improve a credit system in the consumer sector. This includes refining mechanisms for sharing and jointly utilizing credit information in the consumer domain, piloting punitive damages for enterprises found to be in breach of trust in select regions, and enhancing recall systems for critical consumer goods such as food and pharmaceuticals, among other policy measures.

Fifth, we will optimize the supporting measures to boost household consumption. This includes formulating and implementing relevant systems and policies under the new Individual Income Tax Law, actively piloting deferred‑tax commercial pension insurance for individuals, accelerating innovation in consumer credit management models and products, and deepening reforms of the income distribution system, among other policy measures.

Sixth, strengthen consumer promotion and information guidance. This primarily includes measures such as enhancing statistical monitoring in the consumption sector, expanding the application of big data in this field, and diligently carrying out consumer awareness‑raising and guidance initiatives.

Shanghai Free Trade Zone Implements a Negative List for Cross-Border Trade in Services

On October 9, the Shanghai Municipal Government Information Office held a press conference, at which Vice Mayor Wu Qing announced that, in order to pursue institutional innovation in the field of trade in services, Shanghai has decided to pilot a negative-list management model for cross-border trade in services within the free trade zone.

To this end, Shanghai has recently formulated and issued the “Measures for the Implementation of the Negative List Management Model for Cross-Border Trade in Services in the China (Shanghai) Pilot Free Trade Zone” (hereinafter referred to as the “Measures”) and the “Special Administrative Measures for Cross-Border Trade in Services in the China (Shanghai) Pilot Free Trade Zone (Negative List) (2018).”

Wu Qing stated that further exploring the negative‑list approach to managing cross‑border trade in services represents a groundbreaking institutional innovation rooted in Shanghai, serving the entire nation, and benchmarked against international standards. This initiative is of great significance, enabling China to proactively respond to shifts in the global economic and trade landscape and deepen its integration into the global value chain. Pioneering the implementation of the negative‑list model for cross‑border trade in services within the free trade zone will help advance the liberalization and facilitation of service trade, broaden areas of cooperation, align China with high‑standard agreements, participate in the formulation of international rules, further integrate into the global value‑chain division of labor, and enhance China’s voice in the global economic and trade system.

The “Special Management Measures for Cross‑Border Trade in Services (Negative List) of the China (Shanghai) Pilot Free Trade Zone (2018)” is formulated in line with the requirements for deepening reform and opening up in the free trade zone, with the goal of building a free trade zone that boasts the highest degree of openness. It is the first negative list in the field of service trade nationwide.

Li Jun, Deputy Director of the Shanghai Municipal Financial Services Office, stated that the recently released negative list for cross-border trade in services in the Shanghai Free Trade Zone includes 31 items related to the financial sector, covering four areas: monetary and financial services, capital market services, insurance, and other financial activities. Building on the ongoing efforts to deepen reform and opening-up through the Shanghai Pilot Free Trade Zone, this initiative aims to further enhance the transparency and operational feasibility of financial-sector liberalization. Going forward, the authorities will actively seek support from national financial regulators to facilitate pilot implementation of the financial‑sector liberalization measures listed, starting in Shanghai.

The Measures define “cross-border trade in services” as “commercial activities involving the provision of services from abroad to entities within the free trade pilot zone,” and encompass three modes: cross-border payments, overseas consumption, and the movement of natural persons. The Measures stipulate that the Leading Group for Promoting Work in the Free Trade Pilot Zone shall coordinate and integrate the expansion of openness in cross-border trade in services with ongoing and post‑event regulatory oversight; the competent authorities of each sector shall perform their regulatory duties in accordance with the law and refine the management measures applicable to cross-border trade in services within their respective industries; and the Management Committee of the Free Trade Pilot Zone shall, in collaboration with relevant departments, implement the negative list, while the foreign exchange, tax, entry‑exit, telecommunications, and customs authorities shall support the specific measures for ongoing and post‑event supervision.

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