JC Master Legal News Issue 848

Key Takeaways for This Issue

Three departments jointly issue a unified enforcement mechanism for the bond market.

In recent years, China’s bond market has grown rapidly, remaining generally stable and well‑regulated. As of the end of October 2018, the outstanding balance of the bond market reached RMB 83.8 trillion, ranking third globally and second in Asia; the outstanding balance of corporate credit bonds ranked second worldwide and first in Asia. At the same time, certain illegal and non‑compliant practices have emerged in the bond market, underscoring the need for further regulatory strengthening.

State Council: Allows management and research personnel to hold shares in the form of technology equity plus cash equity.

On December 5, Premier Li Keqiang of the State Council presided over an executive meeting of the State Council, which decided to further roll out a batch of reform measures to promote innovation and further unleash creativity; adopted the Draft Amendment to the Patent Law of the People’s Republic of China, thereby effectively protecting property rights and vigorously cracking down on infringement; and approved the Draft Regulations on Emergency Response to Production Safety Accidents.

Individuals’ income from the transfer of shares acquired after listing on the New Third Board, provided they are not original shares, is temporarily exempt from individual income tax.

Recently, the Ministry of Finance, the State Taxation Administration, and the China Securities Regulatory Commission jointly issued the “Notice on the Individual Income Tax Policy Concerning the Transfer of Shares in Companies Listed on the National Equities Exchange and Quotation System for Small and Medium-sized Enterprises” (Cai Shui [2018] No. 137).

The Supreme People’s Court has released ten exemplary cases of diversified dispute resolution in securities and futures matters.

On December 1, the Supreme People’s Court released ten exemplary cases of diversified dispute resolution in securities and futures matters. The cases include: a mass‑action dispute arising from fraudulent issuance by a listed company; a dispute between investors and a futures company and its branch offices over futures trading; a case in which notarized escrow resolved a dispute between investors and a securities office concerning wealth‑management products; and a series of default disputes involving bond transactions under fund‑managed asset products, among others—totaling ten cases.

Three departments: Implement tax policies to support entrepreneurship and employment among key groups.

The Ministry of Finance, the State Taxation Administration, and the Ministry of Human Resources and Social Security recently jointly issued the “Notice on Further Implementing Tax Policies Supporting Entrepreneurship and Employment for Key Groups” (Cai Shui [2018] No. 136).

Table of Contents

Table of Contents

Finance & Capital Markets

Three departments jointly issue a unified enforcement mechanism for the bond market.

National Equities Exchange and Quotations Company: Standardizing the Restrictions on and Release of Share Lock-up for Listed Companies

The PPP Regulations are expected to be issued within the year, aiming to prevent local governments from engaging in disguised borrowing.

The securities regulators of Mainland China and Hong Kong have signed a Memorandum of Understanding on cross-border regulatory cooperation.

Stock index futures are undergoing their third major adjustment: margin requirements have been cut in half, and trading commissions have been reduced.

The China Securities Regulatory Commission has issued guidelines to standardize asset management operations by financial institutions.

Strengthening the Institutional Foundation and Enhancing Regulatory Effectiveness — The SSE Revises Its Rules on Bond Listing and Trading

The Shenzhen Stock Exchange has refined its corporate bond regulatory framework to promote the high-quality development of the bond market.

Corporate & Commercial

State Council: Allows management and research personnel to hold shares in the form of technology equity plus cash equity.

Two departments: Standardize overloading enforcement and optimize the business environment.

Regulations on the Administration of Wealth Management Subsidiaries Have Been Issued: Public Offering Wealth Management Products Are Now Permitted to Directly Invest in Stocks.

The Supreme People’s Court has issued supporting documents for the international commercial dispute resolution mechanism under the Belt and Road Initiative.

General Administration of Customs: Enterprise coordinators who disclose trade secrets will be disqualified.

Eleven departments have called for the categorized handling of “zombie enterprises” and the direct debts of enterprises undergoing capacity reduction.

State Administration for Market Regulation: Piloting Reforms to Improve the Simplified Enterprise Deregistration Process

Taxation

Individuals’ income from the transfer of shares acquired after listing on the New Third Board, provided they are not original shares, is temporarily exempt from individual income tax.

State Taxation Administration: Currently studying and advancing substantive tax reduction measures, including VAT cuts.

Three departments: Positive progress has been made in regulating tax compliance within the film and television industry.

Wang Yi: China and the United States have agreed to halt the imposition of additional tariffs on each other.

Litigation & Arbitration

The Supreme People’s Court has released ten exemplary cases of diversified dispute resolution in securities and futures matters.

The Supreme People’s Court overturned the original ruling in the “Bentley refund‑plus‑three‑times‑damages case”: the dealer did not engage in fraud.

Other

Three departments: Implement tax policies to support entrepreneurship and employment among key groups.

State Council: Enterprises that refrain from laying off employees or reduce layoffs may receive a 50% refund of their unemployment insurance contributions.

Finance & Capital Markets

Three departments jointly issue a unified enforcement mechanism for the bond market.

In recent years, China’s bond market has grown rapidly, remaining generally stable and well‑regulated. As of the end of October 2018, the outstanding balance of the bond market reached RMB 83.8 trillion, ranking third globally and second in Asia; the outstanding balance of corporate credit bonds ranked second worldwide and first in Asia. At the same time, certain illegal and non‑compliant practices have emerged in the bond market, underscoring the need for further regulatory strengthening.

To thoroughly implement the spirit of the 19th National Congress of the Communist Party of China and the National Financial Work Conference, to improve the financial regulatory system, to optimize the allocation of regulatory resources, and to safeguard against systemic financial risks, with the approval of the State Council, the People’s Bank of China, the China Securities Regulatory Commission, and the National Development and Reform Commission have jointly issued the “Opinions on Further Strengthening Law Enforcement in the Bond Market” (hereinafter referred to as the “Opinions”), aiming to reinforce regulatory enforcement, enhance inter‑agency coordination, and establish a unified law‑enforcement mechanism for the bond market.

The Opinions clarify that, with the approval of the State Council, the China Securities Regulatory Commission shall, in accordance with the law, conduct unified enforcement actions against unlawful activities in both the interbank bond market and the exchange‑traded bond market. With respect to violations of information disclosure requirements, insider trading, market manipulation, and other acts contravening the Securities Law involving corporate bonds, enterprise bonds, debt financing instruments issued by non‑financial enterprises, financial bonds, and other types of bonds, such violations shall be identified and subject to administrative penalties pursuant to the relevant provisions of the Securities Law. Where criminal offenses are discovered during the course of an investigation, the case shall be promptly referred to the public security authorities for prosecution and criminal liability in accordance with the law.

The issuance of the “Opinions” represents an important step in improving China’s bond market regulatory framework. The People’s Bank of China, the China Securities Regulatory Commission, and the National Development and Reform Commission will, in accordance with the requirements set forth in the “Opinions,” further refine a collaborative mechanism characterized by clear division of responsibilities, close coordination, and effective synergy; actively carry out unified enforcement in the bond market; steadily advance the implementation of the “Opinions”; and jointly promote the sound and stable development of China’s bond market.

Attachment: Opinions of the People’s Bank of China, the China Securities Regulatory Commission, and the National Development and Reform Commission on Further Strengthening Law Enforcement in the Bond Market

To all bond market participants:

In recent years, China’s bond market has grown rapidly, remaining generally stable and well‑regulated; however, certain illegal and non‑compliant practices have emerged, necessitating further strengthening of enforcement in the bond market. To thoroughly implement…

In line with the spirit of the 19th National Congress of the Communist Party of China and in implementation of the requirements of the Fifth National Financial Work Conference, to improve the financial regulatory system, optimize the allocation of regulatory resources, and promote the sound and stable development of China’s bond market, and with the approval of the State Council, the following opinions are hereby put forward to further strengthen law enforcement in the bond market:

I. Strengthen regulatory enforcement and establish a unified enforcement mechanism for the bond market.

The China Securities Regulatory Commission (CSRC) conducts unified enforcement actions, in accordance with the law, against illegal activities in both the interbank bond market and the exchange‑traded bond market. With respect to violations of information disclosure requirements, insider trading, market manipulation, and other breaches of securities laws involving corporate bonds, enterprise bonds, non‑financial corporate debt financing instruments, financial bonds, and other types of bonds, the CSRC makes determinations and imposes administrative penalties pursuant to Articles 193, 202, 203, 223, and 226 of the Securities Law, among other relevant provisions. As for unlawful conduct by commercial banks, securities offices, and other entities during the underwriting of various bond products, such violations are penalized in accordance with Article 191 of the Securities Law. Where the circumstances of an illegal act are particularly serious, the CSRC may, under Article 233 of the Securities Law, impose a ban on the relevant persons from participating in the securities market. During the course of investigations, if criminal offenses are suspected, cases are promptly referred to public security authorities for prosecution in accordance with the law; upon receipt of such legally transferred cases, the public security organs shall promptly file a case and initiate an investigation. The People’s Bank of China, the CSRC, and the National Development and Reform Commission will continue to perform their respective duties as currently assigned.

Administrative supervision of the bond market. Bond market self-regulatory organizations and other market participants shall perform their self-regulatory duties and related tasks.

II. Strengthen law enforcement safeguards to ensure the smooth implementation of unified law enforcement efforts.

In carrying out unified enforcement in the bond market, the CSRC is authorized to take the measures prescribed in Article 180 of the Securities Law. The CSRC may require self-regulatory organizations of the bond market, stock exchanges and trading platforms, registration, custody and settlement institutions, as well as market participants, to provide information related to the case…

Collect evidence materials related to the investigation, including transaction records, registration, custody and settlement documents, and information disclosure filings; and, when necessary, lawfully request from relevant departments and entities credit reports, social insurance records, customs records, tax records, industrial and commercial data, telecommunications records, and other pertinent information pertaining to the entities and individuals involved in the investigated matter.

The China Securities Regulatory Commission shall perform its duties in accordance with the law, and any entity or individual under investigation shall cooperate by truthfully providing relevant documents and materials, and may not refuse, obstruct, or conceal information. With respect to responsible personnel who fail to cooperate with the investigation, the Commission has the authority to recommend that the relevant financial regulatory authorities or competent supervisory departments, in accordance with the law, order their employers to impose disciplinary sanctions, or to recommend that their qualifications for holding office be revoked or that they be prohibited from engaging in related financial‑industry activities.

III. Strengthen coordination and collaboration, and establish a close‑working mechanism.

The People’s Bank of China and the National Development and Reform Commission actively support the China Securities Regulatory Commission in carrying out unified law enforcement in the bond market, cooperate with the CSRC in case consultations, issue written opinions on specialized issues involved in cases, and assist in responding to administrative reconsideration and administrative litigation proceedings. When the People’s Bank of China and the National Development and Reform Commission identify leads related to illegal activities in the bond market, they promptly refer such information to the CSRC.

National Equities Exchange and Quotations Company: Standardizing the Restrictions on and Release of Share Lock-up for Listed Companies

The National Equities Exchange and Quotations Co., Ltd. recently issued the “Guidance on Share Lock-up and Unlocking Procedures” (hereinafter referred to as the “Guidance”), which shall take effect from the date of its publication.

The Guidelines stipulate that the imposition or release of share restrictions on stocks of listed companies shall comply with relevant provisions of the Company Law, the Measures for Takeovers, the Business Rules, and other applicable regulations, and that applications must be submitted to the National Equities Exchange and Quotations Co., Ltd. in a timely manner. When applying for the imposition or release of share restrictions, consideration shall be given to whether the shareholder meets the criteria for multiple rounds of restriction or release. Upon a shareholder’s shares reaching the conditions for restriction or release, the listed company shall promptly submit the relevant application documents to its sponsoring securities office.

Attachment: “Guidelines on Share Lock-up and Unlock-up for Companies Listed on the National Equities Exchange and Quotations System”

To further enhance the standardization of procedures for share lock-up and unlock transactions of listed companies, this Guide has been formulated in accordance with relevant provisions of the Company Law, the Measures for the Administration of Acquisitions of Non‑Listed Public Companies (hereinafter referred to as the “Acquisition Measures”), the Business Rules of the National Equities Exchange and Quotations System for Small and Medium‑Sized Enterprises (Trial) (hereinafter referred to as the “Business Rules”), and the Detailed Rules on Information Disclosure by Listed Companies of the National Equities Exchange and Quotations System for Small and Medium‑Sized Enterprises (hereinafter referred to as the “Information Disclosure Rules”).

I. The imposition of share restrictions and the lifting of such restrictions on shares of listed companies shall comply with relevant provisions of the Company Law, the Acquisition Measures, the Business Rules, and other applicable regulations, and applications must be submitted promptly to the National Equities Exchange and Quotations Co., Ltd. (hereinafter referred to as the NEEQ). When applying for the imposition or lifting of share restrictions, consideration shall be given to whether a shareholder meets multiple criteria for restriction or release; if a shareholder satisfies multiple restriction criteria, the number of shares subject to restriction shall be calculated separately for each criterion, with the maximum value serving as the total number of shares restricted in this instance. Similarly, if a shareholder meets multiple release criteria, the number of shares eligible for release shall be calculated separately for each criterion, with the minimum value serving as the total number of shares released in this instance.

If shares that are pledged or frozen are to be subject to sale restrictions or have such restrictions lifted, the relevant provisions of China Securities Depository & Clearing Corporation Beijing Branch (hereinafter referred to as ChinaClear) must also be complied with.

II. A listed company shall, upon the shares held by its shareholders reaching the conditions for share restriction or release of restriction, promptly submit the following application documents to the sponsoring securities office:

1. The register of all shareholders of the listed company, applied for by the listed company from China Securities Depository and Clearing Corporation;

2. The application and accompanying application form, stamped with the official seal of the listed company, including the “Application Form for Restrictions on Trading of Shares of XXX Co., Ltd.” (Attachment 1) / the “Application Form for Lifting Restrictions on Trading of Shares of XXX Co., Ltd.” (Attachment 2);

3. Other documents required by the National Equities Exchange and Quotations Company.

When the shares held by a shareholder of a listed company meet the conditions for share restriction, the shareholder shall promptly notify the listed company to effect the registration of such restrictions. During the period in which the share‑restriction registration is being processed, the shareholder shall strictly comply with the applicable share‑restriction provisions and shall not engage in any unauthorized transfer of shares.

III. The sponsoring securities office shall promptly review the application materials, verifying that the supporting grounds are sufficient and that all calculations are accurate. Upon conofficeing that the review is in order, the sponsoring securities office shall, through the National Equities Exchange and Quotations Company’s Daily Business System (hereinafter referred to as the “Daily Business System”), submit detailed information on share restrictions and releases, attaching the listed company’s application materials as an appendix, and file such materials with the National Equities Exchange and Quotations Company for recordal.

IV. After the National Equities Exchange and Quotations Company files and conoffices applications for share restrictions and their removal, it shall transmit detailed data to China Securities Depository & Clearing Corporation.

V. Following the submission of the application by the sponsoring securities office, it shall closely monitor the progress of the transaction and, upon the matter’s transfer to China Securities Depository & Clearing Corporation Limited (CSDC), urge the listed company to promptly file with CSDC, in accordance with the relevant provisions of the “CSDC Beijing Branch Issuer Business Guide” (hereinafter referred to as the “Issuer Business Guide”), for registration of share restrictions or the release of such restrictions.

VI. With respect to the processing of share‑restriction removal procedures, the listed company shall, following approval by China Securities Depository & Clearing Corporation, prepare a notice of share‑restriction removal registration in accordance with the “National Equities Exchange and Quotations System – Format Template for Temporary Announcements,” and disclose such notice no later than three transfer days prior to the effective date of the restriction removal, as stipulated in the “Issuer’s Business Guidelines.”

VII. Where the articles of association of a listed company, relevant agreements, or shareholders’ commitments stipulate a longer lock-up period or a higher proportion of shares subject to lock-up for the company’s stock (hereinafter referred to as “voluntary lock-up shares”), the relevant shareholders shall, within two transfer days from the date such circumstances arise, disclose through the listed company a “Notice Regarding the Voluntary Lock-Up of Shares Held by Shareholders” (Attachment 3), and on the same day submit an application to the National Equities Exchange and Quotations Company for the implementation of the share lock-up. The application materials shall include:

(1) The relevant documents specified in Article 2 of this Guide;

(2) “Announcement Regarding the Voluntary Lock-up of Company Shares Held by Shareholders”;

(3) An application form jointly signed and sealed by the listed company and the voluntarily subject-to-sale‑restriction shareholders (Attachment 4);

(4) The review opinion issued by the sponsoring securities office (Attachment 5).

Once the voluntarily restricted shares have met the agreed-upon or committed conditions for lifting the restriction, the listed company shall promptly apply to lift the restriction. Shareholders shall strictly abide by the relevant agreements or commitments regarding voluntary share restrictions and, in principle, may not prematurely lift such restrictions prior to the fulfillment of the agreed-upon or committed conditions.

VIII. Where directors, supervisors, and senior management personnel have non‑trading transfers of their restricted shares due to judicial rulings, inheritance, or other reasons, and the transferee is not subject to any other restrictions on shareholding, the transferee may apply for the removal of such restrictions.

Where voluntarily restricted shares undergo a non‑trading transfer due to judicial rulings, inheritance, or other reasons, the transferee shall continue to comply with the relevant agreements or commitments pertaining to the voluntary restriction.

Listed companies and sponsoring securities offices shall not unreasonably delay applications for the restriction or release of share restrictions. Listed companies, their shareholders, and sponsoring securities offices shall ensure that the materials and data they submit to the National Equities Exchange and Quotations Company and China Securities Depository & Clearing Corporation are true, accurate, complete, and timely, and shall bear the corresponding legal liabilities.

The PPP Regulations are expected to be issued within the year, aiming to prevent local governments from engaging in disguised borrowing.

At present, the National Development and Reform Commission and the Ministry of Finance are working closely with the Ministry of Justice to expedite the drafting of the Regulations on Government–Social Capital Partnerships in the Infrastructure and Public Services Sectors (hereinafter referred to as the PPP Regulations), which are expected to be promulgated within the year. Meanwhile, the Ministry of Finance is preparing to issue implementation guidelines for standardized development, promoting list-based management and imposing restrictions on the scope of PPP applications.

Han Zhifeng, Deputy Director-General of the Investment Department of the National Development and Reform Commission, recently disclosed at the Third China PPP Forum that, in accordance with the State Council’s directives, the NDRC and the Ministry of Finance are working closely with the Ministry of Justice to expedite the drafting of a PPP regulation, with the aim of promulgating it as soon as possible. Earlier, Zhou Jinsong, Deputy Director-General of the Department of Laws and Regulations of the Ministry of Finance, stated that, pursuant to the State Council’s requirements, the PPP regulation is expected to be issued by the end of this year.

Zhuo Shi, Director of the Research Achievement Transformation Center at the PPP Research Institute of the Chinese Academy of Fiscal Sciences, stated that the promulgation of the PPP Regulations serves as a crucial safeguard for the industry’s restructuring and renewed launch, and is fundamental to its further development. Looking ahead, the PPP sector will, on the basis of orderly regulation, usher in more efficient and robust growth.

“Standardization and orderliness are the overarching principles guiding the sustained, healthy development of the PPP model,” said Han Zhifeng. He added that the issuance of the PPP Regulations signals that the PPP market will gradually become more standardized and transparent. He further emphasized the need to establish and refine mechanisms for ensuring reasonable returns on PPP projects, set appropriate pricing and fee structures, and appropriately extend concession periods; to fully unlock the commercial value inherent in each project, encourage private capital to innovate management models, enhance operational efficiency, and reduce project costs; and to select suitable project financing arrangements that lower financing costs and improve capital‑use efficiency.

According to industry insiders, the PPP Regulations are expected to break new ground on the issue of scope of application, which has long been a focal point for the sector. By adopting a checklist‑based regulatory approach, refining project‑entry criteria, clearly defining positive and negative lists for verification, streamlining review procedures, and strengthening cross‑level oversight, the regulations aim to ensure the quality of newly approved projects. In addition, in the area of performance management, relevant guidance documents will be issued to enhance operational efficiency, standardize investment‑return mechanisms, and prevent short‑term profiteering and speculative capital flows.

Han Zhifeng stated that PPP projects must comply with fiscal management requirements, strictly prohibit the use of the PPP model to illegally and non‑compliantly engage in disguised borrowing, and rigorously guard against local government debt risks. They must also meet financial regulatory standards, avoid maturity mismatches and equity‑in‑name‑but‑debt‑in‑substance arrangements, and thereby mitigate financial risks.

Liu Ping, an international partner at Shanghai Qinli Law Office, stated that PPP projects currently face issues such as the “entrenchment” of expenditure liabilities, disguised debt‑equity arrangements, and government guarantees. Some local governments prioritize the short‑term goal of “launching projects,” while certain initiatives exhibit a pronounced bias toward construction at the expense of operations. Furthermore, some local authorities package purely commercial ventures—such as real estate developments—as PPP projects, leveraging the “green channel” afforded to PPPs by relevant departments and financial institutions to secure expedited approvals and financing, thereby circumventing oversight under pertinent industrial policies and undermining the effectiveness of macroeconomic regulation.

Industry consensus holds that establishing a restrictive catalog is particularly crucial for addressing the aforementioned issues, providing investors with clearer guidance. Reportedly, some localities have already launched pilot programs adopting a checklist‑based regulatory approach. For instance, Hunan Province recently issued the first provincial‑level negative list for PPP projects, specifying five circumstances in which the PPP model may not be employed and seven categories of activities that are ineligible for government procurement of services.

A typical example of adopting a positive‑list approach is the Gu’an model. According to industry insiders, the Gu’an County Government in Hebei Province has entrusted the comprehensive operation of a designated area to Huaxia Xingfu. The company is responsible for planning and design, land remediation, infrastructure development, public‑service facility construction, industrial‑development support, and urban operations, while the government pays based on performance, with the payment capped at a certain percentage of the additional fiscal revenue generated within the designated zone. This arrangement both helps mitigate government debt risks and provides positive incentives for the enterprise.

Han Zhifeng stated that the PPP model can fully leverage the market’s decisive role in resource allocation and harness the enthusiasm and initiative of social capital; however, any issues arising in practice must be promptly addressed and brought into compliance.

It is worth noting that PPP projects will be subject to end-to-end management. The Ministry of Finance is currently drafting performance‑management guidelines for PPPs, strengthening performance reviews during the project registration process, refining performance evaluation frameworks and indicator systems, and establishing a tiered, sector‑specific, and domain‑specific performance‑indicator framework to create a comprehensive, full‑cycle performance‑management chain for these projects.

The securities regulators of Mainland China and Hong Kong have signed a Memorandum of Understanding on cross-border regulatory cooperation.

Recently, the China Securities Regulatory Commission (CSRC) and the Securities and Futures Commission of Hong Kong (SFC) jointly announced that they have formally signed the Memorandum of Understanding on Regulatory Cooperation and Information Exchange for Cross-Border Regulated Entities (hereinafter referred to as the “Memorandum”).

The signing of the Memorandum will help deepen cross-border regulatory cooperation and information exchange between the mainland and Hong Kong securities regulators in the securities and fund sectors, encourage cross-border securities and fund institutions on both sides to continuously enhance their compliance standards and service capabilities, further strengthen investor protection, effectively mitigate financial risks, and promote the stable and sound development of the capital markets in the mainland and Hong Kong, thereby better supporting China’s high-quality economic growth and its strategy of high-standard opening-up.

Stock index futures are undergoing their third major adjustment: margin requirements have been cut in half, and trading commissions have been reduced.

With the approval of the China Securities Regulatory Commission, the China Financial Futures Exchange, after a comprehensive assessment of market risks and proactive enhancements to its regulatory framework, has prudently and orderly adjusted the trading arrangements for stock index futures as follows: First, effective at the settlement on December 3, 2018, the margin requirements for CSI 300 and SSE 50 index futures will be uniformly set at 10%, while the margin requirement for the CSI 500 index futures will be uniformly set at 15%; Second, starting December 3, 2018, the regulatory threshold for intraday excessive trading in stock index futures will be adjusted to 50 contracts per individual contract, with no limit on the number of opening positions for hedging transactions; Third, also effective December 3, 2018, the transaction fee for same-day closing of stock index futures positions will be adjusted to 4.6 basis points of the transaction value.

This adjustment is a proactive measure to optimize the operation of stock index futures trading and to promote the effective functioning of the market. Following the implementation of these measures, the China Financial Futures Exchange will continue to monitor and assess their effectiveness, strengthen market risk surveillance and oversight of trading activities, and ensure the safe and stable operation of the stock index futures market.

The China Securities Regulatory Commission has issued guidelines to standardize asset management operations by financial institutions.

Recently, the China Securities Regulatory Commission issued the “Operational Guidelines for the Application of the ‘Guiding Opinions on Regulating Asset Management Business of Financial Institutions’ to the Large‑Scale Collective Asset Management Business of Securities Companies” (hereinafter referred to as the “Guidelines”).

Pursuant to the Securities Law, in 2003 the China Securities Regulatory Commission (CSRC) issued the Provisional Measures for the Client Asset Management Business of Securities Companies. Subsequently, securities companies and their asset management subsidiaries legally established more than 400 collective asset management schemes—hereinafter referred to as “large‑scale collective products”—each of which was not subject to the 200‑investor limit. Since the enactment and implementation of the Fund Management Law in 2013, the CSRC has continuously urged industry participants to bring these large‑scale collective products into compliance with the requirements applicable to public mutual funds. In April 2018, the Guiding Opinions on Regulating Asset Management Business of Financial Institutions (hereinafter referred to as the “Guiding Opinions”) were promulgated and put into effect, further setting out a number of specific operational standards for public‑offering products. Since the issuance of the Guiding Opinions, industry institutions have generally focused on how large‑scale collective products should be governed by the relevant provisions therein.

To implement the Guiding Opinions and address industry concerns, the China Securities Regulatory Commission has formulated these Guidelines. Adhering to the principles of categorized, orderly, and standardized regulation, effective protection of investor interests, and maintenance of market stability, the Guidelines further refine and clarify the standards and procedures for aligning large‑scale collective investment products with public‑fund practices, thereby promoting their regulated development. A reasonable transitional period is also provided, with no uniform requirements imposed on the pace of compliance. Following such regulatory adjustments, large‑scale collective investment products will be reclassified as public funds or private asset management plans and will continue to operate in a stable and compliant manner in accordance with applicable laws and regulations.

Attachment: “Operational Guidelines for the Application of the ‘Guiding Opinions on Regulating Asset Management Business of Financial Institutions’ to the Large‑Scale Collective Asset Management Business of Securities Companies”

To implement the requirements of the “Guiding Opinions on Regulating Asset Management Business of Financial Institutions” (Yin Fa [2018] No. 106, hereinafter referred to as the “Guiding Opinions”), promote the sound and standardized development of asset management business by securities companies, and safeguard the legitimate rights and interests of investors, this Guidance is formulated in accordance with the Securities Law, the Fund Management Law (hereinafter referred to as the “Fund Law”), the Guiding Opinions, the Measures for the Administration of Operations of Publicly Offered Mutual Funds (hereinafter referred to as the “Operational Measures”), and other relevant provisions.

I. Collective asset management plans established under the administration of securities companies, which are not subject to the 200‑investor limit (hereinafter referred to as “large‑scale collective products”), shall be governed by these Guidelines; large‑scale collective products established in the form of special‑purpose asset management plans shall be regulated in accordance with these Guidelines.

II. Securities companies shall strictly comply with the Fund Law and other relevant laws, administrative regulations, and the provisions of the China Securities Regulatory Commission governing the management and operation of large‑scale collective investment products (hereinafter referred to as public offering funds):

(1) Effective from the date of promulgation of this Guidance, new investments undertaken by large‑scale collective investment products shall comply with the statutory investment scope and investment restrictions applicable to public mutual funds, strengthen liquidity risk management of the investment portfolio, and set aside risk reserves in accordance with the relevant provisions governing public mutual funds.

(2) Existing large‑scale collective asset management businesses shall, by December 31, 2020, be managed in accordance with the standards applicable to public mutual funds, including but not limited to the following aspects:

1. Requirements related to product sales, share trading and subscription/redemption, share registration, investment operations, valuation and accounting, information disclosure, and the accrual of risk reserves are consistent with those applicable to public mutual funds;

2. Securities companies shall, in accordance with the legal and regulatory requirements applicable to public fund managers, revise and improve their systems for compliance management, internal control, risk management, and other related areas.

3. Senior management and other practitioners of securities companies engaged in the management of large‑scale collective investment products shall comply with the qualification requirements and conduct standards set forth in the laws and regulations governing public mutual funds.

4. With respect to performance fees already accrued for existing products and other matters as determined by the China Securities Regulatory Commission, adjustments and compliance will be made upon the issuance of relevant special regulations governing public funds.

5. Other matters prescribed by the China Securities Regulatory Commission.

(3) Following the promulgation of this Guidance, existing large‑scale collective investment products that, for 60 consecutive business days, have fewer than 200 investors or a net asset value below RMB 50 million shall, during the transition period, be gradually converted into private asset management plans compliant with applicable laws and regulations, and shall duly complete the required filing and other procedures as prescribed by law; alternatively, such products may be brought into compliance through measures such as merger with other products or termination of their product contracts.

When implementing the provisions of this paragraph, securities offices shall obtain the consent of investors and custodians in accordance with the methods stipulated in the product contract, safeguard investors’ right to opt out of large‑scale collective investment products, effectively manage liquidity risks, and make fair and reasonable arrangements for all related follow‑up matters.

(4) Until the aforementioned regulatory requirements are met, large‑scale collective investment products shall have their size strictly controlled. In principle, non‑cash‑management large‑scale collective investment products shall not accept any new net subscriptions, and cash‑management large‑scale collective investment products shall not onboard any new clients.

III. With respect to the following large‑scale collective investment products that do not comply with the requirements of the “Guiding Opinions,” securities companies shall, in accordance with Article 29 of the “Guiding Opinions” and the “Notice on Further Clarifying Relevant Matters Concerning the Guiding Opinions on Regulating Asset Management Business of Financial Institutions,” among other applicable provisions, bring them into compliance.

(1) Large-scale collective investment products that exhibit characteristics of fund‑pooling business, such as rolling issuance, pooled management, and separate pricing;

(2) Establishing large-scale collective investment products with tiered share classes;

(3) Other large‑scale collective investment products as determined by the China Securities Regulatory Commission.

IV. Effective from the date of promulgation of this Guidance, large‑scale collective investment products shall not engage in any of the following activities:

(1) Before completing rectification and compliance, publicly or indirectly publicly raise funds for product shares;

(2) Disguisedly initiating the establishment of new large‑scale collective investment products through methods such as issuing sub‑shares on a phased basis and maintaining separate accounting for each.

(3) Illegally engaging investment advisors for large‑scale collective investment products;

(4) Making any substantive adjustments or amendments to the contract terms without prior registration;

(5) Other matters prescribed by laws, administrative regulations, and the China Securities Regulatory Commission.

V. During the standardization process, securities offices shall perform the following tasks:

(1) In accordance with the requirements of this Guidance, formulate a standardized plan for large‑scale collective investment products that features reasonable measures, clear timelines, and a prudent, orderly implementation process, and submit it to the local branch of the China Securities Regulatory Commission by the end of 2018.

(2) Strengthen risk control by developing comprehensive risk assessment frameworks and contingency plans, conducting robust stress tests, and effectively safeguarding the safe and stable functioning of the market.

(3) During the process of standardizing collective investment products, for low‑liquidity assets held by the product that, despite various measures, remain difficult to dispose of, as well as for assets that have not matured by the end of the transition period, provided that fair trading is ensured and the legitimate rights and interests of investors are not impaired, securities companies may, after completing the necessary procedures required by applicable laws, regulations, and contractual agreements, appropriately handle such assets by purchasing them with their own funds, continuing them through existing collective investment products, or transferring them to existing or newly established private asset management plans.

(4) Upon expiration of the transition period, securities offices shall promptly report to the China Securities Regulatory Commission any assets that, due to special circumstances, are genuinely difficult to dispose of.

VI. Securities companies that have not obtained public fund management qualifications shall follow the procedures set forth below,

Complete the standard acceptance of the large‑scale aggregation product and submit the product contract amendment request:

(1) After a securities company has completed the required rectification measures and obtained conofficeation from the custodian, it shall submit the acceptance application documents to the local branch of the China Securities Regulatory Commission (CSRC). The CSRC branch will review and verify the rectification work and issue a conofficeation letter for those large‑scale collective investment products that have indeed been brought into compliance.

(2) Upon obtaining the conofficeation letter, the securities company shall submit an application to the China Securities Regulatory Commission for a contract amendment with respect to the collective investment scheme; in principle, the contract term shall not exceed three years.

(3) Prior to amending the contract of a collective investment product, the securities company shall solicit the views of the product’s investors through appropriate means. If any investor raises objections, and provided that overall liquidity risk remains under control, the company shall ensure that such investor retains the right to withdraw from the collective investment product.

(4) Upon completion of the aforementioned procedures, collective investment products shall be managed and operated in accordance with the Fund Law, the Operational Measures, and other relevant laws and administrative regulations, as well as the provisions of the China Securities Regulatory Commission. With respect to public offering, sales service fees, minimum subscription amounts, and other related matters, they may, unless otherwise stipulated by the CSRC, follow the applicable rules governing public mutual funds.

VII. Securities companies that are qualified to manage public‑offering funds, upon obtaining the conofficeation letter, shall, in accordance with the Fund Law, the Operational Measures, and other relevant laws and administrative regulations, as well as the provisions of the China Securities Regulatory Commission, apply to the CSRC for the registration amendment of their relevant large‑scale collective investment products into public funds whose risk‑return characteristics are appropriately aligned. Following registration with the CSRC, such products shall continue to operate in compliance with the applicable laws and regulations governing public funds.

VIII. Effective from the date of promulgation of these Guidelines, securities companies and their asset management subsidiaries that obtain public‑fund management qualifications or acquire controlling interests in fund management companies through initiating establishment, equity acquisitions, or other means shall, after completing the requisite procedures prescribed by laws, regulations, and contractual agreements, re‑register the relevant large‑scale collective investment products as public funds managed by the corresponding public‑fund management entity.

9. Securities companies that have not yet obtained public fund management qualifications are encouraged to proactively comply with the regulatory requirements for large‑scale collective asset management business by transferring the management of their large‑scale collective products to fund management companies in which they hold controlling or minority stakes, and by registering such products as public funds.

X. The custodian of a collective investment scheme shall strictly perform all custodial duties prescribed by the Fund Law, the Measures for the Administration of Custody Business of Securities Investment Funds, and other relevant laws and administrative regulations, as well as by the China Securities Regulatory Commission. Collective investment schemes shall be subject to supervision and administration on a par with public‑offering funds, with particular attention paid to their investment operations, valuation and accounting, and other related matters. The custodian shall strengthen oversight of the implementation of these Guidelines by such schemes, regularly submit relevant regulatory data to the China Securities Regulatory Commission, and promptly report to the Commission any conduct that violates these Guidelines.

XI. The China Securities Regulatory Commission (CSRC) and its local branches, in accordance with the Fund Law and other laws and administrative regulations governing public‑offering funds, as well as relevant CSRC provisions and the requirements set forth in the Guiding Opinions, shall exercise regulatory oversight over securities companies, custodians, sales agencies, and other entities engaged in large‑scale collective asset management business. Local CSRC branches shall strengthen supervision of the compliance efforts of securities companies within their jurisdictions regarding large‑scale collective products, urge these offices to formulate compliance plans strictly in line with the requirements of this Guidance, ensure that such compliance measures are effectively implemented, and conduct regular summaries and analyses of the status of product compliance within their jurisdictions, incorporating these findings into their quarterly and annual regulatory reports. Where significant risks or violations are identified, they shall promptly report such matters to the CSRC.

XII. In accordance with the market principles of fairness, impartiality, and transparency, the China Securities Regulatory Commission shall accord priority in the review process to securities companies and their asset management subsidiaries that have completed compliance measures and achieved significant results, when they apply for administrative licenses such as eligibility to manage public mutual funds or to establish or hold equity interests in fund management companies. For large‑scale collective investment products that, upon expiration of their three‑year contracts following compliance, have still not been converted into public mutual funds, the Commission will, as appropriate, implement measures such as scale‑control.

Thirteen. This Guidance shall take effect from the date of its promulgation.

Strengthening the Institutional Foundation and Enhancing Regulatory Effectiveness — The SSE Revises Its Rules on Bond Listing and Trading

Recently, with the approval of the China Securities Regulatory Commission, the Shanghai Stock Exchange has promulgated and implemented the newly revised “Shanghai Stock Exchange Rules for the Listing of Corporate Bonds” and the “Shanghai Stock Exchange Rules for the Public Offering and Trading of Non‑Publicly Issued Corporate Bonds” (hereinafter collectively referred to as the Listing and Trading Rules).

Since 2015, the corporate bond market has developed steadily, with its structure continuously improving. As the market size has gradually expanded, the need to further strengthen foundational institutional arrangements and refine listing and trading rules has become increasingly apparent. To this end, the Shanghai Stock Exchange initiated a revision of its listing and trading rules in the second half of last year and publicly solicited comments from the public in May of this year. This round of revisions received nearly 50 specific feedback submissions from relevant institutions and investors. The Exchange carefully reviewed each comment, engaged in repeated discussions, and revised the draft multiple times, incorporating all reasonable and feasible suggestions. In addition to adjustments to the format and structure of the rules, this revision focused on optimizing and enhancing the following key areas:

First, we will strengthen frontline supervision to effectively enhance regulatory efficiency. In accordance with the latest requirements set forth in the Measures for the Administration of Stock Exchanges regarding the fulfillment of exchange duties, we will expand the scope of self-regulatory oversight to include issuers, their controlling shareholders, actual controllers, directors, supervisors, senior management, or individuals performing equivalent functions, as well as professional institutions and their personnel providing relevant services. Additionally, we have introduced new supervisory tools such as on-site inspections and measures like the imposition of punitive default penalties, thereby encouraging all market participants to assume their respective responsibilities and further improving regulatory effectiveness.

Second, the procedures for bond pre‑review have been standardized, and the principle of “submission triggers regulatory oversight” has been strengthened. A dedicated chapter has been added to underscore the regulatory requirements governing the pre‑listing review and the conofficeation of listing eligibility, further clarifying the scope of authority for bond pre‑review, the documentation requirements for applications, the powers of self‑regulatory oversight, and the reporting obligations for post‑submission matters, thereby implementing the pre‑review requirement that “submission entails regulatory oversight.”

Third, we have refined information disclosure and ongoing‑term management arrangements to strengthen investor protection. In response to the new challenges and evolving landscape in bond credit risk prevention and control, we have focused on enhancing the post‑issuance framework, including further expanding and tightening information‑disclosure requirements, reinforcing the accountability of disclosure obligors, and specifying qualification standards for issuers’ designated information‑disclosure officers. We have also clarified the trustee’s duties—such as conducting due diligence, managing risks, providing supplementary disclosures, and issuing risk warnings—while optimizing the structure of bondholder meetings, thereby bolstering risk‑management measures and better safeguarding bondholders’ rights.

Fourth, we will standardize the suspension and resumption of trading in bonds to ensure the stable functioning of the bond market. In recent years, certain bonds have faced liquidity disruptions—such as being suspended due to abnormal price swings or in accordance with regulatory requirements—drawing significant market attention. This revision further refines the circumstances under which bond trading may be suspended or resumed, thereby safeguarding the continuity of trading, and specifies detailed requirements for information disclosure and risk assessment during suspension periods.

Fifth, we will ensure seamless coordination and refine the exchange‑based bond self‑regulatory framework. By incorporating the requirements of newly issued rules in recent years, we have clarified the regulatory provisions for specific bond types such as exchangeable bonds and perpetual bonds, and further enhanced the mechanisms governing bond trading and transfer.

The Rules on Bond Listing and Trading constitute the fundamental regulatory framework of the SSE’s bond market. This revision and promulgation will further strengthen the self-regulatory rule system of the SSE bond market, standardize the market conduct of issuers, intermediaries, and other market participants in areas such as listing and trading, information disclosure, trading and transfer, and credit risk management, thereby laying a more robust institutional foundation for building a high‑quality exchange‑traded bond market. The SSE will continue to carry out its self‑regulatory duties in a solid and diligent manner, steadily enhance its capacity to organize the market and serve the real economy, effectively safeguard the legitimate rights and interests of bond investors, and promote and ensure the stable, orderly, and sound development of the exchange‑traded bond market.

The Shenzhen Stock Exchange has refined its corporate bond regulatory framework to promote the high-quality development of the bond market.

On December 7, in accordance with the unified deployment of the China Securities Regulatory Commission, the Shenzhen Stock Exchange revised and issued the “Rules for the Listing of Corporate Bonds” (hereinafter referred to as the “Listing Rules”) and the “Rules for the Public Offering and Trading of Corporate Bonds on the Exchange” (hereinafter referred to as the “Trading Rules”). This revision represents an important step taken by the Shenzhen Stock Exchange to implement the relevant requirements of the new “Administrative Measures for Stock Exchanges” and to enhance the capital market’s ability to serve the real economy. It will help further standardize and improve the listing and trading of corporate bonds as well as their public offering and trading on the exchange, elevate the quality of information disclosure in the corporate bond market, safeguard the legitimate rights and interests of bond investors, and promote the high-quality development of the exchange‑traded bond market.

The Shenzhen Stock Exchange previously conducted extensive consultations with all sectors of society on the Listing Rules and the Delisting Rules, and has refined these rules in light of the relevant suggestions and feedback. The main contents of this revision include:

First, the exchange has strengthened its frontline regulatory functions by implementing the requirements of the Measures for the Administration of Stock Exchanges to enhance the self-regulatory nature of its oversight. It has broadened the scope of self-regulatory supervision to encompass securities offices, investors, and relevant personnel, while also bolstering its regulatory tools and measures—introducing on-site inspections and introducing disciplinary sanctions such as the imposition of punitive default penalties—thereby further refining the self-regulatory framework.

Second, the principle of “registration entails regulatory oversight” is fully implemented, strengthening supervision at the issuance‑entry stage. A dedicated chapter sets out specific requirements for the pre‑review of corporate bond listings and for the conofficeation of transfer conditions for privately issued corporate bonds, thereby further solidifying the self‑regulatory foundation at the entry point and enhancing risk prevention at the source.

Third, regulatory oversight of information disclosure has been enhanced, imposing stricter requirements on issuers’ awareness of their obligations, sense of responsibility, and compliance. It is now explicitly stipulated that the issuer’s directors and senior management must serve as the persons responsible for information disclosure, and the obligation to disclose periodic reports for privately placed corporate bonds has been reinforced. Moreover, the timing for submitting periodic reports has been tightened, and provisions allowing for delayed disclosure of such reports have been removed. In addition, in light of regulatory practice, the circumstances triggering the filing of ad hoc reports have been further refined.

Fourth, the investor protection mechanism has been improved by further clarifying the credit risk management responsibilities of issuers, trustees, and other relevant parties—particularly the trustee’s obligations to monitor, address, and report risks, as well as the duty of other stakeholders to cooperate with the trustee in fulfilling its duties. A new provision has been introduced allowing the Shenzhen Stock Exchange to require issuers to engage accountants to conduct ad hoc special audits of raised funds, thereby effectively enforcing fund‑raising oversight requirements. Meanwhile, to enhance the efficiency of bondholders’ meetings and in response to market needs, the relevant rules governing such meetings have been revised and refined.

Commercial & Corporate

State Council: Allows management and research personnel to hold shares in the form of technology equity plus cash equity.

On December 5, Premier Li Keqiang of the State Council presided over an executive meeting of the State Council, which decided to further roll out a batch of reform measures to promote innovation and further unleash creativity; adopted the Draft Amendment to the Patent Law of the People’s Republic of China, thereby effectively protecting property rights and vigorously cracking down on infringement; and approved the Draft Regulations on Emergency Response to Production Safety Accidents.

The meeting noted that, in accordance with the arrangements of the CPC Central Committee and the State Council, eight regions—including Beijing–Tianjin–Hebei, Shanghai, and Guangdong—have undertaken pioneering trials of reform measures to foster innovation. Last year, the first batch of 13 such measures was rolled out nationwide. The meeting decided to further replicate and extend a new set of 23 measures across a broader scope, thereby more vigorously mobilizing innovation resources, incentivizing innovative activities, and nurturing new drivers of growth. Among these, the key measures to be promoted nationwide include: First, strengthening incentives for the commercialization of scientific and technological achievements. This involves allowing management personnel and researchers at restructured research institutes and public institutions to hold equity in the form of “technology shares plus cash shares,” introducing technology managers to participate throughout the entire process of成果转化, and encouraging universities and research institutes to engage in enterprise‑led technological problem‑solving through commissioned projects and other mechanisms. Second, innovating financial services for science and technology to open up financing channels for small and medium‑sized tech enterprises, including those with light asset bases or yet to turn a profit. It also calls for directing government equity funds toward seed‑stage and early‑stage tech offices, while enabling entrepreneurial teams to repurchase government‑invested equity at the principal amount plus interest at the prevailing commercial loan rate. Furthermore, it encourages the development of insurance products such as patent‑enforcement insurance and liability insurance for infringement losses, thereby reducing the risk of infringement faced by innovators. Third, improving research management by promoting market‑based operation of state‑owned scientific instruments and equipment to facilitate open sharing, and establishing a fault‑tolerance mechanism for innovation decision‑making. In addition, three reform measures previously piloted in select regions will be extended to all eight pilot areas, including granting researchers ownership of a certain proportion of their official scientific and technological成果, establishing specialized boards for technological innovation on regional equity markets, and allowing local universities to independently carry out talent recruitment and professional title evaluations. The meeting urged strengthened monitoring and evaluation of the phased rollout of these measures, as well as other pioneering reforms, to distill lessons learned, refine policies, deepen reform efforts, and better leverage the crucial role of scientific and technological innovation in driving high‑quality development.

To further strengthen the protection of patent holders’ legitimate rights and interests, improve the mechanisms and systems for incentivizing invention and innovation, and elevate proven practices that effectively safeguard patents in practice to the level of law, the meeting adopted the Draft Amendment to the Patent Law of the People’s Republic of China. The draft seeks to intensify efforts to combat intellectual property infringement by drawing on international best practices, substantially increasing compensation and fines for intentional infringements and patent counterfeiting, thereby significantly raising the costs of unlawful conduct and deterring violations. It also clarifies the evidentiary burden on infringers to cooperate in providing relevant materials and stipulates that online service providers shall bear joint liability if they fail to promptly prevent infringing acts. In addition, the draft establishes an incentive mechanism ensuring that inventors and designers reasonably share in the proceeds from official inventions and designs, and it refines the patent‑granting system. The meeting decided to submit the draft to the Standing Committee of the National People’s Congress for deliberation.

The meeting adopted the Draft Regulations on Emergency Response to Production Safety Accidents. The draft clarifies an emergency response framework in which governments at or above the county level provide unified leadership, industry regulators assume responsibility according to their respective duties, and comprehensive regulatory authorities offer guidance and coordination. It places particular emphasis on emergency response to key sectors and to serious and extremely serious accidents, stipulating requirements for the formulation, revision, and drills of emergency rescue plans, the development of emergency rescue teams, and on‑call emergency duty, while also detailing specific emergency rescue measures for both government bodies and production and business entities.

Two departments: Standardize overloading enforcement and optimize the business environment.

On November 29, the Highway Bureau of the Ministry of Transport and the Traffic Management Bureau of the Ministry of Public Security jointly convened a national on-site conference in Datong City, Shanxi Province, to standardize highway overloading enforcement and optimize the business environment. The meeting studied and implemented the CPC Central Committee and the State Council’s decisions and arrangements for improving the business environment, reported on issues identified during the State Council’s 2018 comprehensive inspection, and outlined key priorities for the next phase of nationwide overloading control. It called on all localities to further standardize overloading enforcement, enhance the business environment, better safeguard the lives and property of the people, and promote high-quality economic development.

In his address, Wu Dejin, Director of the Highway Bureau of the Ministry of Transport, commended the achievements made by transportation and public security traffic management authorities across the country in standardizing overload‑control enforcement. He conducted an in-depth analysis of the current situation and challenges facing this work, and expressed strong appreciation and high praise for Shanxi Province’s approaches to advancing overload‑control efforts.

Wu Dejin stated that all provinces, autonomous regions, and municipalities should take Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era as their guiding principle, aim to optimize the business environment, base their efforts on improving policies and regulations, prioritize rigorous and standardized law enforcement, and orient themselves toward strengthened publicity and education. They should study and draw on the advanced experiences of Shanxi and other provinces, and accelerate the modernization of the governance system and governance capacity for addressing over‑limit and overloaded vehicle issues. At present and in the period ahead, it is essential to focus on “five areas of reinforcement” to achieve “five comprehensive outcomes”: strengthen the shift in mindset and comprehensively enhance the sense of mission to govern for the people; strengthen pragmatic measures and fully implement the institutionalized, routine mechanisms for joint law enforcement; strengthen technological support and comprehensively elevate the modernization of capabilities in managing over‑limit and overloaded vehicles; strengthen precise coordination and comprehensively optimize licensing services for the transport of oversized and over‑weight cargo; and strengthen supervision and inspection to thoroughly investigate and rectify any instances of non‑compliant law enforcement.

Yan Chenxi, Deputy Head of the Shanxi Provincial Leading Group for Overload Control and Director of the Provincial Department of Transport, presented Shanxi Province’s experience in standardizing overload‑control enforcement. Guo Bingfu, Deputy Head of the Shanxi Provincial Leading Group for Overload Control and a member of the Party Committee of the Provincial Public Security Department as well as Director of the Traffic Management Bureau, shared insights into joint enforcement practices. Representatives from Henan Province, Guangdong Province, and Shaanxi Province each outlined their experiences in areas such as coordinated overload‑control enforcement, enhancing the standardization of enforcement procedures, and streamlining licensing services for oversized‑cargo transportation. In addition, the participants visited the overload‑control checkpoint at the entrance to the Xinrong South Expressway in Datong City, the Zhongxin Tangshangou Coal Company, the Shenquanbao Highway Overload Inspection Station, a site dedicated to managing truck traffic order, and the Datong Municipal Overload Control Office’s information‑command platform.

Regulations on the Administration of Wealth Management Subsidiaries Have Been Issued: Public Offering Wealth Management Products Are Now Permitted to Directly Invest in Stocks.

In accordance with the relevant requirements of the “Guiding Opinions on Regulating Asset Management Business of Financial Institutions” (hereinafter referred to as the “New Regulations on Asset Management”) and the “Measures for the Supervision and Administration of Wealth Management Business of Commercial Banks” (hereinafter referred to as the “New Regulations on Wealth Management”), the China Banking and Insurance Regulatory Commission has formulated the “Administrative Measures for Wealth Management Subsidiaries of Commercial Banks” (hereinafter referred to as the “Administrative Measures for Wealth Management Subsidiaries”), which shall take effect from the date of their promulgation.

From October 19 to November 18, 2018, the China Banking and Insurance Regulatory Commission publicly solicited comments on the Measures for the Administration of Wealth Management Subsidiaries. Financial institutions, industry self-regulatory organizations, experts and scholars, and the general public all paid close attention to the consultation. Our Commission carefully reviewed each piece of feedback, thoroughly incorporated sound and reasonable suggestions, and has adopted or plans to incorporate the vast majority of these views into relevant supporting regulatory frameworks.

The Measures for the Administration of Wealth Management Subsidiaries serve as a supporting regulatory framework to the New Regulations on Wealth Management, and together with the New Regulations on Asset Management and the New Regulations on Wealth Management, they constitute the set of supervisory requirements that wealth management subsidiaries must comply with in conducting their wealth management business. The Measures comprise six chapters and 62 articles, covering General Provisions, Establishment, Amendment, and Termination, Business Rules, Risk Management, Supervision and Administration, and Supplementary Provisions.

Wealth management subsidiaries are non‑bank financial institutions established by commercial banks to engage in wealth management business. In view of the fact that the “New Regulations on Wealth Management” apply to cases where banks have not yet conducted wealth management activities through subsidiaries, the “Administrative Measures for Wealth Management Subsidiaries” have made appropriate adjustments to certain provisions of the New Regulations, ensuring that the regulatory standards for wealth management subsidiaries are broadly aligned with those applicable to other asset management institutions. First, with respect to public‑offering wealth management products—specifically regarding equity investments and minimum investment thresholds—building on earlier provisions that permitted bank private‑offering products to invest directly in equities and public‑offering products to invest indirectly via public mutual funds, the Measures further allow public‑offering products issued by wealth management subsidiaries to invest directly in equities. Moreover, in line with the regulatory framework for other asset management products, the Measures do not impose a minimum sales threshold for such products. Second, concerning distribution channels and investor suitability management, the Measures stipulate that wealth management products may be distributed through banking financial institutions or other entities approved by the China Banking and Insurance Regulatory Commission, while adhering to requirements related to dedicated sales areas, audio‑video recording, assessment of investors’ risk tolerance, risk‑matching principles, and information disclosure. Consistent with the regulatory treatment of other asset management products, the Measures do not mandate face‑to‑face verification for individual investors making their first purchase of a wealth management product. Third, in terms of managing limits on non‑standard credit‑related investments, taking into account the specific characteristics of wealth management subsidiaries, the Measures require that the outstanding balance of non‑standard credit assets shall not exceed 35% of the net asset value of each wealth management product. Fourth, with regard to product structuring, wealth management subsidiaries are permitted to issue structured wealth management products, provided they comply with the relevant provisions of the “New Regulations on Asset Management” and the Administrative Measures for Wealth Management Subsidiaries governing tiered asset management products. Fifth, in defining the scope of cooperating institutions, the Measures align with the New Regulations on Asset Management, stipulating that for public‑offering wealth management products issued by wealth management subsidiaries, the issuers and trustees of the underlying asset management products may only be licensed financial institutions. By contrast, for private‑offering products, cooperating institutions may include licensed financial institutions, as well as qualified private‑equity fund managers that operate in compliance with applicable laws and regulations. Sixth, on the front of risk management, wealth management subsidiaries are required to set aside risk reserves and comply with relevant requirements pertaining to net capital, liquidity management, and other aspects; they must also strengthen risk isolation and enhance the management of related‑party transactions, while observing specific obligations in corporate governance, business administration, trading practices, internal control and auditing, personnel management, and investor protection. In addition, in accordance with both the New Regulations on Asset Management and the New Regulations on Wealth Management, wealth management subsidiaries are further obligated to adhere to qualitative and quantitative regulatory standards governing leverage levels, concentration limits, and other related matters.

The promulgation and implementation of the Measures for the Administration of Wealth Management Subsidiaries represent an important step taken by the China Banking and Insurance Regulatory Commission to enforce the New Regulations on Asset Management and the New Regulations on Wealth Management. This initiative will help strengthen risk isolation in banks’ wealth management businesses, optimize organizational and management frameworks, and steer bank‑based wealth management back to its core asset‑management functions; it will also foster and expand the ranks of institutional investors, guiding wealth‑management funds to enter the real economy and financial markets in lawful and compliant ways; furthermore, it will promote the harmonization of regulatory standards for asset‑management products, better safeguard investors’ legitimate rights and interests, and effectively contain financial risks.

Going forward, the China Banking and Insurance Regulatory Commission will continue to strengthen the development of supporting regulatory frameworks, further refine the supervisory framework for bank wealth management subsidiaries, and actively engage in communication and coordination with relevant departments to foster a favorable external environment that promotes the sound and orderly development of these subsidiaries.

The Supreme People’s Court has issued supporting documents for the international commercial dispute resolution mechanism under the Belt and Road Initiative.

On December 5, the Supreme People’s Court convened a symposium on diversified mechanisms for resolving international commercial disputes and issued and formally put into effect three normative documents: the “Notice of the General Office of the Supreme People’s Court on Designating the First Batch of International Commercial Arbitration and Mediation Institutions to Be Included in the ‘One-Stop’ Diversified Mechanism for Resolving International Commercial Disputes,” the “Provisions on the Procedures of the International Commercial Court of the Supreme People’s Court (Trial Implementation),” and the “Rules of Work of the International Commercial Experts Committee of the Supreme People’s Court (Trial Implementation).”

The three normative documents released this time are important supplementary instruments to the earlier‑issued “Provisions of the Supreme People’s Court on Several Issues Concerning the Establishment of International Commercial Courts,” marking a significant milestone in the Supreme People’s Court’s implementation of the “Opinions of the General Office of the CPC Central Committee and the General Office of the State Council on Establishing Mechanisms and Institutions for the Resolution of International Commercial Disputes under the Belt and Road Initiative,” and in carrying out the major decisions and deployments of the Party Central Committee. Among them, the “Notice on Designating the First Batch of International Commercial Arbitration and Mediation Institutions to Be Included in the One‑Stop Multilateral Dispute Resolution Mechanism” identifies five international commercial arbitration institutions—the China International Economic and Trade Arbitration Commission, the Shenzhen International Arbitration Centre, the Shanghai International Economic and Trade Arbitration Commission, the Beijing Arbitration Commission, and the China Maritime Arbitration Commission—as well as two international commercial mediation institutions—the China Council for the Promotion of International Trade Mediation Center and the Shanghai Economic and Trade Mediation Center—as the first batch of entities to be incorporated into the one‑stop platform’s multilateral dispute resolution mechanism. This provides institutional safeguards for the establishment of a one‑stop, multilateral mechanism for resolving international commercial disputes. The “Procedural Rules of the International Commercial Court of the Supreme People’s Court (Trial)” sets out the procedures governing the court’s acceptance of cases, service of process, pre‑trial mediation, case adjudication, enforcement, and support for arbitration‑based dispute resolution, while clarifying the coordination between litigation and mediation, and between judicial proceedings and arbitration. These rules are of great significance in guiding domestic and foreign parties to independently choose their preferred dispute‑resolution methods through the one‑stop mechanism, thereby ensuring that international commercial disputes are resolved fairly, efficiently, and conveniently. The “Working Rules of the International Commercial Experts Committee (Trial)” further specifies the committee’s functions and composition, the qualifications, duties, and obligations of its expert members, the responsibilities of the committee’s secretariat, the mechanisms for mediation and advisory services provided by expert members, and the measures to ensure the proper performance of their duties. These provisions ensure that the International Commercial Experts Committee operates in a systematic and well‑grounded manner. With the entry into force of these normative documents, the one‑stop, multilateral platform for resolving international commercial disputes—integrating litigation, arbitration, and mediation—has been officially completed and has entered the operational phase.

The symposium was chaired by Zhang Yongjian, Chief Judge of the Fourth Civil Division of the Supreme People’s Court, and attended by all judges of the Supreme People’s Court’s International Commercial Court, representatives of the International Commercial Experts Committee, as well as representatives from relevant arbitration and mediation institutions. During the meeting, Wang Shumei, Deputy Chief Judge of the Fourth Civil Division, read out the official notice, while Deputy Chief Judge Gao Xiaoli outlined the background, development process, and key provisions of two newly issued rules. Focusing on the theme of building a “one-stop” diversified mechanism for resolving international commercial disputes, participants engaged in thorough discussions on a range of issues, including intensifying publicity for the International Commercial Court, enhancing the international community’s awareness of the “one-stop” system, and strengthening coordination between arbitration and mediation institutions and the work of the International Commercial Court. They put forward constructive opinions and recommendations. All attendees afofficeed their commitment to the principles of extensive consultation, joint contribution, and shared benefits, each fulfilling their respective responsibilities and doing their utmost to jointly foster a fair, just, transparent, and convenient rule-of-law environment for international business.

Luo Dongchuan, a member of the Party Leadership Group and Vice President of the Supreme People’s Court, attended the meeting and delivered a speech. He commended the significant progress made in preparing to establish a “one-stop” diversified mechanism for resolving international commercial disputes, noting that the Belt and Road Initiative is both a grand vision for international cooperation put forward by General Secretary Xi Jinping and the largest public good China has offered to the world. Establishing and improving an international commercial dispute‑resolution system is of great importance for advancing the Belt and Road Initiative, appropriately settling disputes, and ensuring its steady and sustainable development. Mr. Luo emphasized that the first batch of international commercial arbitration and mediation institutions incorporated into the “one-stop” diversified mechanism should fully exercise their creativity and initiative, work in concert with the International Commercial Court and the International Commercial Experts Committee, carry out relevant tasks, and actively explore and experiment so as to make the “one-stop” mechanism truly effective, providing fair, efficient, convenient, swift, and low‑cost dispute‑resolution services to domestic and foreign parties. In addition, drawing on the functions and distinctive features of the International Commercial Court, Mr. Luo set forth clear requirements for accelerating the improvement of the Court’s case‑handling procedures, strengthening coordination and cooperation among legal service resources and information sharing, and intensifying publicity efforts for the International Commercial Court.

General Administration of Customs: Enterprise coordinators who disclose trade secrets will be disqualified.

On December 3, the General Administration of Customs issued the “Announcement on Matters Relating to the Implementation of Enterprise Coordinator Management” (hereinafter referred to as the “Announcement”), which shall take effect from January 1, 2019.

To implement the customs management philosophy of “enterprise‑centricity, extending from enterprises to goods,” foster a favorable credit environment characterized by integrity, lawfulness, and facilitation, and build a close yet clean cooperative relationship between customs authorities and enterprises, in accordance with the Measures for the Administration of Enterprise Credit of the Customs of the People’s Republic of China (General Administration of Customs Order No. 237) and other relevant provisions, the following matters concerning the implementation of the enterprise coordinator system by the customs authorities are hereby announced:

1. An enterprise coordinator is a customs officer designated by the directly affiliated customs authority, specifically tasked with coordinating matters between the customs authorities and enterprises that pertain to customs-related business.

II. The services of the enterprise coordinator are intended for Customs‑certified AEO enterprises.

III. The enterprise coordinator shall provide the following services to enterprises:

(1) Providing advisory services on customs policies, laws, and regulations;

(2) To hear and convey the legitimate demands of enterprises;

(3) Coordinate to resolve difficulties and issues encountered by enterprises in handling customs-related matters;

(4) Soliciting opinions and suggestions on customs administration;

(5) Provide guidance to enterprises on standardizing and improving their operations, and conduct publicity campaigns on integrity and compliance with the law.

(6) Provide guidance to enterprises in cooperating with customs administration;

(7) Responsible for other matters related to cooperation between customs and enterprises.

IV. Enterprises shall designate a senior management executive responsible for customs affairs as the contact person, who shall be tasked with communicating and coordinating with the customs authorities.

V. When enterprise coordinators are required to conduct on-site work at enterprises, they shall perform their duties in pairs; if circumstances exist that mandate recusal under the relevant regulations, the enterprise coordinator shall apply for recusal.

VI. The Customs shall revoke the qualification of an enterprise coordinator if any of the following circumstances applies:

(1) Those who have engaged in illegal activities or serious disciplinary violations;

(2) Violating customs regulations on integrity and other provisions, thereby seeking improper benefits for oneself or others;

(3) Disclosing state secrets, customs‑related work secrets, or enterprise trade secrets;

(4) Abusing customs authority by requiring enterprises to handle matters unrelated to customs‑enterprise cooperation;

(5) Failing to perform duties or unreasonably delaying the resolution of issues raised by enterprises;

(6) No longer possessing the professional qualifications required for enterprise certification;

(7) Those who, for other reasons, are no longer suitable to serve as enterprise coordinators.

VII. This Announcement shall take effect as of January 1, 2019.

Eleven departments have called for the categorized handling of “zombie enterprises” and the direct debts of enterprises undergoing capacity reduction.

The National Development and Reform Commission recently issued the Notice on Further Improving Debt Resolution for “Zombie Enterprises” and Enterprises Undergoing Capacity Reduction (NDRC Financial [2018] No. 1756), calling for the proactive yet prudent handling of debts owed by “zombie enterprises” and enterprises undergoing capacity reduction.

The notice stipulates that, based on factors such as the operating value, debt‑repayment capacity, and asset‑liability status of “zombie enterprises” and enterprises undergoing capacity‑reduction, their direct debts shall be disposed of through classified measures—namely bankruptcy liquidation, bankruptcy reorganization, debt restructuring, and merger‑and‑restructuring—in accordance with relevant laws and regulations. Local people’s governments at all levels and the respective state‑owned asset management authorities are required to finalize the first batch of lists for handling the debts of “zombie enterprises” and capacity‑reduction enterprises within three months of the issuance of this notice. In principle, all disposal work should be completed by the end of 2020.

Attachment: Notice on Further Improving the Handling of Debts of “Zombie Enterprises” and Enterprises Undergoing Capacity Reduction

To the People’s Governments of all provinces, autonomous regions, and municipalities directly under the central government; to the Xinjiang Production and Construction Corps; and to all member units of the Inter-Ministerial Joint Conference on Actively and Prudently Reducing Corporate Leverage Ratios:

In order to thoroughly implement Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era and the spirit of the 19th National Congress of the Communist Party of China, to win the tough battle of preventing and defusing major risks, to carry out the arrangements set forth at the Central Economic Work Conference, the National Financial Work Conference, and the Government Work Report, to further advance supply-side structural reform, to prudently and effectively address the debts of “zombie enterprises” and enterprises undergoing capacity reduction, to accelerate the exit of “zombie enterprises,” to effectively prevent and defuse corporate debt risks, and to boost the quality and efficiency of the economy, with the approval of the State Council, the relevant matters are hereby notified as follows.

I. Principles for Handling

(1) Adhere to market‑based and rule‑of‑law principles. Relevant market entities shall conduct debt resolution in accordance with these principles, adopt appropriate measures based on specific circumstances, independently negotiate and formulate resolution plans, and allocate disposal costs fairly and reasonably in compliance with the law. Fully respect creditor–debtor relationships and, in accordance with the law, safeguard the legitimate rights and interests of enterprise employees, creditors, shareholders, and investors.

(II) Fully leverage the government’s guiding role. Improve relevant systems and policies pertaining to debt resolution, accelerate the establishment of incentive and restraint mechanisms, and create a favorable policy and institutional environment for debt management. At the same time, strengthen organizational leadership and coordination efforts; for “zombie enterprises” and capacity‑reduction enterprises within the state‑owned sector, formulate comprehensive debt‑resolution plans with clearly defined deadlines, and encourage financial institutions and enterprises to proactively engage in debt‑resolution activities.

(3) Effectively guard against all types of risks in debt resolution. All tasks must be carried out in a prudent and orderly manner, with concrete measures to prevent moral hazards such as debt evasion and the risk of loss of state‑owned assets, thereby safeguarding social stability. Furthermore, financial risks associated with debt resolution should be closely monitored and promptly addressed and mitigated.

II. Scope of Disposal

(1) Direct debts of “zombie enterprises” and capacity‑reduction enterprises. These are debts in which the legal entities of “zombie enterprises” and capacity‑reduction enterprises serve as the borrowing parties, with clear creditor–debtor relationships.

(2) Unified borrowing of debt by “zombie enterprises” and capacity‑reduction enterprises. The corporate group serves as the borrowing entity, undertaking unified borrowing and repayment for debts that are actually allocated to “zombie enterprises” and to legally compliant, registered capacity‑reduction projects that have been phased out.

(3) Guarantee liabilities of “zombie enterprises” and enterprises undergoing capacity reduction. These are guarantee liabilities arising from guarantees provided by corporate groups or other third parties for loans extended to “zombie enterprises” and to legally compliant, in‑service capacity‑reduction projects that have been phased out.

III. Disposal Methods

(1) Implement differentiated treatment of the direct debts of “zombie enterprises” and capacity‑reduction enterprises. Based on factors such as their going‑concern value, debt‑repayment capacity, and balance‑sheet position, and in accordance with applicable laws and regulations, adopt appropriate measures—such as bankruptcy liquidation, bankruptcy reorganization, debt restructuring, or merger and reorganization—to address their direct debts on a case‑by‑case basis. For capacity‑reduction enterprises that possess sufficient repayment capacity, actively pursue recovery to effectively prevent malicious attempts to evade or default on debts.

(2) Separate the syndicated debt of “zombie enterprises” and capacity‑reduction enterprises, and incorporate it into direct debt resolution. Relevant enterprises and creditors may, upon mutual agreement based on the terms of the loan contract, the share of assets or operating revenue of “zombie enterprises” and capacity‑reduction enterprises within the corporate group, and the proportion of the capacity being reduced relative to the group’s total capacity, carve out from the group’s syndicated debt the portion actually allocated to these entities. The resulting segregated syndicated debt may then be treated as part of the direct debt of the “zombie enterprises” and capacity‑reduction enterprises for joint resolution.

(3) Autonomous negotiation to address the guarantee liabilities of “zombie enterprises” and enterprises undergoing capacity reduction. Enterprises and their creditors may, upon mutual agreement, release or partially release the guarantee obligations of enterprise groups or third parties. In particular, guarantee liabilities arising from guarantees provided for enterprises undergoing capacity reduction may be partially discharged based on factors such as the proportion of the reduced capacity relative to the total capacity of the enterprise group.

IV. Handling Procedures and Time Limits

(1) Establish a list of enterprises subject to debt resolution. People’s governments at all local levels and relevant state‑asset management authorities at each level shall, in accordance with the scope of disposal and based on actual conditions, regularly identify “zombie enterprises” and enterprises undergoing capacity‑reduction that require debt resolution, and promptly notify the relevant financial institutions and other creditors. Local people’s governments and relevant state‑asset management authorities that have not yet established lists of such enterprises shall, within three months of the issuance of this notice, designate the initial batch. Subsequent lists of enterprises to be addressed should be scheduled appropriately, with the goal of completing all disposal measures by the end of 2020, in principle.

(2) Formulate and implement a disposal plan. For “zombie enterprises” that still retain some operational value, as well as for capacity‑reduction enterprises whose asset‑liability ratios exceed reasonable levels and which face difficulties in repaying maturing debts, it is encouraged to engage in asset, debt, and business restructuring through the financial creditors’ committee mechanism, conducting autonomous negotiations with creditors. Support should also be provided for attracting strategic investors to facilitate mergers and reorganizations. All relevant stakeholders shall, within six months of the official designation of a “zombie enterprise,” reach consensus and formulate a restructuring plan. For “zombie enterprises” that meet the conditions for bankruptcy reorganization, local governments at all levels, the respective state‑owned asset management authorities, and financial regulatory agencies shall actively facilitate their entry into reorganization proceedings; the administrator or the debtor, in accordance with the relevant provisions of the Enterprise Bankruptcy Law, shall prepare a draft reorganization plan within six months, with a possible extension of up to three additional months. As for “zombie enterprises” that satisfy the criteria for bankruptcy liquidation, they must undergo compulsory bankruptcy liquidation.

(3) Follow-up measures for enterprises facing disposal difficulties. For “zombie enterprises” and capacity‑reduction enterprises that, after being placed on the disposal list, fail to reach a debt‑restructuring agreement within the prescribed time limit, or whose asset‑liability ratios remain persistently high due to other disposal challenges, those meeting the relevant criteria shall, in accordance with the regulations on strengthening asset‑liability constraints for state‑owned enterprises, be added to the list of key enterprises subject to asset‑liability ratio oversight. Their debt financing and other business activities shall be subject to strict restrictions, and such enterprises shall promptly formulate plans to reduce their asset‑liability ratios. Where bankruptcy conditions are met, they shall be transferred to bankruptcy proceedings for debt resolution.

V. Improving the Policy and Institutional Framework

(1) Support asset disposal and the revitalization of existing assets. While safeguarding against the loss of state-owned assets, further clarify and standardize procedures for the transfer of such assets, enhance approval efficiency, and refine rules governing the disposition of collateral associated with “zombie enterprises” and enterprises undergoing capacity‑reduction. Actively leverage a variety of mechanisms—including property rights exchanges, leasing, and asset securitization—to fully unlock the value of the effective assets of “zombie enterprises” and capacity‑reducing offices, thereby facilitating debt repayment.

(II) Implement and refine relevant financial and credit policies. For “zombie enterprises” whose debt resolution remains inadequate, whose asset–liability ratios persistently exceed reasonable levels, and which face difficulties in timely repayment of maturing debts, regulatory authorities should strictly enforce stringent conditions for extending loan maturities, rolling over loans, and granting new‑for‑old financing or guarantee‑backed loans involving affiliated entities; prohibit the provision of special regulatory policy support to such institutions; and impose appropriate disciplinary measures on financial institutions that engage in non‑compliant practices. Furthermore, ensure the effective implementation of policies aimed at reducing excess capacity and restructuring the debts of “zombie enterprises,” promptly verifying and writing off losses incurred during the debt‑resolution process, while also applying due‑diligence‑based liability exemptions. Strengthen financial support for mergers and reorganizations by encouraging financial institutions, under the premise of compliance with laws and regulations and within a controllable risk framework, to extend M&A loans and to facilitate eligible enterprises in issuing M&A notes and attracting M&A funds.

(3) Implement and refine relevant social security and fiscal‑tax policies. Improve the social security system and ensure that it fully fulfills its role as a safety net. Encourage localities with the necessary conditions to explore the establishment of multi‑channel funding mechanisms for bankruptcy expenses, to cover remuneration for administrators and other bankruptcy costs in cases where bankruptcy assets are insufficient to meet such expenses. Strictly prohibit governments from using fiscal subsidies to keep “zombie enterprises” afloat. Effectively implement existing tax‑support measures for corporate bankruptcy and reorganization, and, based on actual circumstances, conduct further research into related policies.

(4) Support the effective reuse of land. State-owned land lawfully acquired by “zombie enterprises” and enterprises undergoing capacity reduction may be reclaimed by local governments. The proceeds from the transfer of such land, after it has been reclaimed by people’s governments at all levels, may, in accordance with relevant regulations, be allocated through the budget to cover costs associated with the resettlement of enterprise employees. Provided that planning requirements and transfer conditions are met, land-use right holders may transfer their land-use rights in whole or in part; where such transfers involve a change in land use or the transfer of originally allocated land-use rights, approval may be obtained to handle the relevant land‑use procedures via negotiated agreements. For land repurposed for new industries and business models encouraged by the state, the original land use and type of land‑use rights may continue to apply for a period of up to five years.

(5) Improve the credit‑rehabilitation mechanism for reorganized enterprises. During the implementation of the reorganization plan, enterprises may apply to have relevant information added to the chronology entries on the National Credit Information Sharing Platform, the National Enterprise Credit Information Publicity System, and the Financial Credit Information Basic Database, thereby promptly reflecting their most recent production and operational status. Upon completion of the reorganization plan, enterprises may also apply to have additional information regarding the completion of the restructuring included, thereby signaling the enterprise’s restructuring progress.

VI. Organization and Implementation

(1) Establish a government–court coordination mechanism. Localities are encouraged to set up such mechanisms. No organization, institution, enterprise, or individual may obstruct or delay the filing of bankruptcy applications by enterprises that meet the statutory requirements or by their creditors. People’s courts at all levels are supported in accepting all types of bankruptcy applications in accordance with the law and on the basis of statutory criteria.

(II) Strengthen social credit-based constraints. For “zombie enterprises” and enterprises undergoing capacity‑reduction, establish credit records for those responsible for illegal and non‑compliant conduct such as malicious debt evasion or the loss of state‑owned assets during debt‑resolution processes, and incorporate these records into the National Credit Information Sharing Platform, the National Enterprise Credit Information Publicity System, and the Financial Credit Information Basic Database. Develop a joint punitive mechanism for untrustworthy behavior, and, in accordance with relevant laws and regulations, hold accountable—on a strict basis—the entities and individuals involved in such illegal and non‑compliant acts as malicious debt evasion and the loss of state‑owned assets.

(3) Clarify the responsible entities and ensure effective organizational coordination. “Zombie enterprises” and enterprises undergoing capacity‑reduction are the primary entities accountable for debt resolution. All localities shall establish working mechanisms for handling the debts of “zombie enterprises” and capacity‑reducing enterprises, designating lead departments. Each region must compile lists of “zombie enterprises,” formulate implementation plans, conduct comprehensive audits, and report the results. The National Development and Reform Commission, in coordination with the Ministry of Finance, the People’s Bank of China, the China Banking and Insurance Regulatory Commission, the State-owned Assets Supervision and Administration Commission, and other relevant departments and units of the Inter‑ministerial Joint Conference on Actively and Prudently Reducing Corporate Leverage, shall, leveraging these working mechanisms, undertake organizational coordination, promote progress, and carry out oversight and inspection of debt resolution for “zombie enterprises” and capacity‑reducing enterprises. This will help advance the ongoing deepening of supply‑side structural reform, with major issues reported to the State Council in a timely manner.

State Administration for Market Regulation: Piloting Reforms to Improve the Simplified Enterprise Deregistration Process

On December 6, the State Administration for Market Regulation issued the “Notice on Launching a Pilot Program to Further Improve the Reform of Simplified Enterprise Deregistration” (hereinafter referred to as the “Notice”), deciding to conduct pilot projects in Beijing, Baodi District of Tianjin, and the cities of Hangzhou and Ningbo in Zhejiang Province, among other locations, to further explore and refine the reform of simplified enterprise deregistration.

Among these measures, the Notice explicitly stipulates that the public notice period for simplified enterprise deregistration will be further shortened. Pilot regions, building on the “Guiding Opinions on Comprehensively Promoting the Reform of Simplified Enterprise Deregistration,” are to reduce the public notice period from 45 days to 20 days. Within 30 days after the expiration of the notice period, enterprises must apply to the registration authority for deregistration.

Attachment: “Notice on Launching a Pilot Program to Further Improve the Reform of Simplified Enterprise Deregistration”

Market Supervision and Administration Departments of Beijing Municipality, Tianjin Municipality, Zhejiang Province, Anhui Province, Fujian Province, Jiangxi Province, Shandong Province, Henan Province, Hubei Province, Hunan Province, Guangdong Province, Guangxi Zhuang Autonomous Region, Hainan Province, Sichuan Province, Chongqing Municipality, Guizhou Province, and Shaanxi Province:

To further deepen the reform of the business registration system and improve the market entity exit mechanism, in accordance with the requirements of the “Notice of the General Office of the State Council on Issuing the Division of Key Tasks for the National Teleconference on Deepening the ‘Delegation, Regulation, and Service’ Reform and Transforming Government Functions” (Guobanfa [2018] No. 79), and with a focus on addressing issues raised by enterprises—such as the limited scope of application for simplified deregistration, excessively long public notice periods, and low tolerance for errors in the registration process—the State Administration for Market Regulation has decided to launch pilot programs in Beijing; Baodi District of Tianjin; Hangzhou and Ningbo in Zhejiang Province; Wuhu and Bengbu in Anhui Province; Quanzhou in Fujian Province; Ganzhou and Jiujiang in Jiangxi Province; Jinan and Rizhao in Shandong Province; the Henan Pilot Free Trade Zone; the Hubei Pilot Free Trade Zone (Yichang Area) and the East Lake New Technology Development Zone in Wuhan; Yueyang in Hunan Province; Nansha District of Guangzhou, Shenzhen, Zhuhai, and Dongguan in Guangdong Province; Fangchenggang in the Guangxi Zhuang Autonomous Region; Hainan Province; Chengdu and the Sichuan Pilot Free Trade Zone (Southern Sichuan Port‑Related Area) in Sichuan Province; Dazu and Shapingba Districts of Chongqing; Guiyang in Guizhou Province; and Xianyang in Shaanxi Province, with the aim of further exploring and refining the reform of simplified enterprise deregistration. Relevant matters are hereby notified as follows:

I. Adhere to the pilot principles of convenience and efficiency, openness and transparency, and risk control.

Pilot programs should balance law-based administration with reform and innovation. In accordance with the principles of appropriate eligibility criteria and streamlined procedures, they should introduce innovative registration methods, optimize registration workflows, and enhance the efficiency of deregistration, thereby maximizing convenience for businesses. The application requirements, registration procedures, review standards, and review time limits for simplified enterprise deregistration must be made publicly available to improve predictability for enterprises. Upholding the presumption of good faith while imposing strict penalties for breaches of trust, these measures should reinforce enterprises’ obligations of integrity and their legal liabilities, prevent the malicious exploitation of simplified deregistration procedures to evade debts and harm creditors’ interests, and effectively safeguard transactional security.

II. Further Expand the Scope of Application for Simplified Enterprise Deregistration Procedures

Building on the “Guiding Opinions on Comprehensively Promoting the Reform of Simplified Enterprise Deregistration” issued by the former State Administration for Industry and Commerce (Document No. [2016] 253 of the SAIC, hereinafter referred to as the “Guiding Opinions”), market regulatory authorities in pilot regions shall further expand the scope of application of the simplified enterprise deregistration procedure. Specifically, non‑listed joint stock companies and all types of enterprise branches that have obtained a business license but have not yet commenced operations, and which either have no outstanding claims or debts prior to applying for deregistration, or have already completed the settlement of all such claims and debts, shall be subject to the simplified enterprise deregistration process. Similarly, farmer professional cooperatives and their branches that meet the aforementioned conditions shall, by analogy, be governed by the simplified enterprise deregistration procedure.

For a non‑listed joint stock company applying for simplified deregistration, it need only submit the Application Form, the Power of Attorney for the Designated Representative or Jointly Authorized Agent, the Undertaking Letter from All Promoters, and the original and duplicate copies of its business license. For branches of various types of enterprises applying for simplified deregistration, it need only submit the Application Form, the Power of Attorney for the Designated Representative or Jointly Authorized Agent, the Undertaking Letter stamped with the enterprise’s official seal, and the original and duplicate copies of its business license.

III. Further Shorten the Public Notice Period for Simplified Enterprise Deregistration

Pilot regions shall, on the basis of the “Guiding Opinions,” reduce the public notice period for simplified enterprise deregistration from 45 calendar days to 20 calendar days. Within 30 calendar days after the expiration of the notice period, enterprises shall apply to the registration authority for deregistration.

Pilot regions should leverage their advantages as pioneers, relying on an integrated government service platform to establish a dedicated online portal for business deregistration. Enterprises may independently choose either the standard or simplified deregistration procedure. By promoting inter‑agency business coordination and implementing “information sharing and synchronized guidance” across departments, they can deliver one‑stop online services for business deregistration, enabling enterprises to access, through a single platform, information on each stage of the process, its progress, and the final outcome. This will enhance the user experience and improve the efficiency of business deregistration procedures.

IV. Establishing a Fault-Tolerant Mechanism for Simplified Enterprise Deregistration

Where an enterprise applies for simplified deregistration, if, upon review by the registration authority, it is found to fall under any of the following circumstances—being listed on the List of Enterprises with Abnormal Operations; having its equity (investment interests) frozen, pledged, or subject to a pledge over movable property; or having an unregistered non‑legal‑person branch—the simplified deregistration procedure shall not apply. Once the abnormal status has been resolved, the enterprise shall be permitted to reapply for simplified deregistration in accordance with the prescribed procedures. With respect to enterprises whose commitment letters contain irregularities in wording or format, the registration authority shall accept their simplified deregistration applications after the enterprise has made the necessary corrections.

V. Further Strengthen Coordination with the Judicial Authorities

Market regulation authorities in pilot regions shall further strengthen communication and coordination with the people’s courts. Where a people’s court has issued a ruling on compulsory liquidation or a ruling declaring bankruptcy, the relevant enterprise may apply to the registration authority for simplified deregistration without undergoing the simplified deregistration public notice procedure. If an enterprise submits false documents to fraudulently obtain simplified deregistration, any interested party may, in accordance with the relevant provisions of the Supreme People’s Court’s Provisions on Several Issues Concerning the Application of the Company Law (II), petition the people’s court to safeguard its legitimate rights and interests.

VI. Effectively Strengthen Organizational Support for Reform Pilot Projects

Market regulation authorities in all provinces, autonomous regions, and municipalities directly under the central government shall strengthen overall coordination, provide effective guidance to pilot areas, and ensure that the pilot program for simplified enterprise deregistration is conducted in a standardized and unified manner. Pilot areas must earnestly reinforce organizational leadership, make meticulous arrangements and deployments, clearly define responsibilities and divisions of labor, and prioritize communication and coordination with the people’s courts, departments of human resources and social security, commerce, taxation, and other relevant agencies, so as to ensure seamless integration of tasks and the orderly implementation of all reform measures. In accordance with the “Guiding Opinions” and the requirements set forth in this notice, they should develop implementation plans for the pilot program, promptly adjust, refine, and detail relevant institutional measures and work procedures, and leverage information technology to enhance the corresponding functionalities of the National Enterprise Credit Information Publicity System, including the addition of reminder services for businesses. Furthermore, they should intensify publicity and outreach efforts, provide clear explanations of the pilot policies, and guide enterprises to select the appropriate deregistration method based on their specific needs.

Each pilot region shall officially launch the pilot program by the end of January 2019. With regard to any new circumstances or issues encountered in advancing the pilot reform of simplified enterprise deregistration, it is essential to collect and compile relevant information and promptly report it to the Registration Bureau of the State Administration for Market Regulation.

Taxation TAXATATION

Individuals’ income from the transfer of shares acquired after listing on the New Third Board, provided they are not original shares, is temporarily exempt from individual income tax.

Recently, the Ministry of Finance, the State Taxation Administration, and the China Securities Regulatory Commission jointly issued the “Notice on the Individual Income Tax Policy Concerning the Transfer of Shares in Companies Listed on the National Equities Exchange and Quotation System for Small and Medium-sized Enterprises” (Cai Shui [2018] No. 137).

Effective November 1, 2018 (inclusive), personal income derived from the transfer of shares acquired after a company’s listing on the New Third Board—provided such shares are not original shares—shall be temporarily exempt from individual income tax. Income derived prior to listing shall be taxed as “income from transfer of property” at a flat rate of 20%. Prior to September 1, 2019, the administration and collection of individual income tax on the transfer of original shares of companies listed on the New Third Board shall follow the existing provisions governing income from equity transfers, with the share transferee serving as the withholding agent and the tax authority at the location of the invested enterprise responsible for tax collection and administration.

Attachment: “Notice on the Individual Income Tax Policy Pertaining to the Transfer of Shares in Companies Listed on the National Equities Exchange and Quotation System by Individuals”

To the Finance Departments (Bureaus) of all provinces, autonomous regions, municipalities directly under the central government, and cities separately listed in the national plan; to the Tax Bureaus of all provinces, autonomous regions, municipalities directly under the central government, and cities separately listed in the national plan of the State Taxation Administration; to the Finance Bureau of the Xinjiang Production and Construction Corps; to the National Equities Exchange and Quotations Co., Ltd.; and to China Securities Depository & Clearing Corporation Limited:

To promote the long-term, stable development of the National Equities Exchange and Quotations System for Small and Medium-sized Enterprises (hereinafter referred to as the “New Third Board”), the following personal income tax policies regarding the transfer of shares in companies listed on the New Third Board by individuals are hereby notified:

I. Effective November 1, 2018 (inclusive), personal income derived from the transfer of non‑original shares in companies listed on the New Third Board shall be temporarily exempt from individual income tax.

For the purposes of this notice, “non‑original shares” refer to shares acquired by an individual after a company is listed on the New Third Board, as well as any bonus or capitalization shares issued in connection with such shares.

II. Income derived by individuals from the transfer of original shares in companies listed on the New Third Board shall be subject to individual income tax at a rate of 20%, classified as “income from the transfer of property.”

For the purposes of this notice, “original shares” refer to shares acquired by an individual prior to a company’s listing on the New Third Board, as well as any bonus or capitalization shares issued from such shares both before and after the company’s listing.

III. Prior to September 1, 2019, the administration and collection of individual income tax on the transfer of pre-IPO shares of companies listed on the New Third Board shall be governed by the existing provisions applicable to income from equity transfers, with the share transferee serving as the withholding agent and the tax authority at the location of the invested enterprise responsible for tax collection and administration.

Effective September 1, 2019 (inclusive), with respect to the individual income tax on the transfer of pre-IPO shares of companies listed on the New Third Board, the securities institution entrusted with custody of the shares shall serve as the withholding agent, and the tax authority having jurisdiction over the location of that securities institution shall be responsible for collection and administration. The specific rules and procedures for such collection shall be implemented in accordance with the relevant provisions set forth in the “Notice of the Ministry of Finance, the State Administration of Taxation, and the China Securities Regulatory Commission on Issues Concerning the Collection of Individual Income Tax on Gains from the Transfer of Restricted Shares of Listed Companies” (Cai Shui [2009] No. 167) and the “Supplementary Notice of the Ministry of Finance, the State Administration of Taxation, and the China Securities Regulatory Commission on Issues Concerning the Collection of Individual Income Tax on Gains from the Transfer of Restricted Shares of Listed Companies” (Cai Shui [2010] No. 70).

IV. Prior to November 1, 2018, for individuals who transferred non‑original shares of companies listed on the New Third Board and have not yet completed tax treatment, the provisions set forth in Article 1 of this Notice shall apply by analogy. Where relevant tax treatment has already been carried out, no further tax adjustments shall be made.

V. China Securities Depository & Clearing Corporation shall clearly distinguish between pre‑IPO shares and post‑IPO shares within its registration and clearing system. China Securities Depository & Clearing Corporation, securities offices, and their branches shall actively cooperate with the finance and tax authorities in carrying out related tasks.

State Taxation Administration: Currently studying and advancing substantive tax reduction measures, including VAT cuts.

Since the beginning of this year, tax authorities have earnestly implemented the Party Central Committee and the State Council’s decisions and arrangements to cut taxes and reduce burdens, continuously improving the tax-related business environment and providing stronger support for economic development and improvements in people’s livelihoods. The three measures to deepen VAT reform, rolled out successively from May 1 this year, resulted in a total tax reduction of RMB 298 billion between May and October; meanwhile, the personal income tax reform, introduced in October, delivered a tax cut of RMB 31.6 billion.

Under the impact of tax cuts, this year’s growth in tax revenue has exhibited a pronounced “high‑first, low‑later” pattern. In the first 11 months, tax revenues collected by national tax authorities—excluding export tax rebates—rose 9.5% year on year; specifically, growth stood at 16.8% during the first four months, but slowed to 4.7% from May to November, a decline of 12.1 percentage points compared with the earlier period. Moreover, from January to November, nationwide export tax rebates totaled RMB 1.3505 trillion, up 9.9% year on year—significantly outpacing the growth rate of exports over the same period. Zhang Bin, a researcher at the Institute of Financial Strategy of the Chinese Academy of Social Sciences, believes that a series of targeted tax‑incentive policies have delivered substantial and cumulative effects, effectively supporting steady economic growth in China.

The benefits of the VAT reform have resonated with businesses.

Lowering the VAT rate, refunding outstanding VAT credits, and unifying the threshold for small-scale taxpayers—these measures underscore the deepening of VAT reform, with a clear focus on the real economy, thereby providing robust support for advancing enterprise transformation and upgrading and accelerating development.

— The reduction in the value-added tax rate resulted in a net tax cut of RMB 179.4 billion. According to Lin Feng, Deputy Director-General of the Department of Goods and Services Tax at the State Taxation Administration, the VAT rate adjustment affected a total of 9.26 million general VAT taxpayers. Industries previously subject to 17% and 11% rates—such as manufacturing, transportation, and construction—generally saw tax reductions following the cuts to 16% and 10%, respectively. Among these, the manufacturing sector led in terms of tax relief: from May to October, cumulative tax reductions benefited 2.46 million manufacturing enterprises, yielding a net tax cut of RMB 71.45 billion, accounting for 39.8% of the total tax savings resulting from the rate reductions.

Sun Pishu, Chairman and CEO of Inspur Group, stated: “Since the implementation of the business tax-to-VAT reform, a series of favorable tax policies have bolstered confidence in the development of China’s information technology sector and provided strong impetus for enterprises to expand internationally and compete on the global stage.” Over the past five years, a package of tax‑cut and fee‑reduction measures has cumulatively reduced Inspur Group’s tax burden by RMB 2.44 billion. Notably, this year alone, the reduction in the VAT rate is expected to cut the company’s taxes by an additional RMB 130 million.

— A total of RMB 114.8 billion in value-added tax credit refunds was issued. In accordance with the State Council’s arrangements, this year, enterprises in advanced manufacturing sectors such as equipment manufacturing and in modern service industries that are prioritized for national support were granted VAT credit refunds, with a cumulative total of RMB 114.8 billion returned. Of this amount, RMB 106.1 billion—accounting for 92%—was allocated to advanced manufacturing and modern service industries.

Recently, John Deere (Tianjin) Co., Ltd. received a value-added tax credit refund totaling nearly RMB 90 million. Zhang Qing, the company’s CFO, expressed his excitement: “Going forward, we plan to allocate this refund to research and development of engines that meet China IV emission standards, as well as to upgrading our production lines, thereby driving product upgrades and quality improvements.”

— Tax reductions totaling RMB 3.8 billion were achieved by unifying the threshold for small-scale taxpayers. Effective May 1 this year, the annual sales threshold for VAT‑registered small-scale taxpayers was raised from RMB 500,000 to RMB 5 million. As of the end of October, more than 300,000 entities previously classified as general VAT taxpayers had re‑registered as small-scale taxpayers, resulting in tax savings of RMB 3.8 billion.

Li Wanfu, Director of the Tax Science Research Institute of the State Taxation Administration, explained that small and micro enterprises may, based on their specific circumstances and market demand, choose to register as small-scale taxpayers and pay taxes at a lower tax rate. Alternatively, they may opt to become general taxpayers, thereby enjoying the full deduction of input VAT, which upholds the principle of tax equity and effectively reduces the tax compliance costs for small and micro enterprises.

The personal income tax reform package will benefit middle- and low-income groups to a greater extent.

Since the personal income tax reform was implemented in October this year, the first filing period has proceeded smoothly. Income from wages and salaries paid in October, as well as production and business income earned by individual business households, have been duly reported. Data show that, following the conclusion of the first filing period, personal income tax reductions totaled RMB 31.6 billion, and more than 60 million taxpayers who were subject to the tax prior to the reform are now exempt from paying personal income tax on wage and salary income.

“This round of personal income tax reform has optimized the tax rate structure and significantly widened the brackets for lower and middle-income tax rates, ensuring that the benefits of the reform are more broadly shared by middle- and low-income earners,” said Luo Tianshu, Director-General of the Income Tax Department of the State Taxation Administration. He added that in October, taxpayers whose monthly salary and wage income was RMB 20,000 or less saw tax reductions exceeding 50 percent, accounting for 96.1 percent of all pre-reform taxpayers. The total tax relief amounted to RMB 22.4 billion, representing 70.9 percent of the month’s overall tax-cutting measures.

The implementation of the individual income tax reform has been widely praised within iFLYTEK. Based on the basic deduction of RMB 5,000 per month and the new tax rates, the company’s withheld and remitted taxes have dropped by approximately 45% following the reform. iFLYTEK Chairman Liu Qingfeng likened the new personal income tax policy to a “salary increase” for employees, funded by the state without raising employers’ labor costs.

Tax incentives supporting “mass entrepreneurship and innovation” provide further impetus for enterprise development.

Since the beginning of this year, tax authorities have continued to prioritize supporting “mass entrepreneurship and innovation” as a key pillar for fostering high-quality economic development. In the first ten months, the implementation of tax preferential policies in support of “mass entrepreneurship and innovation” resulted in tax reductions totaling RMB 678.9 billion, an increase of RMB 181.78 billion, or 36.6%, compared with the same period last year.

According to Zheng Xiaoying, Deputy Director-General of the Revenue Planning and Accounting Department of the State Taxation Administration, tax incentives supporting innovation—such as the reduced 15% corporate income tax rate for high-tech enterprises, additional deductions for R&D expenses, and accelerated depreciation of fixed assets—resulted in a total tax reduction of 472.7 billion yuan, up 38% year on year. Meanwhile, tax measures aimed at bolstering small and micro‑profit enterprises—including a 50% reduction in corporate income tax for eligible entities and VAT exemption for small and micro businesses with monthly sales below 30,000 yuan—generated tax cuts totaling 182.5 billion yuan, a 37.1% increase over the previous year, benefiting more than 30 million such enterprises. In addition, tax policies designed to promote entrepreneurship and employment led to tax reductions of 23.7 billion yuan, up 10.2% year on year.

A responsible official from the State Taxation Administration stated that, while fully and faithfully implementing existing tax preferential policies, the tax authorities will work closely with relevant departments to conduct in-depth research and, as soon as possible, put forward policy recommendations for tax reductions and burden alleviation that are broader in scope, more substantive, and more universally beneficial. In particular, they will promptly study and advance measures such as substantive VAT cuts and universal tax exemptions for small and micro enterprises and technology‑based start-ups, continuously enhancing the precision and effectiveness of tax policy implementation, and leveraging reductions in tax revenue to inject vitality and momentum into the high‑quality development of businesses.

Three departments: Positive progress has been made in regulating tax compliance within the film and television industry.

Recently, the State Taxation Administration, the National Radio and Television Administration, and the China Film Administration stated that efforts to standardize tax compliance in the film and television industry are progressing in an orderly manner, with film and television enterprises and relevant practitioners conducting thorough self-inspections and rectifications and proactively filing and paying their taxes.

To thoroughly implement the requirements of the notice issued by the Publicity Department of the CPC Central Committee and four other departments on addressing issues such as exorbitant actor fees and tax evasion through “yin-yang contracts” in the film and television industry, since the launch of efforts to standardize tax compliance in the sector this October, relevant authorities have carried out their work in accordance with laws and regulations, intensified policy briefings, provided meticulous guidance and notifications, and assisted taxpayers in conducting self‑inspections and rectifications. At present, these regulatory measures are being implemented in an orderly manner, with film and television enterprises and related professionals earnestly undertaking self‑examination and self‑correction and proactively filing and paying taxes. Through this initiative, the tax order within the industry will be further standardized, the legitimate rights and interests of law‑abiding taxpayers will be safeguarded, a fair and competitive tax environment will be fostered and maintained, and the healthy development of the film and television sector will be promoted.

Officials from the relevant departments emphasized that the state’s commitment to fostering the healthy development of the film and television industry will remain unchanged, as will its policies aimed at leveraging taxation to promote such development. Moreover, while strengthening regulatory oversight, the government will further enhance its services and support to accelerate the industry’s growth.

Relevant officials from the State Taxation Administration, the National Radio and Television Administration, and the China Film Administration reiterated that, in accordance with the Tax Collection and Administration Law and its implementing rules, film and television enterprises and related practitioners who conduct self‑examination and self‑correction and subsequently pay any outstanding taxes to their competent tax authorities will be exempt from administrative penalties and fines. It is hoped that the broader film and television industry will seize this opportunity to standardize its operations, proactively align with tax laws and regulations, and rigorously carry out self‑examination and self‑correction, thereby ensuring that both enterprises and individuals comply with tax obligations and uphold the principles of lawfulness and integrity. According to reporters, no formal interviews or related procedures were conducted during the self‑examination and self‑correction phase; instead, the tax authorities provided policy guidance and engaged in communication and clarification to help film and television enterprises and practitioners better undertake these efforts.

Under tax laws, income earned by individuals from film and television, performances, advertising, and similar activities must be reported and taxed as labor‑service income or other applicable categories. Regarding the past practice of some studios misclassifying such personal labor‑service income as studio operating revenue, officials from the three departments stated that a factual, case‑by‑case distinction must be made. Specifically, operating income attributable to ancillary services provided by the studio—already subject to assessed taxation in the past—will not be adjusted; all other personal labor‑service income will be reported accurately by the individuals concerned, with self‑assessment and self‑correction. At the same time, the three departments reiterated that local authorities must strictly adhere to laws and regulations, precisely interpret and implement relevant policies, and safeguard the legitimate rights and interests of film and television enterprises and their practitioners.

According to statistics, since July this year, the number of film and television enterprises deregistered nationwide has remained stable, while the number of newly registered companies has been on the rise. Meanwhile, both the quantity and quality of creative output in the industry have improved steadily, reflecting a favorable trend of stable development in China’s film and television sector. Industry experts note that standardizing tax compliance will help enhance financial management—covering areas such as remuneration, capital allocation, and accounting—and will undoubtedly foster the healthy growth of China’s film and television industry.

Wang Yi: China and the United States have agreed to halt the imposition of additional tariffs on each other.

State Councilor and Minister of Foreign Affairs Wang Yi recently held a briefing for Chinese and foreign media on the China-U.S. presidential meeting.

Wang Yi stated that on the evening of December 1, Chinese President Xi Jinping, at the invitation of U.S. President Donald Trump, dined with him and held a meeting in Buenos Aires. This meeting marked the second encounter between the two heads of state since their November last year summit in Beijing. In a friendly and candid atmosphere, the two leaders engaged in an in-depth exchange lasting two and a half hours—far exceeding the scheduled time. The meeting was highly successful, resulting in important consensus and charting the course for China-U.S. relations in the period ahead.

Wang Yi stated that, during their meeting, President Xi Jinping pointed out that, as two major countries, China and the United States shoulder increasingly significant joint responsibilities in promoting world peace and prosperity, and that cooperation is the best choice for both sides. The two heads of state agreed that China-U.S. relations must be managed well—and will indeed be managed well. Both sides pledged to advance a China-U.S. relationship characterized by coordination, cooperation, and stability. The two leaders will maintain close communication through visits, meetings, phone calls, and written exchanges, jointly steering the course of China-U.S. relations. The two sides will also arrange reciprocal visits at an appropriate time. Furthermore, both sides expressed their willingness to work together to achieve greater outcomes in exchanges and cooperation across all fields.

Wang Yi stated that the discussions between the two sides on economic and trade issues were highly positive and constructive. The leaders of both countries reached a consensus to halt the imposition of additional tariffs on each other. Both sides put forward a series of constructive proposals for appropriately resolving existing differences and outstanding issues. China is willing, in line with domestic market conditions and the needs of its people, to expand imports, including purchasing market‑oriented goods from the United States, thereby gradually easing the trade imbalance. The two sides agreed to further open their markets to one another and to address, in a step‑by‑step manner, the legitimate concerns of the U.S. side as China advances a new round of reform and opening-up. The working teams of both sides will, in accordance with the principled consensus reached by the two heads of state, intensify consultations with the aim of eliminating all additional tariffs and strive to conclude, at an early date, concrete agreements that deliver mutual benefits and win‑win outcomes.

Both sides agree that the aforementioned principled consensus is of great significance: it has not only effectively prevented further escalation of economic and trade tensions but has also opened up new prospects for mutually beneficial cooperation; it serves the development of both China and the United States and enhances the well-being of their peoples, while also contributing to the stable growth of the global economy and aligning with the interests of all nations. Facts have demonstrated that the common interests between China and the United States outweigh their differences, and the need for cooperation far exceeds the scope of friction. As long as both sides approach dialogue with a spirit of mutual respect, address each other’s concerns, and engage in earnest discussions on an equal footing, they can find solutions that deliver win‑win outcomes.

The two sides also agreed to take proactive measures to strengthen law enforcement and drug-control cooperation, including the regulation of fentanyl-related substances. The measures China has taken to date have received full recognition from the international community, including the United States. China has decided to place all fentanyl-related substances under comprehensive control and has initiated procedures to amend relevant regulations.

Wang Yi stated that China reafofficeed its principled position on the Taiwan question, while the U.S. side indicated it would continue to adhere to the one-China policy. The two sides exchanged views on the Korean Peninsula issue; China supports another meeting between the leaders of the United States and the Democratic People’s Republic of Korea, and hopes that both sides will move forward in tandem, address each other’s legitimate concerns, and advance in parallel the goals of complete denuclearization of the Peninsula and the establishment of a peace mechanism there. The U.S. side commended China’s constructive role and expressed its desire to maintain communication and coordination with China on this matter.

Wang Yi concluded by noting that, through this important meeting, the two heads of state have laid out a roadmap and charted the course for properly addressing the issues between China and the United States and for advancing bilateral relations. Both sides will, in accordance with the principles and directions set by the two leaders, take proactive measures, move forward in tandem, respect one another, focus on cooperation, manage differences, and work to ensure the long-term, healthy, and stable development of China-U.S. relations, thereby delivering greater and more tangible benefits to the peoples of both countries and to the world at large.

Litigation & Arbitration

The Supreme People’s Court has released ten exemplary cases of diversified dispute resolution in securities and futures matters.

On December 1, the Supreme People’s Court released ten exemplary cases of diversified dispute resolution in securities and futures matters. The cases include: a mass‑action dispute arising from fraudulent issuance by a listed company; a dispute between investors and a futures company and its branch offices over futures trading; a case in which notarized escrow resolved a dispute between investors and a securities office concerning wealth‑management products; and a series of default disputes involving bond transactions under fund‑managed asset products, among others—totaling ten cases.

I. Cases of Mass-Action Disputes Arising from Fraudulent Issuance by Listed Companies

Participating entities: Fujian Provincial Higher People’s Court, Liaoning Provincial Higher People’s Court, Fuzhou Intermediate People’s Court, Shenyang Intermediate People’s Court, China Securities Association, Shenzhen Stock Exchange, China Securities Investor Protection Fund Co., Ltd., and China Securities Depository & Clearing Corporation Limited.
I. Case Summary
In May 2016, X Co., Ltd., a company listed on the ChiNext Board, received a “Pre‑Notice of Administrative Penalty and Market Ban” from the China Securities Regulatory Commission due to false statements in its IPO application documents and false entries and material omissions in its periodic reports filed after listing. In August 2017, X Co., Ltd. was officially delisted. It became the first company to be delisted from the ChiNext Board and the first in China’s capital market to be delisted for fraudulent issuance. As a result of the company’s delisting, numerous investors incurred losses; failure to secure lawful compensation could trigger mass‑scale disputes involving many stakeholders, leading to a surge in claims litigation and complaints, thereby undermining the smooth implementation of the delisting process and jeopardizing the stability of the capital market.
To resolve the collective disputes between those responsible for fraudulent issuance and investors, XY Securities Co., Ltd. (hereinafter referred to as “XY Securities”), as the sponsor of X Company’s IPO, has decided to establish a special compensation fund with an initial size of RMB 550 million to compensate eligible investors for their investment losses. The China Securities Industry Association, together with the China Securities Investor Protection Fund Co., Ltd., the Shenzhen Stock Exchange, China Securities Depository & Clearing Corporation Limited, and XY Securities, has formed a Coordination Group for the Pre‑Compensation Program for Investors in X Company, tasked with advancing the formulation and refinement of the pre‑compensation plan and ensuring the effective implementation of all related measures. XY Securities has organized multiple expert review meetings and investor forums, extensively soliciting input from investors, regulatory authorities, members of the Coordination Group, legal experts, and financial engineering specialists, and has also sought guidance from the Supreme People’s Court, thereby conducting a comprehensive evaluation of the pre‑compensation plan.
Beginning in June 2017, after two phases of claim‑submission procedures and culminating in the transfer of funds for the second round of payouts completed in October 2017, a total of 11,727 eligible investors—representing 95.16% of all eligible investors—received compensation and reached a valid settlement with XY Securities. The total amount paid out amounted to RMB 241,981,273, or 99.46% of the aggregate sum originally due. Moreover, the preliminary compensation scheme in this case has been endorsed by the courts: the Fujian Provincial Higher People’s Court, the Liaoning Provincial Higher People’s Court, the Fuzhou Intermediate People’s Court, the Shenyang Intermediate People’s Court, and others have consistently applied the law in line with the preliminary compensation plan when adjudicating claims arising from XY Securities’ involvement in X Company’s fraudulent issuance.
II. Typical Significance
X Company’s investor‑first compensation represents the first instance in China’s capital market of a sponsor institution stepping forward to compensate investors for losses arising from a listed company’s fraudulent issuance and subsequent delisting, and it holds significant importance for advancing the pilot program on diversified mechanisms for resolving securities and futures disputes. With the support of the judicial system and regulatory authorities, and through the concerted efforts of the members of the Coordination Group for Advance Compensation and a broad array of securities offices, this initiative has progressed smoothly. By means of voluntary settlement, it has resolved disputes between operating institutions and issuers on one hand, and numerous investors on the other, thereby facilitating X Company’s orderly delisting. It has also prompted the relevant responsible parties to draw lessons, standardize their operations and management, and enhance their compliance awareness and risk‑control capabilities. As a result, no social tensions have been triggered by the delisting of the first listed company involved in fraudulent issuance, thus safeguarding the harmony and stability of both the capital market and society.

II. Case Studies on Disputes over Control of Listed Companies

Participating entities: Shenzhen Securities Regulatory Bureau, Shenzhen Securities and Futures Dispute Mediation Center, and Shenzhen International Arbitration Centre.
I. Case Summary
Company C and Company W were listed on the Shanghai and Shenzhen stock exchanges in 2002 and 2007, respectively. A dispute over control arose between the ultimate controllers of Company C and Company W, centering on issues such as Company C’s corporate governance structure, its business development strategy, and investments in major projects, thereby attracting widespread attention. With the active support of the Shenzhen Securities Regulatory Bureau, the Shenzhen Securities and Futures Industry Dispute Mediation Center (hereinafter referred to as the “Mediation Center”) formally accepted the case concerning the control dispute of Company C in December 2017.
In view of the case’s complexity, substantial interests at stake, and high public attention—factors that could undermine capital market stability and social harmony if mishandled—the Mediation Center, upon accepting the matter, specially formulated the “Special Guidelines for Mediation Procedures in Corporate Control Disputes.” Following selection by both parties and appointment by the Center, a mediation panel was established, comprising three seasoned legal and industry experts with deep expertise in capital markets. The panel members demonstrated exceptional professionalism and dedication, rigorously verifying and thoroughly scrutinizing the financial, legal, and other technical issues involved in the listed company’s equity transfer. Guided by the principle of voluntary participation, and with a focus on preventing and mitigating risks in the capital market while safeguarding the rights and interests of the listed company, its shareholders, and investors, they engaged in reasoned persuasion, emotional appeal, and strategic incentives. Over the course of four face-to-face mediation sessions and several rounds of “back-to-back” consultations, they progressively refined a concrete plan to resolve the dispute over corporate control. In January 2018, pursuant to resolutions passed by the boards of directors of both parties, Company C and Company W formally executed a settlement agreement, witnessed by the Shenzhen Securities Regulatory Bureau, the Mediation Center, and other relevant authorities. According to the listed company’s public announcement, Company C agreed to transfer a 75% equity interest in one of its subsidiaries to Company W, while Company W agreed to sell, through a contractual transfer at a premium, 74 million unrestricted tradable shares it held in Company C to a third-party entity. In March 2018, upon application by both parties, the Shenzhen International Arbitration Court constituted a sole arbitrator tribunal and promptly rendered an arbitral award in accordance with the terms of the settlement agreement.
II. Typical Significance
First, this case resolved the dispute over control through mediation, paving a new and replicable path for handling similar disputes in the future. In May 2018, building on the successful mediation experience in this case, the Mediation Center and the Shenzhen International Arbitration Centre jointly established the first “M&A Dispute Resolution Center” in China’s domestic capital market, aiming to strengthen research, prevention, and resolution of M&A disputes involving listed companies. Second, the Shenzhen Securities Regulatory Bureau, the Mediation Center, and the Shenzhen International Arbitration Centre collaborated closely to resolve, within a short period, a four-year-long dispute over control of a listed company, thereby fully demonstrating the advantages and effectiveness of an integrated dispute‑resolution mechanism—combining professional mediation, commercial arbitration, industry self‑regulation, and administrative supervision—in addressing complex conflicts in the capital markets. Third, following the mediation‑based settlement, both parties achieved a win‑win outcome: Company C optimized its equity structure, debt profile, and industrial mix, securing a favorable operating environment, while Company W transferred the relevant shares and committed to relinquish its claim to control, enabling it to focus more intently on developing its core business.

III. Case of Dispute over Compensation for False Statements between Investors and a Listed Company (I)

Participating entities: Shanghai No. 1 Intermediate People’s Court, Shanghai Securities Regulatory Bureau, and China Securities Investor Service Center Co., Ltd.
I. Case Summary
C Listed Company was subject to administrative penalties by the China Securities Regulatory Commission for making false statements by concealing material related-party transactions in its annual report. Pursuant to the Supreme People’s Court’s “Several Provisions on the Trial of Civil Compensation Cases Arising from False Statements in the Securities Market,” investors who purchased C Company’s securities between the date the false statement was made and the date it was disclosed, and who incurred losses either upon selling those securities after the disclosure or correction date or as a result of continuing to hold them, may bring claims against C Company. Subsequently, more than 100 investors filed lawsuits with the No. 1 Intermediate People’s Court of Shanghai, alleging that C Company had committed tortious acts through false statements in the securities market and seeking compensation for losses caused by the decline in the stock price. After accepting the case, the court referred it to the China Securities Investor Service Center for mediation.
Under the guidance and coordination of the Shanghai Securities Regulatory Bureau, the mediator conducted an in-depth analysis of the case and engaged in thorough discussions with both parties. The mediator determined that the key points of contention centered on the methodology for calculating losses arising from false‑statement torts and the appropriate deduction for systemic risk. Current regulations do not specify a clear approach to loss calculation; in practice, methods such as FIFO, weighted average, and moving weighted average are employed when determining the average purchase price of the relevant shares. Drawing on judicial precedents and practical materials, the mediator systematically compared the strengths and limitations of these methods and performed itemized calculations for each party’s preferred approach. Meanwhile, referencing the methodologies used in cases like the Foshan Lighting case and the Wanfushengke case to determine the proportion of systemic risk, the mediator also estimated the applicable deduction rate for systemic risk factors in this case. Given that investors were relatively unfamiliar with the legal framework governing false‑statement claims, the mediator patiently explained the relevant statutes and case law, helping investors fully appreciate both the inherent risks of stock market investing and the systemic risks of the equity market. The mediator further cautioned investors about the substantial time and effort required to resolve disputes through litigation and urged them to carefully weigh these considerations against C Company’s debt‑repayment capacity and its developmental needs, thereby fostering realistic expectations regarding the compensation they might receive. On the basis of this work, the mediator proposed a mediation plan. Ultimately, more than 100 investors and C Company formally signed the mediation agreement, with both sides expressing satisfaction with the outcome.
II. Typical Significance
The successful mediation in this case has set a positive example for resolving false‑statement disputes involving listed companies. First, it provides a convenient and efficient means of defusing conflicts. Such disputes typically involve a large number of investors spread across many regions and carry significant social implications; if handled improperly, they can easily trigger adverse effects—such as volatility in the company’s stock price—thereby undermining both corporate development and investors’ legitimate interests. Previously, these disputes were resolved through litigation, which is often fraught with difficulties in presenting evidence, lengthy proceedings, and substantial time and resource costs for all parties. By contrast, professional mediation helps strike a balance between safeguarding investors’ rights and maintaining market stability and corporate growth, fostering a win‑win outcome that brings cases to a close while promoting harmony among the parties. Second, it effectively conserves judicial resources. Following this case, numerous courts and relevant mediation organizations have established mechanisms for linking litigation and mediation, entrusting or assigning many dispute cases to mediation bodies for resolution. This approach facilitates swift dispute settlement, significantly reduces the burden on the judiciary, and enables investors to protect their rights at lower cost.

IV. Case Study on Compensation Disputes Arising from Misrepresentations by Investors and Listed Companies (II)

Participating entities: Nanjing Intermediate People’s Court, Jiangsu Securities Regulatory Bureau, and China Securities Investor Service Center Co., Ltd.
I. Case Summary
In November 2015, the China Securities Regulatory Commission initiated an investigation into H Listed Company (hereinafter referred to as “H Company”) and issued a Preliminary Notice of Administrative Penalty and Market Ban, finding that the company had engaged in failure to disclose information as required and made misleading statements, as stipulated in Article 193 of the Securities Law, and proposed imposing administrative penalties. In April 2017, a group of investors filed a lawsuit with the Nanjing Intermediate People’s Court (hereinafter referred to as “Nanjing Intermediate Court”), alleging that H Company had committed unlawful false statements and seeking compensation for their investment losses. The Nanjing Intermediate Court accepted these cases and entrusted the China Securities Investor Service Center (hereinafter referred to as “Investor Service Center”) to conduct mediation.
Under the guidance and coordination of the Jiangsu Securities Regulatory Bureau, the mediator thoroughly examined the case and engaged in active communication with both parties. On the one hand, the mediator informed Company H that, having already received the CSRC’s “Notice of Administrative Penalty and Market Ban” and held a hearing, the facts of the violation were essentially established. At the same time, the mediator emphasized that litigation and mediation are two distinct dispute-resolution mechanisms, each with its own characteristics: litigation is compulsory and public, with rigorous and complex procedures, whereas mediation is a consensual process conducted with the participation of an impartial third party, offering greater speed, timeliness, confidentiality, and flexibility. The mediator thus urged the company to weigh the advantages and disadvantages of each approach and encouraged it to proactively offer compensation, thereby achieving a more effective resolution of the dispute. On the other hand, the mediator explained to the investors that lawsuits involving false statements by listed companies typically involve lengthy proceedings. In such circumstances, reaching a settlement through mediation would enable investors to receive compensation sooner, saving considerable time and effort. Following several rounds of consultations and good‑faith facilitation led by the presiding judge and organized by the mediator, the parties reached a settlement agreement at the court in May 2017, under which the listed company paid settlement compensation, and the investors subsequently withdrew their lawsuit against the company. This case marked the first instance in the capital market of a civil mediation agreement being concluded prior to an administrative penalty in a matter involving compensation for false statements by a listed company.
II. Typical Significance
In this case, in accordance with the requirements of the case‑filing registration reform, the Nanjing Intermediate People’s Court accepted a dispute brought by investors against Company H for false statements, even though the China Securities Regulatory Commission had not yet issued an administrative penalty decision against the company, thereby safeguarding the parties’ right to bring suit. Under the guidance of the regulatory authorities, the Investor Service Center maintained close communication and coordinated efforts with the Nanjing Intermediate People’s Court, leveraging the flexible advantages of mediation to resolve the dispute. The Center also urged the company to proactively reach settlements with investors, thereby protecting the company’s public image and achieving a win‑win outcome.
The mediation mechanism in this case is groundbreaking, serving as a model for the timely and effective resolution of civil compensation disputes arising from false statements and for reducing the costs incurred by investors in protecting their rights. It also provides a successful practical exploration that advances the reform of the people’s courts’ case acceptance system and the administrative pre‑litigation procedure for securities‑related civil compensation cases.

V. Case Studies of Disputes Between Investors and Futures Companies and Their Branch Offices Regarding Futures Trading

Participating entities: the Supreme People’s Court, the Shandong Securities Regulatory Bureau, and the China Futures Association.
I. Case Summary
In the case in which the Supreme People’s Court was hearing a retrial application filed by applicant W in a dispute over futures trading with respondent H Futures Co., Ltd. and its JN Branch, and with the consent of both parties, the Court, in accordance with the relevant provisions of the “Notice of the Supreme People’s Court and the China Securities Regulatory Commission on Piloting a Multi‑Channel Dispute Resolution Mechanism for Securities and Futures Disputes in Certain Regions Nationwide,” entrusted the China Futures Association (hereinafter referred to as the “Futures Association”) to conduct mediation in this retrial matter.
In accordance with the Supreme People’s Court’s Regulations on Special Invited Mediation and the China Futures Association’s Code of Conduct for Mediators, the Futures Industry Association required in advance that any individuals with potential conflicts of interest recuse themselves throughout the entire process. Following joint selection by both parties and appointment by the Futures Industry Association, three industry experts and seasoned lawyers were designated as mediators in this case. To ensure the mediation proceeded smoothly, and with the consent of the parties, the mediation was held at the mediation room of the Xicheng District People’s Court, where court officers maintained order during the proceedings. At the first in-person mediation session, due to significant differences, the two sides were unable to reach an agreement. Guided by the principle of resolving disputes and putting an end to conflicts, the Futures Industry Association patiently counseled and provided detailed explanations to investor W, while also actively engaging with the Supreme People’s Court, the Shandong Securities Regulatory Bureau, and the futures company to persuade the latter to cooperate in the mediation. With the mediation efforts of the Supreme People’s Court and the Futures Industry Association, a second in-person mediation session was convened, at which the parties ultimately reached consensus and signed a mediation agreement. Based on this agreement, the Supreme People’s Court issued a civil mediation statement. H Futures Company and the JN Branch made a one-time compensation payment to the investor in the amount stipulated in the mediation agreement, thereby bringing the entire dispute to a final resolution.
II. Typical Significance
First, this case marks the first commercial dispute to be mediated under the auspices of the Supreme People’s Court. The concerted efforts of the court, regulatory authorities, and industry associations have doubled the effectiveness of dispute resolution. The successful settlement of the dispute between investor W and H Futures Company and its branch office was inseparable from the close collaboration among the court, regulators, and the association. The Supreme People’s Court has set a leading example by actively leveraging the litigation‑mediation linkage mechanism to resolve conflicts, providing guidance on the applicable law and logistical support for mediation, and swiftly issuing civil mediation agreements based on the parties’ agreed terms, thereby affording such agreements a higher level of legal protection. The local securities regulatory bureau maintained vigilant oversight, proactively encouraging both parties to adopt a flexible, mediation‑based approach to resolve their dispute and prevent escalation. Meanwhile, the futures industry association, as an industry‑wide mediation body, played a pivotal role as a bridge and “lubricant,” promptly easing tensions between the parties and facilitating a mutually satisfactory settlement.
Second, mediation demonstrates unique advantages in resolving securities and futures disputes. By fostering negotiation, dialogue, and mutual compromise, mediation offers a more flexible and efficient procedure at a lower cost, thereby meeting the needs of the parties and society for dispute resolution. In economic disputes within the financial sector—particularly where legal relationships are relatively complex and evidence‑gathering is challenging—resorting to mediation not only helps protect personal privacy and commercial secrets, defuse adversarial tensions, and minimize damage to the relationship between the parties, but also makes rational use of judicial resources, reduces public expenditures, and, by resolving the dispute, fosters improved social relations and promotes social harmony.

VI. Case Studies on Disputes Between Investors and Futures Companies Arising from Trading System Malfunctions

Participating entities: Xiamen Securities Regulatory Bureau, China Securities Investor Service Center Co., Ltd.
I. Case Summary
Investor Z opened a futures account with D Futures Company in 2017. In March 2018, while executing futures contract trades, Z discovered—due to a system malfunction—that they were unable to close their positions, resulting in financial losses. Consequently, Z entered into a dispute with D Company and sought compensation for the losses incurred.
Under the guidance and coordination of the Xiamen Securities Regulatory Bureau, mediators from the China Securities Investor Service Center conducted mediation in this dispute. First, after meticulously verifying the factual issues at the heart of the parties’ disagreement, the mediators concluded that, with respect to whether a system malfunction occurred, the principle of “who asserts must prove” assigns substantial responsibility to the investor for failing to promptly and properly preserve relevant evidence. At the same time, the statements made by D Company’s customer service representatives in responding to the investor’s inquiries also contained certain deficiencies. Second, in response to D Company’s argument that the trading system is provided by the futures exchange and that clients connect to the exchange via its interface, thus absolving the company of liability for client losses, the mediators carefully examined similar court rulings and conducted a thorough analysis of the allocation of responsibility. They pointed out that the trading system is a tool supplied by the company to enable investors to transmit trading instructions; accordingly, the company owes investors ancillary contractual obligations—including notification, assistance, and protection—and must exercise due diligence and good faith in fulfilling these duties.
Through the mediator’s explanation of the relevant legal provisions and analysis of practical cases, Company D acknowledged its own shortcomings but continued to dispute the amount of losses claimed by the investors. Following the mediator’s patient efforts to facilitate dialogue, the two parties reached a basic agreement on the loss amount. Company D compensated the investors by refunding a portion of the retention fees held in their accounts, thereby bringing the dispute to a satisfactory resolution.
II. Typical Significance
Today, trading securities and futures via computers and mobile devices has become the primary method for retail investors, and disputes arising from trading‑system malfunctions have emerged as a significant category in dispute‑resolution work. While the transaction amounts involved are typically modest, these cases pose considerable challenges to mediation, primarily because, when a system failure occurs, investors are often unable to pinpoint its cause and tend to attribute it broadly to the platform operator, leading to heightened emotional responses. Moreover, investors generally lack a strong awareness of evidence preservation and seldom furnish robust proof of the malfunction, resulting in a dearth of foundational documentation for mediation.
The successful mediation in this case provides a valuable reference for handling similar matters going forward. With respect to the allocation of liability, drawing on established judicial precedents, given that investors are typically in a weaker position and face genuine difficulties in preserving evidence, it may be appropriate to accord them a degree of favorable consideration. As for the form of compensation, since most cases involving system malfunctions involve relatively modest sums, and taking into account institutional financial constraints, institutions, while assuming their corresponding liabilities, can flexibly employ a variety of measures to compensate investors, thereby facilitating the conclusion of mediation agreements. At the same time, this case underscores the importance for investors, when confronted with similar situations, of enhancing their awareness of evidence preservation, so as to better safeguard their rights and interests.

VII. Case Study: Notarized Escrow as a Mechanism for Resolving Disputes Between Investors and Securities Offices in Wealth Management Product Transactions

Participating entities: Inner Mongolia Securities Regulatory Bureau, China Securities Investor Service Center Co., Ltd.
I. Case Summary
In May 2016, investor W was introduced by a third party to Z, the business manager of a branch office of H Securities Company. Accompanied by Z, W went to the branch where Z worked to open a securities account. The branch’s head informed W that Z was a star investment manager at the branch and that, for any investment needs, W could approach Z directly. Subsequently, W transferred large sums of money in three separate transactions to Z’s personal account, entrusting Z with purchasing wealth-management products on his behalf. In January 2018, investor W discovered that Z had not used the funds to purchase wealth-management products but had instead invested in stocks, resulting in substantial losses. W therefore sought compensation for his losses from the securities company’s branch. Both parties filed a request for mediation with the China Securities Regulatory Commission’s Small and Medium Investor Service Center (hereinafter referred to as the “Investor Service Center”).
Prior to the mediator’s intervention in this dispute, W and the securities office’s branch had engaged in multiple rounds of negotiations over compensation without reaching an agreement, leading W to lose confidence in the process and become increasingly agitated, thereby posing significant challenges to mediation. To rebuild trust between the two parties, the Investor Service Center innovatively proposed a mediation approach involving notarized escrow of funds. Under this arrangement, the securities office deposits a specified sum into a dedicated account held by a notary public; once the parties reach a settlement agreement and Z fulfills the obligations set forth therein, the notary may directly release the escrowed funds to Z. This approach places the initiative for mediation officely in the hands of investor Z, effectively calming Z’s emotions, facilitating a smoother negotiation process, and ultimately enabling a satisfactory resolution of the dispute.
II. Typical Significance
This case marks the first instance in capital market dispute mediation where notarized escrow of funds was employed to facilitate settlement. Following a dispute between an investor and a market‑operating institution, mutual trust eroded: during mediation, investors typically insisted on receiving compensation before fulfilling their agreed obligations, while the institution feared that, once it disbursed the relevant sum, it would lack effective recourse should the investor fail to honor the mediation agreement. Under such conditions of deep mistrust, advancing the mediation process proved exceedingly difficult. In response to the specific circumstances of this case, the Investor Service Center proposed the use of notarized escrow as a targeted solution, which played a pivotal role in brokering a settlement. First, establishing notarized escrow requires both parties to enter into a formal escrow agreement. Throughout this process, through negotiation and consensus‑building, a foundation of trust gradually takes shape prior to formal mediation, fostering a constructive atmosphere for subsequent discussions. Second, by depositing a specified sum in advance, the escrowor demonstrates genuine intent to resolve the issue, providing the investor with psychological reassurance and helping to ease the heightened tensions and adversarial stance between the two sides. Third, notarized escrow serves as an effective safeguard for enforcing the mediation agreement. Once the funds are placed in escrow under the supervision of the notary, the escrowor is precluded from retracting its commitment; upon fulfillment of the obligations set forth in the mediation agreement, the investor can securely and conveniently access the escrowed funds, thereby helping to protect the investor’s legitimate rights and interests in this case.

VIII. Case Study on Disputes Between Investors and Securities Brokerage Offices Regarding Commission Adjustments

Participating entities: Fujian Securities Regulatory Bureau, Fujian Provincial Securities and Futures Industry Association, and the Securities and Futures Arbitration Center of the Fuzhou Arbitration Commission.
I. Case Summary
Investor L reported to the Fujian Securities and Futures Association (hereinafter referred to as the “Association”) that he had applied to a certain securities branch to adjust his trading commission. Although customer service verbally agreed, no corresponding receipt or documentation was provided. Subsequently, L discovered that his commission had not been reduced and requested the branch to refund the overcharged amount. In response, the branch stated that it could not locate any records pertaining to L’s commission‑adjustment request and emphasized that front‑office staff are prohibited from informing clients of a commission adjustment without following the prescribed approval procedures; therefore, the branch declined to accede to L’s request.
At the request of both parties and under the guidance and coordination of the Fujian Securities Regulatory Bureau, the association’s mediators facilitated mediation of the dispute. First, they clarified the facts of the case by asking L to recount the circumstances surrounding the transaction and provide additional leads, while also verifying the details with the branch office and assessing whether its commission‑adjustment procedures were appropriate. Second, they examined the applicable legal framework, inviting both sides to hear the views of a professional lawyer on key issues such as the branch’s liability for failing to issue a receipt and the controversy over “compensation without evidence.” The lawyer concluded that commission adjustments constitute an agreement between the branch and the client to apply more favorable fee rates; current laws and regulations do not prescribe specific procedural requirements, and whether or not to issue a receipt is at the branch’s discretion, based on compliance and service considerations. Both parties accepted this analysis. Third, they worked toward reaching a consensus: on the one hand, urging the financial institution to assume primary responsibility for handling the complaint; on the other, actively engaging with the investor to encourage a rational resolution of the dispute. Following several rounds of discussions, the parties agreed on the basis and proportion for calculating the compensation amount, with the branch providing L with a settlement payment. They subsequently signed a mediation agreement. Fourth, the arbitration body conofficeed the outcome. To strengthen the legal enforceability of the mediation agreement, the association invited representatives from the Fuzhou Arbitration Commission to witness the signing and issue an arbitration award on the spot. Both parties expressed satisfaction with the mediated settlement.
II. Typical Significance
Commission disputes are a common type of service-related conflict in the securities market, often involving small sums of money, protracted resolution times, and significant time and effort. This case offers valuable lessons for leveraging mediation mechanisms to resolve such disputes. First, it emphasizes guiding both parties to focus on resolving the dispute itself. In this instance, neither party presented conclusive evidence, and existing regulations do not impose mandatory procedural requirements for commission adjustments. Accordingly, the mediator encouraged the parties to steer clear of debating the factual merits of the dispute and instead concentrate on identifying shortcomings in their own conduct, thereby working collaboratively toward a settlement. Second, it underscores the importance of standardizing mediation procedures. Throughout this case—ranging from the initiation of mediation and proposal of a settlement plan to the signing of an agreement and the witnessing of arbitration—the process adhered rigorously to established mediation protocols. The mediator upheld core principles of voluntariness, good faith, impartiality, and confidentiality, maintaining an independent third-party stance that facilitated a successful resolution. Third, it highlights the need for institutions to enhance their customer service. In this case, although the branch office followed five internal steps—from initial acceptance to final commission adjustment, including approval and review—it failed to provide clients with a receipt or proactively conoffice the outcome of the adjustment, thus failing to establish a robust risk‑control feedback loop and creating potential risks. Only by embedding a “customer‑centric” philosophy throughout the organization and continuously refining services at every stage—through policy development and process design—can financial institutions improve client satisfaction and fundamentally reduce the occurrence of such disputes.

IX. The First Case Applying the Small-Amount Expedited Mediation Mechanism

Participating entities: Beijing Securities Regulatory Bureau, China Securities Investor Service Center Co., Ltd.
I. Case Summary
In March 2014, investor W purchased a product under F Securities’ “Certain Collective Asset Management Plan.” At the time of promotion, the company explicitly stated that the product would “not directly invest in the secondary market.” In May 2014, the Shanghai and Shenzhen stock exchanges introduced new trading regulations requiring asset managers to increase their exposure to the secondary market. In August 2015, after the product distributed investment dividends, W made an additional investment. In November of the same year, the fund’s net asset value declined, prompting W to contend that F had unilaterally decided to expand its secondary‑market investments without the investor’s knowledge, thereby seriously breaching its prior commitments, and to seek compensation for losses. F argued that its decision to invest in the secondary market was prompted by the new trading rules, and that W, having become aware of this development, nonetheless proceeded with further investments; accordingly, F maintained that any profits earned by W should be offset against his losses when calculating damages. However, W contended that his investment gains represented legitimate returns and should be excluded from the calculation of his losses. With both parties steadfastly maintaining their positions and the dispute remaining unresolved, W filed a request with the China Securities Regulatory Commission’s Small and Medium Investor Service Center (hereinafter referred to as the “Investor Service Center”) to initiate mediation proceedings.
Under the guidance and coordination of the Beijing Securities Regulatory Bureau, the mediator conducted a systematic legal analysis of the parties’ points of contention. First, with respect to liability, in accordance with the Civil Procedure Law and the Supreme People’s Court’s Provisions on Evidence in Civil Litigation, Company F’s decision to adjust its investment strategy following the issuance of new regulations by the regulatory authorities constitutes a legally recognized ground for contract modification; however, this does not absolve it of its obligation to provide adequate notice. By failing to inform Party W of this change, Company F’s conduct was found to be defective. At the same time, Party W, having been aware that the product invested in the secondary market, nevertheless proceeded to make additional investments, thereby bearing some degree of responsibility as well. Accordingly, drawing on prior judicial precedents and applying the principle of fairness, the mediator determined that Company F and Party W shall bear 70% and 30% of the fault, respectively. Second, regarding the calculation of damages, the mediator invoked the principle of set‑off of gains and losses, as articulated in the Supreme People’s Court’s relevant guidelines on adjudication, holding that Party W’s investment returns should be offset against its losses when determining the total amount of harm suffered. Ultimately, the mediator proposed deducting Party W’s investment returns from the total loss and then multiplying the resulting figure by the 70% apportionment of fault, thereby arriving at a mediation settlement specifying the amount of compensation owed by Company F. Party W expressed acceptance of this proposal. Since all financial institutions operating within the Beijing jurisdiction have signed a memorandum of cooperation governing the application of the small‑claim, expedited mediation mechanism, the agreed‑upon settlement automatically became binding on Company F. The two parties subsequently executed the mediation agreement and fulfilled it on the spot.
II. Typical Significance
This case marks the first instance in the securities and futures market to apply the small‑amount, expedited mediation mechanism. In practice, many mediation disputes involving relatively modest sums and straightforward facts remain unresolved for extended periods, consuming valuable mediation resources while draining both parties’ time and energy. In response, the Investor Service Center, drawing on international best practices, has innovatively introduced a small‑amount, expedited mediation mechanism designed to provide preferential protection to retail investors. Specifically, for securities and futures disputes where the amount at stake is relatively low—typically under RMB 5,000 in most cases, and up to RMB 50,000 in certain localities—market participants, through self‑regulatory commitments, voluntary participation, and the signing of cooperation agreements, undertake to cooperate with mediation efforts: first, upon an investor’s request, the institution shall actively support the mediation process; second, the mediation agreement shall be binding only upon the investor’s consent, with the institution unconditionally accepting it and voluntarily complying; and third, if the investor does not accept the mediation outcome, the agreement shall have no legal effect on either party, leaving the investor free to pursue other available remedies.
The small-amount, fast-track mediation mechanism has opened up a new avenue for dispute resolution and for investors to obtain prompt compensation, enhancing the efficiency of mediation and serving as a valuable complement to other investor‑rights protection channels, such as administrative and judicial remedies. To date, this mechanism has been successfully piloted and rolled out in 18 provinces and municipalities, with numerous successful cases already reported in practice.

X. Case Study on a Chain of Default Disputes in Bond Transactions Involving Fund Asset Management Products

Participating Organizations: Beijing Xicheng District People’s Court, Asset Management Association of China
I. Case Summary
X Private Equity Fund’s Q Asset Management Plan engaged in bond trading in the interbank market, repeatedly employing a reverse‑repo structure and maintaining a high level of leverage. A significant portion of its holdings consisted of Bond A issued by Company D. Following the default on another bond issued by Company D, Bond A was marked to zero, leaving the asset management plan unable to borrow additional funds to repurchase it. Consequently, it could no longer conduct pledge‑based reverse repos to sustain other maturing transactions, thereby triggering a cascade of defaults across multiple reverse‑repo positions linked to other bonds held with various financial institutions. As a result, the entire asset management plan’s bond‑trading operations experienced a chain reaction of defaults, with the aggregate default exposure peaking at nearly RMB 1 billion. This dispute involves four public mutual funds, one private equity fund manager, one client, and one custodian securities office, making the legal relationships highly complex.
Regulatory authorities have imposed lawful supervisory measures on Fund X, the manager of the asset management plan, promptly implementing account supervision and transaction guidance to reduce the fund’s overall leverage ratio. However, numerous inter‑institutional disputes remain unresolved, with the total amount at stake still running into hundreds of millions of yuan. The parties are deadlocked, lacking mutual trust; some institutions have resorted to filing for arbitration and seeking judicial freezes, raising the risk of further escalation and posing significant systemic risks.
To safeguard the image and reputation of the fund industry, prevent the situation from spiraling out of control, and promote the fair and efficient resolution of related disputes, at the request of the parties involved, the Asset Management Association of China (hereinafter referred to as the “AMAC”) intervened six months after the dispute arose. It first worked to ease tensions and foster a more constructive dialogue among the parties, coordinating their application to suspend arbitration. Subsequently, AMAC dispatched a highly skilled and professional mediation team to conduct mediation efforts, engaged senior lawyers as legal advisors, and facilitated the establishment—under AMAC’s unified facilitation—of guiding principles for handling this bond‑investment default incident. Thereafter, mediators worked overtime, engaging in round‑the‑clock communication and coordination with all parties, and presided over dozens of one‑on‑one, one‑to‑many, and many‑to‑many mediation sessions. At critical junctures, mediators would make dozens of phone calls daily to seven different parties, and even during weekends or late at night continued to address and reconcile the parties’ respective demands. AMAC also established a litigation‑mediation linkage mechanism with the Xicheng District People’s Court of Beijing. With AMAC mediators and judges of the Xicheng District People’s Court serving as witnesses, all parties jointly signed a mediation agreement and obtained judicial conofficeation of that agreement. As a result, the dispute was effectively resolved in accordance with the terms of the mediation agreement.
II. Typical Significance
Mediating fund‑related disputes arising among members or between members and clients is one of the key responsibilities entrusted to the Asset Management Association by law. This case marks the first-ever dispute over bond transactions between association members, carrying significant industry‑wide示范 value. As a self‑regulatory body, the Association has proactively assumed a guiding role, actively exploring new models of mediation‑judicial cooperation with judicial authorities, and employing diversified approaches to resolve industry‑wide conflicts. On the one hand, the “industry mediation plus judicial conofficeation” framework has conserved judicial resources, enhanced the credibility of mediation, and swiftly and effectively reduced inter‑member tensions. On the other hand, through closed‑door internal resolution mechanisms—leveraging the Association’s industry‑wide public trust—the parties have been coordinated to allocate fund assets in an orderly manner according to principles of fairness, thereby resolving complex debt disputes, effectively containing the spillover of risks within the fund sector, and preventing isolated incidents from escalating into localized or even systemic risks.

The Supreme People’s Court overturned the original ruling in the “Bentley refund‑plus‑three‑times‑damages case”: the dealer did not engage in fraud.

Recently, the Supreme People’s Court issued its final judgment in the widely watched “Bentley ‘one refund, threefold compensation’ case,” overturning the first-instance court’s ruling ordering “one refund and threefold compensation” and instead awarding the car buyer 110,000 yuan in damages at the court’s discretion.

In the second half of 2014, a Guizhou-based car owner, surnamed Yang, purchased an imported Bentley valued at RMB 5.5 million. After using the vehicle for nearly two years, Mr. Yang discovered online that it had undergone two prior repair‑and‑reconditioning incidents. He concluded that the dealer had sold him a vehicle that had been extensively overhauled and thus suffered substantial losses. Consequently, he filed a lawsuit, seeking triple damages—RMB 16.5 million—plus the return of his purchase price and nearly RMB 6 million in vehicle acquisition tax. In October 2017, the court of first instance ruled that the dealer had failed to disclose the vehicle’s repair history, constituting fraud, and ordered the dealer to refund the purchase price and pay triple damages.

Following the judgment, the dealer appealed to the Fifth Circuit Court of the Supreme People’s Court in Chongqing. The China Automobile Dealers Association and the China Consumers Association each submitted their views to the court. The China Automobile Dealers Association argued that the pre‑delivery inspection procedure—commonly known as PDI—is an industry‑standard practice. Under this procedure, authorized dealers address minor defects identified prior to vehicle delivery in accordance with the manufacturer’s specifications and standards, treating such actions as the manufacturer’s responsibility, with the aim of ensuring that consumers receive a compliant new vehicle. In this case, the Bentley’s paint polishing and waxing, as well as the replacement of its curtains, fall within the scope of the PDI process. To further standardize the PDI procedure, the Association issued relevant guidelines in 2017. By contrast, the China Consumers Association contended that these guidelines do not bind consumers. Since the PDI process is conducted without informing consumers, it violates provisions of the Consumer Rights Protection Law, infringes upon consumers’ right to information, and constitutes fraud; therefore, the court should order the return of the vehicle and award triple damages based on the vehicle’s full purchase price.

After trial, the Supreme People’s Court ascertained that, prior to delivery, the dealer had polished and waxed a minor paint defect on one of the car doors—without involving bodywork or repainting—and replaced the window curtains with original imported parts. Both repair records were uploaded by the dealer to the relevant online platform. The Supreme People’s Court held that Mr. Yang’s claim that the paint polishing and waxing, as well as the curtain replacement, constituted a “major overhaul” and that the vehicle was defective is clearly inconsistent with the public’s reasonable understanding of what constitutes a “major overhaul.” The vehicle’s import documentation is complete, it has not been used by others, and the vehicle provided by the dealer conforms to the terms of the contract. Furthermore, there is no evidence to support Mr. Yang’s assertion of “substantial losses.”

The Supreme People’s Court held that, although window curtains are not considered critical vehicle components, the replacement of such parts does not involve a significantly low‑value item. Even when imported, genuine‑part replacements are concerned, the dealer is still required to disclose this fact truthfully. Moreover, given that the issue was clearly minor—posing no apparent threat to the vehicle’s safety, primary functions, or intended use—and did not adversely affect Mr. Yang’s daily driving, it did not impair his property interests. At the time the contract was signed, the vehicle had not yet arrived at the dealership, so the dealer was unaware of the minor defect; following its resolution, the dealer promptly recorded and uploaded the relevant information, demonstrating no subjective intent to conceal.

In light of the foregoing facts, the Supreme People’s Court held that the dealer did not engage in fraud and therefore was not required to pay “one refund and threefold compensation.” However, because the dealer failed to disclose the relevant information in a more direct, explicit, and convenient manner, it did to some extent infringe upon consumers’ right to know. Balancing the protection of consumers’ cognitive capacities and purchasing psychology with the encouragement and guidance of operators to promptly record and upload information, the Supreme People’s Court determined, at its discretion, that the dealer should compensate the consumer RMB 110,000.

According to the presiding judge in this case, in recent years, the number of automobile sales fraud cases in China has been steadily increasing. For clearly minor issues, such as failure to disclose information, this judgment offers an alternative resolution pathway, beyond the two prevailing approaches—either “refund one, compensate three” or no compensation at all. The outcome of this case holds instructive significance for the reasonable protection of consumers’ right to know and for the orderly development of the industry.

Other

Three departments: Implement tax policies to support entrepreneurship and employment among key groups.

The Ministry of Finance, the State Taxation Administration, and the Ministry of Human Resources and Social Security recently jointly issued the “Notice on Further Implementing Tax Policies Supporting Entrepreneurship and Employment for Key Groups” (Cai Shui [2018] No. 136).

Among these measures, policies supporting entrepreneurship and employment for key groups—including individuals who have been registered as unemployed for more than six months under Document No. 49 [2017] of the Ministry of Finance and the State Taxation Administration, college graduates within their graduation year, zero‑employment households, and registered unemployed persons of working age from families receiving urban subsistence allowances—will be fully implemented. Enterprises that hire rural residents registered as impoverished will be eligible for tax incentives in accordance with the provisions of Document No. 49 [2017].

Attachment: “Notice on Further Implementing Tax Policies for Entrepreneurship and Employment of Key Groups”

To the Finance Departments (Bureaus) and Human Resources and Social Security Departments (Bureaus) of all provinces, autonomous regions, municipalities directly under the central government, and cities separately listed in the national plan; to the Tax Service Bureaus of the State Taxation Administration in all provinces, autonomous regions, municipalities directly under the central government, and cities separately listed in the national plan; and to the Finance Bureau and the Human Resources and Social Security Bureau of the Xinjiang Production and Construction Corps:

To support and promote entrepreneurship and employment among key groups, the Ministry of Finance, the State Taxation Administration, and the Ministry of Human Resources and Social Security have issued the “Notice on Continuing to Implement Tax Policies Supporting and Promoting Entrepreneurship and Employment among Key Groups” (Cai Shui [2017] No. 49). To further ensure effective implementation of these policies, the relevant issues are hereby notified as follows:

I. Strengthen leadership and ensure meticulous planning to fully implement the entrepreneurship and employment policies for key groups, including individuals who have been registered as unemployed for more than six months, college graduates within their graduation year, zero‑employment households, and working-age registered unemployed persons from families receiving urban subsistence allowances, as stipulated in Document No. 49 [2017] of the Ministry of Finance and the State Taxation Administration.

II. Diligently implement the spirit of the Decision of the CPC Central Committee and the State Council on Winning the Battle Against Poverty, and ensure that enterprises that employ registered impoverished rural residents are eligible for tax incentives in accordance with Document Cai Shui [2017] No. 49, thereby contributing to the successful completion of the poverty alleviation campaign.

III. Fiscal, tax, human resources and social security authorities at all levels shall improve information-sharing mechanisms and streamline tax-processing procedures; proactively carry out policy publicity and clarification efforts to ensure that enterprises and vulnerable groups are informed of and fully understand the relevant policies; strengthen research and analysis, closely monitor the implementation of tax policies, and promptly address any difficulties or issues that arise in the course of policy execution.

State Council: Enterprises that refrain from laying off employees or reduce layoffs may receive a 50% refund of their unemployment insurance contributions.

On December 5, the State Council issued the “Several Opinions on Doing a Good Job in Promoting Employment in the Current and Next Period” (hereinafter referred to as the “Opinions”), which stipulates that insured enterprises that maintain or reduce their workforce may receive a refund of 50% of the unemployment insurance premiums they actually paid in the previous year.

The “Opinions” set forth key measures to promote employment for the present and the foreseeable future. First, support enterprises in maintaining stable development; second, encourage and assist employment and entrepreneurship; third, actively implement training programs; and fourth, promptly provide assistance to laid-off and unemployed workers. The document emphasizes the need to further enforce local governments’ primary responsibility for promoting employment, clarify the organizational and coordination duties of relevant departments, and launch special initiatives to boost employment. It also calls for robust policy implementation and service delivery, including the timely public release of policy lists and application procedures, as well as the establishment of a real-name‑based management and service information system. At the same time, enterprises and other stakeholders should be guided to fulfill their social responsibilities, working together to advance employment‑related efforts.

Attachment: “Several Opinions on Effectively Promoting Employment in the Current and Next Period”

To the People’s Governments of all provinces, autonomous regions, and municipalities directly under the central government; to all ministries and commissions of the State Council, and to all institutions directly affiliated with the State Council:

Employment is the most vital aspect of people’s wellbeing and a top priority for economic development. At present, China’s employment situation remains generally stable; however, with economic conditions undergoing changes amid mounting downward pressure, the implications for employment warrant close attention. It is imperative to place employment stability in an even more prominent position, thoroughly implement Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era and the spirit of the 19th National Congress of the Communist Party of China, and fully carry out the decisions and arrangements of the CPC Central Committee and the State Council on ensuring employment stability. We must steadfastly pursue the employment‑first strategy and adopt a more proactive employment policy, support enterprises in stabilizing jobs, promote employment and entrepreneurship, strengthen training and services, and ensure that both current and future employment targets are met while maintaining sustained stability in the employment landscape. To this end, the following recommendations are put forward:

I. Supporting the Stable Development of Enterprises

(1) Strengthen support for maintaining employment. For insured enterprises that do not lay off employees or reduce layoffs, 50% of their actual unemployment insurance contributions from the previous year may be refunded. From January 1 to December 31, 2019, for insured enterprises facing temporary production and operational difficulties but with prospects of recovery and committed to maintaining employment levels or minimizing layoffs, the refund amount may be determined either on the basis of six months’ local per capita monthly unemployment benefits multiplied by the number of insured employees, or on the basis of 50% of the social insurance contributions that the enterprise and its employees were required to pay over a six-month period. The aforementioned funds shall be allocated from the unemployment insurance fund. (The Ministry of Human Resources and Social Security and the Ministry of Finance are responsible; the entity listed first is the lead agency, the same applies hereinafter.)

(2) Leverage the role of government-backed financing guarantee institutions to support small and micro enterprises. Fully harness the functions of the National Financing Guarantee Fund and guide more financial resources toward entrepreneurship and employment. Local government-backed financing guarantee funds should give priority to providing low‑fee guarantee services to eligible small and micro enterprises, thereby enhancing their access to loans. (The Ministry of Finance, the Ministry of Industry and Information Technology, the People’s Bank of China, and the China Banking and Insurance Regulatory Commission are responsible.)

II. Encouraging and Supporting Employment and Entrepreneurship

(3) Strengthen support for interest subsidies and incentive‑reward policies on entrepreneurship guarantee loans. Individuals who meet the eligibility criteria may apply for an entrepreneurship guarantee loan of up to RMB 150,000 when starting their own businesses. Micro and small enterprises that, in the current year, hire new employees meeting the eligibility requirements in numbers equal to at least 25% of their existing workforce (or 15% for enterprises with more than 100 employees) and sign labor contracts with them for a term of one year or longer may apply for an entrepreneurship guarantee loan of up to RMB 3 million. Localities may, based on local conditions, appropriately relax the eligibility criteria for such loans; the associated interest subsidy costs shall be borne by local fiscal authorities. Furthermore, ensure that incentive‑reward policies are effectively implemented by awarding, at a specified percentage of the total amount of newly issued entrepreneurship guarantee loans in each locality during the year, institutions responsible for managing and operating the entrepreneurship guarantee loan fund, thereby encouraging them to further enhance their proactive efforts in supporting entrepreneurship and employment. (The Ministry of Finance, the Ministry of Human Resources and Social Security, the People’s Bank of China, and the China Banking and Insurance Regulatory Commission are responsible.)

(4) Support the development of entrepreneurship incubation platforms. Encourage localities to accelerate the construction of incubation facilities tailored to priority groups, providing entrepreneurs with low-cost premises, advisory services, and policy support. Based on the number of resident entities, the effectiveness of incubation, and the employment‑generation impact, appropriate awards and subsidies shall be granted to entrepreneurship incubation bases. In regions facing significant pressure to maintain stable employment, provide free business premises to unemployed individuals who wish to start their own businesses. (The Ministry of Human Resources and Social Security, the Ministry of Science and Technology, the Ministry of Finance, the Ministry of Housing and Urban–Rural Development, and the State Administration for Market Regulation, together with the people’s governments of all provinces, shall assume responsibilities in accordance with their respective duties.)

(5) Expand the scope of employment internship subsidies. Effective January 1, 2019, a three-year program to provide one million youth internships will be implemented; the eligibility for employment internship subsidies will be extended from college graduates who have graduated but remain unemployed to unemployed youth aged 16 to 24; unemployed youth will be organized to participate in employment internships lasting 3 to 12 months, with subsidies provided in accordance with relevant regulations, and the subsidy rates will be appropriately increased. (The Ministry of Human Resources and Social Security and other relevant departments and agencies are responsible.)

III. Actively Implement Training Programs

(6) Support enterprises facing difficulties in conducting on-the-job training for their employees. From January 1 to December 31, 2019, such enterprises may organize on-the-job training for their employees, with the necessary funds allocated from the enterprises’ employee education budgets in accordance with relevant regulations. Any shortfall, after being reviewed and approved by the local human resources and social security authorities, may be appropriately supported by employment subsidy funds. (The Ministry of Human Resources and Social Security and the Ministry of Finance are responsible.)

(7) Conduct training for unemployed persons. Support vocational schools (including technical colleges), general institutions of higher education, vocational training organizations, and eligible enterprises to provide skills‑based or entrepreneurship training to the unemployed. Provide vocational training subsidies to those who successfully complete the training; subsidy rates shall be determined based on training costs, duration, market demand, and attainment of relevant certificates. From January 1, 2019, to December 31, 2020, additional living allowances shall be granted during the training period to individuals facing significant employment difficulties and members of zero‑employment households. The living allowance may be claimed only once per person per year and cannot be received concurrently with unemployment insurance benefits. (The Ministry of Human Resources and Social Security, the Ministry of Finance, the Ministry of Education, and other relevant departments and agencies are responsible.)

(8) Relax the eligibility criteria for claiming the skills‑enhancement subsidy. From January 1, 2019, to December 31, 2020, the requirement that employees must have been covered by unemployment insurance for at least three years will be relaxed to one year or more. Employees who hold a professional qualification certificate or a vocational skills level certificate may apply for the skills‑enhancement subsidy in the locality where they are insured. The necessary funds will be allocated from the unemployment insurance fund. (Responsible: Ministry of Human Resources and Social Security, Ministry of Finance)

IV. Provide Timely Support to Laid-Off and Unemployed Workers

(9) Implement unemployment registration services at the place of permanent residence. Unemployed individuals may register with the public employment service agency in their place of permanent residence and apply to access local employment and entrepreneurship services, employment support policies, and tax incentives for entrepreneurship and employment targeting priority groups. In particular, older workers, persons with disabilities, and members of families receiving subsistence allowances may, at their place of permanent residence, apply to be recognized as having difficulty finding employment and thereby receive employment assistance. (The Ministry of Human Resources and Social Security, the Ministry of Finance, and the State Taxation Administration, together with the people’s governments of each province, shall assume responsibilities according to their respective duties.)

(10) Implement unemployment insurance benefits. Eligible unemployed individuals shall receive unemployment benefits from the unemployment insurance fund, and their individual contributions to basic medical insurance shall be paid out of the same fund. (Responsible: Ministry of Human Resources and Social Security, National Healthcare Security Administration)

(11) Ensure the basic livelihood of persons in need. Provide temporary living allowances to eligible laid-off and unemployed individuals experiencing financial hardship, with subsidy levels determined on a comprehensive basis according to household vulnerability and regional cost-of-living levels. Promptly include eligible households within the scope of minimum living security. Grant temporary assistance to those who meet the criteria for such aid. Through a combination of targeted measures, help those in need overcome and escape poverty. (The Ministry of Finance, the Ministry of Human Resources and Social Security, the Ministry of Civil Affairs, and other relevant departments and agencies shall assume responsibility in accordance with their respective duties.)

V. Implementing the Responsibilities of All Parties

(12) Implement the principal responsibility of local governments. People’s governments at all levels shall earnestly assume primary responsibility for promoting employment in their respective regions, establish a working mechanism led by government officials and involving relevant departments, adopt measures tailored to local conditions, and coordinate efforts to advance employment initiatives. They should implement tiered early warning systems, layered responses, and category-specific policies. Within 30 days from the date of issuance of these Opinions, the people’s governments of provinces, autonomous regions, and municipalities directly under the central government shall formulate and promulgate specific implementation measures, and, in consultation with relevant departments, reasonably determine, based on local realities and fiscal capacities, the scope of enterprises facing difficulties eligible for policy support, prioritize key groups requiring assistance, and set appropriate standards for subsidies and other benefits, ensuring that all policies are put into effect promptly. (Responsible: People’s governments of all provincial-level administrative units.)

(13) Clarify the responsibilities of relevant departments for organizational coordination. The Ministry of Human Resources and Social Security shall coordinate the formulation, implementation, and statistical monitoring of employment‑promotion policies. The Ministry of Finance shall increase financial support to ensure the effective implementation of these policies. Other relevant departments and units shall, in accordance with their respective functions and responsibilities, proactively introduce policies and measures to promote employment and entrepreneurship, launch more targeted initiatives conducive to job creation, and work together to advance employment‑related efforts. (Each relevant department and unit shall assume responsibility according to its assigned duties.)

(14) Effectively strengthen policy services. All localities and relevant departments shall proactively carry out policy publicity, publicly release lists of policies, application procedures, subsidy standards, service agencies and their contact information, as well as hotline numbers for supervision and complaints. They should also conduct in-depth briefings at enterprises to explain policies, identify difficulties, and provide targeted assistance. For enterprises facing hardship and for laid-off or unemployed individuals applying for employment and entrepreneurship support policies and services, a real-name management information system must be established. Procedures should be streamlined, supporting documentation simplified, and oversight strengthened to ensure that funds under all policies are disbursed promptly, efficiently, and in compliance with regulations, reaching the intended beneficiaries. (Relevant departments and units, as well as provincial people’s governments, shall assume responsibility according to their respective duties.)

(15) Guide enterprises and all other stakeholders to fulfill their social responsibilities. Encourage struggling enterprises to place greater emphasis on leveraging market mechanisms and economic tools, and to resettle and reassign employees through multiple channels—such as restructuring and diversifying production, providing training for job transitions, and supporting “mass entrepreneurship and innovation”—while handling labor relations in accordance with the law. Urge employees to take an active interest in the survival and development of their enterprises; where mutually agreed upon by struggling enterprises and their employees, measures such as negotiated wages, adjusted working hours, rotational shifts and rest periods, and on-the-job training may be adopted to preserve jobs and stabilize labor relations. Encourage workers to adopt a sound outlook on employment, proactively enhance their employability, and achieve employment or start their own businesses through their own efforts. Mobilize broad participation from all sectors of society to forge a concerted effort to stabilize and expand employment. (Relevant departments and units, as well as provincial people’s governments, shall assume responsibility according to their respective duties.)

A portion of the special subsidy funds for industrial enterprise restructuring shall be allocated and disbursed in a timely manner, to be centrally managed by local authorities and incorporated into employment subsidy funds, with dedicated use earmarked for current efforts to stabilize employment. Localities are required to review existing subsidy programs; while ensuring policy continuity and stability, they should consolidate and streamline subsidy schemes and delivery mechanisms to enhance the efficiency of fund utilization. Local governments shall promptly report to the Ministry of Human Resources and Social Security on the implementation of these guidelines, as well as any significant issues identified.

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