JC Master Legal News Issue 845

Key Takeaways for This Issue

The China Securities Regulatory Commission has revised and issued “Guideline No. 26 on the Content and Format of Information Disclosure by Companies Issuing Securities to the Public—Major Asset Restructuring of Listed Companies (Revised in 2018).”

To further encourage and support mergers and acquisitions and restructuring activities of listed companies, enhance the quality of listed offices, serve the real economy, and implement the reform of the stock suspension and resumption system, the China Securities Regulatory Commission recently revised and issued “Guideline No. 26 on the Content and Format of Information Disclosure by Companies Issuing Securities to the Public—Major Asset Restructuring of Listed Companies (Revised in 2018)” (CSRC Announcement [2018] No. 36), thereby reducing and simplifying the disclosure requirements for preliminary plans related to such transactions.

Premiums sold through the four major state-owned banks’ affiliated insurers plunged 22% year over year, with group insurance becoming a standard employee benefit.

Recently, bank-affiliated insurance companies have successively disclosed their related-party transaction data with their parent banks for the first nine months of this year. Notably, the premium‑sales figures generated through each major bank’s distribution channels have also been released. In the first three quarters, the combined premiums sold by Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, and China Construction Bank on behalf of ICBC‑AXA, ABC Life, BOC‑Samsung Life, and CCB Life totaled RMB 71.2 billion, a sharp 22% decline from RMB 90.2 billion in the same period last year.

Ministry of Finance: Studying the Implementation of Larger-Scale Tax Cuts

Liu Kun, Secretary of the Party Leadership Group and Minister of Finance, recently wrote that the real economy is the foundation of a country’s economic strength, the fundamental source of wealth creation, and a vital pillar of national prosperity.

The Supreme People’s Court has released 10 typical cases involving state compensation and judicial assistance.

On the 13th, the Supreme People’s Court held a press conference to release ten typical cases involving state compensation and judicial assistance.

Jack Ma ramps up investment in internet healthcare: Alibaba Health teams up with Alipay to integrate resources.

On November 15, Alibaba Health announced that it had signed a strategic cooperation agreement with Alipay, a subsidiary of Ant Financial.

Table of Contents

Table of Contents

Finance & Capital Markets

The China Securities Regulatory Commission has revised and issued “Guideline No. 26 on the Content and Format of Information Disclosure by Companies Issuing Securities to the Public—Major Asset Restructuring of Listed Companies (Revised in 2018).”

Two banks listed on the New Third Board plan to pursue an A-share IPO.

The Shanghai Stock Exchange has officially issued new regulations on mandatory delisting for material violations.

SSE: Is Working Around the Clock to Draft Relevant Plans for the STAR Market

The Shenzhen Stock Exchange has initiated the mandatory delisting procedure for major violations against Changsheng Bio.

The number of private placement product issuances has declined for eight consecutive months.

Corporate & Commercial

Premiums sold through the four major state-owned banks’ affiliated insurers plunged 22% year over year, with group insurance becoming a standard employee benefit.

65% of the assets of central enterprises have been injected into listed companies.

— The State-owned Assets Supervision and Administration Commission is formulating a reform plan for the authorized operation of state capital, shifting the focus from managing enterprises to managing capital.

A Unique Scene at the First China International Import Expo: Those Overseas Companies “Returning Home”

Multiple departments have implemented targeted measures to pave the way for the high-quality development of private enterprises.

Taxation

Ministry of Finance: Studying the Implementation of Larger-Scale Tax Cuts

The 48th Annual Conference of the Asian Tax Administration and Research Organization opened in Hangzhou, where Wang Jun attended the event and delivered a keynote address.

Litigation & Arbitration

The Supreme People’s Court has released 10 typical cases involving state compensation and judicial assistance.

The new Regulations on Patent Agency shall come into force on March 1, 2019.

China’s first case in which a trademark owner was awarded punitive damages: A company was fined RMB 16,000 for producing cookies that unlawfully used the “Six Walnuts” trademark.

Top 10 Antitrust Civil Litigation Cases in Chinese Courts, 2008–2018

Other

Jack Ma ramps up investment in internet healthcare: Alibaba Health teams up with Alipay to integrate resources.

An Qingsong: The securities industry is fully committed to supporting the development of green finance in the Xiong’an New Area.

Finance & Capital Markets

The China Securities Regulatory Commission has revised and issued “Guideline No. 26 on the Content and Format of Information Disclosure by Companies Issuing Securities to the Public—Major Asset Restructuring of Listed Companies (Revised in 2018).”

To further encourage and support mergers and acquisitions and restructuring activities of listed companies, enhance the quality of listed offices, serve the real economy, and implement the reform of the stock suspension and resumption system, the China Securities Regulatory Commission recently revised and issued “Guideline No. 26 on the Content and Format of Information Disclosure by Companies Issuing Securities to the Public—Major Asset Restructuring of Listed Companies (Revised in 2018)” (CSRC Announcement [2018] No. 36), thereby reducing and simplifying the disclosure requirements for preliminary plans related to such transactions.

The main revisions are as follows: First, the focus is on disclosing the core elements of the principal counterparties and the transaction subject. The requirement to disclose the counterparties’ business development status, key financial metrics, and a list of their subsidiaries has been removed; for transactions such as overseas M&A and land‑use rights auctions, biddings, and listings, simplified or deferred disclosure of relevant information is permitted. Second, flexibility has been introduced in the due‑diligence verification requirements for intermediary institutions, allowing them to disclose their verification opinions based on the actual progress of their due diligence. Third, where the transaction subject has already been clearly identified, there is no longer a mandatory requirement to disclose the subject’s preliminary valuation or proposed pricing, thereby enabling all parties to engage in more thorough negotiations. Fourth, provided that relevant risks have been fully disclosed, there is no longer a requirement to disclose defects in ownership, project approval and environmental compliance matters, the anticipated impact of this transaction on the company’s competitive landscape and related‑party transactions, or the self‑examination results of relevant parties regarding their stock trading activities.

Going forward, listed companies must further ensure full compliance with the phased disclosure requirements. Relevant shareholders, directors, supervisors, and senior management personnel are required to strictly adhere to their confidentiality obligations throughout the planning and implementation of merger and acquisition and restructuring plans, strengthen internal‑information management, and maintain accurate records of persons privy to such information. No one may exploit information related to restructuring proposals to engage in insider trading, market manipulation, or “deceptive” restructuring—any such conduct is prohibited under applicable laws and regulations. The China Securities Regulatory Commission will continue to refine the suspension and resumption of trading regime and its supporting policies and measures, further enhance oversight across the entire M&A and restructuring process, enforce a robust, comprehensive mechanism for preventing and controlling insider trading, and impose strict penalties on illegal and non‑compliant activities.

Two banks listed on the New Third Board plan to pursue an A-share IPO.

Recently, Qilu Bank, which has been listed on the National Equities Exchange and Quotations for Small and Medium‑sized Enterprises (hereinafter referred to as the “New Third Board”) for more than three years, has finally embarked on its journey to transfer to the A‑share market. Following the board’s approval of the proposal on the plan for an initial public offering of Renminbi ordinary shares (A‑shares) and listing, the bank, according to the latest disclosure released last Friday, has submitted the filing materials for IPO and listing guidance to the Shandong Securities Regulatory Bureau of the China Securities Regulatory Commission. Three years ago, Qilu Bank took the lead among its peers in listing on the New Third Board; and as it prepares to transition to the A‑share market, the New Third Board now counts as many as nine banks. Another bank listed on the New Third Board, Jiangsu Rugao Rural Commercial Bank Co., Ltd. (hereinafter referred to as “Rugao Bank”), also plans to move to the A‑share market. Notably, Qilu Bank and Rugao Bank rank first and second, respectively, in terms of strength among all banks on the New Third Board, making them the most qualified candidates for such a transition.

Qilu Bank has submitted the filing materials for its IPO sponsorship.

In June 2015, with Qilu Bank successfully listing on the New Third Board, the platform finally opened its doors to the banking sector—a traditionally heavyweight industry. At that time, the majority of companies listed on the New Third Board were still early-stage small and micro enterprises; a large‑scale bank’s admission was an unprecedented event. Over the following three years, Qilu Bank raised RMB 8.5 billion through targeted share placements and the issuance of preferred shares on the New Third Board, while continuing to actively explore additional avenues for capital replenishment—namely, a transfer to the A‑share market. According to an announcement issued by Qilu Bank, its board of directors has approved a proposal to initiate an initial public offering of Renminbi ordinary shares (A‑shares) and seek a listing. Meanwhile, given that this matter involves policy consultations with relevant authorities and entails significant uncertainties, trading of Qilu Bank’s shares was suspended on the New Third Board effective November 5, 2018, with the resumption of trading tentatively scheduled no later than February 4, 2019. Qilu Bank will determine, based on the progress of this major initiative, whether to apply to the National Equities Exchange and Quotations System for an extension of the suspension.

Qilu Bank stated that this move will diversify its capital‑raising channels, optimize its capital structure, enhance its market competitiveness and risk‑resilience, and support its long-term development. As of the end of September, the bank’s capital adequacy ratio, Tier 1 capital adequacy ratio, and Common Equity Tier 1 capital adequacy ratio stood at 13.83%, 11.15%, and 10.02%, respectively—down 0.66 percentage points, 0.39 percentage points, and 0.26 percentage points from year‑end 2017. If Qilu Bank successfully lists on the A‑share market, it would also significantly bolster its capital adequacy ratios.

According to the latest reports, Qilu Bank has recently submitted its filing for initial public offering and listing guidance to the Shandong Securities Regulatory Bureau of the China Securities Regulatory Commission and has made the relevant materials publicly available on the bureau’s official website. At present, Qilu Bank is receiving guidance from CITIC Securities.

Banks seeking to list on the A-share market must pass the review of the Securities Regulatory Commission.

Coincidentally, in addition to Qilu Bank, another well‑capitalized bank on the New Third Board—Rugao Bank—has also begun preparing to transfer its listing to the A‑share market. In September this year, Rugao Bank, which is likewise listed on the New Third Board, launched a tender process for an A‑share IPO. According to the tender documents posted on the bank’s official website for its initial public offering and listing project, bidders must be securities offices that possess independent corporate legal status and hold both sponsorship and underwriting qualifications. Furthermore, these offices are required to have completed at least two IPOs in the past three years (2015–2017) and demonstrate adequate capabilities in personnel, capital, and other relevant areas. Notably, the tender document explicitly states that Rugao Bank plans to list on the Shanghai Stock Exchange, issuing no more than 328 million shares of Renminbi ordinary stock (A‑shares), with the intention of completing the filing for the share issuance in the first half of 2019. Reviewing the bank’s shareholder information reveals that its two largest shareholders, each holding an equal stake, are banks: Wujiang Bank and Jiangsu Kunshan Rural Commercial Bank, each currently owning 100 million shares, or 10% of the total. In the first half of this year, both Wujiang Bank and Jiangsu Kunshan Rural Commercial Bank increased their holdings in Rugao Bank by 35 million shares apiece.

According to statistics, among the more than 10,000 companies listed on the New Third Board, financial institutions account for only 148, or 1.36%. These include one city commercial bank, four rural commercial banks, three rural and township banks, and one rural credit cooperative. Among them, Qilu Bank and Rugao Bank—both planning to transfer to the A-share market—are the two most prominent. The interim reports of New Third Board‑listed banks show that as of the end of June this year, Qilu Bank’s total assets stood at RMB 251.73 billion, while Rugao Bank’s total assets reached RMB 49.66 billion; by contrast, the asset sizes of other banks are significantly smaller, with several falling short of RMB 10 billion. Compared with the high listing thresholds for A‑shares and H‑shares, accessing the New Third Board is clearly more feasible for small and medium‑sized banks. However, for relatively large city commercial banks, the main board remains far more attractive, whether in terms of fundraising capacity or brand enhancement. In the first three quarters of this year, 20 New Third Board companies successfully transferred to the A‑share market, and an additional 70 have announced that they have begun receiving pre‑listing guidance.

However, like other companies seeking to transfer to a public listing, these two banks will still face rigorous review and scrutiny. From October 2017 to the present, the Issuance Review Committee has examined 252 companies applying for their initial public offerings, of which 55 came from the New Third Board, accounting for more than 20 percent. Among them, 29 New Third Board‑listed companies have had their IPOs approved, yielding an overall approval rate of 52.73 percent.

The Shanghai Stock Exchange has officially issued new regulations on mandatory delisting for material violations.

On November 16, 2018, building on earlier public consultations, the Shanghai Stock Exchange officially promulgated and implemented the “Measures for the Mandatory Delisting of Listed Companies for Material Violations” (hereinafter referred to as the “Measures”), concurrently issuing the “Shanghai Stock Exchange Rules for Listing Stocks (Revised in November 2018)” and the “Measures for the Re‑listing of Delisted Companies of the Shanghai Stock Exchange (Revised in November 2018).” Throughout this process, the Exchange extensively incorporated feedback from all market participants, forged broad consensus, and clearly defined the specific types of material violations triggering mandatory delisting as well as the corresponding implementation procedures. It also formulated related business rules that are more objective in their standards, more transparent in their procedures, more targeted, and more effective in deterring misconduct. The promulgation and implementation of these new delisting regulations will further strengthen the foundational institutional framework, standardize market exit mechanisms, promote a culture of compliance, and enhance the overall quality of listed companies.

I. Officely implement the CSRC’s decisions, and ensure that the SSE earnestly assumes its principal responsibility for delisting enforcement.

On July 27, 2018, the China Securities Regulatory Commission (CSRC) officially issued the “Decision on Amending the Several Opinions on Reforming, Improving, and Strictly Implementing the Delisting System for Listed Companies” (hereinafter referred to as the “Decision”), which calls for refining the key circumstances triggering mandatory delisting for material violations and strengthening the stock exchanges’ principal responsibility for implementing the delisting regime. Pursuant to the CSRC’s decision, the Shanghai Stock Exchange has fully exercised its frontline regulatory functions, establishing a decision-making mechanism with clearly defined powers and responsibilities, standardized procedures, and well-defined criteria for determination. Adhering to the principle of strict enforcement, it has, in accordance with the law, imposed delisting risk warnings on the shares of relevant companies and made decisions to suspend or terminate their listing. As part of this delisting system reform, the Shanghai Stock Exchange formulated and promulgated the “Implementation Measures,” while also revising related rules such as the “Stock Listing Rules” and the “Measures for the Re‑listing of Delisted Companies.”

In 2016, Boyuan Investment was delisted in accordance with the law and relevant regulations for material violations of information disclosure, becoming the first company in the capital market to be delisted due to serious legal breaches. This practice was widely recognized by all market participants and provided valuable lessons for subsequent reforms. In this round of delisting reform, the Shanghai Stock Exchange carefully reviewed its practical experience and, in line with the principles set forth in the CSRC’s Decision, adopted a more systematic and detailed regulatory framework for mandatory delisting on grounds of material violations. This refined the circumstances under which mandatory delisting applies for such violations, thereby enhancing the rule’s operational clarity. The new rules primarily delineate two categories of mandatory delisting—material violations involving securities and material violations that pose a significant threat to public safety—and specifically designate as a separate category cases where a listed company gravely disrupts market order, seriously harms the public interest, or generates substantial adverse social impact. The promulgation and implementation of this series of regulations represent a concrete manifestation of the Shanghai Stock Exchange’s resolute commitment to fulfilling the CSRC’s directives and exercising its frontline regulatory responsibilities, fully realizing the fundamental principles and objectives of the CSRC’s current delisting reform.

II. Optimize the circumstances under which securities issuers are subject to mandatory delisting for material violations, thereby enhancing practical operability.

From the perspective of the overall framework for delisting due to material violations of securities laws, the focus has been on whether such violations in securities market information disclosure affect a company’s listed status. Accordingly, the implementing measures, building on the two existing categories of fraudulent issuance and material information‑disclosure violations, have introduced a typology of delisting scenarios, identifying four specific instances: fraudulent issuance in an initial public offering, fraudulent issuance in a restructuring‑related listing, falsification of annual reports to evade delisting, and other circumstances as determined by the stock exchange. These four scenarios are centered on whether the unlawful conduct undermines the company’s listed status, with standards that are clearer, more objective, and more detailed, thereby providing a robust and reliable basis for subsequent enforcement.

Among the circumstances triggering mandatory delisting for material securities violations, fraudulent issuance primarily concerns whether false records, misleading statements, or material omissions were present in application or disclosure documents submitted during an initial public offering or a restructuring‑related listing, and whether such conduct has resulted in administrative penalties imposed by the China Securities Regulatory Commission pursuant to relevant provisions of the Securities Law, or in a conviction for the crime of fraudulent issuance by a people’s court. The legislative rationale is that companies engaging in fraudulent issuance are inherently flawed from the very outset of obtaining listed status. Removing them from the market helps safeguard the foundation of honesty and good faith across the entire market and contributes to stricter regulation of entry into the capital markets. As for cases where annual report fraud is used to evade delisting, the primary regulatory logic is to assess whether, during its time as a listed company, the entity concealed facts indicating that it had already breached financial‑based delisting criteria, thereby warranting termination of its listing. Listed companies falling into such categories have disclosed information that seriously deviates from their true financial condition, failing to provide investors with essential pricing data and decision‑making references, and distorting the market’s normal pricing and exit mechanisms. Whether viewed in terms of their own financial health or the compliance level of their information disclosure, they are no longer suitable for remaining on the Shanghai Stock Exchange’s Main Board and should be delisted in accordance with the listing rules. If they maintain their listed status through financial fraud, they disrupt the order of information disclosure, undermine the market’s price‑discovery function, and inflict severe harm on investor interests; therefore, stringent oversight is required, and such entities must be delisted.

During the initial public consultation, some comments pointed out that the draft regulations’ two major delisting criteria—namely, repeated administrative penalties for violations of information disclosure requirements and criminal penalties for offenses involving the unlawful disclosure or non-disclosure of material information—while reflecting the principle of stringent, law-based regulation, focus primarily on the administrative or criminal sanctions themselves. This approach fails to adequately capture the underlying rationale of assessing whether the factual violations and their degree of harm actually affect a company’s listed status, and moreover, these scenarios can be subsumed under several other categories. Accordingly, after careful deliberation, these two categories have been removed from the list of standalone delisting grounds.

III. Introduction of a new category of mandatory delisting for serious violations involving public safety, addressing societal expectations.

In a decision issued on July 27, the China Securities Regulatory Commission added provisions stipulating that material violations involving national security, public safety, ecological security, production safety, and public health safety shall trigger delisting. Previously, during the consultation process, some opinions also suggested that serious violations that gravely harm national interests or the public interest should likewise be subject to mandatory delisting. Accordingly, the Shanghai Stock Exchange has explicitly incorporated such cases of mandatory delisting for material violations into its new delisting rules. The normative rationale underlying these circumstances primarily encompasses the following three aspects:

First, the occurrence of serious violations involving public safety indicates a severe divergence between a listed company’s business and operational values and the social responsibilities it ought to assume. Under the Company Law, companies engaging in business activities must observe social ethics and commercial morality and fulfill their social responsibilities. Listed companies, by virtue of their public‑oriented nature, are distinct from ordinary enterprises: while generating profits and bearing legal obligations to shareholders and employees, they must also shoulder responsibilities toward stakeholders such as consumers, local communities, and the environment. Relevant legal frameworks governing the capital markets further require listed companies to earnestly discharge their comprehensive public responsibilities—covering social issues, environmental protection, public welfare, and corporate integrity—throughout their production processes. If significant illegal acts arise in areas that affect public safety, this signals a grave misalignment in the company’s value orientation, making it difficult for the company to adequately fulfill the duties and mission expected of a publicly listed entity.

Second, serious violations of public safety laws not only harm the interests of capital market investors but also directly undermine the broader public interest and even national interests, making them wholly incompatible with the value‑oriented principles underlying capital market legislation and regulation. Article 1 of the Securities Law explicitly identifies the safeguarding of socio‑economic order and the public interest as one of its legislative objectives—this is also the fundamental purpose of capital market oversight. If a listed company commits grave violations in areas that affect public safety, it demonstrates that the company is exploiting the capital market to inflict harm on society, thereby gravely breaching the basic requirements for market access. Such cases must be dealt with rigorously, and the offending entity should be expelled from the market.

Third, when a listed company commits serious violations that jeopardize public safety, it is often stripped of its production and business licenses and loses its ability to continue operating; objectively, it can no longer maintain its listed status. For example, if a listed company has its business license revoked, it must be dissolved and deregistered in accordance with the law, at which point the entity ceases to exist. Similarly, if its license for its principal line of business is revoked, it loses the legal authorization to continue engaging in that core activity. In the former case, this situation already falls under the existing grounds for delisting; in the latter, the company has lost its capacity for sustained profitability, and allowing it to remain on the capital market would undoubtedly inflict secondary harm on investors and the general public.

With respect to the specific circumstances triggering mandatory delisting for serious violations of public safety, these are primarily categorized and specified into three scenarios: First, the listed company or one of its principal subsidiaries has had its business license revoked, been ordered to shut down, or been deregistered in accordance with the law; second, the listed company or one of its principal subsidiaries has had its license for its principal line of business revoked pursuant to law, or has otherwise lost the legal capacity to continue its operations; and third, the Exchange determines, based on the severity of the listed company’s major unlawful conduct in harming national interests or the public interest, together with factors such as the type of legal liability borne by the company and the extent of its impact on the company’s operations and its listed status, that the company’s shares should be delisted.

IV. Strictly enforce the mandatory delisting procedure for serious violations, thereby clarifying market expectations.

The new delisting rules establish a rigorous and standardized decision-making and implementation process. First, they institute a Listing Committee decision‑making mechanism, stipulating that the Committee shall base its deliberations on facts established in administrative penalty decisions issued by relevant authorities or in final judgments rendered by people’s courts, to assess whether a listed company’s conduct has seriously jeopardized its listing status and whether it should be subject to delisting for material violations. The Committee is required to render an independent, professional judgment and issue a review opinion. Moreover, the rules clearly set time limits for each stage of the review process, including the Committee’s deliberation period, the issuance of a notice of findings, the provision of opportunities for defense and hearings, and the adoption of a delisting decision. Second, the rules afford parties concerned reasonable avenues and remedies, primarily by granting listed companies suspected of material‑violation‑related delisting the right to request a hearing, submit written statements and defenses, and seek a review. This safeguards their procedural rights and protects their fundamental rights. Third, the rules clarify the key stages of the material‑violation‑based delisting process—suspension of trading, delisting risk warnings, suspension of listing, and termination of listing—and reduce the duration of the suspension of listing from one year to six months, thereby enhancing the efficiency of delisting proceedings.

In addition, the delisting reform plan has revised the conditions for relisting. For companies that engaged in fraudulent issuance at the very outset of their market entry—whose violations were particularly egregious and drew strong public backlash—the new rules no longer grant them the opportunity to relist. Other companies delisted for material violations must remain listed on the National Equities Exchange and Quotations for a full five complete fiscal years before they may apply to relist. Meanwhile, for companies that enter the delisting process after triggering mandatory delisting due to material violations, unless the relevant administrative penalties or judicial rulings are legally revoked, declared invalid, or otherwise lawfully amended, they will no longer be permitted to regain listing status. This measure is intended to send a clear signal of strict enforcement of delisting for material violations, further clarify market expectations, and prevent unnecessary back-and-forth during the delisting process that could fuel speculative trading.

V. Implement multiple measures to improve supporting mechanisms and safeguard the interests of small and medium-sized investors.

Investor protection serves as both the starting point and the ultimate goal of major institutional reforms in the capital market. As one of the capital market’s foundational systems, the delisting regime directly affects investors’ interests, giving rise to concentrated conflicts and complex stakeholder demands. For investors who hold shares in listed companies, a company’s delisting means losing access to trading on the main board. However, viewed holistically, removing from the market those offices that disrupt market order and pose risks to society helps purify the market environment, strengthen the mechanism of survival of the fittest, encourage sound corporate governance, and genuinely enhance the quality of listed companies—making it a fundamental strategy for safeguarding investor rights.

In this round of delisting reforms, specific measures to protect investors have been put in place across several key areas, including listed companies’ information disclosure, the design of risk‑alert mechanisms, restrictions on the rights of relevant parties, and disciplinary actions against responsible entities. When a listed company faces delisting risks, regulators promptly require it to disclose such risks and provide adequate risk warnings. During the delisting process, a risk‑alert system has been established, and trading mechanisms have been subject to regulatory oversight. These institutional arrangements are intended to encourage investors to make rational investment decisions, carefully aligning their investment choices with their risk‑bearing capacity. In addition, under the share‑reduction rules issued in the previous phase, major shareholders of listed companies are prohibited from reducing their holdings during periods when the company is under investigation by the China Securities Regulatory Commission or being investigated by judicial authorities for suspected securities or futures‑related violations, as well as within six months after an administrative penalty decision or a criminal judgment has been rendered. At the same time, we note that the civil compensation mechanism for false statements in the securities market has become increasingly mature, and people’s courts have steadily strengthened their adjudicatory efforts in such cases, enabling investors to pursue their claims through judicial channels. In practice, numerous individual cases have already resulted in investors obtaining redress via the courts.

VI. Clarify arrangements for aligning regulatory frameworks to ensure the smooth implementation of the new delisting rules.

Following the issuance of these new regulations, in order to ensure their smooth implementation, specific arrangements have been made to facilitate the transition between the old and new rules:

First, for listed companies that, prior to the implementation of the CSRC’s Decision, had already been determined to have committed material violations or had been legally referred to public security authorities and subsequently subject to a decision to terminate their listing, the original rules shall apply. After the Decision takes effect, if a listed company is subjected to administrative penalties by the relevant administrative authorities or is found by a final judicial ruling to have engaged in unlawful conduct—regardless of when such misconduct occurred—any suspension or termination of its listing arising from such violations shall be governed by the new regulations. This arrangement is consistent with the principles underlying the CSRC’s Decision, primarily because, at the time a penalty decision is issued or a judicial ruling establishes unlawful conduct, the company’s listing status may already be materially affected. Applying the new rules in such cases reflects the actual circumstances, aligns with the normative logic of the revised delisting regime, and is an essential requirement for enforcing strict market discipline, purifying the market environment, and promoting survival of the fittest.

Second, regarding the cut‑off date for distinguishing between old and new cases under the major‑violation delisting regime for annual report fraud: Given that the major‑violation delisting system was formally implemented only after the CSRC issued its Opinions on Delisting Reform in November 2014, the starting point for this distinction is set at the 2015 annual report. Accordingly, only financial indicators for consecutive accounting years beginning in 2015 that, upon retrospective adjustment, meet the criteria for termination of listing will trigger delisting; financial performance for 2014 and earlier years will no longer be taken into account. For example, if a company falsified its annual reports to circumvent the net profit delisting threshold, and, following the disclosure of its 2018 annual report and subsequent administrative penalties, retrospective adjustments reveal losses for four consecutive years from 2015 to 2018, the company’s shares will be subject to mandatory delisting on the grounds of a major violation. Similarly, if a company fabricated its annual reports to avoid the net assets delisting criterion, and, after the 2017 annual report was disclosed and administrative penalties were imposed, retrospective adjustments show negative net assets for three consecutive years from 2015 to 2017, the company’s shares will likewise be subject to mandatory delisting for a major violation.

Third, regarding the application of the rules to companies that had already completed a restructuring‑based relisting prior to the new regulations’ entry into force: If a listed company with material violations has undergone a complete transformation before the new rules took effect—such that its control structure and core business have both changed—it would be unreasonable to subject it to delisting. Accordingly, for such companies, if they had legally and compliantly completed a restructuring‑based relisting prior to the implementation of these Measures, and if the material violations occurred prior to that relisting and are unrelated to it, they may apply to this Exchange for an exemption from mandatory delisting on the grounds of material violations. After the Measures officially come into effect, any listed company with material violations that subsequently undertakes a restructuring‑based relisting will still be subject to mandatory delisting in strict accordance with the new regulations. The restructuring party must conduct thorough due diligence to avoid being subjected to mandatory delisting due to material violations committed by the listed company prior to the relisting.

Fourth, with respect to the application of the old and new regimes governing resumption of listing. For companies that, prior to the implementation of the new rules, had already been delisted by this exchange on the grounds of material violations, if they apply to resume listing within 36 months after the new rules take effect, the original rules shall continue to apply.

VII. Implement the requirements of higher-level laws and simultaneously revise the relevant provisions of the Listing Rules.

This revision of the Rules for Stock Listing, in addition to implementing the requirements set forth by the CSRC and further refining and clarifying the procedures for mandatory delisting due to material violations, also incorporates provisions from the Measures for the Administration of Stock Exchanges and other relevant regulations. The primary aim is to enhance the exchange’s frontline regulatory tools: the SSE has introduced new supervisory measures, such as on-site inspections of listed companies and access to and review of working papers submitted by sponsors and securities service institutions. Moreover, the rules specify a range of routine regulatory measures and disciplinary sanctions, including issuing regulatory recommendation letters to competent authorities and imposing punitive liquidated damages. At the same time, safeguards for the rights of those subject to disciplinary action have been strengthened, explicitly granting parties the right to a hearing and the right to seek reconsideration of disciplinary decisions. In line with other amendments to the Measures for the Administration of Stock Exchanges, corresponding adjustments have been made, including stipulating that listing agreements, declarations, and commitments constitute key regulatory bases for the SSE, and expanding the scope of application of these rules to include issuers and counterparties in major asset restructuring transactions.

In addition, pursuant to the China Securities Regulatory Commission’s revised “Information Disclosure Rule No. 14,” the term “non‑standard unqualified audit opinion” in the Listing Rules has been uniformly replaced with “non‑standard audit opinion,” and the provision requiring suspension of trading for listed companies that receive a non‑standard audit opinion due to clear violations of accounting standards and disclosure requirements has been abolished. At the same time, the requirement that sponsors for resumption of listing must be sponsoring securities offices has been removed, and the conduct of directors, supervisors, and senior management in disclosing information to the public has been standardized.

In summary, this reform of the delisting system has extensively sought input from all stakeholders and broadly reflected market consensus, representing a significant step toward improving the exit mechanism for market participants. Following the promulgation and implementation of the new delisting rules, the Shanghai Stock Exchange will assume primary responsibility, rigorously enforce the revised regulations, and ensure that any listed company found to have committed material violations triggering mandatory delisting is delisted without exception. At the same time, we will continue to provide robust support to listed companies, urging and guiding them to strengthen their core business fundamentals, substantially enhance their quality, promote the sound development of the securities market, and safeguard the fundamental interests of investors.

SSE: Is Working Around the Clock to Draft Relevant Plans for the STAR Market

On November 16, Que Bo, Deputy General Manager of the Shanghai Stock Exchange, stated at the 7th China Listed Companies Summit Forum that the SSE will, in accordance with the CSRC’s strategic plan, seamlessly integrate the various measures for capital market reform and opening-up and the comprehensive, law-based, and stringent regulatory initiatives with efforts to bolster and restore investor confidence, thereby striving to ensure the stable functioning of the capital market and support the high-quality development of listed companies.

Regarding the STAR Market, which has attracted significant market attention, Que Bo revealed that the Shanghai Stock Exchange is currently working around the clock to draft the relevant plans.

Que Bo stated that, in the face of both domestic and international challenges in the current economic environment, China’s economy remains resilient and is well-positioned to advance high-quality development. Since the beginning of this year, Shanghai‑listed companies have taken supply-side structural reform as their central task, upheld the new development philosophy, and implemented the requirements for high-quality growth. By the end of the third quarter, they had generated approximately RMB 23.6 trillion in operating revenue and RMB 2.3 trillion in net profit, up 12% and 11%, respectively, year on year. Overall, given the current trajectory of China’s economy, there is a solid foundation for achieving high-quality development.

He also emphasized that entrepreneurs must innovate, and the capital market must provide robust support. To achieve high-quality development, enterprises need to ramp up investment in innovation, bolster their intrinsic growth momentum, and pursue transformative upgrades—only by elevating operational quality can they remain at the forefront. Many offices in the market still require transformation; therefore, the capital market must play a decisive role in resource allocation, strengthen its ability to serve the real economy, intensify innovation across multiple fronts, refine mechanisms for shared risk‑taking, and unleash market potential and vitality. At the same time, it should advance state‑owned enterprise reform and support the development of private enterprises.

Looking ahead to future economic development, Que Bo stated that there are both clear goals and high expectations. The Shanghai Stock Exchange will comprehensively advance innovation, vigorously implement an innovation-driven development strategy, and accelerate the establishment of innovative mechanisms. It will promote technological innovation, corporate innovation, product innovation, market innovation, and brand innovation across the board, while expediting the translation of scientific and technological achievements into real productive forces. In this regard, the capital market has a very clear vision.

In addition, according to Que Bo, the Shanghai Stock Exchange has not only been vigorously supporting the development of a multi-tiered market domestically but has also steadily accelerated its internationalization in recent years. It has established deep cooperation with stock exchanges along the Belt and Road Initiative and maintains collaborative relationships with more than 50 exchanges worldwide.

The Shenzhen Stock Exchange has initiated the mandatory delisting procedure for major violations against Changsheng Bio.

On October 16, 2018, the principal subsidiary of Changsheng Bio‑Technology Co., Ltd. (hereinafter referred to as “Changsheng Bio” or the “Company”) was subject to an administrative penalty by the National Medical Products Administration, which revoked its drug production license and imposed a fine totaling RMB 9.1 billion, due to illegal and non‑compliant vaccine production. The Company’s principal subsidiary engaged in serious violations affecting national security, public safety, ecological security, workplace safety, and public health. In accordance with Article 5, Paragraph 2 of the China Securities Regulatory Commission’s “Opinions on Amending the ‘Several Opinions on Reforming, Improving, and Strictly Implementing the Delisting System for Listed Companies,’” as well as the Shenzhen Stock Exchange’s “Measures for the Mandatory Delisting of Listed Companies for Material Violations” (hereinafter referred to as the “Measures”), and Article 2 of the “Notice on the Issuance of the ‘Shenzhen Stock Exchange Rules for Listing Stocks (Revised November 2018),’ the ‘Shenzhen Stock Exchange Rules for Listing Stocks on the ChiNext Board (Revised November 2018),’ the ‘Shenzhen Stock Exchange Measures for the Mandatory Delisting of Listed Companies for Material Violations,’ and the ‘Shenzhen Stock Exchange Measures for the Re‑listing of Delisted Companies (Revised 2018)’” (hereinafter referred to as the “Notice”), Changsheng Bio may fall under circumstances triggering mandatory delisting for material violations, prompting the Shenzhen Stock Exchange to initiate the delisting procedure applicable to such cases.

Pursuant to Article 4 of the Notice, the company’s shares will be suspended from trading starting on the next trading day following the promulgation of the Implementation Measures, which shall serve as the commencement date for the Shenzhen Stock Exchange Listing Committee to render an independent professional judgment and formulate a preliminary review opinion within fifteen trading days. Thereafter, the Shenzhen Stock Exchange will, in accordance with applicable rules, determine whether to impose a mandatory delisting for material violations on the company’s shares. Should the Exchange decide to delist Changsheng Bio’s shares on the grounds of material violations, in compliance with the Shenzhen Stock Exchange’s Rules for Stock Listing, the Exchange will, in due course, issue a delisting risk alert, suspend trading, and terminate listing, in that order. The delisting risk alert period shall last thirty trading days, and the suspension period shall be six months. Following the Exchange’s decision to terminate listing, the company’s shares will enter a delisting reorganization period, during which trading will continue for thirty trading days.

Under the leadership of the China Securities Regulatory Commission, the Shenzhen Stock Exchange will earnestly fulfill its statutory duties as a frontline regulator, rigorously assume responsibility for delisting, safeguard the integrity and authority of the delisting regime, and strictly enforce delisting procedures. With respect to companies that commit serious violations—whether by gravely disrupting market order, severely harming public interests, or causing adverse social repercussions—the Exchange will resolutely ensure that “for every such case, there is a corresponding delisting,” thereby purifying the market environment, enhancing market quality, and fostering a market ecosystem characterized by survival of the fittest.

The number of private placement product issuances has declined for eight consecutive months.

Since the beginning of this year, A‑shares have remained in a weak, consolidating market, which has temporarily hampered the issuance of private‑fund products. According to the latest data released by Private Equity Ranking Network, a total of 16,952 private‑fund products were launched in the first ten months of the year, yet the number of new issuances has shown a clear downward trend over the course of the year. Meanwhile, the cumulative number of liquidated funds has reached 3,840, with equity‑strategy funds accounting for the largest share at 53.15%.

Industry insiders point out that the lukewarm reception to private‑placement product launches stems primarily from the sluggish performance of A‑shares, which has dampened high‑net‑worth investors’ appetite. Moreover, the new asset‑management regulations have prompted an increasing number of banks to cease distributing private‑fund products and to reduce their outsourced investment quotas, thereby cutting off one of the most critical sources of capital for private funds. Among the eight major strategy‑based private funds, futures‑oriented strategies—thanks to their hedging mechanisms—remain the key product category underpinning institutional returns.

Product issuance has posted eight consecutive declines.

According to data from Private Equity Ranking Network, private equity funds launched a total of 16,952 products in the first ten months of this year. However, the number of new launches has shown a marked downward trend throughout the year: since February, monthly issuance has hovered around 1,000, and both September and October fell below that level—representing a substantial decline compared with last year’s peak. Meanwhile, in terms of product liquidations, private equity funds have cumulatively closed 3,840 products this year, with equity‑strategy funds accounting for the largest share at 53.15%.

Since the beginning of this year, the three major A-share indices have once again hit new year-to-date lows. In the first week of October, the Shanghai Composite Index fell below the key 2,638-point level, dipping as low as 2,449 points, while the Shenzhen Component Index consecutively broke through several important round-number thresholds, dropping to a low of 7,084 points. Meanwhile, the ChiNext Index briefly slipped below the critical 1,200-point mark, reaching a low of 1,184.91 points. Looking at market‑wide sectors, the securities brokerage sector stood out, posting an impressive 8.48% gain in October—far outpacing the broader market, which posted negative returns over the same period. Next came the best‑performing group: deeply undervalued, low‑priced stocks, which at one point saw a wave of limit‑up rallies. Against this backdrop, private‑equity strategy indices delivered lackluster results. Year‑to‑date, the managed futures strategy index remains far ahead, ranking first with a positive return of 3.22%, though its performance has edged down from the previous month. Following that, the fixed‑income and relative value strategy indices posted returns of 1.10% and 0.36%, respectively. These three strategies are the only ones to have recorded positive gains.

Looking at October, the market’s loss‑making effect remained pronounced: the equity strategy index fell 5.55% for the month, ranking seventh among the eight major strategies. The top performer was the relative value strategy, up 0.03%, while the managed futures strategy—strong in the first half of the year—ranked third in October with a return of –0.74%. The remaining five strategies all posted sizable losses, each exceeding 3%, with the event‑driven strategy suffering the steepest decline at 6.22% for the month. More than half of equity‑type funds experienced drawdowns of over 20%.

According to data from Private Equity Ranking Network, among the eight major strategy categories, equity‑oriented funds have experienced the largest drawdowns over the past year. Specifically, equity strategies posted an average one‑year drawdown of 23.91%, widening from September; of these, 14.90% recorded a maximum one‑year drawdown of 10% or less, while 57.74% saw drawdowns exceeding 20%. Meanwhile, relative value and fixed income strategies exhibited comparatively modest drawdowns, with average one‑year declines of just 7.20% and 3.51%, respectively; within the relative value category, 72.82% of products posted drawdowns below 10%. In addition, fund‑of‑funds averaged a one‑year drawdown of 12.32%, up from the previous month but still well below the average for long‑only equity strategies.

Hongshang Asset’s analysis indicates that, in the fourth quarter, attention should remain focused on downside risks to the economy. Going forward, policy priorities will center on stabilizing economic growth, bolstering market expectations, and ensuring employment, which should help ease short-term market pessimism. At present, market dynamics are markedly divergent, with increased activity among speculative capital and a modest improvement in profit‑making conditions.

Junmao Capital stated that, in recent weeks, a series of favorable policies have been introduced across various fronts, making the policy bottom quite clear. However, turning this policy inflection point into an earnings bottom for listed companies will require the effective implementation of these measures, which is essential to genuinely reverse market expectations regarding corporate profitability and, in turn, drive a substantial rebound in A-share stock prices. At present, A-share valuations have already reached historic lows, and once the newly unveiled policy support is put into practice, it should swiftly reshape market perceptions of corporate earnings, spurring a bottom‑forming rally. Investors can now begin allocating capital to securities with sound long-term investment fundamentals.

Commercial & Corporate

Premiums sold through the four major state-owned banks’ affiliated insurers plunged 22% year over year, with group insurance becoming a standard employee benefit.

Recently, bank-affiliated insurance companies have successively disclosed their related-party transaction data with their parent banks for the first nine months of this year. Notably, premium‑generation figures from these insurers’ sales through their respective banks have also been released. In the first three quarters, the combined premiums generated by ICBC, ABC, BOC, and CCB through their subsidiaries—ICBC‑AXA, ABC Life, BOC‑Samsung Life, and CCB Life—totaled RMB 71.2 billion, a sharp 22% decline from RMB 90.2 billion in the same period last year. A senior executive at one bank‑affiliated insurer noted that selling short- and medium-term insurance products via the parent bank is relatively straightforward, but promoting long‑term protection‑oriented policies remains challenging. The drop in bank‑channel premiums this year reflects broader industry shifts toward strategic realignments. Interestingly, the related-party transaction reports also revealed that banks have been purchasing group insurance for their employees; in the first three quarters alone, ICBC and ABC spent over RMB 300 million on group welfare insurance for their staff.

In the first three quarters, bancassurance premiums across banks generally declined.

From January to September this year, the four major state-owned banks all reported a broad-based decline in premium income generated through their affiliated life insurance subsidiaries. According to data disclosed by ICBC‑AXA Life, in the third quarter of this year, premiums sold on behalf of the insurer via ICBC totaled RMB 6.635 billion (compared with RMB 6.365 billion in the second quarter and RMB 9.848 billion in the first quarter), bringing the cumulative total for the first three quarters to RMB 22.848 billion—down 31.7% from RMB 33.442 billion in the same period last year. Similarly, as of the end of the third quarter, ABC‑Life’s premiums sold through Agricultural Bank of China amounted to RMB 7.009 billion (including new channels such as counter sales, online platforms, and self-service terminals), a 58% drop from RMB 16.588 billion in the same period last year. Premiums distributed through the parent banks also declined at CCB‑Life and BOC‑Samsung Life. In the first three quarters, Bank of China’s agency‑sold premiums for BOC‑Samsung Life reached RMB 3.394 billion, slightly lower than the RMB 3.06 billion recorded in the same period last year. Meanwhile, CCB‑Life’s agency‑generated premium income stood at approximately RMB 37.984 billion, marginally down from RMB 37.08 billion a year earlier. Regarding the overall trend of declining agency‑driven premiums across many bank‑affiliated insurers, management at these institutions attributes the slowdown primarily to banks’ proactive shift toward protection‑oriented products. Another industry insider noted that, since last year, the company has focused on developing high‑value lines of business, tightened cost controls, and adopted a dual‑engine strategy of “insurance plus investment,” enabling it to turn profitable two years ahead of schedule. The office expects this approach to contribute increasingly to group earnings going forward. This year, it plans to maintain risk‑protection and long‑term savings products as its core growth pillars, aiming to drive expansion in premium volume, profitability, and shareholder value.

Notably, in recent years, banks have increasingly shifted the distribution of insurance premiums from offline to online channels. According to statistics from the China Insurance Association on cumulative premium income for internet-based life insurance in the first half of 2018, Jianxin Life Insurance ranked first with RMB 27.052 billion. Other bank‑affiliated insurers among the top ten included ICBC‑AXA Life, ABC‑Life, and Everbright‑Yongming Life, among others. The move toward online distribution of bank‑sold insurance premiums is also linked to broader changes in bank branches, such as the implementation of “dual recording” requirements. As noted in a report by the China Insurance Association, tightening regulations on savings‑substituting products, coupled with the hollowing out of bank branches and an aging customer base, have placed the bancassurance channel under significant pressure.

The bank provides group insurance benefits for its employees.

In fact, related-party transactions between banks and their affiliated insurance companies extend beyond agency business to encompass a wide range of areas, including investments. Notably, some banks directly arrange group insurance policies issued by their own insurers as employee benefits. According to data disclosed by ICBC‑AXA Life, in the third quarter of 2018, the company engaged in various related-party transactions primarily with branches and sub‑branches of the Industrial and Commercial Bank of China, subsidiaries at all levels, entities under the AXA Group, and affiliates of China Minmetals Corporation. These transactions covered investment of corporate funds, leasing of fixed assets, bancassurance agency services, group insurance operations, reinsurance ceding, and overseas assistance services. Taking investment activities as an example, ICBC‑AXA Life reported that it executed four related-party transactions in the third quarter of 2018. Two involved subscriptions to Pufa‑AXA Money Market Funds and Pufa‑AXA Daily‑Xin Money Market Fund, with transaction amounts of RMB 30 million and RMB 50 million, respectively. The remaining transaction was a subscription to ICBC‑Cinda Ruyi B Fund, conducted with ICBC‑Cinda Fund Management Co., Ltd., totaling RMB 100 million.

In addition to its investment business, the bank also arranges group insurance policies for its employees through its affiliated insurer. According to data, in the third quarter of 2018, ICBC‑AXA provided group employee benefit insurance as related-party transactions to a total of 88 companies and institutions, including Industrial and Commercial Bank of China and its subsidiaries at various levels, China Minmetals Corporation and its affiliates, and AXA China’s affiliated entities, with aggregate transaction amounts totaling RMB 155 million.

In addition, during the third quarter of this year, Agricultural Bank Life Insurance provided employee welfare and protection insurance to the Agricultural Bank of China and its various subordinate institutions, resulting in a total of 233 group‑insurance related transactions with an aggregate value of RMB 24.5978 million. As of the end of the third quarter, Agricultural Bank Life Insurance had cumulatively facilitated employee‑benefit insurance transactions for the Agricultural Bank and its subsidiaries totaling RMB 160 million. Beyond the aforementioned “convenience” in business operations, the parent bank can also offer its subsidiary insurer a range of support services, including office‑space leasing and software‑technology services—truly benefiting from the strong backing of its parent. For example, ICBC‑AXA noted that in the third quarter of 2018, it continued to lease 34 office locations from ICBC and entered into a new office‑leasing agreement with the Yunnan Provincial Branch, paying total rent of RMB 2.8556 million. At the same time, the company engaged in software‑licensing service transactions with ICBC, amounting to RMB 1.184 million.

65% of the assets of central enterprises have been injected into listed companies.

The State-owned Assets Supervision and Administration Commission is formulating a reform plan for the authorized operation of state capital, shifting the focus from managing enterprises to managing capital.

“The State-owned Assets Supervision and Administration Commission (SASAC) is formulating a reform plan for the authorized operation of state capital, shifting its focus from managing enterprises to managing capital,” said Wang Jeming, Deputy Director of SASAC, at a media briefing held on November 14. He added that, for enterprises undergoing mixed‑ownership reform, SASAC will further prioritize capital management and grant these enterprises greater autonomy.

As a key breakthrough in this round of state-owned enterprise reform, with the implementation of a series of policy documents and the continued deepening of reform measures, the mixed-ownership reform of SOEs has entered a new phase, characterized by an accelerated pace and an expanding scope.

According to reports, most state-owned enterprises have already achieved mixed‑ownership reform at the capital level. First, from a property‑rights perspective, by the end of 2017, among central SOEs under the supervision of the State-owned Assets Supervision and Administration Commission (SASAC) and their subsidiaries at all levels, the share of mixed‑ownership entities reached 69%, while at the provincial level, this figure stood at 56%. Currently, the proportion of mixed‑ownership reforms among first‑tier commercial central SOEs has exceeded 70%; in five key sectors—construction, real estate, manufacturing, telecommunications, and wholesale and retail—the respective shares of mixed‑ownership entities are 87%, 80%, 75%, 74%, and 72%. Moreover, more than 85% of fourth‑level and lower subsidiaries of central SOEs have completed mixed‑ownership reforms.

Secondly, from a capital perspective, listed companies have become a key vehicle for the mixed‑ownership reform of state‑owned enterprises. At present, the majority of high‑quality state‑owned assets have been incorporated into listed entities. By the end of 2017, the total assets of central SOEs amounted to RMB 54.5 trillion, with approximately 65% already held by listed companies—an increase of 11 percentage points from 54% at the end of 2012. Meanwhile, about 40% of provincial‑level SOE assets are held by listed offices, with several regions—including Shanghai, Chongqing, and Anhui—exceeding 50%.

Furthermore, pilot programs for mixed‑ownership reform have been rolled out in stages and continue to deepen. Since 2014, when the State-owned Assets Supervision and Administration Commission (SASAC) selected China National Building Material Group and Sinopharm Group to conduct mixed‑ownership reform pilots, by the end of 2017, 70% and 90%, respectively, of these two groups’ operating revenues came from mixed‑ownership enterprises. Subsequently, beginning in 2016, the state has launched three batches of pilot projects involving 50 state‑owned enterprises across key sectors, including power, petroleum, natural gas, civil aviation, telecommunications, and the defense industry. In addition, in August 2016, a pilot program on employee stock ownership in mixed‑ownership enterprises was officially launched, with nearly 200 companies nationwide selected to participate.

Weng Jieming believes that state-owned enterprises should pursue two-way mixed ownership in accordance with the principles of the market economy—boldly “bringing in” non-public capital to encourage its participation in SOE reform, while also actively “going out” to support and assist the development of non-public enterprises.

According to the State-owned Assets Supervision and Administration Commission, from 2013 to 2017, private capital participated in the mixed-ownership reform of central enterprises through various channels, with total investment exceeding RMB 1.1 trillion. Meanwhile, provincial state-owned enterprises also attracted non-public capital totaling more than RMB 500 billion. During the same period, state-owned enterprises actively invested in and acquired equity stakes in non-state-owned enterprises, with provincial SOEs’ investments in such entities surpassing RMB 600 billion.

“In fact, mixed‑ownership reform should inherently be a two‑way process: private capital can participate in the mixed‑ownership restructuring of state‑owned enterprises, while state capital can also enter private offices to take part in their reform,” said Weng Jieming. He added that, throughout this process, several key core elements must be clearly defined: whether market principles are genuinely respected, whether the laws governing enterprise development are truly honored, and whether both sides can genuinely achieve mutual benefit and win‑win outcomes.

Looking ahead, Wang Jeming stated that the SASAC will adhere to the principles of enhancing the functions of state capital, preserving and increasing its value, and boosting its competitiveness. Guided by the approach of “it is better to sever one finger than to injure all ten,” it will focus on key challenges and difficulties and coordinate efforts to advance mixed‑ownership reform in a comprehensive and systematic manner.

Specifically, the key initiatives fall into five main areas: First, closely aligning with the functional positioning of enterprises, we will advance mixed‑ownership reform in a categorized and tiered manner. We will actively push forward mixed‑ownership reform in commercial state‑owned enterprises whose core businesses operate in highly competitive industries and sectors, ensuring prudent entry and exit in line with the optimization of the state‑capital allocation structure. We will deepen pilot programs in priority sectors, make full use of supporting policies, and intensify efforts to attract private capital. At different corporate levels, we will promote mixed‑ownership reform, focusing on orderly implementation at the subsidiary level, strengthening overall planning to prevent layered equity diversification within enterprises from complicating management. Second, we will integrate all pilot programs and coordinate mixed‑ownership reform across the board. Using mixed‑ownership reform as an opportunity, we will launch comprehensive reforms, enhance inter‑reform linkages, and amplify the multiplier effect of SOE reform. Enterprises undergoing mixed‑ownership reform will simultaneously advance related reforms—such as empowering boards of directors, adopting market‑based recruitment of managers, implementing differentiated compensation systems, and introducing employee stock ownership—to enhance the systemic and holistic nature of the reforms. Pilot enterprises under the state‑capital investment and operation companies will prioritize mixed‑ownership reform among their subsidiaries, boosting capital liquidity and continuously refining organizational frameworks and operating models. Pilot projects such as the “Double Hundred Action” and regional comprehensive SOE reform pilots will also proactively pursue mixed‑ownership reform, attracting diverse forms of capital. In pilot initiatives like building world‑class demonstration enterprises and conducting comprehensive reforms of central SOEs in Northeast China, mixed‑ownership reform will be given careful consideration and prioritized, ensuring the timely emergence of a set of advanced examples. Leveraging mixed‑ownership reform, we will encourage SOEs to employ market‑based mechanisms to address longstanding legacy issues, stepping up efforts to streamline operations and resolve structural bottlenecks, thereby enabling enterprises to operate with greater agility. Third, we will sustain momentum and further deepen pilot programs for mixed‑ownership reform in key sectors. Fourth, we will effectively refine institutional mechanisms and strengthen incentives to ensure high‑quality development of mixed‑ownership enterprises. Fifth, adhering to a capital‑management‑oriented approach, we will substantially transform the regulatory framework for mixed‑ownership enterprises.

A Unique Scene at the First China International Import Expo: Those Overseas Companies “Returning Home”

The inaugural China International Import Expo (hereinafter referred to as CIIE), themed “A New Era, Shared Future,” concluded successfully on November 10, with total intended deals reaching US$57.83 billion over the course of a year. The CIIE brought together high-quality products from around the world, showcasing a wealth of highlights—ranging from the concept car dubbed the “flying car” and Germany’s SCHUNK SVH simulated five-finger robotic hand, to Hema’s robot‑powered restaurant, ion‑generating devices that promote health and healing, and even crystal shoes studded with ten thousand diamonds. Whether cutting‑edge in technology, more human‑centric, or superior in quality and eco‑friendliness, these imported exhibits all seek to meet the people’s growing aspirations for a better life.

The China International Import Expo witnessed an unprecedented spectacle, with overseas exhibitors taking center stage and reaping substantial benefits from showcasing their products. Many expressed their intention to return next year. Notably, behind numerous participating importers stood Chinese enterprises; having once gone global, they are now “returning home” to exhibit, demonstrating how the strategic internationalization efforts of Chinese companies over the past few years are, in turn, bolstering the domestic market. Furthermore, the Russia Silk Road Group, established in Russia in 2001, was also founded by a native Chinese entrepreneur. Professor Fu Ping, Vice President of the Russia Silk Road Group, stated: “Our chairman is Chinese. When this company was first set up in Russia, its core business was oil‑drilling services. It became the first Chinese office to successfully wrest work from Halliburton—the global industry leader—at a time when Western offices dominated the Russian client base. Over two decades of development in Russia, our flagship products now cover 70% of the Russian market and surrounding regions, consistently ranking first and establishing us as a highly influential local enterprise. Today, the oil‑equipment sector has reached a high degree of maturity. Driven by a deep commitment, our chairman seeks to promote Chinese culture throughout Russia and even into Europe. Since 2015, we have expanded into the healthcare, environmental protection, and cultural‑tourism sectors, while also establishing subsidiaries in China to strengthen economic and trade ties. In the realm of traditional Chinese medicine, we serve as the officially designated China‑Russia Center for TCM in Russia—a pilot site for fostering cultural exchanges between China and Russia.”

This “return to the motherland” event featured not only overseas enterprises with Chinese owners, such as Russia’s Silk Road Group, but also foreign companies that have invested in China. Global health‑tech offices and products—including CAR‑T cell immunotherapy, the da Vinci surgical robot, Indian injectable medicines, and the generic‑drug manufacturer Gland Pharma—were on display, alongside brands like Britain’s Silver Cross strollers and France’s century‑old dairy brand St Hubert. All 11 participating overseas companies share a common trait: they are subsidiaries of Fosun Group, a Shanghai‑based private enterprise. As early as 2007, Fosun articulated a globalization strategy of “leveraging China’s strengths to connect with global resources,” and at this year’s CIIE it showcased its achievements: 34 top‑tier hospitals across China signed letters of intent to procure da Vinci surgical robots, totaling nearly US$110 million.

At the food pavilion, a steady stream of visitors paused before the “Yami Youngme” brand of imported foods. Making its debut at this year’s China International Import Expo, “Yami Youngme” is, in fact, also a Chinese‑made brand. Three years ago, Laiyifen began strategically expanding its international supply chain; now, it has consolidated more than a decade of relationships with top-tier global suppliers under this new, fashion‑forward import brand—“Yami Youngme”—with a focus on building a “direct‑from‑global‑sources” platform that brings together the world’s most stylish and delicious offerings. Commenting on this trend, Li Mingyu, co‑founder of the Going Global Think Tank, said: “The purpose of the CIIE is to demonstrate, through concrete actions, China’s commitment to opening its market to the world. On the one hand, Chinese companies, leveraging their comprehensive manufacturing advantages across entire industries and value chains, are well positioned to withstand competition from imported products. On the other hand, we hope other countries will follow China’s lead and continue to open up, jointly fostering an open, globalized economic community. The presence at the CIIE of overseas exhibitors backed by Chinese investment represents a new model, reflecting an economic logic that optimizes global resource allocation. Outward expansion and inward attraction must go hand in hand: Chinese capital and the Chinese market, combined with cutting‑edge foreign technologies or markets, are generating fresh momentum for China’s economic development—benefiting both China and the host countries. Under the favorable policy environment, this approach will gradually yield positive effects, helping Chinese offices seize opportunities presented by consumption upgrading and boost corporate profitability.” In recent years, as China has accelerated its internationalization, its overseas investment has achieved remarkable results. From 2002 to 2016, China’s outward direct investment grew for 14 consecutive years, with its share of global FDI rising from 0.5% in 2002 to 13.5%. Consequently, Chinese enterprises have steadily increased their standing and influence in the global landscape of overseas direct investment. In 2016, China’s outward FDI reached a record $196.2 billion, second only to the United States ($299 billion), maintaining its position as the world’s second largest.

Multiple departments have implemented targeted measures to pave the way for the high-quality development of private enterprises.

Recently, the central government has reafofficeed that its policy of fostering a favorable environment and providing greater opportunities for the development of the non-public sector remains unchanged.

General Secretary Xi Jinping, at the symposium on private enterprises, urged Party committees and governments at all levels to earnestly implement the requirements for fostering a new type of government-business relationship characterized by both closeness and integrity, to regard supporting the development of private enterprises as a key task, and to devote more time and effort to addressing the needs of private offices and the growth of private entrepreneurs. He emphasized the importance of regularly listening to the concerns and demands of the private sector, particularly in times when private enterprises face difficulties and challenges, calling for proactive measures and front‑line services to help resolve their practical problems.

Huang Jianhui, President of the China Minsheng Bank Research Institute, argues that it is essential to vigorously optimize the business environment by further deepening reforms of the administrative approval and commercial registration systems, continuing to advance the government’s “delegation, regulation, and service” reform, and reducing institutional transaction costs. Efforts should focus on establishing and fostering a new type of government–business relationship characterized by both closeness and integrity, innovating mechanisms for government–enterprise interaction, improving positive incentive frameworks for private entrepreneurs, and further refining and implementing systems to protect the property rights of private enterprises. Such measures must ensure the lawful and effective protection of the property rights of private enterprises and their entrepreneurs, thereby bolstering the innovative vitality and entrepreneurial drive of private-sector leaders. Policy formulation must be precise, policies must be effectively implemented, and confidence among private entrepreneurs must be officely reinforced while their expectations remain stable, all within a business environment that is rule‑based, transparent, and fair.

Regarding the new type of government–business relationship characterized by both closeness and clarity, Bian Yongzu, a researcher at the Chongyang Institute for Financial Studies of Renmin University of China, stated in an interview that “closeness” means proactively creating a thoughtful and supportive service environment for enterprises. This entails not only eliminating practices such as making it difficult to gain access or treating businesses with disdain, but also fostering a level playing field that encourages healthy competition. “Closeness” further manifests itself in providing tangible support for business development, particularly in areas like financing and market access. For instance, for companies temporarily facing liquidity challenges yet possessing strong growth potential, the government can take active steps to mediate bank–enterprise relations; meanwhile, local governments can offer credit guarantees and, within the scope of applicable policies, reduce or exempt taxes and fees to help these offices navigate their difficulties.

Bian Yongzu argues that “integrity” first requires government officials to maintain moral rectitude, actively promote local economic development for the benefit of the people, and address issues with a pragmatic, fact-based approach, avoiding one-size-fits-all solutions.

“The financial regulators, including the People’s Bank of China and the two commissions, are closely tied to the vital interests of private enterprises and wield significant influence over their operations and development. Therefore, these authorities should adopt proactive, targeted policies—viewed through the lens of fostering sustainable economic growth and enhancing future competitiveness—to improve the overall business environment,” Bian Yongzu argued.

At present, private enterprises have become a major force in employment, taxation, and exports, while also playing a pivotal role in high‑tech industries and emerging economic sectors. Consequently, supporting the development of private enterprises is critical to enhancing China’s competitive edge in its future economic growth.

Bian Yongzu recommends that financial institutions prioritize actively supporting private enterprises as a key task. First, they should treat private offices on an equal footing in terms of mindset, focusing instead on whether the enterprises have promising growth prospects and align with relevant national industrial policies. Second, given the large number of private enterprises, their high operational risks, and widely varying financing needs, financial institutions should proactively develop new financial products, tailor solutions to market‑driven demands, and thereby reduce their own operational risks.

Among the financial authorities, the financial regulatory agencies play a particularly crucial role in the development of private enterprises. At present, China’s financial structure remains somewhat imbalanced, and direct financing is one of the key areas for future development.

“The multi-tiered capital market is a crucial platform for private enterprises’ future financing,” says Bian Yongzu. First, it is essential to ensure that private offices can access these markets. Given the wide diversity in the scale of private enterprise development, in addition to the main board, the SME board, and the ChiNext, we must also actively foster the growth of the New Third Board and regional equity trading markets, providing viable channels for private companies seeking funding. Second, once listed, they must be able to attract capital. Although China’s capital market structure is already relatively well‑developed, liquidity remains insufficient across many segments beyond the main board. To address this, while refining market mechanisms, managing overall financial risks, and strengthening investor education, we should strive to ease investment restrictions and boost capital inflows, thereby promoting balanced development across all tiers of the capital market.

Finally, it is essential to improve the information disclosure regime and investor protection mechanisms. For main board markets and similar segments, the intensity of information disclosure should be strengthened. As for the New Third Board and regional equity trading markets, given that listed companies are generally small in scale and operate at a relatively low level of sophistication, their information disclosure frameworks should be designed pragmatically, with due consideration for alleviating the administrative burden on enterprises. Moreover, any conduct that harms investors’ interests must be subject to stricter penalties.

Recently, the China Securities Regulatory Commission and the Shanghai and Shenzhen stock exchanges have made concerted efforts to provide relief to privately owned listed companies. Bian Yongzu stated that easing restrictions on listed companies’ access to financing to replenish liquidity would be a timely remedy for alleviating the current liquidity challenges faced by some private enterprises; likewise, encouraging corporate share buybacks and, in turn, relaxing constraints on refinancing would help enhance operational stability and support long-term growth.

“How to ensure that enterprises with growth potential and aligned with China’s long-term competitiveness can access financing in a timely manner, thereby fostering their rapid development, is the primary objective of developing a multi-tiered capital market. Accordingly, from a medium- to long-term perspective, accelerating the development of the STAR Market will create listing opportunities for private enterprises. This will require refining the registration-based IPO system, enhancing listing efficiency, expediting the growth of relevant intermediary institutions, strengthening investor protection, and speeding up the establishment of a modernized capital market in China,” said Bian Yongzu.

“In line with the needs of future economic development, financial regulators should proactively foster the growth of new types of financial institutions, such as venture capital offices, and work to create a fair financing environment. They should also promptly revise or repeal outdated laws and regulations, ensuring that private enterprises can access relevant financial services on an equal and impartial basis,” suggested Bian Yongzu.

Taxation TAXATATION

Ministry of Finance: Studying the Implementation of Larger-Scale Tax Cuts

Liu Kun, Secretary of the Party Group and Minister of Finance, recently wrote that the real economy is the foundation of a country’s economic strength, the fundamental source of wealth creation, and a key pillar of national prosperity. In recent years, the fiscal authorities have officely adhered to the guiding principle of “allowing the market to play a decisive role in resource allocation while better leveraging the government’s functions,” and, in conjunction with efforts to improve the tax system, have implemented tax and fee reductions and strengthened support for the development of the real economy. In 2018, with a focus on tax and fee cuts, building on the effective implementation of existing measures, the government introduced preferential policies covering multiple stages and sectors, emphasizing priority areas and benefiting a broad range of entities, thereby further invigorating market players and bolstering the endogenous drivers of economic growth.

Liu Kun stated that the tax burden on enterprises will be significantly reduced. The VAT reform will be deepened, with VAT rates lowered for industries such as manufacturing and for goods like agricultural products; the threshold for small-scale VAT taxpayers will be unified; and eligible advanced manufacturing offices, modern service enterprises, and power grid companies will receive a one-time refund of any remaining input VAT credits that have not been fully offset within a specified period. To support the development of small and micro businesses, the annual taxable income cap for small and low-profit enterprises eligible for the preferential policy of halving corporate income tax has been raised, and the single‑account credit limit for VAT exemption on interest income from loans to eligible small and micro enterprises and individual business households has been increased from RMB 1 million to RMB 10 million. To foster enterprise innovation, the pilot scope of tax incentives for venture capital and angel investment has been expanded nationwide; the policy of increasing the deduction rate for R&D expenses to 75% has been extended from technology‑based SMEs to all enterprises; equipment and instruments newly purchased by enterprises at a cost of RMB 5 million or less may be fully deducted before tax in the year of acquisition; the restriction barring the additional deduction of overseas R&D expenses commissioned by enterprises has been lifted; and the carryforward period for losses incurred by high‑tech enterprises and technology‑based SMEs has been extended. To bolster an open economy, policies have been introduced, including the temporary suspension of withholding income tax on direct reinvestment of profits by foreign investors and the implementation of a comprehensive credit system for overseas income; export rebate policies have been refined to reduce the tax burden on exporting enterprises; and, in response to the needs of industrial upgrading, tariffs on imported industrial goods such as electromechanical equipment, parts, and raw materials have been cut, bringing China’s overall tariff level down from 9.8% in 2017 to 7.5%.

“We will further reduce the non‑tax burdens on enterprises. We will focus on lowering compliance costs by suspending or reducing certain administrative and public‑service fees, lowering the collection rates for the Employment Guarantee Fund for Persons with Disabilities, the National Major Water Conservancy Project Construction Fund, and other government‑mandated funds, and rigorously addressing arbitrary fee‑charging practices, so that businesses can operate with lighter burdens and concentrate on development,” said Liu Kun.

Liu Kun pointed out that, at present, the tax and fee reduction policies set at the beginning of the year have been rolled out and implemented. Coupled with a series of measures introduced mid-year to boost the development of the real economy, the total relief is expected to exceed 1.3 trillion yuan for the year. The fiscal authorities will focus on bolstering long-term growth momentum, strengthen their commitment to “letting the water rise to nurture the fish,” and explore the introduction of larger‑scale tax cuts and more substantial fee reductions to further promote the sound development of the real economy.

The 48th Annual Conference of the Asian Tax Administration and Research Organization opened in Hangzhou, where Wang Jun attended the event and delivered a keynote address.

On November 13, the 48th Annual Conference of the Standing Group on Tax Administration and Research (SGATAR) opened in Hangzhou. This marks China’s third time hosting the SGATAR conference, following previous events in 1998 and 2008. The meeting brought together approximately 150 participants, including tax administrators from 16 SGATAR member jurisdictions, three permanent observers, and other invited observers. The conference aims to strengthen dialogue and cooperation among member tax authorities in the field of international taxation, with discussions centered on topics such as “Taxation in Support of the Belt and Road Initiative,” “Improving the Tax‑Related Business Environment,” and “Enhancing Capacity Building in Tax Administration.”

Wang Jun, Director of the State Taxation Administration of China, attended the opening ceremony and delivered a keynote address titled “Deepening Tax Reform and Serving China’s Opening-Up.” Wang Jun noted that at the opening ceremony of the China International Import Expo held last week, Chinese President Xi Jinping pledged to the world that China’s door of openness will never close—it will only open wider. He added that over the past 40 years of reform and opening-up, China’s tax authorities have consistently focused on the overarching national development agenda, fully leveraged the role of taxation, and achieved significant results.

Wang Jun stated that in March this year, with a view to the overall development of the tax sector, the Chinese government made a major decision to reform the administration and collection system for both national and local taxes. The key measures include merging provincial‑level and sub‑provincial tax authorities, and assigning the administration and collection of social insurance contributions and non‑tax revenues to the tax authorities. This reform encompasses tax agencies at the provincial, city, county, and township levels—comprising tens of thousands of institutions, more than one million tax officials, and over one billion taxpayers and payers—and is unprecedented in its scale, scope, and depth of impact. Under the strong leadership of the Chinese government, the State Taxation Administration has established a robust organizational mechanism to drive the reform forward. To date, the new tax institutions, responsibilities, and personnel at all four levels—provincial, city, county, and township—have been fully put in place, ensuring the smooth and steady implementation of the reform.

Wang Jun stated that this year, China’s tax reform has been advanced in a coordinated and comprehensive manner: the Individual Income Tax Law was revised to raise the standard deduction, widen the brackets for lower and middle‑income tax rates, and introduce six new special additional deductions. Starting January 1 next year, a personal income tax system combining comprehensive and classified approaches will be implemented, significantly reducing the tax burden on middle- and low-income earners. Beginning May 1 this year, three major reform measures were put into effect—reducing VAT rates, unifying the criteria for small‑scale taxpayer status, and refunding input VAT credits for eligible enterprises in advanced manufacturing and modern services—further easing the tax burden on businesses and supporting industrial transformation and upgrading. Meanwhile, China’s tax authorities have continued to optimize their services and improve the business environment. According to the World Bank’s latest “Doing Business 2019” report, China’s ranking in the ease of doing business has risen sharply to 46th place, placing it among the top 50 economies worldwide. In particular, China’s tax‑paying indicator improved by 16 places compared with last year, with all four sub‑indicators showing gains. The two indicators directly related to tax administration—the number of tax payments and the time required to comply—advanced by 23 and 43 places, respectively, ranking 15th and 53rd.

Wang Jun pointed out that in recent years, China’s tax authorities have continuously expanded comprehensive and pragmatic cooperation in the field of international taxation, fully supporting China’s strategy of opening up to the world. He stated that the first Belt and Road Tax Administration Cooperation Forum will be held in China next spring, aiming to reduce tax barriers, further improve global tax governance, and share the fruits and opportunities of development. To further advance international tax cooperation, Wang Jun put forward three initiatives: first, pursue mutual benefit and win-win outcomes by jointly establishing and refining modern tax policies and administration systems, thereby fostering stable and sustainable economic growth in the Asia-Pacific region; second, promote mutual learning and exchange by creating a key platform for sharing successful experiences and best practices, thus enhancing tax administration capacities across the board; and third, embrace openness and inclusiveness by broadening and deepening SGATAR‑led tax cooperation, driving multilateral mechanisms such as SGATAR and Belt and Road tax cooperation toward higher levels, greater depth, and greater diversity.

Wu Weicong, Commissioner of the Inland Revenue Authority of Singapore, stated that the global tax landscape is becoming increasingly complex and dynamic, underscoring the growing importance of international tax cooperation. SGATAR has consistently served as a platform for fostering vital connections among its members, strengthening bilateral and multilateral relationships through the cultivation of enduring trust and camaraderie. Singapore will engage in mutual learning with all participants, enhance professional expertise and standards, and seek solutions to address emerging issues and challenges.

In his address, former Conference President and Director-General of the Philippine Internal Revenue Service, Caesar Dulay, stated that SGATAR has played a pivotal role in leveraging taxation to drive economic development across Asia. At this year’s annual meeting, participants have gathered in Hangzhou in the spirit of fostering friendship and mutual learning, and are sure to achieve fruitful outcomes.

The meeting elected Wang Jun, Director of the State Taxation Administration of China, as President of the 48th Session. Sun Ruibiao, Deputy Director of the State Taxation Administration of China, served as Secretary-General of the session and attended the meeting.

LITIGATION & ARBITRATION

The Supreme People’s Court has released 10 typical cases involving state compensation and judicial assistance.

On the 13th, the Supreme People’s Court held a press conference to release ten typical cases involving state compensation and judicial assistance. Zhu Erjun, Deputy Director of the Compensation Office of the Supreme People’s Court, stated that in recent years, people’s courts at all levels have continuously advanced the development of state compensation and judicial assistance, prioritizing law enforcement and case handling. They have duly adjudicated a large number of state compensation cases, including those involving Hugjiltu, Nie Shubin, and Beipeng Company, and have appropriately resolved numerous judicial assistance cases involving Xiao Zufu, Li Xunle, Xin Jincheng, and others. According to the briefing, the five typical state compensation cases released this time represent a microcosm of the many such cases reviewed by the Compensation Committees of the people’s courts, categorized primarily according to the compensating authorities and the grounds for compensation. The compensating authorities encompass public security, procuratorial, judicial, and prison administration organs, while the grounds for compensation cover criminal‑law‑violation‑related detention compensation, compensation for wrongful arrest, compensation for erroneous enforcement, compensation for dereliction of duty, as well as situations where no compensation is granted despite lawful performance of official duties.

The five typical cases of state judicial assistance released this time represent the Supreme People’s Court’s first-ever publication of such cases. Each of the five cases pertains to assistance for criminal victims, civil litigation, administrative litigation, and enforcement proceedings.

The new Regulations on Patent Agency shall come into force on March 1, 2019.

The State Council Executive Meeting held on September 6 adopted the Draft Amendment to the Regulations on Patent Agency. According to reports, the revised Regulations will come into effect on March 1, 2019.

“The patent agency system is a foundational institutional framework that safeguards the rights and interests of inventors and fosters scientific and technological innovation, serving as an indispensable component of the patent system,” said He Hua, Deputy Director of the National Intellectual Property Administration. He added that this revision focuses on adapting to the evolving realities of the patent‑agency sector, strengthening the “delegation, regulation, and service” reform, optimizing the business environment, refining the patent‑agency system, and supporting mass entrepreneurship and innovation.

— Streamline administration and delegate power, support innovation and entrepreneurship, reduce the burden on the public, and unleash market vitality and creativity. The provincial-level preliminary review for the approval of agency establishment has been abolished; requirements regarding the organizational structure of agencies have been relaxed; examination registration criteria have been simplified, with the requirement that applicants for patent agent qualification must have work experience being removed; and unnecessary supporting documents have been eliminated.

— Combining deregulation with effective oversight, strengthening routine supervision, standardizing market order, and safeguarding the legitimate rights and interests of innovation entities. Regulatory authorities shall conduct inspections and oversight of the professional activities of patent agencies and patent attorneys through random sampling, and publicly disclose the results of such inspections and any resulting actions. They shall also support innovation by encouraging patent agencies and patent attorneys to provide assistance services to small and micro‑enterprises and vulnerable groups. Furthermore, they will refine professional standards by requiring patent agencies to establish and improve systems for reviewing conflicts of interest, and enhance legal liability provisions for unlawful conduct by patent agencies and patent attorneys.

— Optimizing services, enhancing convenience for the public, and improving service efficiency. Regulatory authorities should strengthen the public disclosure of information on patent agencies, providing query services to enable the public to access details on agency operations and the professional practice of patent attorneys. All registration and approval procedures for patent attorneys and agencies are now handled through a single online platform. According to available data, as of the end of October 2018, China had 42,569 individuals qualified as patent attorneys, with 18,468 practicing patent attorneys and 2,126 patent agencies; moreover, more than 1,000 institutions were engaged in PCT filing services.

China’s first case in which a trademark owner was awarded punitive damages: A company was fined RMB 16,000 for producing cookies that unlawfully used the “Six Walnuts” trademark.

A food company in Shandong was sued by the owner of the “Six Walnuts” trademark for alleged infringement related to its production of “Six Walnuts Biscuits,” and ultimately was ordered to pay punitive damages totaling RMB 16,000. This marks the first case nationwide in which a trademark owner has obtained punitive damages since the new Trademark Law came into effect four and a half years ago.

In July 2018, Hebei Yangyuan Zhihui Beverage Co., Ltd., the trademark owner of “Six Walnuts,” filed a lawsuit with the Intermediate People’s Court of Zaozhuang City, Shandong Province, against Shandong Tengzhou Jutai Food Co., Ltd. The company alleged that Jutai had used the “Six Walnuts” trademark on the packaging boxes of its biscuits without authorization and sought an injunction to immediately cease the infringing acts, as well as punitive damages in the amount of RMB 48,000—twice the statutory license fee for the trademark.

On August 29 of this year, the Intermediate People’s Court of Zaozhuang City, Shandong Province, issued a Civil Mediation Agreement, conofficeing that “the defendant, Tengzhou Jutai Food Co., Ltd., shall pay the plaintiff, Hebei Yangyuan Zhihui Beverage Co., Ltd., punitive damages in the amount of RMB 16,000.”

Although the amount is relatively small, it is worth noting that this is the first case nationwide in which a trademark owner has obtained punitive damages since the new Trademark Law came into effect in May 2014.

At present, trademark infringement is far from an isolated issue; counterfeiting of trademarks and the sale of goods bearing counterfeit registered trademarks are all too common. China’s new Trademark Law came into effect on May 1, 2014. In response to the high costs and often unprofitable nature of enforcing trademark rights in practice, the law introduced, for the first time, a system of punitive damages, with the aim of helping trademark owners safeguard their legitimate rights and effectively curb trademark infringement.

However, since the new Trademark Law came into effect, courts nationwide have rarely handed down cases involving punitive damages for trademark infringement. Questions such as the circumstances in which this provision applies and how the amount of compensation is determined in practice have long been the focus of external attention.

Heshan, president of the Consumer Law Research Association and a principal drafter of the Civil Procedure Law and the Contract Law, has stated that trademark infringement is far from uncommon in China. However, since the Standing Committee of the National People’s Congress adopted the third amendment to the Trademark Law on August 30, 2013, no cases have yet been brought under the rubric of punitive damages for trademark infringement. This indicates that the punitive‑damages regime under the Trademark Law remains poorly understood and widely unrecognized by the public. He further argues that punitive damages are not exclusive to consumers; legal entities pursuing anti‑counterfeiting actions may also be entitled to such damages.

With regard to the determination of the amount of damages, the Trademark Law adopted in 1982 stipulated that “the amount of compensation shall be either the profits obtained by the infringer during the period of infringement or the losses suffered by the right holder during the same period,” thereby establishing the infringer’s profits and the right holder’s losses as the two fundamental bases for calculating damages. This provision was retained in the first amendment to the Trademark Law in 1993. The second amendment in 2001 introduced statutory damages as a new method for determining the amount of compensation.

In 2013, the third amendment to the Trademark Law ultimately decided to introduce a punitive damages regime and specified methods for determining the amount of compensation. Article 63 provides that “the amount of compensation for infringement of exclusive trademark rights shall be determined based on the actual losses suffered by the right holder as a result of the infringement; if such actual losses are difficult to ascertain, the compensation may be determined according to the profits obtained by the infringer through the infringement; if both the right holder’s losses and the infringer’s profits are difficult to determine, the compensation shall be reasonably determined by reference to a multiple of the trademark licensing fee. For malicious infringements of exclusive trademark rights involving serious circumstances, the compensation may be set at an amount exceeding one but not more than three times the sum determined in accordance with the aforementioned methods. The compensation shall include the reasonable expenses incurred by the right holder in stopping the infringing acts.”

As the court that heard the nation’s first case in which a trademark owner was awarded punitive damages, the Zaozhuang Intermediate People’s Court stated that on July 5 this year, the case-handling team conducted thorough preparations and engaged in repeated legal explanations and reasoned discussions with both parties, clarifying the relevant statutory provisions. Ultimately, Shandong Tengzhou Jutai Food Co., Ltd. acknowledged the infringement and agreed to pay the punitive damages.

Subsequently, Yangyuan Company and Jutai Company entered into a Settlement Agreement, under which “both parties conoffice that Party B shall compensate Party A in accordance with Article 63 of the Trademark Law. Given that Party A’s standard for the license‑fee for the ‘Six Walnuts’ trademark is RMB 4,000 per batch, and that in this case Party B has engaged in malicious infringement of exclusive trademark rights of a serious nature, the punitive damages shall be determined at twice the trademark license‑fee, and then further doubled—namely, RMB 4,000 × 2 × 2 = RMB 16,000.”

Liu Jialiang, an associate professor at the School of Law of Shandong University, stated that since the amendment to the Trademark Law, no case had ever applied Article 63 of the law to award punitive damages up until the filing of this case; thus, this case has effectively “activated” that legal provision. “The significance lies not in the amount awarded, but in the fact that this is the first time the provision has been invoked. Previously, trademark infringement damages were primarily compensatory—reimbursing plaintiffs only for the actual losses incurred. By contrast, punitive damages break with that approach: building on compensation, they explicitly recognize the use of punitive damages as a legal tool to combat counterfeit and substandard goods, thereby helping to purify the market and safeguard consumer rights.”

According to reports, the previous Trademark Law applied the so‑called “make‑whole” principle in calculating damages for infringement of exclusive trademark rights. However, due to factors such as incomplete corporate financial records and difficulties in gathering evidence, plaintiffs often struggle to convincingly demonstrate the harm they have suffered as a result of the infringement, let alone to prove the profits that the defendant has derived from the infringing conduct.

Cheng Yongshun, Director of the Beijing Pragmatic Intellectual Property Development Center and former Deputy Chief Judge of the Intellectual Property Division of the Beijing Higher People’s Court, stated that in most cases, the parties fail to provide evidence of the extent of the infringement‑related losses or profits, instead directly requesting that the court determine the amount of damages according to the statutory damage‑award regime. As understood, Chinese courts set the award within the statutory cap of RMB 500,000. In other words, the statutory damages provided for under this framework are not punitive in nature; rather, they represent an amount that judges discretionarily award based on the facts of the case when the actual harm cannot be ascertained, with the determination still grounded in the principle of “restoration to the prior position.” Because the statutory damage‑award method often lacks sufficient—or even any—evidence to support it, the resulting damage awards tend to be unduly low, sometimes falling short even of covering litigation costs.

“The reason trademark infringement persists despite repeated prohibitions is that offenders stand to gain substantial profits, primarily because the costs of illegal conduct are low and infringing activities can yield enormous illicit gains. Meanwhile, trademark owners generally find that the compensation awarded through enforcement is insufficient to cover their维权 expenses, often falling short even of the legal fees incurred in pursuing such actions,” Liu Jialiang further explained. To impose enhanced damages on malicious infringers and to underscore the punitive function of civil liability, the revised Trademark Law has raised the statutory cap on damages to RMB 3 million, thereby affording judicial tribunals greater discretion in adjudicating such cases.

Commenting on this case, Liu Junhai, a professor at Renmin University of China, doctoral supervisor, and vice president of the Consumer Rights Protection Law Research Association of the China Law Society, stated: “By conofficeing in the mediation agreement that the parties shall pay punitive damages, the case embodies the judicial principle of strengthening penalties for intellectual property infringement, while also demonstrating the creativity and proactive role of the judiciary.”

Top 10 Antitrust Civil Litigation Cases in Chinese Courts, 2008–2018

On November 16, 2018, the Supreme People’s Court convened a symposium to mark the tenth anniversary of the Anti-Monopoly Law’s implementation. Song Xiaoming, Chief Judge of the Intellectual Property Division of the Supreme People’s Court, presented an overview of the basic trends in the adjudication of anti-monopoly civil cases by the people’s courts over the past decade and announced the ten landmark cases in anti-monopoly civil litigation. According to available information, since the law’s enactment, the number of anti-monopoly civil cases accepted and concluded by the people’s courts has shown a marked upward trajectory. By the end of 2017, 700 first-instance anti-monopoly civil cases had been filed, and 630 had been concluded. These cases spanned a wide range of sectors, including transportation, insurance, pharmaceuticals, food, household appliances, electricity supply, and information networks.

Other

Jack Ma ramps up investment in internet healthcare: Alibaba Health teams up with Alipay to integrate resources.

On November 15, AliHealth issued an announcement stating that it has signed a strategic cooperation agreement with Alipay, a subsidiary of Ant Financial. “AliHealth will exclusively establish an independent healthcare services channel on the Alipay app, assuming full responsibility for managing and operating the healthcare industry partners within that channel. At the same time, by continuously onboarding new medical institutions and health service providers, it will offer users more comprehensive healthcare services and products on the Alipay platform.” The announcement also outlined the next steps in the collaboration: “Following the signing of this strategic partnership, our group will work together with a wide range of offline medical institutions on the Alipay platform, leveraging our technological expertise, resources, and operational capabilities in the healthcare sector to help them achieve digital transformation and deliver internet-based healthcare services. Meanwhile, through the Alipay Healthcare Services channel, we will onboard and operate with additional healthcare industry partners, thereby advancing our efforts to deepen our presence across the healthcare value chain.”

Alibaba Health and Alipay have signed a strategic cooperation agreement to achieve deep resource integration in the healthcare sector, with early signs already evident. On October 16, Alibaba Health announced that, in collaboration with Alipay, it had successfully enabled end-to-end facial‑recognition‑based medical services at the Yuhang No. 1 People’s Hospital in Hangzhou, allowing patients to settle their insurance‑covered medical bills directly within the clinic. At the same time, through Alipay’s Life Account and Mini Programs, Alibaba Health rolled out a suite of Internet‑plus‑healthcare digital innovations across more than 100 hospitals and nearly 1,000 departments in Hangzhou, including mobile appointment booking, electronic payments, report viewing, report printing, and credit‑based medical services. The two partners also plan to progressively launch additional features within Alipay, such as a consultation assistant, in‑hospital navigation, online doctor consultations, and prescription renewal for follow-up visits, gradually extending these convenient, patient‑centric services nationwide to further alleviate the challenge of accessing healthcare.

It is worth noting that, to guide public hospitals in implementing online payment services and further enhance patients’ healthcare experience, the National Health Commission issued the “Notice on Issuing the Guiding Opinions on the Implementation of Online Payment Services by Public Hospitals” on October 26.

The National Health Commission stated that, as the reform of the medical and healthcare system continues to deepen, some localities and public hospitals have actively leveraged information technology to explore online payment services, implement appointment-based consultations, offer multiple payment options, shorten patients’ payment times, reduce queueing at service windows, and enhance the overall patient experience. In accordance with the requirements of establishing a modern hospital management system, advancing the Action Plan for Further Improving Medical Services, and promoting the development of “Internet Plus Healthcare,” these Guidelines have been formulated to provide guidance to all regions in further advancing online payment services.

Both Alipay and WeChat are steadily ramping up their efforts in hospital payment services. Going forward, it will be worth watching what kind of synergies emerge from Alipay’s collaboration with AliHealth. Regarding this strategic partnership, AliHealth stated that it represents a “powerful alliance” that leverages the complementary strengths of AliHealth, Ant Financial, and Alipay in the healthcare services sector.

Alibaba Health stated that this collaboration will enable the sharing and synergy of resources within the Ant Financial ecosystem, creating favorable conditions for the company’s growth in the industry. At the same time, Alibaba Health will leverage its accumulated expertise and strengths in the healthcare sector to enrich and optimize Alipay’s medical service offerings, delivering end-to-end, high-quality health services and products to users, enhancing user engagement, and attracting new customers.

According to reports, as the flagship platform of Alibaba’s “Double H” strategy in the pharmaceutical and healthcare sector, AliHealth has, over the years, progressively established a comprehensive health‑care ecosystem that encompasses medical institutions, third‑party software and hardware developers, pharmaceutical manufacturers, and brick‑and‑mortar pharmacies, while cultivating robust capabilities in the operation of professional medical and health services. Meanwhile, Alipay has consistently leveraged its technological expertise in mobile internet, credit systems, and biometric identification to deliver a wide range of public‑service solutions to Chinese consumers. Over the past decade, it has provided more than 100 types of services—including government administration, medical care, transportation, and bill payments—to nearly 500 million people across over 300 cities.

An Qingsong: The securities industry is fully committed to supporting the development of green finance in the Xiong’an New Area.

On November 9, the Securities Association of China convened a special meeting of its Green Securities Committee in the Xiongan New Area and conducted on-site research to gain an in-depth understanding of the region’s development progress and its green finance development plan, while exploring ways to guide the securities industry in supporting Xiongan’s construction and growth. At the meeting, An Qingsong, Secretary of the Party Committee and Executive Vice Chairman of the Securities Association of China, stated that to help Xiongan become a leading hub for green finance, the securities industry must harness intellectual, market, and sectoral strengths, mobilize all positive factors, and support the region’s green development. He emphasized the importance of leveraging the capital market’s pivotal role to provide a steady flow of capital and economic vitality to Xiongan’s green initiatives, as well as capitalizing on investment banks’ expertise in transaction structuring, resource aggregation, and risk management. By returning to fundamentals and optimizing its structure, the industry should fully support the development of green industries and green finance in Xiongan, ensuring that professional capabilities, business activities, and financial resources are prioritized, and striving to be at the forefront of supporting Xiongan’s high-quality development.

An Qingsong pointed out that the 18th National Congress of the Communist Party of China adopted the strategic decision to “vigorously advance ecological civilization,” while the Fifth Plenary Session of the 18th CPC Central Committee established the new development philosophy of “innovation, coordination, green development, openness, and shared prosperity.” The 19th National Congress further laid out the work plan to “plan from a high starting point and build the Xiongan New Area to high standards.” Upholding the principle of prioritizing ecology and pursuing green development, the Xiongan New Area has become a model for China’s high-quality economic development in the new era. General Secretary Xi Jinping’s call to “create Xiongan quality” is not only a political rallying cry but also an inspiring expression of advanced thought. Green development is characterized by capital intensity and long‑term implementation, and it relies on the robust support of a highly developed green finance sector.

The meeting concluded that the establishment of the Xiongan New Area in Hebei is a major strategic decision made by the CPC Central Committee with Comrade Xi Jinping at its core to further advance the coordinated development of the Beijing–Tianjin–Hebei region. It is another new area of national significance, following the Shenzhen Special Economic Zone and the Shanghai Pudong New Area, and represents a long-term plan of paramount importance for the nation. The Green Securities Committee of the China Securities Industry Association convened a special meeting in the Xiongan New Area, bringing together leading figures from the industry to jointly explore ways to promote green development in the region. This underscores the Association’s strong political commitment and unwavering determination to support the construction of the Xiongan New Area. The meeting noted that the planning and development of the Xiongan New Area will significantly boost the growth of green industries and the green economy, while providing a vast market space for the innovative development of green finance.

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