JC Master Legal News Issue 841

Key Takeaways for This Issue

CSRC: The waiting period for companies whose IPO applications have been rejected to restructure and relist has been shortened from three years to six months.

On October 20, China Securities Regulatory Commission (CSRC) spokesperson Chang Depeng stated that, in response to market demand and to standardize regulatory requirements for IPO re‑filing by companies whose applications were previously rejected, support high-quality enterprises in participating in listed company mergers and acquisitions and restructuring, and promote the enhancement of listed company quality, the CSRC will reduce the waiting period for IPO‑rejection‑restructuring listings from three years to six months.

Liu He chaired the second meeting of the State Council Leading Group for Promoting the Development of Small and Medium-sized Enterprises, calling for the adoption of targeted and effective measures to provide strong support for the development of micro, small, and medium-sized enterprises.

The second meeting of the State Council Leading Group for Promoting the Development of Small and Medium-sized Enterprises was held in Beijing on October 17. Liu He, Member of the Political Bureau of the CPC Central Committee, Vice Premier of the State Council, and Head of the Leading Group, presided over the meeting and delivered a speech. The meeting heard reports on the overall progress in implementing the key tasks from the first meeting of the Leading Group, as presented by the Ministry of Industry and Information Technology; on the work advances and related recommendations regarding addressing the difficulties and high costs of financing for SMEs, as outlined by the People’s Bank of China, the China Banking and Insurance Regulatory Commission, and the China Securities Regulatory Commission; on the third-party assessment conducted by the All-China Federation of Industry and Commerce to evaluate the implementation of policies and measures aimed at alleviating financing challenges and costs for SMEs; and on the operational status of the National Fund for the Development of Small and Medium-sized Enterprises and the implementation of fiscal and tax support policies for SME development, as reported by the Ministry of Finance. Officials from other member units of the Leading Group also made statements.

The rollout of detailed rules for individual income tax deductions is entering the final countdown.

A major highlight of the latest round of personal income tax reform—the policy on special additional deductions—was unveiled on October 20. Starting that day, the “Interim Measures for Special Additional Deductions under the Individual Income Tax Law (Draft for Public Comment),” drafted jointly by the Ministry of Finance and the State Taxation Administration along with relevant departments, was posted on the official websites of the two agencies for a two-week period of public consultation. Also made available for public comment as of the 20th was the “Regulations for the Implementation of the Individual Income Tax Law of the People’s Republic of China (Draft Amendment for Public Comment).”

Twenty-eight departments have jointly issued a document: violent attacks on medical personnel and disruptive behavior in hospitals will be subject to coordinated punitive measures.

On October 16, 28 government departments, including the National Development and Reform Commission, the People’s Bank of China, the National Health Commission, the Organization Department of the CPC Central Committee, and the Publicity Department of the CPC Central Committee, jointly issued the “Memorandum of Cooperation on Joint Punitive Measures Against Persons Responsible for Dishonest Conduct That Severely Disrupts Normal Medical Order.” Under this memorandum, natural persons who have committed or participated in medical‑related illegal or criminal activities, and who have been subject to administrative detention or more severe penalties by public security organs, or who have been held criminally liable by judicial authorities, will be subject to joint punitive measures.

The penalties and compensation in the Changsheng vaccine case have been announced!

On the 16th, the National Medical Products Administration and the Jilin Provincial Food and Drug Administration each imposed multiple administrative penalties on Changchun Changsheng Company.

Table of Contents

Table of Contents

Finance & Capital Markets

CSRC: The waiting period for companies whose IPO applications have been rejected to restructure and relist has been shortened from three years to six months.

CSRC: The ten major industries are eligible for the “small‑amount, fast‑track” review mechanism for mergers and reorganizations.

In an interview on current economic and financial issues, Liu He emphasized that the government attaches great importance to the healthy and stable development of the stock market.

Liu Shiyu stated that he encourages all types of funds to help alleviate the distress caused by stock pledge financing and urges private equity funds to participate in the mergers and reorganizations of listed companies.

The CSRC has refined its review procedures for refinancing, stipulating that raised funds may not be diverted for other purposes.

Guo Shuqing, Chairman of the China Banking and Insurance Regulatory Commission, stated in an interview that efforts will be stepped up to increase insurance funds’ investment in high-quality listed companies.

The Shanghai and Shenzhen Stock Exchanges are vigorously advancing the globalization of the capital market.

SSE: Providing Comprehensive Services for “New Blue-Chip” Enterprises

Corporate & Commercial

Liu He chaired the second meeting of the State Council Leading Group for Promoting the Development of Small and Medium-sized Enterprises, calling for the adoption of targeted and effective measures to provide strong support for the development of micro, small, and medium-sized enterprises.

China Banking and Insurance Regulatory Commission: Allows bank wealth management subsidiaries to directly invest in equities through public offering wealth management products.

In the first three quarters, China’s GDP grew 6.7% year on year, with steady improvements in quality and efficiency.

The State-owned Assets Supervision and Administration Commission responds to key reform issues: more state-owned assets will be transferred to the social security system.

Taxation

The rollout of detailed rules for individual income tax deductions is entering the final countdown.

Two departments: Property tax will be exempted for enterprises that have ceased production as part of capacity-reduction efforts.

The Ministry of Finance has once again signaled large-scale tax cuts, with experts estimating the total could reach trillions of yuan.

Litigation & Arbitration

Twenty-eight departments have jointly issued a document: violent attacks on medical personnel and disruptive behavior in hospitals will be subject to coordinated punitive measures.

The Supreme People’s Court, the Supreme People’s Procuratorate, and the Ministry of Public Security have issued the “Opinions on Several Issues Concerning the Application of Law in Handling Criminal Cases Involving Theft of Oil and Gas and Destruction of Oil and Gas Facilities.”

The Jiangsu Provincial People’s Procuratorate and the Provincial Lawyers Association have launched a pilot program allowing applicants for legal practice to serve as assistant prosecutors during their internship.

Other

The penalties and compensation in the Changsheng vaccine case have been announced!

The Shenzhen Stock Exchange has initiated the delisting procedure for Zhonghong Shares.

Finance & Capital Markets

CSRC: The waiting period for companies whose IPO applications have been rejected to restructure and relist has been shortened from three years to six months.

On October 20, China Securities Regulatory Commission (CSRC) spokesperson Chang Depeng stated that, in response to market demand and to standardize regulatory requirements for IPO re‑filing by companies whose applications were previously rejected, support high-quality enterprises in participating in listed company mergers and acquisitions and restructuring, and promote the enhancement of listed company quality, the CSRC will reduce the waiting period for IPO‑rejection‑restructuring listings from three years to six months.

Q: We have noted that the CSRC has adjusted its policy regarding the participation of companies whose IPO applications were rejected as target assets in listed‑company restructuring transactions. Could you explain the rationale behind this change?

A: To prevent some IPO‑rejected companies with substandard qualifications from circumventing the process by pursuing mergers and restructurings to gain access to the capital markets, the Commission previously issued relevant Q&A documents, imposing a three-year waiting period for such companies seeking to relist through restructuring and strengthening information‑disclosure oversight. This approach has played a positive role in curbing regulatory arbitrage and maintaining market order. However, given the diverse reasons behind IPO rejections, many companies that have addressed the underlying issues demonstrate sound corporate governance and strong profitability, and there is considerable demand for them to leverage the capital markets for growth. In response to market needs, and in order to standardize regulatory requirements for IPO‑rejected companies seeking to refile, support high‑quality enterprises in participating in listed‑company mergers and restructurings, and enhance the overall quality of listed companies, the Commission has reduced the waiting period for IPO‑rejected offices planning to pursue restructuring and relisting from three years to six months. The Commission will continue to deepen market‑oriented reforms of mergers and restructurings, thereby contributing to the high‑quality development of the national economy.

CSRC: The ten major industries are eligible for the “small‑amount, fast‑track” review mechanism for mergers and reorganizations.

On October 19, the China Securities Regulatory Commission issued the “Questions and Answers on Industry Policy Requirements for the ‘Exemption/Fast-Track’ Lane of the M&A and Restructuring Review System,” clarifying that the newly added industries eligible for exemption or fast-track treatment under this review system include ten sectors, such as next-generation information technology, new materials, new energy, and the bio‑industry.

Recently, the China Securities Regulatory Commission officially launched a “small‑amount, fast‑track” review mechanism for mergers and reorganizations, under which applications are reviewed directly by the Listed Companies’ M&A and Reorganization Review Committee, thereby streamlining administrative approvals and shortening the review period.

Under the differentiated review regime for mergers and reorganizations, the industrial policies applicable to the “exemption/fast-track” pathway have drawn market attention. The China Securities Regulatory Commission (CSRC) stated that, in order to effectively support supply-side structural reform and further bolster the development of high‑tech industries, and building on the existing supportive measures, it has, in accordance with the decisions and arrangements set forth in the Outline of the 13th Five-Year Plan for National Economic and Social Development of the People’s Republic of China, Made in China 2025, and the National Strategic Emerging Industries Development Plan for the 13th Five-Year Period, added the following new industry categories to the exemption/fast-track pathway under the differentiated review regime:

High-end CNC machine tools and robots, aerospace equipment, marine engineering equipment and high-tech vessels, advanced rail transit equipment, power equipment, next-generation information technology, new materials, environmental protection, new energy, and the bio-industry; as well as other industries that the CPC Central Committee and the State Council have identified as urgently requiring accelerated integration and transformation and upgrading. Meanwhile, financial advisors shall conduct special due diligence on the aforementioned matters and issue clear opinions.

In an interview on current economic and financial issues, Liu He emphasized that the government attaches great importance to the healthy and stable development of the stock market.

On the morning of October 19, Liu He, Member of the Political Bureau of the CPC Central Committee and Vice Premier of the State Council, granted a joint interview to People’s Daily reporter Gong Wen, Xinhua News Agency reporter Zhao Cheng, and China Central Television reporter Xu Qiang on current hot topics in the economy and finance. The following is the transcript of the interview:

Reporter: Vice Premier Liu, we know you are extremely busy, but given the recent changes in the economic and financial landscape, we would like to ask a few questions to address market concerns.

Liu He: You are welcome to conduct your interviews, and I am very happy to answer any questions you may have.

Adjust to foster the long-term healthy development of the stock market and create favorable investment opportunities.

Reporter: Vice Premier Liu, what is your view on the recent sharp volatility in China’s stock market?

Liu He: Over the recent period, China’s stock market has experienced noticeable volatility and a downward trend, driven by a combination of factors. First, there are external influences. Following interest-rate hikes by major central banks, global equity markets have become volatile and have declined; U.S. stocks, too, have seen a marked pullback, a process that continues to unfold. Sino‑U.S. trade tensions have also weighed on the market, though, to be frank, their psychological impact has outweighed the tangible effects—negotiations between the two sides are currently underway. Second, China’s economic structure is undergoing a transition from old to new, which inevitably exerts pressure on the stock market. Third, shifting market expectations and the myriad uncertainties surrounding the future economic environment have influenced investor behavior. Investors are particularly concerned about the development of the private sector and the protection of property rights. In addition, over the past few days, certain technical factors have come into play—for instance, passive position reductions have emerged amid the market’s decline. Taken together, these elements have contributed to the stock market’s volatility.

Recently, I have been closely following the assessments of international investment institutions regarding the Chinese stock market, as well as the market analyses conducted by domestic professional offices. A broadly shared view is that, from a global asset‑allocation perspective, China is emerging as one of the most attractive markets for investment. Bubble risks have significantly receded, the quality of listed companies is improving, and valuations are at historically low levels. Consequently, many institutions are urging investors to pay close attention to the Chinese stock market, believing it now offers substantial investment value. Investors, in turn, are expected to make informed, rational judgments based on these evaluations. In essence, the ongoing market correction and deleveraging are creating favorable opportunities for the long-term, healthy development of the stock market.

Five Major Reform Measures to Promote the Healthy Development of the Stock Market

Reporter: What new measures has the government introduced to promote the healthy development of the stock market?

Liu He: The government attaches great importance to the healthy and stable development of the stock market. At present, the market is characterized by strong expectations for institutional innovation and reform policies, and there is a robust positive feedback loop between market performance and these expectations.

Therefore, to promote the sound development of the stock market, it is essential to introduce new reform measures in a targeted manner. Recently, the People’s Bank of China, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, and other relevant authorities have been studying and rolling out fresh reform initiatives, resulting in a number of new institutional arrangements and policy tools. This morning, these policies were announced one after another, covering at least the following key areas: First, on the front of market stability, bank wealth‑management subsidiaries are permitted to invest in the capital markets; financial institutions are required to manage risks associated with equity‑pledge financing in a prudent and rational manner; and local‑government‑managed funds and private equity funds are encouraged to assist promising companies in alleviating difficulties related to equity pledges. Second, in terms of fundamental market‑system reforms, measures such as the “Administrative Measures for Private Asset Management Business of Securities and Futures Operating Institutions” have been formulated; the share‑repurchase regime for listed companies has been refined; market‑oriented reforms of mergers and acquisitions and restructuring have been deepened; reforms of the New Third Board have been advanced; and support for technology‑innovation enterprises seeking IPOs has been strengthened. Third, to foster long-term funding sources for the market, greater efforts will be made to channel insurance funds into high‑quality listed companies through both financial and strategic investments, thereby bolstering the ranks of institutional investors and solidifying the foundation for long-term investment. Fourth, to advance state‑owned enterprise reform and private‑sector development, a series of new measures will be accelerated, including promoting mixed‑ownership reforms of SOEs in the capital markets, supporting leading private enterprises in undertaking industrial mergers and restructurings, and launching bond‑financing and equity‑financing support programs for private offices. Fifth, in expanding opening-up, comprehensive liberalization will continue, with the pace of opening in banking, securities, insurance, and other sectors accelerated in line with the spirit of General Secretary Xi Jinping’s Boao Forum address. This year marks the 40th anniversary of reform and opening-up; the overarching principles of this major policy initiative have been set, and the key now lies in rigorous implementation. We are at a critical juncture where action speaks louder than a dozen policy outlines. All parties must step up their efforts, demonstrate a stronger sense of responsibility, dare to take ownership, act swiftly, and deliver concrete policies that effectively drive the healthy development of the stock market.

Uphold the “two unwavering commitments”

Reporter: At present, private enterprises are experiencing some anxiety regarding the implementation of the basic economic system. What is your view on this issue?

Liu He: First of all, I would like to emphasize that we must unswervingly implement the basic economic system and uphold the “two unwavering commitments”: on the one hand, we must unswervingly consolidate and develop the public sector; on the other, we must unswervingly encourage, support, and guide the development of the non-public sector. At present, in actual implementation, certain misunderstandings and deviations have emerged. For example, some institutional staff believe that extending credit to state-owned enterprises is safe, whereas lending to private enterprises carries political risks, leading them to prefer inaction rather than risk making a political mistake. Such perceptions and practices are entirely wrong. We must approach this issue from the standpoint of upholding political principles and the overall national interest. The private sector occupies a vital position in the national economy, contributing over 50% of tax revenue, more than 60% of GDP, over 70% of technological innovation, more than 80% of urban employment, and over 90% of new jobs and business establishments. Without the development of private enterprises, there can be no stable economic growth; without a high‑quality private‑sector system, there can be no modern industrial framework. Supporting the development of private enterprises is, therefore, tantamount to supporting the entire national economy. Any actions taken—under the pretext of so‑called “personal safety”—to refrain from supporting private enterprises reflect serious political shortcomings and must be resolutely corrected. With regard to private enterprises, we must underscore the “four musts”: First, we must adhere to the basic economic system and fully leverage the crucial role of small, medium, and micro enterprises, as well as the private sector, in China’s economic and social development. Second, we must attach great importance to the temporary difficulties currently faced by these enterprises and adopt precise, effective measures to provide robust support for their growth. Third, we must further deepen research into policy measures that alleviate tax and fee burdens, address financing challenges, improve environmental governance, and enhance scientific and technological innovation capabilities—all aimed at bolstering the development of small, medium, and micro enterprises. Fourth, we must strengthen the intrinsic capacity of small, medium, and micro enterprises and the private sector, enabling them to continuously adapt to changing market conditions and strive for high‑quality development. Recently, the Office of the State Council Leading Group for Promoting the Development of Small and Medium‑Sized Enterprises, together with the All‑China Federation of Industry and Commerce, will conduct on‑site inspections across various regions to assess the implementation of the basic economic system and the progress of small, medium, and micro enterprises. We hope for your active support.

There is no issue of “state enterprises advancing while private enterprises retreat.”

Reporter: There has been some discussion in society about the phenomenon of “state advancing, private sector retreating.” What is your view on this?

Liu He: The notion circulating in society that “the state is advancing while the private sector is retreating” is both one-sided and mistaken. Recently, some private enterprises that previously expanded rapidly through heavy debt have run into liquidity difficulties because they strayed from their core businesses. In such cases, state-owned banks or state-owned enterprises have stepped in to provide assistance or even undertake restructuring—actions that help these private offices weather the crisis and, far from signaling a retreat of the private sector, instead underscore the mutual dependence and cooperation between state‑owned and private enterprises. I believe this is a positive development, and there is no basis for claiming a “state‑led advance at the expense of the private sector.” When private enterprises improve their performance, state capital can exit. Conversely, if state‑owned enterprises encounter difficulties, private offices can play an active role in boosting efficiency. We also encourage well‑positioned, high‑performing private enterprises to take a proactive part in industrial restructuring, facilitating mergers and reorganizations among small and medium‑sized enterprises within the same sector that possess competitive potential but are currently facing challenges.

It must be recognized that China’s state-owned and private enterprises have already established a complete industrial chain. State-owned enterprises predominantly occupy the upstream segments, playing a pivotal role in foundational industries and heavy manufacturing, while private enterprises are increasingly supplying manufactured goods, particularly final consumer products. The two sectors enjoy a highly complementary relationship, characterized by mutual cooperation and support. Going forward, China’s economy will continue to advance along this trajectory, moving toward high-quality development. We must abandon traditional, rigid mindsets and adopt a fresh, modern perspective on industrial chains to better understand both the state‑owned and private sectors.

I would like to emphasize that, as China’s economy remains in a phase of overlapping challenges—characterized by the confluence of three distinct periods—many enterprises are facing difficulties. Yet this very period presents an extraordinary opportunity for entrepreneurs: those with courage, vision, and a willingness to take bold action should lead the way and live up to public expectations. The Chinese government is committed to fostering a level playing field, strengthening the rule of law, enhancing protection of property rights and intellectual property, upholding the basic economic system, and deepening reform and opening-up. Under these circumstances, there is every reason to be confident in the broad prospects of China’s economic development.

The economy has maintained a steady and improving trend.

Reporter: What is your view on the current economic and financial landscape, as well as the evolving industrial structure?

Liu He: I believe that, overall, China’s economy has maintained a fundamental trend of steady progress and improvement. Judging from key indicators such as economic growth, employment, prices, the balance of payments, corporate profits, fiscal revenue, and labor productivity, China’s economic performance remains within an appropriate range. Compared with major economies worldwide, China’s economic performance has been quite strong, and both the International Monetary Fund and the World Bank have expressed high praise for the country’s sustained development. In the financial sector, monetary policy has been implemented prudently, structural deleveraging has advanced steadily, and the impulse among various institutions to expand recklessly in the face of risks has noticeably subsided, leading investment behavior to become more rational. At the same time, the various risks and problems accumulated over time are inevitably coming to light—a natural and inevitable process that should be viewed rationally.

In response to the marginal changes emerging in economic performance, the CPC Central Committee and the State Council have called for steadfast efforts to ensure stable employment, financial stability, steady foreign trade, stable foreign investment, robust investment, and sound market expectations—goals that we must resolutely implement. Of course, it is especially important to strike an appropriate balance among maintaining growth, adjusting the economic structure, and guarding against risks: on the one hand, we must uphold the stability of economic growth; on the other, we must effectively contain financial risks and keep the overall macro leverage ratio relatively stable. The key to achieving this balance lies in the effective implementation of a policy framework centered on supply-side structural reform. Over the past three years, we have achieved phased results in the “three reductions, one cut, and one supplement” agenda. The international community generally recognizes that, through “creative destruction,” price levels in certain overcapacity sectors of the Chinese economy have returned to equilibrium, supply-demand conditions have improved markedly, thereby boosting economic growth and contributing to the global economic recovery.

The task of adjusting China’s economic structure remains unfinished, and supply-side structural reform must be further deepened. The next priority should be to bolster the vitality, resilience, and innovative capacity of micro‑entities, thereby driving economic transformation and upgrading and fostering a virtuous cycle in the national economy. To this end, we must promptly focus on three key areas. First, we will support the development of private enterprises, enhance financial accessibility, and alleviate various burdens. Second, we will deepen state‑owned enterprise reform, with particular emphasis on advancing mixed‑ownership reform, establishing more robust corporate governance frameworks, strengthening internal incentive mechanisms, and enhancing core competitiveness. Third, the financial system must become more adaptable and better able to serve the real economy. Under the current circumstances, it is especially important to accelerate institutional development and fully leverage the pivotal role of capital markets. Of course, achieving these objectives requires the backing of prudent macroeconomic policies. We will continue to implement an active fiscal policy, a prudent monetary policy, clear industrial investment policies, and social policies that are more inclusive and sustainable, so as to further advance supply-side structural reform—the cornerstone of our policy agenda. When assessing China’s economic performance, short‑term fluctuations may give the impression of certain challenges; however, viewed as part of a longer historical trajectory, the outlook remains exceptionally bright.

From the perspective of a healthy, virtuous cycle in the national economy, China’s economy is undergoing a structural transformation—what we often describe as a shift from traditional growth drivers to new ones. Today, the market is keenly interested in the specific direction of this transition. Clearly articulating this process is complex, as it involves market‑driven experimentation and trial-and-error. However, from the demand side, several key trends are already evident. First, China’s vast middle‑income cohort is emerging, generating substantial and diversified demand. Second, population aging is becoming increasingly pronounced, giving rise to significant new needs. Third, a new wave of technological revolution and industrial transformation—characterized by the convergence of biotechnology and information technology—is gaining momentum; this not only calls for supply‑side innovations but will also spur robust demand. Fourth, green development is opening up fresh opportunities. We must seize these emerging directions, identifying and capitalizing on new opportunities within the grand historical process of advancing industrialization, informatization, urbanization, marketization, and internationalization. To this end, we should strive to upgrade traditional industries, vigorously develop emerging sectors, and accelerate the building of a modern economic system.

Finally, I would like to say this: under the leadership of the Party Central Committee with Comrade Xi Jinping at its core, China’s pursuit of peaceful development is an historical inevitability. The difficulties and challenges we face are but obstacles on the path forward. As long as we keep this in mind, our hearts will grow calm, and China’s future will surely be brighter!

Liu Shiyu stated that he encourages all types of funds to help alleviate the distress caused by stock pledge financing and urges private equity funds to participate in the mergers and reorganizations of listed companies.

On October 19, Liu Shiyu, Secretary of the CPC Committee and Chairman of the China Securities Regulatory Commission, granted an interview addressing key issues of market concern. He stated that local governments‑managed funds, qualified private equity investment funds, and securities offices’ asset management products are encouraged to establish new funds—either individually or in collaboration—to help listed companies with promising prospects but temporarily facing operational difficulties alleviate their stock‑pledge distress and promote their sound development.

Under the current market conditions, investors are looking forward to the introduction of new measures to advance capital market reform and opening-up. Liu Shiyu stated that the China Securities Regulatory Commission has consistently prioritized reform, opening-up, and innovation as the guiding principles for stabilizing and bolstering market confidence. The key initiatives recently advanced encompass the following areas:

First, the Measures for the Administration of Private Asset Management Business by Securities and Futures Operating Institutions are set to be promulgated. During the transition period, relevant products will be permitted to roll over in order to accommodate outstanding assets. Following the expiration of the transition period, products that genuinely cannot complete rectification may, upon approval by the China Securities Regulatory Commission, adopt appropriate measures to ensure their orderly resolution, thereby guaranteeing the seamless continuation of business operations and the effective protection of investors’ legitimate rights and interests.

Second, we will promptly refine the share‑repurchase regime for listed companies. The relevant draft amendment has been submitted by the State Council to the Standing Committee of the National People’s Congress for deliberation in accordance with legislative procedures. The China Securities Regulatory Commission will work closely with relevant departments to actively support this effort, efficiently facilitating eligible listed companies to repurchase shares in compliance with applicable laws and regulations.

Third, we will continue to deepen market‑oriented reforms of mergers and acquisitions and restructuring. We have already introduced a “small‑amount, fast‑track” review mechanism for M&A and restructuring, and we will soon implement a “tiered review system” based on industry sectors, giving priority to high‑tech industries. We will also diversify the payment instruments used in M&A and restructuring, enhance review efficiency, and encourage and support listed companies in leveraging these transactions to improve their performance and grow stronger.

Fourth, we will encourage various funds managed by local governments, qualified private equity investment funds, and securities‑office asset management products—either individually or in collaboration—to establish new funds, thereby helping listed companies with promising prospects but temporarily facing operational difficulties to alleviate their stock‑pledge distress and promote their sound development.

Fifth, private equity funds are encouraged to acquire shares of listed companies and participate in their mergers and reorganizations by means such as subscribing to non‑public offerings, entering into contractual transfers, and executing block trades.

Sixth, we will continue to pursue comprehensive opening-up, supporting foreign‑owned asset management institutions in establishing legal entities within China to engage in asset management activities, including equity‑type assets such as stocks.

On supporting the development of private enterprises, Liu Shiyu stated that the private sector is an essential component of the national economy, and the competitiveness of private enterprises is a key pillar of national competitiveness. Listed companies with private ownership are public companies. We must officely uphold the “two unwavering commitments,” strengthen innovation across institutional frameworks and policy tools, and provide robust support for the growth of private enterprises.

First, enhance the inclusiveness of the ChiNext Board and improve the quality of its listed companies. Advance reforms to the issuance and trading systems of the New Third Board, thereby strengthening its capacity to provide financing services to listed companies.

Second, we will encourage all types of asset management institutions, including private equity funds, to raise capital in a more market-oriented manner, establish equity investment funds, venture capital funds, and bond investment funds that primarily invest in private enterprises, and actively participate in the mergers and reorganizations of privately owned listed companies.

Third, we will explore the use of established credit enhancement tools to help private enterprises, particularly privately held listed companies, overcome difficulties in issuing bonds. We will also support small and medium-sized private enterprises in issuing high-yield bonds, private placement bonds, and other specialized debt instruments.

The CSRC has refined its review procedures for refinancing, stipulating that raised funds may not be diverted for other purposes.

Recently, the China Securities Regulatory Commission issued to securities offices the “Q&A on Financial Matters in Refinancing Reviews” and the “Q&A on Non-Financial Matters in Refinancing Reviews,” further clarifying the key review points for refinancing. Specifically, it stipulates that when raising funds through a rights issue, the issuance of preferred shares, or a non‑public offering of shares with a designated list of subscribers approved by the board of directors, all proceeds may be used to replenish working capital and repay bank loans; however, such funds may not be diverted under the guise of replenishing working capital or repaying bank loans to other purposes.

With regard to the overarching regulatory requirements governing the allocation of proceeds from refinancing, the “Q&A on Financial Matters in Refinancing Reviews” clarifies that, to guide listed companies in making prudent decisions about the use of raised funds and to prevent such funds from being diverted from the real economy to speculative activities, the proceeds must support the real economy and align with national industrial policies, with primary investment directed toward the company’s core business. In principle, raised funds may not be used for cross‑industry investments in film, television, or gaming. Except for financial institutions, such funds may not be allocated to trading‑type financial assets, available‑for‑sale financial assets, lending to others, entrusted wealth management, or other financial‑type investments and quasi‑financial activities.

At the same time, projects funded by the raised capital must be well-defined and may not be preliminary or tentative initiatives, nor may they be fund‑pooling schemes that merely disclose investment directions. Furthermore, such projects must have the requisite implementation prerequisites; for instance, if the funds are to be used for film and television production, the relevant scripts must undergo the prescribed filing procedures.

With respect to the use of raised funds for non‑capital expenditures such as replenishing working capital and repaying bank loans, the “Q&A on Financial Matters in Refinancing Reviews” clarifies that financial institutions may allocate all proceeds to bolster their capital base. For issuances conducted through rights offerings, preferred stock offerings, or private placements where the board of directors designates the subscribers, all proceeds may be used to replenish working capital and repay bank loans. In other cases, the portion of proceeds allocated to replenishing working capital and repaying bank loans shall not exceed 30% of the total funds raised.

The “Q&A on Financial Knowledge for Refinancing Review” also requires listed companies to disclose the intended use of raised funds in accordance with their actual purposes, and to reasonably determine the scale of supplementary working capital and bank‑loan repayment based on their existing asset–liability structure, operating scale and trends, as well as projected future working‑capital needs. Companies must not, under the guise of supplementing working capital or repaying bank loans, indirectly divert raised funds to other purposes. If a listed company has undertaken or plans to undertake a major asset acquisition within six months prior to the date of this board resolution, it shall specify the sources of funding for the acquisition and the sources of repayment (including any bank loans), and clarify whether there is any circumvention of the rules by using the proceeds from this fundraising for such acquisitions.

With respect to payroll, payments to suppliers, marketing expenses, working capital reserves, contingency funds, other non‑capitalizable expenses, and repayments of working‑capital loans or short‑term debt financing instruments, as well as expenditures for short‑term externally contracted projects, such amounts shall be treated as supplementary working capital. Likewise, funds used to reimburse acquisition payments and advances made prior to the board’s approval shall also be deemed supplementary working capital.

With respect to replenishing working capital, the “Q&A on Financial Matters in Refinancing Reviews” stipulates that when proceeds are used to augment working capital, the analysis should take into account the company’s cash and cash equivalents; the extent to which the overall industrial chain ties up the company’s funds, as well as the company’s own use of funds from upstream and downstream partners; the utilization of previously raised funds, including whether any substantial amounts have been left idle for extended periods; the company’s retained earnings; anticipated large‑scale capital expenditures; the amount of working capital replenishment and debt repayment financed by raised funds over the most recent reporting period; and other relevant factors, in order to substantiate the necessity of the proposed scale of working‑capital replenishment funded by this offering.

In the “Q&A on Non-Financial Matters in Refinancing Reviews,” the key issues that review authorities focus on when assessing the use of raised funds for PPP projects are clearly outlined, such as whether the PPP project has duly completed the required approval and filing procedures with the competent authorities regarding project initiation, environmental impact assessment, land management, and other relevant matters. If government funding is involved, additional approval steps must be taken, including compliance with the Ministry of Finance’s “Notice on Standardizing the Management of the Project Database of the Comprehensive Information Platform for Public‑Private Partnerships (PPP)” and inclusion in the Ministry of Finance’s national PPP comprehensive information platform database, as well as approval by the local people’s congress and incorporation into the government’s fiscal budget. If no government funding is involved, the applicant shall disclose the rationale for designating the project as a PPP, conoffice its compliance with applicable laws and regulations, and identify any potential risks.

Guo Shuqing, Chairman of the China Banking and Insurance Regulatory Commission, stated in an interview that efforts will be stepped up to increase insurance funds’ investment in high-quality listed companies.

On October 19, Guo Shuqing, Chairman of the China Banking and Insurance Regulatory Commission, stated in an interview that three major policy measures will be introduced in the near term to fully leverage the long-term, stable investment strengths of insurance funds and steer the financial market back onto a path of normal, healthy development.

Guo Shuqing believes that, in recent days, China’s financial markets have experienced significant and unusual volatility due to a variety of factors—volatility that is sharply at odds with the fundamentals of China’s economic development and inconsistent with the overall soundness of the country’s financial system. At present, the trend of steady and improving economic performance remains unchanged, and systemic financial risks are fully under control.

“We will further deepen reform and expand opening-up, adopt relevant policies and measures, and implement the CPC Central Committee and the State Council’s ‘Six Stabilities’ requirements, so as to steer the financial market back onto a track of normal, healthy development,” Guo Shuqing stated. According to the relevant work plan, the key policy measures in the near term include:

In accordance with the relevant requirements of the New Regulations on Asset Management and the New Regulations on Wealth Management, the China Banking and Insurance Regulatory Commission has formulated the Measures for the Administration of Commercial Bank Wealth Management Subsidiaries and is now officially soliciting public comments.

Banking financial institutions are required to conduct risk management for equity‑pledge financing in a scientific and prudent manner. When the pledged collateral triggers the stop‑loss threshold, the pledgee shall comprehensively assess the pledgor’s actual risks and future prospects, and adopt appropriate measures to handle the situation prudently.

Fully leverage the long-term, stable investment strengths of insurance funds and increase their financial and strategic investments in high-quality listed companies. Allow insurance funds to establish special-purpose products to help mitigate liquidity risks associated with stock pledges by listed companies, excluding such investments from equity‑investment ratio regulatory constraints.

The Shanghai and Shenzhen Stock Exchanges are vigorously advancing the globalization of the capital market.

Recently, the Shanghai Stock Exchange and the Shenzhen Stock Exchange have each signed a series of cooperation memoranda of understanding and agreements with overseas exchanges and other institutions, thereby advancing the globalization of China’s capital markets.

The Shanghai Stock Exchange and Euronext have signed a memorandum of cooperation.

On October 16, the Shanghai Stock Exchange and Euronext successfully held a signing ceremony for a memorandum of understanding on cooperation, along with a promotional event for the Euronext market, at the SSE Trading Hall. The two parties will jointly advance the development of CAC40 ETF products, which will help broaden the SSE’s cross-border ETF offerings and further deepen and expand cooperation between the two exchanges.

In his address, Liu Shaotong, Deputy General Manager of the Shanghai Stock Exchange, stated that Euronext is Europe’s leading multi‑asset exchange, with a product and business portfolio spanning major global markets. The listing and trading of ETFs based on Euronext’s flagship CAC 40 index on the Shanghai Stock Exchange will help foster closer cooperation between the two exchanges, while also supporting the Shanghai Stock Exchange in building a diversified product lineup and advancing the opening-up of China’s capital market.

Consul General Corryu of the French Consulate General in Shanghai stated that the CAC 40 index is currently the most widely followed benchmark on the French stock market and also serves as a key reference for overseas investors seeking access to the European market. The memorandum of understanding recently signed between the Shanghai Stock Exchange and Euronext represents an important step in further opening China’s capital markets; through CAC 40 ETF products, Chinese investors will be able to participate more conveniently in the French securities market.

The Shanghai Stock Exchange stated that it will further explore exchanges and cooperation with overseas exchanges, establish a long-term communication mechanism, continuously enhance the SSE’s influence in international markets, and strive to serve as a bridge within financial market infrastructure. It will also promote new avenues for collaboration among fund management companies, member institutions, and foreign exchanges, thereby supporting the globalization of China’s capital markets.

The Shenzhen Stock Exchange has signed memoranda of cooperation with two major stock exchanges.

From October 11 to 15, Peng Ming, Deputy General Manager of the Shenzhen Stock Exchange, led a delegation on a visit to Russia and Poland—both countries along the Belt and Road—to advance exchanges and cooperation with capital markets in Belt and Road economies. During the trip, the Shenzhen Stock Exchange signed memoranda of understanding on cooperation with the Moscow Exchange and the Warsaw Stock Exchange, under which the two sides will engage in in-depth collaboration across areas including information sharing, personnel exchanges, market development, product innovation, and innovative capital‑market services.

Going forward, the Shenzhen Stock Exchange will, in accordance with the unified deployment of the China Securities Regulatory Commission, proactively support the country’s Belt and Road Initiative, fully leverage its distinctive strengths in serving small and medium-sized enterprises and fostering an innovation‑driven ecosystem, and continue to explore new mechanisms and pathways for capital market cooperation along the Belt and Road. The Exchange will strengthen international cooperation and exchanges, contribute to the new landscape of China’s opening-up, and strive to build an internationally leading center for the formation of innovative capital.

In addition, on October 16, the China–Norway Business Summit was held in Beijing. The Shenzhen Stock Exchange and the Nordic accelerator nHACK signed a strategic cooperation agreement to establish a new cross-border investment and financing service mechanism between China and Norway. King Harald V of Norway and Gu Shengzu, Vice Chairman of the National Committee of the Chinese People’s Political Consultative Conference, attended the event, while Wang Jianjun, General Manager of the Shenzhen Stock Exchange, and Yong Aiwén, co-founder of nHACK, signed the agreement on behalf of their respective sides.

Under the agreement, the two parties will leverage the Shenzhen Stock Exchange’s Innovation and Entrepreneurship Investment and Financing Platform to establish a collaborative network through information sharing, roadshow matchmaking, training, and exchanges. They will vigorously advance innovation in cross-border financial services for technology offices and small and medium-sized enterprises, foster efficient integration between technology and finance, and support and promote the formation of cross-border capital flows between China and Nordic countries such as Norway.

SSE: Providing Comprehensive Services for “New Blue-Chip” Enterprises

“We hope that, through the implementation of the ‘New Blue-Chip’ initiative, we can serve the national economic development strategy, bolster the development of the capital market, nurture the growth of high-quality enterprises, and deliver value to a broad base of investors. Over the course of several years, we aim to support the emergence of a new generation of ‘BAT’‑type companies and cultivate a cohort of ‘new blue-chip’ enterprises with global influence and competitiveness,” said Xu Yilin, Deputy General Manager of the Shanghai Stock Exchange, at the 2018 Annual Meeting of the 21st Century International Finance Summit held on October 17.

“Embracing the new economy is both an overarching trend in global economic development and an objective necessity for China’s economic upgrading and optimization,” said Xu Yilin.

Xu Yilin stated that the Shanghai Stock Exchange will proactively embrace the “four new economies,” deepen its “New Blue-Chip” initiative, concentrate resources on advancing institutional development and refining its regulatory framework, provide tailored support to companies in these sectors, integrate regulation with service, and strive to build a multi-tiered, inclusive “New Blue-Chip” market.

First, we will vigorously implement the “New Blue-Chip” initiative to support the accelerated growth of companies in the “four new economies.” At present, the Shanghai Stock Exchange has compiled a list of both established “New Blue-Chip” enterprises and promising candidates. These companies include leading players in niche segments such as the internet, artificial intelligence, and biopharmaceuticals, as well as national strategic pillars in aerospace, aviation, marine engineering, and high-end equipment manufacturing.

Secondly, we have proactively provided financing support to enterprises in the “four new economies.” Since 2017, a total of 219 high-tech companies listed on the Shanghai Stock Exchange’s main board, accounting for 82.6% of all new listings on the exchange. These companies raised RMB 154.38 billion, representing 72% of the aggregate fundraising by newly listed offices.

Finally, we will study regulatory and service measures tailored to “four‑new enterprises.” The Shanghai Stock Exchange will continue to focus on providing targeted support for companies in the “four‑new economy,” intensify research on issuance and listing mechanisms, refine the development of service platforms, and identify, nurture, and assist high‑quality innovative enterprises in going public. We will also explore differentiated and inclusive listing frameworks that meet the diverse financing needs of new‑economy offices, thereby bolstering the development of a multi‑tiered capital market and continuously enhancing the capital market’s ability to serve the real economy.

Commercial & Corporate

Liu He chaired the second meeting of the State Council Leading Group for Promoting the Development of Small and Medium-sized Enterprises, calling for the adoption of targeted and effective measures to provide strong support for the development of micro, small, and medium-sized enterprises.

The second meeting of the State Council Leading Group for Promoting the Development of Small and Medium-sized Enterprises was held in Beijing on October 17. Liu He, a member of the Political Bureau of the CPC Central Committee, Vice Premier of the State Council, and head of the Leading Group, presided over the meeting and delivered a speech. The meeting heard reports on the overall progress in implementing the key tasks from the first meeting of the Leading Group, as presented by the Ministry of Industry and Information Technology; on the progress and related recommendations regarding addressing the difficulties and high costs of financing for SMEs, as outlined by the People’s Bank of China, the China Banking and Insurance Regulatory Commission, and the China Securities Regulatory Commission; on the third-party assessment conducted by the All-China Federation of Industry and Commerce to evaluate the implementation of policies and measures aimed at alleviating financing challenges for SMEs; and on the operational status of the National Fund for the Development of Small and Medium-sized Enterprises and the implementation of fiscal and tax support policies for SME development, as reported by the Ministry of Finance. Officials from other member units of the Leading Group also made remarks. Bai Yi, General Manager of Beijing Dongfang Baitai Biotechnology Co., Ltd.; Zheng Weifeng, General Manager of Beijing Zhendi Technology Co., Ltd.; Wang Shumin, Chairman of Anji Microelectronics Technology (Shanghai) Co., Ltd.; Zhu Kangjian, Chairman of Guangzhou Bochuang Intelligent Equipment Co., Ltd.; and Yang Lin, General Manager of Sichuan Tongren Precision Engineering Technology Co., Ltd., were invited to attend the meeting and speak.

The meeting emphasized the need to uphold the basic economic system and fully leverage the vital role of small, medium, and micro enterprises and the private sector in China’s economic and social development. It is imperative to give high priority to the pressing challenges currently facing these enterprises and to adopt targeted, effective measures to provide robust support for their growth. In accordance with the division of responsibilities and the established timetable, efforts must be sustained to ensure the timely implementation of the key tasks outlined at the Leading Group’s first meeting. Furthermore, it is essential to deepen research into policy measures that support the development of small, medium, and micro enterprises—covering areas such as reducing tax and fee burdens, addressing financing difficulties, improving environmental governance, enhancing technological innovation capabilities, and strengthening international cooperation—in order to promote their high-quality development.

China Banking and Insurance Regulatory Commission: Allows bank wealth management subsidiaries to directly invest in equities through public offering wealth management products.

On October 19, the China Banking and Insurance Regulatory Commission issued the “Administrative Measures for Wealth Management Subsidiaries of Commercial Banks (Draft for Public Comment)” and solicited public feedback. The measures stipulate that, building on the earlier authorization allowing banks’ private‑placement wealth management products to invest directly in equities and their public‑offering wealth management products to invest indirectly via public mutual funds, they further permit publicly offered wealth management products issued by these subsidiaries to invest directly in equities.

The Measures for the Administration of Wealth Management Subsidiaries serve as a supporting regulatory framework to the New Regulations on Wealth Management, and together with the New Regulations on Asset Management and the New Regulations on Wealth Management, they constitute the set of supervisory requirements that wealth management subsidiaries must comply with in conducting their wealth management business. The Measures comprise six chapters and 61 articles, covering General Provisions, Establishment, Amendment, and Termination, Business Rules, Risk Management, Supervision and Administration, and Supplementary Provisions.

Wealth management subsidiaries are non-bank financial institutions established by commercial banks to engage in wealth management business. In view of the fact that the “New Regulations on Wealth Management” apply to cases where banks have not yet conducted wealth management activities through subsidiaries, the “Administrative Measures for Wealth Management Subsidiaries” have made appropriate adjustments to certain provisions of the “New Regulations on Wealth Management,” ensuring that the regulatory standards for wealth management subsidiaries are broadly aligned with those applicable to other asset management institutions.

First, with respect to equity investments and minimum investment thresholds for public‑offering wealth management products, building on the earlier authorization allowing banks’ private‑placement wealth management products to invest directly in equities and public‑offering products to invest indirectly via public funds, the regulations now further permit public‑offering wealth management products issued by subsidiaries to invest directly in equities. In line with the regulatory framework applicable to other asset‑management products, the Measures for the Administration of Wealth Management Subsidiaries do not impose a minimum investment threshold for such products.

Second, with respect to sales channels and investor suitability management, the regulations stipulate that subsidiary wealth management products may be distributed through banking financial institutions or other entities approved by the China Banking and Insurance Regulatory Commission, while complying with requirements regarding dedicated sales areas in business premises, audio‑video recording, customer risk‑tolerance assessments, risk‑matching principles, and information disclosure. In line with regulatory provisions applicable to other asset‑management products, individual investors are not required to undergo face-to-face verification when making their first purchase of a wealth management product.

Third, with respect to the management of non-standard credit investment limits, in light of the characteristics of wealth management subsidiaries, it is stipulated that the outstanding balance of investments in non-standard credit assets shall not exceed 35% of the net asset value of wealth management products.

Fourth, with respect to product structuring, subsidiaries are permitted to issue tiered wealth management products, provided they comply with the relevant provisions of the New Regulations on Asset Management and the Measures for the Administration of Wealth Management Subsidiaries governing tiered asset management products.

Fifth, with respect to the scope of wealth management cooperation institutions, in line with the New Regulations on Asset Management, it is stipulated that for public‑offering wealth management products issued by subsidiaries, the issuers and trustees of the asset management products in which such products invest may only be licensed financial institutions. However, for private‑offering wealth management products, the cooperating institutions and investment advisors of public‑offering wealth management products may be either licensed financial institutions or, provided they comply with applicable laws and regulations and meet the relevant requirements, qualified private‑investment fund managers.

Sixth, in the area of risk management, wealth‑management subsidiaries are required to set aside risk reserves and comply with net capital requirements; strengthen risk isolation and enhance the management of related‑party transactions; and adhere to specific requirements pertaining to corporate governance, business management, internal control and auditing, personnel management, and investor protection. In addition, in accordance with the New Regulations on Asset Management and the New Regulations on Wealth Management, these subsidiaries must also meet both qualitative and quantitative regulatory standards governing leverage ratios, liquidity, and concentration limits.

The issuance of the Measures for the Administration of Wealth Management Subsidiaries represents an important step taken by the China Banking and Insurance Regulatory Commission to implement the New Regulations on Asset Management and the New Regulations on Wealth Management. It will help strengthen risk isolation in banks’ wealth management businesses, optimize organizational and management frameworks, steer bank‑based wealth management back to its core asset‑management function, and guide wealth‑management funds into the real economy and financial markets in a lawful and compliant manner. Moreover, it will promote the harmonization of regulatory standards for similar asset‑management products, better safeguard investors’ legitimate rights and interests, gradually and orderly dismantle implicit guarantees, and effectively contain financial risks.

In the first three quarters, China’s GDP grew 6.7% year on year, with steady improvements in quality and efficiency.

On October 19, the State Council Information Office held a press conference on the performance of the national economy for the first three quarters of 2018. Mao Shengyong, spokesperson for the National Bureau of Statistics, stated that during the first three quarters, the national economy maintained overall stability while making progress, with continuous optimization of the economic structure, smooth transition between old and new growth drivers, steady improvements in quality and efficiency, and solid advances in high-quality development.

Mao Shengyong stated that, according to preliminary calculations, China’s GDP for the first three quarters totaled 65.0899 trillion yuan, up 6.7% year on year in comparable prices. The value added of industrial enterprises above designated size increased by 6.4% in real terms year on year, a deceleration of 0.3 percentage points compared with the first half of the year. In the first three quarters, total retail sales of consumer goods reached 27.4299 trillion yuan, up 9.3% year on year, with the growth rate easing by 0.1 percentage point from the first half. Per capita consumption expenditure of all residents nationwide amounted to 14,281 yuan, representing a nominal increase of 8.5% year on year. Specifically, per capita consumption expenditure of urban residents rose by 6.5% in nominal terms, accelerating by 0.3 percentage points, while that of rural residents grew by 12.0% in nominal terms, picking up by 3.4 percentage points.

On the investment front, during the first three quarters, nationwide fixed‑asset investment (excluding household investments) totaled RMB 48.3442 trillion, up 5.4% year on year. Real estate development investment reached RMB 8.8665 trillion, an increase of 9.9% year on year. The sales area of commercial residential properties nationwide was 119.313 million square meters, up 2.9%, while total sales revenue from such properties amounted to RMB 10.4132 trillion, a rise of 13.3%.

Mao Shengyong stated that the economic performance in the first three quarters can be summarized in three key points: first, the overall trend of stability remains unchanged; second, the momentum of progress continues to strengthen; and third, new growth drivers are expanding rapidly. In terms of growth, GDP expanded by 6.7% in the first three quarters, laying a solid foundation for achieving the full-year growth target of around 6.5%. On the employment front, the surveyed urban unemployment rate nationwide stood at 4.9% in September, down 0.1 percentage point from both the previous month and the same period last year. Regarding prices, the consumer price index rose 2.1% in the first three quarters, with the increase widening slightly by 0.1 percentage point compared with the first half of the year. As for household incomes, per capita disposable income grew by 6.6% in real terms, matching the pace recorded in the first half of the year. Taken together, these indicators—economic growth, employment, inflation, and income—suggest that the economy is currently operating steadily within an appropriate range.

Mao Shengyong pointed out that, in the first three quarters, the momentum of global economic growth has weakened, and the expansion of world trade has also slowed. Even some emerging economies are facing significant challenges, while international financial markets have recently experienced sharp volatility. At present, the external environment for the global economy is becoming increasingly uncertain, and the China–U.S. economic and trade tensions remain fraught with considerable ambiguity. Consequently, these factors do indeed introduce additional uncertainty into the stable operation of the economy and exert downward pressure on economic performance.

Mao Shengyong stated that, despite the pressures stemming from external uncertainties, we must leverage domestic certainties to effectively offset their impact and maintain a steady momentum of economic development. Going forward, we will further deepen reform and advance high‑level opening-up, as the benefits of reform and opening-up continue to unfold. All regions and departments should intensify efforts to implement the “Six Stabilities” policies—ensuring stable employment, stable finance, stable foreign trade, stable foreign investment, stable investment, and stable market expectations.

The State-owned Assets Supervision and Administration Commission responds to key reform issues: more state-owned assets will be transferred to the social security system.

On October 15, the State Council Information Office held a press conference, at which Peng Huagang, Deputy Secretary-General and Spokesperson of the State-owned Assets Supervision and Administration Commission of the State Council, presented an overview of the economic performance of central enterprises for the first three quarters of 2018 and addressed key issues related to the reform of state-owned and centrally administered enterprises.

Data show that in the first three quarters, central enterprises recorded cumulative operating revenue of RMB 21.1 trillion, up 11% year on year, with revenue growth exceeding 10% for four consecutive months. Cumulative total profits reached RMB 1.3491 trillion, a year-on-year increase of 21.5%, with growth rates above 20% for five consecutive months. The strong and sustained improvement in economic performance of central enterprises during the first three quarters has laid a solid foundation for achieving the annual targets.

Peng Huagang stated that significant progress has been made in state-owned enterprise reform. To date, the corporatization of state-owned enterprises nationwide has reached 94%; pilot programs for mixed‑ownership reform in key sectors have been rolled out in three batches, involving 50 enterprises; more than 1,500 enterprises have completed tasks to address structural bottlenecks and financial difficulties; the number of central SOEs has been reduced from 116 to 96; and as of the end of September 2018, 91% of state-owned enterprises nationwide had either completed the separation and handover of “three utilities and one service” functions or signed relevant transfer agreements, with this work expected to be largely finished by year’s end.

The objectives of state-owned enterprise reform are consistent with the principle of “competitive neutrality.”

For China’s state-owned enterprise reform, as the country continues to deepen its opening-up and expand international economic cooperation and exchanges, the international community has also been closely watching this process. Recently, at the 2018 G30 International Banking Seminar, People’s Bank of China Governor Yi Gang stated that, in order to address the structural challenges facing the Chinese economy, China will accelerate domestic reforms and further open up to the outside world, strengthen intellectual property protection, and consider applying the principle of “competitive neutrality” to state-owned enterprises.

Peng Huagang pointed out that, after 40 years of reform and opening-up, state-owned enterprises have, in essence, been integrated into the market economy. The guiding principle and objective of the reform is to transform SOEs into independent market entities that operate autonomously, assume their own profits and losses, bear their own risks, exercise self‑discipline, and pursue self‑development. In other words, following reform, SOEs will be on an equal footing with enterprises of other forms of ownership: they will enjoy equal access to production factors under the law, participate fairly in market competition, and receive the same legal protection—aligning with the principle of “competitive neutrality.” We advocate “ownership neutrality,” oppose the imposition of disparate rules based on enterprise ownership, and reject any discriminatory treatment accorded to SOEs in the formulation of international rules.

Peng Huagang stated that the mixed‑ownership reform being advanced is two‑way: on the one hand, it boldly invites private enterprises to participate in state‑owned enterprise reform, providing them with encouragement and support; on the other, it actively promotes the outward expansion of state capital, encouraging and supporting state‑owned investment in private enterprises. At the same time, this two‑pronged approach yields mutually beneficial outcomes. In practice, at present, two‑thirds of all subsidiaries at various levels under central enterprises have already adopted a mixed‑ownership structure. In recent years, central enterprises have streamlined their operations, strengthened their core businesses, and improved quality and efficiency, reducing the number of corporate entities by 11,651—of which 2,618 have transferred controlling stakes to private offices. For example, Baosteel Gases, a subsidiary of China Baowu, despite strong profitability and an annual return on equity exceeding 10%, has become one of the industry’s key competitors; however, because it did not align with the group’s strategic development goals, it was also transferred to private‑capital control.

The transfer of state-owned assets and the pilot program for state-owned investment companies: the next batch of entities is currently under review.

Peng Huagang stated that, in accordance with relevant requirements, we have launched a pilot program to transfer state-owned capital to the social security fund. To date, the three pilot enterprises have transferred over RMB 20 billion in state-owned capital, and the registration of property‑rights changes for these three entities has been completed. We are currently working with the National Council for Social Security Fund to revise the companies’ articles of association and carry out the corresponding industrial and commercial change registrations. At the same time, we are beginning to study a second batch of enterprises eligible for transfer, with the aim of including more qualified central enterprises in the scope of the transfer, intensifying the effort, and expediting the process. Going forward, while continuing to advance the transfer of state‑owned capital to the social security fund, the SASAC will deepen state‑owned enterprise reform, strengthen oversight of state assets, enhance returns on state capital, and ensure that the fruits of SOE development benefit the people to an even greater extent.

“In the initial phase, 10 state‑owned capital investment and operation companies were selected for a pilot program—two of them are operating companies, and eight are investment companies. Recently, the State Council issued a specific document on the pilot program for these state‑owned capital investment and operation companies, and in accordance with its requirements, we are actively working to identify the next batch of such companies,” said Peng Huagang. “On the basis of comprehensive considerations, we have drawn up a preliminary plan, which is currently undergoing the approval process; once finalized, it will be announced as soon as possible.”

Deepen pilot programs for mixed-ownership reform in key sectors and adopt multiple measures to reduce leverage and debt.

Peng Huagang stated that the next phase of state-owned enterprise reform will focus on “six key priorities.”

First, we will prioritize the development of a modern state-owned enterprise system with Chinese characteristics. We will clearly delineate the powers and responsibilities of all corporate governance bodies, fully leverage the leadership 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 distribution, 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 will actively explore mixed‑ownership restructuring at the group level, accelerate such reforms among our subsidiaries, and further deepen pilot programs in key sectors. We will 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 that capital from different ownership structures leverages each other’s strengths, fosters mutual reinforcement, and achieves shared development.

Third, we will place particular emphasis on strengthening market-oriented operating mechanisms. We will implement a tenure system and contract-based management for managerial teams, and accelerate the establishment of a professional manager system. We will expedite reforms to the total wage‑budget management system and comprehensively leverage medium- and long-term incentive measures, including employee stock ownership, listed‑company shareholding plans, and equity‑based profit‑sharing schemes for technology‑focused enterprises. We will fully harness the role of entrepreneurs and continue to foster the growth and consolidation of the state‑owned enterprise entrepreneur corps.

Fourth, we will place a strong emphasis on advancing supply-side structural reform. We will continue to reduce excess capacity in industries such as steel, coal, and coal-fired power, while promptly addressing longstanding debts and legacy issues; accelerate structural adjustment and transformation and upgrading, strengthen independent innovation, and speed up the pace of high-quality development; and adopt a multi-pronged approach to deleveraging and reducing debt, resolutely defusing all types of financial risks.

Fifth, we will prioritize the reform of the authorized‑operation system. We will intensify reforms in organizational structure, operating models, and management mechanisms, ensuring that pilot programs for state‑owned capital investment and operation companies yield tangible results. We will implement differentiated delegation of authority, tailoring authorization to the specific needs and development realities of each state‑owned enterprise.

Sixth, we will place particular emphasis on strengthening the oversight of state-owned assets. Adhering to the principle of prioritizing productive forces, we will enhance our services to market entities, accelerate the establishment of a more effective system for supervising state-owned assets, develop a real-time, online platform for state‑asset supervision, and elevate our professional capabilities and standards, thereby further improving the targetedness, effectiveness, and systemic nature of oversight.

Taxation TAXATATION

The rollout of detailed rules for individual income tax deductions is entering the final countdown.

A major highlight of the latest round of personal income tax reform—the policy on special additional deductions—was unveiled on October 20. Starting that day, the “Interim Measures for Special Additional Deductions under the Individual Income Tax Law (Draft for Public Comment),” drafted jointly by the Ministry of Finance and the State Taxation Administration along with relevant departments, was posted on the official websites of the two agencies for a two-week period of public consultation. Also made available for public comment as of the 20th was the “Regulations for the Implementation of the Individual Income Tax Law of the People’s Republic of China (Draft Amendment for Public Comment).”

Under the newly revised Individual Income Tax Law, going forward, when calculating taxable income, in addition to the basic deduction of RMB 5,000 and special deductions such as contributions to the three social insurances and one housing fund, taxpayers may also claim special additional deductions for children’s education, continuing education, major illness medical expenses, interest on housing loans or housing rent, and support for elderly parents. The law authorizes the State Council to specify the scope, standards, and implementation procedures for these special additional deductions, and to submit them to the Standing Committee of the National People’s Congress for record‑keeping.

Under the Provisional Measures, individual income tax special additional deductions shall adhere to the principles of fairness and reasonableness, simplicity and practicality, tangible relief from tax burdens, and improvement of people’s livelihood.

For example, expenses incurred by taxpayers for their children’s preschool and formal education are eligible for a standard deduction of RMB 12,000 per child per year (RMB 1,000 per month); expenses related to the taxpayer’s own continuing education—whether degree‑granting or non‑degree‑granting—are deductible at a fixed rate of RMB 3,600 or RMB 4,800 per year, as applicable, during the prescribed period.

With respect to major medical expenses, taxpayers may deduct the portion of their out-of-pocket medical expenses that exceeds RMB 15,000 within a tax year, up to an annual limit of RMB 60,000.

With respect to housing loan interest, taxpayers may claim a standard deduction of RMB 1,000 per month for the interest paid on their first home loan, whether incurred by the taxpayer themselves or by their spouse. As for housing rent, a standard deduction ranging from RMB 800 to RMB 1,200 per month applies, depending on the city where the rented residence is located.

With respect to expenses for supporting elderly parents, taxpayers who support parents aged 60 or older may claim a standard deduction of RMB 2,000 per month. Specifically, only children are entitled to a monthly deduction of RMB 2,000 per person, while non‑only children share the monthly RMB 2,000 deduction among themselves and their siblings.

Implementing the policy of special additional deductions is both a highlight and a challenge of the individual income tax reform. According to reports, the public consultation aims to solicit broad input from the general public and better address the expectations of the people. Prior to the issuance of the provisional measures, relevant authorities had already conducted an open‑ended consultation process, gathering views from experts and scholars across the country, deputies and members of the Two Sessions, and representatives of the general public.

Under the Provisional Measures, the standards for special additional deductions are not fixed and will be adjusted as appropriate in response to changes in people’s living expenses related to education, housing, healthcare, and other areas. It is reported that, following public consultation, the Provisional Measures will come into effect on January 1, 2019, in accordance with the law.

Two departments: Property tax will be exempted for enterprises that have ceased production as part of capacity-reduction efforts.

To advance capacity reduction and structural adjustment, and to promote industrial transformation and upgrading, the Ministry of Finance and the State Taxation Administration recently issued a notice clarifying relevant policies on property tax and urban land use tax.

The notice stipulates that, for enterprises that have ceased production and operations or been shut down in accordance with policies on capacity reduction and structural adjustment, property tax and urban land use tax shall be exempted starting from the month following the cessation of operations. The cumulative period during which an enterprise may benefit from this tax exemption shall not exceed two years.

The list of central enterprises that have ceased production or business operations and been shut down in accordance with policies on capacity reduction and structural adjustment shall be determined and published by the State Council’s State-owned Assets Supervision and Administration Commission. For other enterprises, the relevant lists shall be determined and published by the competent authorities for capacity reduction and structural adjustment designated by the people’s governments of provinces, autonomous regions, and municipalities directly under the central government. The designated authorities shall promptly forward copies of the lists of enterprises so designated and published—including the dates of suspension of production or business operations and closure—to the fiscal and tax authorities at the same level.

Designated authorities at all levels shall conduct annual reviews of the enterprises on the list and promptly notify the finance and tax authorities of any enterprises that have resumed production and operations or have completed closure and deregistration procedures.

Enterprises benefiting from the tax exemption policies stipulated in this notice shall file tax reduction and exemption returns as prescribed and retain documentation pertaining to property and land ownership, as well as records of the original value of real estate, for record‑keeping purposes.

This notice shall be implemented from October 1, 2018, to December 31, 2020. For enterprises that, prior to the issuance of this notice, had suspended production or operations and been closed in accordance with policies on capacity reduction and structural adjustment, but whose property tax and urban land use tax liabilities remain unresolved, the provisions of this notice may be applied.

The Ministry of Finance has once again signaled large-scale tax cuts, with experts estimating the total could reach trillions of yuan.

On October 18, the Ministry of Finance held a press conference. Yuan Haiyao, Deputy Inspector of the Tax Policy Department of the Ministry of Finance, stated: “Going forward, in line with the decisions and arrangements of the CPC Central Committee and the State Council, we will focus on supporting the development of the real economy, adhere to the principle of ‘letting the water rise to nurture the fish,’ and fully implement the tax and fee reduction policies already introduced. The operational guidelines for refining the export tax rebate policy will be issued in the coming days, and the specific measures for the individual income tax special additional deductions are currently under study and formulation. At the same time, we are expediting research into larger‑scale tax cuts and more substantial fee reductions to further lower business costs and invigorate market vitality.”

Earlier, Finance Minister Liu Kun stated that the already-announced tax and fee reduction policies must be fully implemented, while work should be expedited to formulate larger-scale tax cuts and more substantial fee reductions, so as to enable enterprises to operate with a lighter burden and pursue development without constraints.

Yuan Haiyao stated that, building on the vigorous implementation of tax and fee reductions over the past few years, further measures were introduced this year. In addition to fulfilling the RMB 1.1 trillion in tax and fee cuts outlined in the Government Work Report at the beginning of the year, a series of policies were rolled out mid-year in response to evolving economic conditions, aimed at boosting the real economy and supporting scientific and technological innovation. These measures are expected to reduce the tax and fee burden by more than RMB 1.3 trillion for the full year.

Yuan Haiyao argues that tax and fee reductions deliver multiple benefits: they not only ease the burden on businesses but also play a crucial role in expanding employment, fostering economic transformation and upgrading, nurturing new growth drivers, and boosting consumer demand. While these measures may reduce fiscal revenues in the short term, they strengthen the economy’s innovation capacity and competitiveness over the long run—essentially using a “subtraction” in government revenue to achieve an “addition” in corporate performance and a “multiplication” of market vitality. At present, China’s economy is stable yet undergoing changes, facing new issues and challenges as the external environment undergoes significant shifts. Market entities across the board are calling for the introduction of even more robust tax and fee reduction policies and measures.

In addition, the second meeting of the State Council Leading Group for Promoting the Development of Small and Medium-sized Enterprises, held on October 17, emphasized the need to further deepen research into policy measures that support the development of micro, small, and medium-sized enterprises—particularly in areas such as reducing tax and fee burdens, addressing financing challenges, improving environmental governance, enhancing technological innovation capabilities, and strengthening international cooperation—in order to promote their high-quality growth.

Zhang Yiqun, Director of the Jilin Provincial Institute of Fiscal Science, stated that China is currently facing a more complex international political and economic environment, with mounting uncertainties that are placing certain pressures on the country’s economic growth in the period ahead. Continuing to implement large-scale tax and fee reduction policies will help ease the tax burden on businesses and individuals, thereby fostering stable and sustainable economic development.

Zhang Yiqun stated that personal income tax reform should be further deepened. Looking ahead, the three‑tier VAT rate structure could eventually be streamlined into a two‑tier system. In line with the principle of easing the tax burden on enterprises and applying the lower rather than the higher rate, once the three VAT rates are consolidated into two and further reduced, the total scale of a single round of tax cuts could reach one trillion yuan, significantly lightening the tax burden on businesses. Moreover, a simpler tax rate structure would enhance administrative efficiency, further reducing both the tax burden on enterprises and the costs of tax administration.

Li Lifeng, an analyst at Guojin Securities, believes that, amid mounting downward pressure on economic growth, tax and fee cuts are likely to become the primary tool of proactive fiscal policy, with room for further reductions in the value-added tax. According to his estimates, if the VAT rate structure were simplified from three brackets to two—16% and 6%—listed companies would pay RMB 81.2 billion less in VAT, equivalent to 2.0% of their total profits. Should the rates be further reduced by an additional 1 percentage point—to 15% and 5%—listed offices would see a VAT reduction of RMB 188 billion, accounting for 4.6% of their total profits.

Litigation & Arbitration

Twenty-eight departments have jointly issued a document: violent attacks on medical personnel and disruptive behavior in hospitals will be subject to coordinated punitive measures.

On October 16, 28 government departments, including the National Development and Reform Commission, the People’s Bank of China, the National Health Commission, the Organization Department of the CPC Central Committee, and the Publicity Department of the CPC Central Committee, jointly issued the “Memorandum of Cooperation on Joint Punitive Measures Against Persons Responsible for Dishonest Conduct That Severely Disrupts Normal Medical Order.” Under this memorandum, natural persons who have committed or participated in medical‑related illegal or criminal activities, and who have been subject to administrative detention or more severe penalties by public security organs, or who have been held criminally liable by judicial authorities, will be subject to joint punitive measures.

There are a total of 14 interdepartmental joint punitive measures, including: restricting access to subsidy‑related financial support; imposing restrictions on recruitment (or hiring) as civil servants or staff members of public institutions; and disqualifying the sanctioned parties from participating in evaluations for awards and honors.

Which entities will be subject to joint punitive measures?

The subjects of joint punitive measures refer to natural persons who, by committing or participating in medical‑related illegal and criminal activities, have been subjected by public security organs to administrative detention or more severe penalties, or have been held criminally liable by judicial authorities, thereby seriously disrupting the normal order of medical services.

The acts of dishonesty that seriously undermine the normal medical order referred to in this memorandum encompass illegal and criminal activities involving medical services—such as reselling hospital appointment slots—that disrupt and damage the orderly conduct of medical diagnosis and treatment, as well as the six categories of such offenses listed in the “Opinions on Lawfully Punishing Medical‑Related Illegal and Criminal Acts and Maintaining Normal Medical Order,” jointly issued on April 28, 2014, by the Supreme People’s Court, the Supreme People’s Procuratorate, the Ministry of Public Security, and the former National Health and Family Planning Commission.

These six categories of medical‑related illegal and criminal activities primarily include the following situations:

(1) Intentionally inflicting bodily harm on medical personnel or damaging public or private property within a medical institution;

(2) Those who disrupt medical order;

(3) Illegally restricting the personal freedom of medical personnel;

(4) Those who insult or intimidate medical personnel;

(5) Illegally bringing firearms, ammunition, controlled instruments, or hazardous materials into a medical institution;

(6) Inciting others or, under the guise of acting on behalf of others, committing medical‑related illegal or criminal acts.

14 Interdepartmental Joint Punitive Measures

(1) Restriction of subsidy-funded support.

(Implementing Agencies: National Development and Reform Commission, State-owned Assets Supervision and Administration Commission)

(2) Guide insurance companies to adjust property insurance rates in accordance with the principle of risk-based pricing.

(Implementing Agency: China Banking and Insurance Regulatory Commission)

(3) Such acts of dishonesty that seriously disrupt the normal order of medical care shall be taken as an important reference factor in restricting access to preferential policies.

(Implementing Agencies: National Development and Reform Commission, Ministry of Commerce, General Administration of Customs, State Administration for Market Regulation)

(4) Restrictions on serving as the legal representative, director, supervisor, or senior management personnel of state-owned enterprises.

(Implementing Agencies: Central Organization Department, State-owned Assets Supervision and Administration Commission, State Administration for Market Regulation)

(5) Restriction on registration as the legal representative of a public institution.

(Implementing Agency: Central Organization Department)

(6) Restriction on recruitment (or hiring) as a civil servant or staff member of a public institution.

(Implementing Agencies: Central Organization Department, Ministry of Human Resources and Social Security)

(7) In accordance with established procedures, promptly revoke any relevant honors and disqualify the subject of disciplinary action from participating in evaluations for awards and commendations; such individuals shall not be conferred honors such as “Model of Morality,” “Model Worker,” or the “May Day Labor Medal.”

(Implementing agencies: the Central Office for Spiritual Civilization, the All-China Federation of Trade Unions, the Communist Youth League Central Committee, the All-China Women’s Federation, and other relevant organizations)

(8) Where a party fails to perform the payment obligations determined in an effective legal document within the time limit specified in the enforcement notice and is subject to consumption restriction measures imposed by the people’s court in accordance with the law, or where such party fails to perform the obligations determined in an effective legal document and is included on the list of discredited persons subject to enforcement by the people’s court in accordance with the law, that party shall be restricted from engaging in high‑consumption activities, including traveling by air, taking soft‑sleeper carriages on trains, riding G‑series high-speed trains, or occupying first‑class or higher seats on other high-speed train sets, as well as from undertaking other expenditures that are not necessary for daily life or work.

(Implementing Agencies: Ministry of Transport, China Railway Corporation, Civil Aviation Administration of China, Ministry of Culture and Tourism, Ministry of Natural Resources, Ministry of Housing and Urban–Rural Development, Supreme People’s Court)

(9) Individuals who engage in acts of dishonesty that seriously disrupt the normal order of medical care shall be included in the National Credit Information Sharing Platform, and their employers shall be notified.

(Implementing Agencies: National Health Commission, Ministry of Public Security)

(10) Individuals who engage in untrustworthy conduct that seriously disrupts the normal order of medical care shall be publicly disclosed to the public via the “Credit China” website and other major news websites.

(Implementing Agencies: Central Publicity Department, Cyberspace Administration of China)

(11) Restriction on obtaining certification body accreditation.

(Implementing Agency: State Administration for Market Regulation)

(12) Information on unlawful and untrustworthy conduct shall be taken into account as an important reference in the approval or filing processes for the establishment of, and changes to the equity structure or actual controllers of, securities companies, insurance companies, fund management companies, and futures companies; in the licensing of insurance intermediary business; in the filing of changes to shareholders or actual controllers of professional insurance intermediary institutions; and in the registration of private fund managers, the amendment of material matters, and the filing of funds.

(Implementing Agencies: China Securities Regulatory Commission, China Banking and Insurance Regulatory Commission)

(13) Use information on unlawful and untrustworthy conduct as a reference in the approval or filing process for the appointment of directors, supervisors, senior management personnel, and heads of branch offices of securities companies, insurance companies, fund management companies, and futures companies.

(Implementing Agencies: China Securities Regulatory Commission, China Banking and Insurance Regulatory Commission)

(14) Use information on illegal and untrustworthy conduct as a reference in the approval process for independent fund sales institutions. Subject entities with records of untrustworthiness shall be subject to stringent review when applying for qualifications to engage in securities, fund, or futures business, and those who have already obtained such qualifications shall be placed under enhanced scrutiny.

(Implementing Agency: China Securities Regulatory Commission)

(15) Restriction on enjoying preferential policies in investment and other fields.

(Implementing Agencies: National Development and Reform Commission and other relevant agencies)

(16) When applying for commercial Internet information services, their untrustworthy information shall be taken as an important reference in the review of relevant permits.

(Implementing Agency: Ministry of Industry and Information Technology)

Four Modes of Implementing Joint Punishment

(1) The Ministry of Public Security shall provide the National Health Commission with information on a list of individuals who have engaged in acts of dishonesty that seriously disrupt the normal order of medical services. The National Health Commission shall, through the National Credit Information Sharing Platform, share this list with the departments participating in joint punitive measures. Upon receipt of the relevant list, the concerned departments shall impose sanctions in accordance with the provisions set forth in this Memorandum.

(2) Establish a mechanism for the regular reporting of disciplinary outcomes, under which relevant departments shall, on a periodic basis, submit reports on the implementation of joint punitive measures to the National Development and Reform Commission and the National Health Commission via the National Credit Information Sharing Platform.

(3) With respect to matters falling within local jurisdiction, local public security organs shall, on a regular basis, provide the local health and health administrative departments with lists of individuals who have engaged in acts of dishonesty that seriously disrupt the normal order of medical services. The local health and health administrative departments shall forward these lists to other relevant departments, which shall, in accordance with this Memorandum, impose corresponding disciplinary measures.

(4) Establish a mechanism for exiting joint punitive measures. The duration of joint punishment shall be calculated from the date on which the offender’s administrative or criminal penalties have been fully served, with a maximum term of five years. If, during this period, the individual again engages in conduct that seriously undermines the normal order of medical services, the punitive period shall be cumulatively extended. Upon expiration of the prescribed punitive period, the individual shall be removed from the list of those subject to joint punishment.

How is dynamic management implemented for joint punitive measures?

The National Health Commission maintains dynamic oversight of the list of serious breaches of trust and other grave violations of laws and regulations that undermine the normal order of medical services, promptly adding, removing, and updating relevant information, and timely sharing such data with the departments participating in joint punitive measures against such misconduct. With respect to entities removed from this list of serious violations, the relevant authorities shall promptly cease implementing any punitive measures.

The Supreme People’s Court, the Supreme People’s Procuratorate, and the Ministry of Public Security have issued the “Opinions on Several Issues Concerning the Application of Law in Handling Criminal Cases Involving Theft of Oil and Gas and Destruction of Oil and Gas Facilities.”

In order to punish, in accordance with the law, crimes such as the theft of oil and gas and the sabotage of oil and gas facilities, and to safeguard public safety, energy security, and ecological security, and pursuant to the provisions of the Criminal Law of the People’s Republic of China, the Criminal Procedure Law of the People’s Republic of China, and the Interpretation by the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues Concerning the Specific Application of Law in Handling Criminal Cases Involving the Theft of Oil and Gas and the Sabotage of Oil and Gas Facilities, among other laws and judicial interpretations, and in light of actual working conditions, the Supreme People’s Court, the Supreme People’s Procuratorate, and the Ministry of Public Security have issued the “Opinions on Several Issues Concerning the Application of Law in Handling Criminal Cases Involving the Theft of Oil and Gas and the Sabotage of Oil and Gas Facilities.”

On the Determination of Endangering Public Safety

In the course of committing theft of oil and gas or other such acts, if the perpetrator damages oil and gas equipment that is in use and the circumstances fall under any of the following, it shall be deemed to constitute “endangering public safety” as stipulated in Article 118 of the Criminal Law:

(1) Any act involving cutting, drilling, prying, smashing, or dismantling, except where such acts clearly do not endanger public safety;

(2) The use of on/off mechanisms or similar methods that are sufficient to create risks of fire, explosion, or other hazards.

On Criminal Liability for Attempted Theft of Oil and Gas

Where a person commences the commission of theft of oil or gas but, due to reasons beyond their control, fails to complete the crime, and one of the following circumstances applies, criminal liability shall be pursued for the crime of theft (attempted):

(1) Where the target of the theft is oil or gas in an exceptionally large quantity;

(2) Where oil and gas have been loaded into packaging or transport vehicles, reaching an amount that is more than three times the threshold for “a relatively large amount”;

(3) Carrying tools for cutting, drilling, prying, smashing, or dismantling, such as oil‑theft clamps, hand drills, electric drills, and welding torches;

(4) Other circumstances involving serious misconduct.

On the Determination of Complicity

In crimes such as the joint theft of oil and gas and the sabotage of oil and gas facilities, anyone who exercises actual control over the crime, provides the primary funding, or organizes, plans, recruits, hires, or directs others to participate shall be identified as a principal offender in accordance with the law; likewise, any other person who plays a major role in the joint criminal activity shall also be deemed a principal offender pursuant to law.

Anyone who, prior to the commissioning of an oil or gas pipeline, unlawfully installs a valve and, after the pipeline has been put into service, provides that valve to others for the purpose of stealing oil or gas, shall be prosecuted as a joint offender for offenses such as theft and destruction of flammable and explosive equipment.

On the Handling of Collusive Theft of Oil and Gas by Both Internal and External Parties

When an offender colludes with personnel of an oil and gas enterprise to jointly steal oil and gas, but does not exploit the official position or authority of such personnel—instead merely taking advantage of their easy access to oil and gas equipment and their familiarity with the premises—the offense shall be prosecuted as a joint crime of theft.

Where the aforementioned conduct also constitutes the crime of sabotaging flammable and explosive equipment, it shall be convicted and punished in accordance with the provision prescribing the heavier penalty.

Handling of the Acts of Harboring, Transferring, Acquiring, Processing, or Acting as an Agent for the Sale of Stolen Oil and Gas

Anyone who, knowing that oil or gas is proceeds of crime, conceals, transfers, acquires, processes, sells on behalf of another, or otherwise disguises or hides such property, and whose conduct meets the criteria set forth in Article 312 of the Criminal Law, shall be held criminally liable for the crime of concealing or disguising proceeds of crime.

The determination of “knowing” shall be made by comprehensively considering such factors as the perpetrator’s cognitive capacity, the remuneration received, the means of transportation, the transport route, the purchase price, the form of acquisition, the processing method, the place of sale, and the storage conditions.

Where the criminal acts specified in paragraph 1 are committed with prior collusion, they shall be prosecuted as joint offenders of theft, destruction of flammable and explosive equipment, or other relevant offenses.

On the Determination of Direct Economic Losses

The “direct economic loss” stipulated in Paragraph 3 of Article 2 of the Interpretation by the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues Concerning the Specific Application of Law in Handling Criminal Cases Involving the Theft of Oil and Gas and the Destruction of Oil and Gas Equipment includes both the losses of oil and gas directly caused by such theft or destruction, as well as the expenses incurred in taking emergency repair and leak‑sealing measures.

With respect to the amount of direct economic loss, it shall be determined by taking into account the evidence submitted by oil and gas enterprises, as well as the defenses and arguments advanced by the suspects, defendants, and their defense counsel. Where such determination is difficult, it shall be made on the basis of a report issued by a price appraisal agency, in conjunction with other relevant evidence.

Evidence submitted by oil and gas enterprises shall bear the signatures of relevant personnel and the official seal of the enterprise.

On the Determination of Specialized Issues

With respect to specialized issues such as the quality and standards of oil and gas, determination shall be based on the evidence submitted by oil and gas enterprises, as well as the defenses and arguments advanced by the suspect or defendant and their counsel. Where such determinations are difficult to make, they shall be reached in accordance with the expert opinions issued by forensic appraisal institutions or reports issued by institutions designated by the public security authorities under the State Council, taking into account other relevant evidence.

Evidence submitted by oil and gas enterprises shall bear the signatures of relevant personnel and the official seal of the enterprise.

The Jiangsu Provincial People’s Procuratorate and the Provincial Lawyers Association have launched a pilot program allowing applicants for legal practice to serve as assistant prosecutors during their internship.

To thoroughly implement the guiding principles of the CPC Central Committee and the Provincial Party Committee on judicial system reform, further refine the training approach for applicants seeking to practice law, and actively advance the development of a legal professional community, the Political Department of the Provincial People’s Procuratorate and the Secretariat of the Provincial Lawyers Association will launch a pilot program in the procuratorial organs of Nanjing and Suzhou, allowing applicants for legal practice to serve as assistant prosecutors during their internship.

Pilot Program Details

Focusing on innovating the training formats for aspiring lawyers, broadening the channels for recruiting assistant prosecutors in the People’s Procuratorates, and deepening mutual professional understanding and recognition between prosecutors and the legal profession, we will further refine the mechanisms for training and exchange between prosecutors and lawyers. This will lay a solid foundation for fostering two-way, constructive interaction between the two professions, accelerating the development of a unified legal professional community, and cultivating and expanding a contingent of professionals dedicated to the rule of law under socialism.

Eligibility Requirements

Possesses strong political integrity, solid legal knowledge, and good moral character; is registered with a bar association within Jiangsu Province, is under 30 years of age, and has completed an internship of at least three months at a law office; and has had social insurance contributions made by the law office to which they are affiliated.

Application Procedure

The People’s Procuratorate, in accordance with its needs, submits to the local bar association a request for internship placements, specifying the number of lawyer‑in‑training and the corresponding job requirements. The bar association may, in turn, proactively communicate its internship needs to the local procuratorate, taking into account the training requirements of aspiring lawyers. The bar association then organizes eligible candidates, who, on a voluntary basis and with the consent of their respective law offices, are recommended to the procuratorate. Following a review of the applicants, the procuratorate selects the most qualified candidates and enters into a commissioned training agreement with the bar association to which the candidate belongs.

Internship Duration and Format

During their internship at the People’s Procuratorate, applicants for legal practice typically perform the duties of an assistant prosecutor, with an internship period generally lasting six months.

Management during the internship period

During their internship at the procuratorate, interns are primarily managed by the receiving procuratorate, with the supervising law office and the local bar association jointly assuming management responsibilities. For those applying to practice law, the procuratorate provides convenient working conditions, offers a modest transportation and living allowance, and ensures that their daily work and personal needs are adequately met.

Other

The penalties and compensation in the Changsheng vaccine case have been announced!

On the 16th, the National Medical Products Administration and the Jilin Provincial Food and Drug Administration each imposed multiple administrative penalties on Changchun Changsheng Company. The main measures include the following:

National Medical Products Administration:

Revoke the drug approval certificate for Changchun Changsheng’s rabies vaccine (National Drug Approval No. S20120016).

The batch release certificate for the biological product involved in the case has been revoked, and a fine of RMB 12.03 million has been imposed.

Jilin Provincial Food and Drug Administration:

Revoke its Drug Production License;

The illegally produced vaccines and illicit proceeds totaling RMB 1.89 billion were confiscated, and a fine equal to three times the value of the illegally produced and sold goods—RMB 7.21 billion—was imposed, bringing the total amount of fines and confiscations to RMB 9.1 billion.

Administrative penalties have been imposed on the 14 directly responsible supervisors, including Gao Junfang, and other persons directly liable, prohibiting them by law from engaging in pharmaceutical production and business activities. Where criminal offenses are suspected, the judicial authorities shall pursue criminal liability in accordance with the law.

The China Securities Regulatory Commission has also imposed penalties on Changsheng Bio for violations of information disclosure requirements.

It is proposed to impose the maximum penalty of a RMB 600,000 fine on Changsheng Bio.

It is proposed to issue warnings to the four parties directly responsible, including Gao Junfang, and impose the maximum penalty of RMB 300,000 on each of them, while also imposing a lifetime ban from the securities market.

Other parties involved in the case were each imposed fines ranging from RMB 300,000 or less, and it is also proposed to impose a five-year ban from the securities market on three individuals, including Zhang Youkui.

In addition, the China Banking and Insurance Regulatory Commission announced this evening a compensation plan for the rabies‑vaccine incident involving Changchun Changsheng, providing a one-time payout of RMB 500,000 per person in cases of severe disability or paralysis, and RMB 650,000 per person in cases resulting in death.

9.1 billion! The National Medical Products Administration and the Jilin Provincial Food and Drug Administration have imposed multiple administrative penalties.

According to an announcement released by ST Changsheng on the evening of October 16, an investigation revealed that, from January 2014 to July 2018, Changchun Changsheng Company illegally manufactured and sold a total of 748 batches (including sub-batches) of lyophilized human rabies vaccine (Vero cell) (hereinafter referred to as the “products involved”), as follows:

1. All products involved in the case, manufactured from January 2014 to July 2018, were prepared by blending two or more batches of raw solution during the production process, and the blended batch was subsequently assigned a new production batch number.

2. From 2016 to 2018, the production batch numbers or actual production dates of 184 batches of products involved in cases were altered. Among these, the production dates of 118 batches were retroactively changed, effectively extending the products’ shelf lives.

3. From February to March 2017, three batches of the implicated products were manufactured using expired bulk solution produced in 2016. From March to April 2018, nine batches of the implicated products were produced using expired bulk solution manufactured in 2017.

4. Of the 387 batches of implicated products manufactured between 2016 and 2017, none underwent thermal stability testing; furthermore, for 382 of these batches, the methods used to determine potency in the finished dosage forms did not comply with regulatory requirements.

5. The centrifuge modification was not filed as required.

6. From 2014 to July 2018, during the production of the products involved in the case, the company destroyed the original records immediately after production was completed and product inspection had been passed, and subsequently prepared falsified batch production records. In the batch inspection records for the products at issue, the company fabricated records of assay and thermal stability testing for the relevant batches.

7. Since 2014, by submitting false documentation, it has fraudulently obtained batch release certificates for the biological products involved in the case.

8. In order to conceal illegal activities, following the National Medical Products Administration’s first unannounced inspection, on July 10, 2018, the entity destroyed relevant evidence by replacing and disposing of internal surveillance video storage cards and certain computer hard drives.

Accordingly, the National Medical Products Administration has imposed two administrative penalties:

Revoke the drug approval certificate for Changchun Changsheng’s lyophilized human rabies vaccine (Vero cell) (National Drug Approval No. S20120016).

The batch release certificates for the implicated biological products fraudulently obtained by Changchun Changsheng Company from January 2014 to July 2018 have been revoked. Furthermore, Changchun Changsheng Company will be barred from submitting batch release applications for its lyophilized human rabies vaccine (Vero cell) (National Drug Approval No. S20120016) for a period of five years, and it has been fined RMB 12.03 million.

The Jilin Provincial Food and Drug Administration imposed the following four penalties:

1. Revoke the Drug Production License of Changchun Changsheng Biotechnology Co., Ltd. (License No.: Ji 20160086);

2. Confiscate 7,794,034 doses of illegally manufactured lyophilized human rabies vaccine (Vero cell), confiscate illegal gains totaling RMB 1,891,978,172.89, impose a fine equal to three times the value of the illegally produced and sold lyophilized human rabies vaccine (Vero cell), amounting to RMB 7,212,301,996.02, and levy total fines and confiscations of RMB 9,104,280,168.91.

3. Confiscate the raw and auxiliary materials, as well as packaging materials, exclusively used by Changchun Changsheng Company for the production of lyophilized human rabies vaccine (Vero cell), including 2,042.6 liters of purified bulk solution, 417 liters of ultrafiltration concentrate, 232 liters of virus harvest fluid, 8,481,677 units of intermediate products, 2,032,917 drug labels, 2,009,037 diluent labels, 234,079 package inserts, 493,360 small cartons, and 262 large cartons.

4. The directly responsible senior management personnel and other persons bearing direct responsibility at Changchun Changsheng Company, including Gao Junfang, Zhang Youkui, Zhang Jing, Liu Jingye, Zhang Xiao, Zhao Hongyang, Li Jinyu, Zhang Huan, Feng Shiming, Zhou Huanhuan, Xu Yang, Xu Liwei, Li Linan, Du Lei, and others, shall be subject to administrative penalties in accordance with the law.

CSRC: Strictly Punish the Changsheng Bio Disclosure Violation Case

According to the findings of the China Securities Regulatory Commission’s investigation into Changsheng Bio’s alleged violations of information disclosure laws, Changsheng Bio was found to have committed five major violations:

First, the company failed to disclose, as required, information regarding the non-compliance of problematic vaccines with relevant standards, as well as details about production suspensions and product recalls.

Second, the announcements disclosing information about the subsidiary’s products contained misleading statements and material omissions.

Third, it failed to disclose information regarding the investigation by the Jilin Provincial Drug Administration.

Fourth, the circumstances surrounding the unauthorized disclosure of the invalidity of the rabies vaccine GMP certificate, which led to the suspension of the company’s core business, as well as the subsequent reacquisition of that certificate;

Fifth, the annual reports and internal control self-assessment reports for the years 2015 to 2017 disclosed contained false statements.

In accordance with the relevant provisions of the Securities Law, the China Securities Regulatory Commission (CSRC) intends to impose the maximum penalty of a RMB 600,000 fine on Changsheng Bio. It also plans to issue warnings to four individuals, including Gao Junfang, the directly responsible senior manager, and to impose the maximum penalty of RMB 300,000 on each of them, while simultaneously imposing a lifetime ban from the securities market. Other parties involved in the case will be subject to fines ranging from less than RMB 300,000, and Zhang Youkui and two other individuals are proposed to be banned from the securities market for five years. Following full consideration of the parties’ statements and defenses, the CSRC will, in accordance with the law, issue a formal administrative penalty decision.

Implementation Plan for Compensation Regarding the Rabies Vaccine Issue at Changchun Changsheng Released

On the evening of the 16th, the China Insurance Regulatory Commission issued the compensation implementation plan for the rabies vaccine incident involving Changchun Changsheng.

According to the plan, compensation will be provided in the following three circumstances:

(1) Where adverse events attributable to the rabies vaccine issue involving Changchun Changsheng Company have resulted in a general disability requiring long-term medical treatment, nursing care, and rehabilitation;

(2) Where, as a result of the rabies‑vaccine incident involving Changchun Changsheng Company, associated harm has occurred, leading to severe disability or paralysis and necessitating long-term medical treatment, nursing care, and rehabilitation;

(3) Deaths resulting from adverse events associated with the rabies vaccine manufactured by Changchun Changsheng Co., Ltd. due to vaccination.

Specifically, for cases resulting in mild disability, a one-time compensation of RMB 200,000 per person shall be paid; for cases resulting in severe disability or paralysis, a one-time compensation of RMB 500,000 per person shall be paid; and for cases resulting in death, a one-time compensation of RMB 650,000 per person shall be paid.

According to the plan, individuals who received rabies vaccines manufactured by Changchun Changsheng Company between January 2014 and December 2017—during the period when the company’s GMP certificate for its rabies vaccine expired on November 19, 2017—and who meet the following conditions and have suffered the aforementioned personal injuries may apply for a one-time compensation in accordance with the plan:

(1) Individuals who have previously reported adverse outcomes following vaccination with the problematic rabies vaccine produced by Changchun Changsheng Company;

(2) Individuals who, following vaccination with the problematic rabies vaccine produced by Changchun Changsheng Company, develop symptoms or signs attributable to the vaccination, seek medical care at a healthcare facility, and possess original medical records;

(3) Following clinical observation at the designated medical institutions, patients presenting with symptoms or signs attributable to vaccination were identified.

The Shenzhen Stock Exchange has initiated the delisting procedure for Zhonghong Shares.

In accordance with the relevant provisions of the Shenzhen Stock Exchange’s Rules for Listing Stocks, the SZSE decided on October 18 to initiate the delisting procedure for Zhonghong Shares.

From September 13 to October 18, 2018, the shares of Zhonghong Holdings Co., Ltd. (stock code: 000979; hereinafter referred to as “Zhonghong Shares” or the “Company”) closed below their par value (RMB 1) for 20 consecutive trading days. In accordance with Article 14.4.11 of the Shenzhen Stock Exchange’s Rules for Listing Stocks, the Company’s shares have been suspended from trading effective at the opening of markets on October 19. The Shenzhen Stock Exchange has initiated the delisting procedure for Zhonghong Shares and will, within fifteen trading days from the date of suspension, determine whether to terminate the listing of the Company’s shares.

In accordance with the relevant provisions of the Shenzhen Stock Exchange’s Rules for Listing Stocks, upon the expiration of five trading days following the SZSE’s decision to delist the company’s shares, the shares shall enter a delisting reorganization period, which lasts for thirty trading days. On the trading day immediately following the conclusion of the delisting reorganization period, the SZSE will remove the company’s shares from the exchange, thereby effecting the termination of their listing.

The Shenzhen Stock Exchange reminds the company that, following the delisting of its shares, it must promptly complete all necessary arrangements to ensure that, within forty-five trading days after the expiration of the delisting reorganization period, its shares can be listed and traded on the share transfer system.

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