JC Master Legal News Issue 852

Key Takeaways for This Issue

The China Securities Regulatory Commission has approved the launch of options trading in natural rubber, cotton, and corn.

The China Securities Regulatory Commission has recently approved the Shanghai Futures Exchange to launch natural rubber options trading, the Zhengzhou Commodity Exchange to launch cotton options trading, and the Dalian Commodity Exchange to launch corn options trading. The official listing and trading dates for the natural rubber, cotton, and corn options contracts are January 28, 2019.

Premier Li Keqiang presided over the State Council Executive Meeting to address the issue of “difficulty in business deregistration.”

On January 2, Premier Li Keqiang of the State Council presided over an executive meeting of the State Council, which outlined measures to align with international best practices and upgrade comprehensive bonded zones, thereby establishing new high-standard platforms for opening-up. The meeting also decided to introduce facilitation reforms to address the pressing issue of “difficult business deregistration” raised by enterprises.

State Taxation Administration: Harness the Role of Tax-Related Professional Services to Support Personal Income Tax Reform

The State Taxation Administration recently issued the “Notice on Leveraging the Role of Tax‑Related Professional Services to Support Personal Income Tax Reform” (Tax General Letter [2018] No. 687).

The Supreme People’s Court has issued the Interpretation on Construction Engineering Cases, promoting the sound development of the construction market.

On January 3, the Supreme People’s Court issued the “Interpretation on Several Legal Issues Concerning the Adjudication of Disputes over Construction Project Contracting” (hereinafter referred to as the “Interpretation”), which took effect on February 1, 2019. The Interpretation sets forth provisions regarding the validity of construction project contracting agreements and the settlement of construction project payments, among other matters.

Ministry of Civil Affairs: Licensing for the establishment of elderly care institutions will no longer be required.

On January 3, the Ministry of Civil Affairs issued the “Notice on Implementing the Newly Amended Law of the People’s Republic of China on the Protection of the Rights and Interests of the Elderly” (hereinafter referred to as the “Notice”).

Table of Contents

Table of Contents

Finance & Capital Markets

The China Securities Regulatory Commission has approved the launch of options trading in natural rubber, cotton, and corn.

M&A and restructuring approval rate hits 85%—a major reshuffle in investment bank rankings.

Overview of Administrative Penalties Imposed by the China Securities Regulatory Commission in 2018

Supply Cut! Some A-share pharmaceutical companies have withdrawn from volume-based procurement, putting the tendering policy to the test.

For the first time in 15 years, Apple has cut its revenue forecast, sending shockwaves through the market.

Corporate & Commercial

Premier Li Keqiang presided over the State Council Executive Meeting to address the issue of “difficulty in business deregistration.”

Multiple departments have issued the “Guidance on Compliance Management for Enterprises Operating Overseas.”

China Banking and Insurance Regulatory Commission: Guiding Opinions on Regulating Off-site, Unlicensed Branches of Banking Financial Institutions

Two departments have abolished the “Certificate of Business Performance and Production Capacity for Processing Trade Enterprises.”

The Ministry of Housing and Urban–Rural Development has amended the Regulations on the Administration of Construction Enterprise Qualifications and other departmental rules.

The State Administration for Market Regulation is soliciting public comments on the “Regulations Prohibiting Monopolistic Agreement Practices.”

Taxation

State Taxation Administration: Harness the Role of Tax-Related Professional Services to Support Personal Income Tax Reform

The Standing Committee of the National People’s Congress has amended the Enterprise Income Tax Law and other laws.

China has promulgated the Customs Tariff of the People’s Republic of China (2019 Edition).

State Taxation Administration: 20 tax-related certification requirements have been abolished.

Litigation & Arbitration

The Supreme People’s Court has issued the Interpretation on Construction Engineering Cases, promoting the sound development of the construction market.

The Ministry of Public Security has issued rules on the collection and examination of electronic evidence in criminal cases.

In the Wenzhou “courier sexual assault” case, the defendant was sentenced to 3 years and 6 months in prison in the first instance.

Reply on How to Determine the Commencement Date of “Within Five Years” for Recidivists After Completion of Their Sentence

Other

Ministry of Civil Affairs: Licensing for the establishment of elderly care institutions will no longer be required.

The General Office of the State Council has issued the “Guiding Opinions on Fully Implementing the Administrative Law Enforcement Publicity System, the Full-Process Recording System for Law Enforcement, and the Legal Review System for Major Law Enforcement Decisions.”

Approval of the State Council on the Master Plan for Xiongan New Area, Hebei (2018–2035)

Finance & Capital Markets

The China Securities Regulatory Commission has approved the launch of options trading in natural rubber, cotton, and corn.

The China Securities Regulatory Commission has recently approved the Shanghai Futures Exchange to launch natural rubber options trading, the Zhengzhou Commodity Exchange to launch cotton options trading, and the Dalian Commodity Exchange to launch corn options trading. The official listing and trading dates for the natural rubber, cotton, and corn options contracts are January 28, 2019.

Natural rubber, cotton, and corn are key agricultural commodities in China. Since their launch, the corresponding futures contracts have maintained generally stable market performance, with broad participation from industrial clients and well‑demonstrated functional effectiveness. In recent years, spot prices for natural rubber, cotton, and corn have exhibited frequent volatility. The introduction of related options contracts can effectively address the personalized and sophisticated risk‑management needs of real‑economy enterprises, further reducing hedging costs. At the same time, this development helps lower farmers’ premium expenses under the “Insurance + Futures” pilot program, thereby better supporting agriculture, rural areas, and farmers, as well as the rural revitalization strategy.

The China Securities Regulatory Commission will urge the relevant futures exchanges to continue making all necessary preparations to ensure the smooth launch and stable operation of options on natural rubber, cotton, and corn.

M&A and restructuring approval rate hits 85%—a major reshuffle in investment bank rankings.

Since 2018, the China Securities Regulatory Commission has relaxed regulations and introduced supportive policies for mergers and acquisitions and restructuring of listed companies, launching a “small‑amount, fast‑track” review channel. As a result, more than 90% of M&A and restructuring transactions no longer require CSRC approval. Following October 2018, the number of reviewed M&A and restructuring projects surged. Recently, Vice Chairman Li Chao of the CSRC stated that, in the first eleven months of last year, the total value of such transactions reached RMB 2.3 trillion, up 42% year on year.

In 2018, the total value of M&A and restructuring transactions reached RMB 2.27 trillion. CITIC Securities, Huatai United Securities, CICC, and CSC Financial ranked first through fourth, with each securing over RMB 100 billion in advisory fees and collectively capturing a 43.93% market share.

Competition among small and medium-sized securities offices remains intense. Statistics show that 24 offices improved their rankings in terms of the total value of M&A and restructuring advisory transactions compared with the full-year results of last year, while another 19 saw their rankings decline.

Data show that in 2018, the top ten securities offices by deal value in the financial advisory business captured more than 60% of the M&A market share, with the top five accounting for 48.32% of the market.

CITIC Securities, Huatai United Securities, CICC, and CITIC Securities Investment Co., Ltd. ranked first through fourth, with each recording advisory‑related transaction volumes exceeding RMB 100 billion in 2018. However, the rankings shifted slightly compared with 2017: CITIC Securities and Huatai United Securities each moved up one spot, while CICC, which had topped the list in 2017, dropped to third place. CITIC Securities Investment maintained its fourth position, though its transaction volume increased.

CITIC Securities captured 13.07% of the market share, ranking first with a transaction value of RMB 160.954 billion, though this represented a 12.13% decline from 2017. Huatai United Securities accounted for 11.46% of the market, posting RMB 141.113 billion in transaction value—a 11.95% increase over 2017. CICC’s 2018 financial advisory transaction value totaled RMB 132.853 billion, roughly halving compared with the same period in 2017. Meanwhile, CITIC Securities Investment Banking saw its transaction value rise slightly by 6.13% year over year, surpassing the RMB 100 billion mark, while maintaining its position unchanged.

In 2018, the top 50 financial advisory offices accounted for RMB 1.16 trillion in transaction value, capturing 94.39% of the market share; in 2017, the same group of top 50 offices recorded RMB 1.44 trillion in transaction value, representing 97.92% of the market share.

Competition in the securities offices’ M&A and restructuring financial advisory business remains intense, with a major reshuffling of rankings in 2018. Statistics show that 24 intermediary institutions improved their positions in the ranking of transaction value for M&A and restructuring advisory services compared to the full year of 2017, with 12 of them climbing by 20 or more places.

Several small and mid-sized securities offices have seen significant improvements in both their transaction volumes and rankings. Huaying Securities increased its M&A and restructuring transaction value from RMB 700 million to RMB 31.584 billion in 2018, climbing from 69th place in 2017 to 11th—a gain of 58 spots. Huaan Securities advanced from 80th place in 2017 to 30th, with M&A and restructuring deal value reaching RMB 5.926 billion in 2018. Meanwhile, Zhongyuan Securities moved up from 74th place in 2017 to 26th in 2018, posting a transaction volume of RMB 8.837 billion that year.

It is also worth noting that Morgan Stanley and Merrill Lynch International, two foreign‑owned securities offices, did not participate in Chinese M&A transactions in 2017. In 2018, their respective deal volumes were RMB 18.838 billion and RMB 15.5 billion, ranking them 17th and 20th, respectively.

Orient Citibank Securities has emerged as the biggest dark horse, surging from 24th place in 2017 to 5th. In 2018, with M&A and restructuring deal value totaling RMB 54.113 billion, it captured a 4.39% market share—up 319.45% from its full-year M&A and restructuring volume in 2017.

Nineteen M&A and restructuring financial advisory offices saw their rankings decline, with five brokerage houses dropping more than 10 places (inclusive). These were Wanhe Securities, UBS Securities, Great Wall Securities, Dongwu Securities, and First Capital Underwriting & Sponsorship. Among them, UBS Securities reported M&A and restructuring advisory transaction value of RMB 6.084 billion in 2018, a year-on-year plunge of 85%, resulting in a 21-place drop in the rankings; First Capital Underwriting & Sponsorship recorded RMB 4.52 billion in such transactions in 2018, down 80% year over year, with its ranking falling by 20 spots.

In 2018, the CSRC’s M&A and Restructuring Review Committee reviewed a total of 144 applications for listed-company restructurings, of which 122 were approved and 17 were rejected, resulting in an approval rate of 84.72%.

A notable feature is that in 2018, the approval rate for M&A and restructuring reviews was significantly higher than that for IPO reviews. However, compared with the same period in 2017, both the number of reviewed applications and the approval rate declined. In 2017, a total of 176 companies’ M&A and restructuring projects were reviewed by the China Securities Regulatory Commission, of which 161 were approved, yielding an approval rate of 91.48%.

Among the 17 restructuring projects that failed to obtain approval from the China Securities Regulatory Commission, the primary reason was doubts about their ongoing profitability, including cases involving Digital China, COFCO Property (Group), Great Wall Film & TV, and Zhonghuan Shares, among others. For example, the asset‑acquisition proposal of Shenzhen Yuanwanggu Information Technology Co., Ltd. was rejected, with the M&A Review Committee citing “insufficient disclosure in the application materials regarding the sustainability of the target company’s projected revenues and its performance.”

From April to August 2018, the monthly review volume remained below 10 cases; starting in September, the monthly review volume increased significantly. For example, in October there were 20 reviews with an approval rate of 85%; in November, 19 reviews with a 100% approval rate; and in December, 21 reviews with an approval rate of 76.19%.

Since September 2018, the number of merger-and‑acquisition and restructuring reviews has risen sharply, a trend closely linked to the CSRC’s policy measures aimed at easing regulatory constraints and providing support. In addition to the streamlined, fast‑track review mechanism for small‑scale transactions, at the end of October the CSRC issued a statement emphasizing the need to create conditions that encourage listed companies to engage in share buybacks and M&A activities. On November 1, the CSRC announced a pilot program allowing targeted convertible bonds to finance M&A deals, thereby diversifying financing channels for such transactions. On November 9, the CSRC revised and released the “Q&A on Issuance Regulation—Regulatory Requirements for Guiding and Standardizing Listed Companies’ Financing Practices,” clarifying the regulatory framework for using raised funds to replenish working capital and repay debt: specifically, proceeds from rights issues, preferred stock offerings, or non‑public offerings with issuance targets determined by the board of directors may be entirely allocated to these purposes; for other fundraising methods, the portion earmarked for working capital and debt repayment must not exceed 30% of the total funds raised. The agency also adjusted the restrictions on the time interval between successive rounds of refinancing.

Overview of Administrative Penalties Imposed by the China Securities Regulatory Commission in 2018

The year 2018 marked the inaugural year for fully implementing the spirit of the 19th National Congress of the Communist Party of China. Over the past year, under the strong leadership of the CPC Central Committee with Comrade Xi Jinping at its core, the China Securities Regulatory Commission (CSRC) has taken Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era as its guiding principle, thoroughly implemented the spirit of the 19th National Congress and the Second and Third Plenary Sessions of the 19th CPC Central Committee, and resolutely carried out all decisions and arrangements of the CPC Central Committee and the State Council. Upholding a correct political stance, the CSRC has officely adhered to the reform direction of marketization, rule of law, and internationalization, placed the prevention and resolution of financial risks in a prominent position, and consistently pursued the principle of comprehensive, stringent, and law-based regulation. It has continuously strengthened regulatory enforcement, rigorously cracked down on all types of illegal and non-compliant activities in the capital markets. With the entire system united in purpose, coordinating closely, standardizing enforcement principles, pooling regulatory strengths, and enhancing the effectiveness of penalties, the CSRC has boldly confronted disorderly practices in the capital markets, maintained high-pressure deterrence, and imposed severe punishments without any leniency. Throughout the year, it issued 310 administrative penalty decisions, a 38.39% increase over the previous year, levied fines and confiscations totaling RMB 10.641 billion, up 42.28% year on year, and imposed market bans on 50 individuals, a 13.64% rise from the prior year. These efforts have effectively safeguarded the orderly functioning of the capital markets, robustly protected the legitimate rights and interests of investors, and provided strong support for the sound development of the capital markets in the new era.

Fifty-six cases involving violations of information disclosure were penalized. Among them, Jinya Technology artificially inflated its total profits by more than RMB 80 million through fictitious customers and forged contracts, while also falsely boosting bank deposits by approximately RMB 218 million and misreporting prepaid engineering payments totaling RMB 310 million, resulting in false statements in its 2014 annual report. Shanghai Putian, in an effort to close a profit gap and meet its earnings targets, engaged in sham transactions with multiple companies, inflating its total profits by nearly RMB 10 million and thereby making false entries in its 2014 annual report. Similarly, Shenglaida fabricated film and television copyright transfer transactions and fictitious government subsidies to falsely increase its net profit by RMB 15 million, leading to false statements in its 2015 annual report. These listed companies, driven by unlawful motives, employed various fraudulent schemes to make false entries in their disclosure documents, concealing the true state of their financial performance; given the severity of these offenses, the Commission has imposed strict enforcement measures in accordance with the law. Additionally, listed companies such as Luoping Zinc & Electricity, Shangfeng Cement, and Shanxi Sanwei were sanctioned for concealing material environmental pollution incidents that had resulted in administrative penalties or criminal investigations. Wuyang Construction, despite lacking the requisite conditions for issuing corporate bonds, submitted application materials containing false financial data to fraudulently obtain bond issuance approval, and failed to disclose, as required, changes in its annual audit office and related matters in its annual report—actions deemed particularly egregious and subject to a fine exceeding RMB 40 million. Furthermore, entities including Huaze Cobalt & Nickel, Changsheng Bio, Pangda Group, Sanfangxiang Shares, Jielong Industrial, Wanji Culture, Qinshang Shares, Longbao Ginseng & Deer Antler, Xinjiang Haoyuan, Jinyang New Materials, and ST Yangfan were all penalized for failing to disclose, in compliance with regulations, significant matters such as related-party transactions, share pledges, and external guarantees. The truthfulness, accuracy, completeness, and timeliness of information disclosure constitute a vital foundation for the sound functioning of the capital market and a statutory requirement for fully safeguarding investors’ right to know. Through rigorous enforcement, the Commission is urging issuers, listed companies, and their major shareholders, actual controllers, directors, supervisors, and other responsible parties to earnestly fulfill their legal obligations regarding information disclosure, thereby continuously strengthening the institutional underpinnings of the capital market’s healthy development.

A total of 38 market‑manipulation cases were penalized. Among them, Beiba Dao controlled 301 securities accounts, including margin‑financing accounts, to manipulate multiple stocks, with total fines and confiscations exceeding RMB 5 billion; Gao Yong leveraged funds through trust schemes and other means to manipulate “Jinghua Pharmaceutical,” resulting in combined fines and confiscations of RMB 1.795 billion; Wang Facu used 344 securities accounts and margin‑financing capital to manipulate three stocks, incurring fines and confiscations totaling RMB 1.389 billion; Fuxing Group and Li Weiwei entered into wealth‑management agreements, successively controlling and utilizing 25 institutional accounts and 436 individual accounts, and employed highly leveraged margin financing to concentrate financial resources and drive up stock prices, thereby manipulating “Dalian Electric Porcelain”; Beijing Daguan controlled four trust‑product accounts and one income‑swap product account to manipulate the stock of “Zhejiang Dingli.” All these cases involved leveraged manipulation, with a large number of accounts implicated and frequent reliance on margin financing to amplify financial advantages, seriously undermining the order of the capital market, and have therefore been severely punished by our Commission. Additionally, new types of market‑manipulation cases—such as Donghai Hengxin’s manipulation of four ETFs, including the 180ETF; the collusive manipulation of 14 New Third Board stocks by Wang Shiming and Chen Jie; and Chen Xian’s manipulation of government bond prices—have all been rigorously investigated and prosecuted in accordance with the law. Recidivist manipulators like Ren Liangcheng and Ma Yongwei, who repeatedly defy legal authority despite repeated admonishments, have likewise been sanctioned in line with the law. Furthermore, typical cases such as Liao Yingqiang’s use of his influence as a well‑known securities program host to engage in “hat‑grabbing” manipulation, and He Simo, the de facto controller of a listed company, who implemented “information‑based” manipulation by issuing proposals for high‑ratio stock dividends and share transfers, have also been subject to strict legal penalties. Market‑manipulation practices distort security prices, obscure the true supply‑and‑demand dynamics of the market, send false market signals, and deliberately defraud small and medium investors. Leveraged manipulation, in particular, amplifies and propagates systemic risks, gravely undermining the fair and orderly development of the capital market. Such conduct must be met with severe punishment: no matter how sophisticated the methods or how concealed the violations, it will ultimately face stringent legal sanctions.

A total of 87 cases involving insider trading were penalized. Among them, 57 involved insider information related to asset mergers and reorganizations, underscoring that this area remains a hotbed for such violations. M&A and restructuring activities typically entail lengthy planning periods, broad stakeholder involvement, and significant market impact, making them particularly susceptible to exploitation by wrongdoers seeking illicit gains. Several high-profile insider‑trading schemes—such as those involving the stocks of Han Ding Yu You, Changying Precision, and Silan Micro—exhibited the hallmark of “group‑based” offenses. Centered on information pertaining to the same M&A or restructuring transactions, certain insiders, blinded by personal gain, disregarded professional ethics and abused their informational advantages to deliberately infringe upon investors’ legitimate rights and interests. Meanwhile, others leveraged special relationships or direct contact with insiders to illegally obtain confidential information in an attempt to reap unlawful profits; all such conduct has been rigorously prosecuted by our Commission in accordance with the law. In addition, individuals including Ong Huiping, Huang Bingwen, Xu Haixia, and Lü Xingping were likewise severely sanctioned for disclosing inside information in violation of the law. Through robust regulatory enforcement, we seek to caution those in positions of informational advantage to exercise utmost prudence and self‑discipline, while warning all relevant parties against pursuing so‑called “inside tips.” The law is both comprehensive and unforgiving: every instance of insider trading leaves a trace and will ultimately be met with strict legal consequences.

Thirteen penalty cases were imposed for violations committed by intermediary institutions. Among them, securities offices such as Guoxin Securities, Zhongyuan Securities, and Orient Citic, acting as financial advisors in asset‑merger and reorganization projects, failed to exercise due diligence in fulfilling their verification obligations during the course of their professional work, resulting in false statements or material omissions in the relevant financial advisory reports; these offices were subject to serious investigations and sanctions by our Commission. Accounting offices including Dahua, Lixin, and Zhongtianyun, serving as auditors for listed companies’ related business, likewise failed to perform audit procedures with due care, leading to false entries in the corresponding audit reports, and were accordingly penalized in accordance with the law. Furthermore, valuation agencies such as Wanlong Appraisal, Zhongqi Hua Appraisal, Zhonghe Appraisal, and Yin Xin Appraisal, in the course of their valuation engagements, neglected to exercise due diligence, causing their valuations to be either overstated or understated and producing appraisal reports containing false statements or misleading representations; these entities were likewise sanctioned by our Commission in compliance with the law. Our Commission is employing robust regulatory enforcement to ensure that intermediary institutions remain true to their original mission as market “gatekeepers,” return to the fundamental goal of sound industry development, and diligently and prudently fulfill their statutory duties. We will resolutely impose severe penalties on institutions and practitioners who breach their fiduciary obligations, thereby effectively safeguarding and regulating the orderly development of the industry.

Ten administrative penalties were imposed in the private‑fund sector. Among them, Wen Hong, Investment Director at Tuopu Company, Liu Xiaodong of Fandé Fund, and others exploited their access to fund account trading information to engage in “rat trading,” gravely breaching their fiduciary duties and professional ethics; accordingly, our Commission applied the Securities Investment Fund Law to impose sanctions in accordance with the law. Tongjin Investment manipulated the share price of “Yongyi Shares” by controlling and using its own privately‑raised fund accounts as well as other accounts; Fuli Wealth failed to disclose and report as required when the proportion of shares it held in a listed company through its private funds reached 5%; and Xinshen Wealth, despite the fact that the funds raised for Xintuobao No. 1 had not yet been fully secured, submitted false information and materials during the filing process. All these cases were investigated and dealt with in accordance with the law. In recent years, while the private‑fund industry has experienced rapid growth, related violations have become increasingly common. Some private‑fund institutions and practitioners exhibit weak compliance awareness and a lack of integrity, deviating from value investing in favor of short‑term speculation. Their business practices repeatedly cross legal red lines; moreover, some even exploit fund products to engage in market manipulation, insider trading, and trading based on non‑public information—actions that seriously disrupt market order. Our Commission will continue to strengthen oversight of the private‑fund sector. By rigorously cracking down on all types of illegal and non‑compliant conduct, we will resolutely curb the recurrence of such violations, encourage private‑fund institutions and their personnel to cultivate a mature and prudent institutional investor culture, adhere to lawful and trustworthy operations, enhance risk‑management capabilities, reinforce compliance and contractual‑obligation awareness, and improve the industry’s ability to serve the real economy.

Thirteen cases of short-term trading were penalized. Among them, Wu Guangming, as chairman of Yuwell Medical and Wandong Medical, controlled other persons’ securities accounts to engage in short-term trading of “Yuwell Medical” and “Wandong Medical”; Wang Qing, while serving as a director of Morn Electric, engaged in short-term trading of “Morn Electric”; Lu Weizhong, during his tenure as deputy general manager of Jixin Technology, engaged in short-term trading of “Jixin Technology”; and Ke Rongqing, as a shareholder holding more than 5% of Rongjie Shares, engaged in short-term trading of “Rongjie Shares.” All such individuals have been held legally accountable by our association in accordance with the law. The legal prohibition on short-term trading is intended not only to curb the abuse of informational advantages by insiders of listed companies but also to serve as a necessary preventive measure against insider‑trading violations, thereby safeguarding the legitimate rights and interests of small and medium investors who are at an information disadvantage and upholding a fair, just, and transparent market order. Regrettably, some directors, supervisors, senior management personnel, and major shareholders of listed companies lack compliance awareness, violating the ban on short-term trading by trading their own company’s shares for improper gains, and will inevitably face severe legal sanctions.

A total of 24 cases involving violations of laws and regulations by industry practitioners have been penalized. Among them, securities professionals Hang Wuyi, Jiao Yumiao, Yao Yiyu, and others illegally traded stocks using other people’s securities accounts in an attempt to evade legal sanctions; all were duly sanctioned in accordance with the law. Similarly, Jiang Lehui, Huang Yongqi, Xu Kang, and others privately accepted clients’ instructions to execute securities transactions in violation of statutory prohibitions and were likewise punished as prescribed by law. Furthermore, Du Yi, Xie Jing, He Wenzhe, and others, while simultaneously accepting clients’ mandates to trade securities, also borrowed others’ accounts to engage in unauthorized stock trading, demonstrating a profound lack of compliance awareness; they too were severely punished in accordance with the law. Securities professionals are key participants in the development and sound functioning of the capital market, and adherence to laws and regulations is the most fundamental professional requirement. However, some practitioners, driven by illicit gains, disregard statutory prohibitions and show indifference to professional ethics, necessitating the full pursuit of their legal liabilities. Our Commission will continue to enforce the law rigorously to address disorderly practices in the industry, urge practitioners to strengthen their compliance awareness, maintain due respect for the law, and ensure the industry’s healthy and orderly development.

In addition to the aforementioned cases, the Commission has also imposed administrative penalties in accordance with the law on more than 50 other types of violations, including fabricating and disseminating false information, holding shares in excess of the statutory limit without disclosure, unauthorized use of another person’s account by a legal entity, and unlawful conduct in the futures market.

Over the past year, the China Securities Regulatory Commission (CSRC), through rigorous and law-based regulatory enforcement, has cracked down hard on all types of securities and futures violations, effectively deterring wrongdoers, decisively addressing market disorder, and guiding market participants to respect the law and uphold bottom lines. As a result, the market’s ecological environment has been purified, its legal foundation has been strengthened, and the bulwark against systemic risks has been further fortified. The year 2019 marks the 70th anniversary of the founding of the People’s Republic of China and is a pivotal year for completing the building of a moderately prosperous society in all respects. Guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, the CSRC will continue to strengthen the “Four Consciousnesses,” officely uphold the “Four Confidences,” resolutely safeguard the “Two Upholds,” and steadfastly adhere to the overarching principle of seeking progress while maintaining stability. Remaining true to its original mission of regulation, the CSRC will courageously shoulder its responsibilities of the times, perform its duties conscientiously, and excel in oversight, consistently maintaining a high‑pressure enforcement stance against illegal and non‑compliant market activities. In doing so, it will provide robust support for deepening capital market reform and for building a capital market that is standardized, transparent, open, dynamic, and resilient.

Supply Cut! Some A-share pharmaceutical companies have withdrawn from volume-based procurement, putting the tendering policy to the test.

On January 3, the Shanghai Municipal Pharmaceutical Centralized Bidding and Procurement Administration issued a notice titled “Notice on Cancellation of Procurement Eligibility for Nimesulide Dispersible Tablets Produced by Kangzhi Pharmaceutical Co., Ltd.” The notice stated that nimesulide oral immediate-release formulations were included in the second batch of centrally organized volume‑based procurement items for medical institutions in Shanghai (No.: SH-DL2015-1), and that Kangzhi Pharmaceutical Co., Ltd. had voluntarily agreed to supply its nimesulide dispersible tablets (100 mg × 20 tablets per box) at the winning bid price under the volume‑based procurement scheme. However, due to rising production costs, the company has indicated it is unable to continue supplying the product at the original price. Following deliberation, it was decided to revoke the procurement eligibility for this drug effective January 7, 2019.

Nimesulide is an antipyretic and analgesic that was first launched in Italy in 1985. In China, production of nimesulide API and tablets began in 1997, with dozens of manufacturers involved. Among them is Kangzhi Pharmaceutical’s flagship product, “Ruizhiqing.”

Since the end of 2014, Shanghai has conducted three rounds of volume‑based procurement. Among these, the second round of centralized volume‑based procurement for medical institutions in Shanghai was announced on December 31, 2015, with nimesulide oral immediate‑release formulations being one of the six key product categories subject to bidding at that time. According to the final winning‑bid results released on October 10, 2016, for both the 50 mg × 20 tablets and the 100 mg × 20 tablets of nimesulide dispersible tablets, Hubei Shubang Pharmaceutical Co., Ltd. emerged as the sole successful bidder, with winning prices of RMB 10.3 per box and RMB 17.51 per box, respectively.

Why has Kangzhi Pharmaceutical become a participant in Shanghai’s volume‑based procurement program?

The “Notice on Properly Carrying Out Relevant Work Regarding Volume-Based Procurement of Medicines under the Municipal Medical Insurance Scheme,” issued by the Shanghai Municipal Government, stipulates that for drugs within the scope of volume‑based procurement—both those previously awarded contracts in this city and those that have qualified through the procurement tender—if the manufacturers voluntarily adjust their prices to no higher than the winning bid price, they may, within 10 working days from the date of this notice’s publication, submit conofficeation procedures to the Pharmaceutical Affairs Office. Otherwise, such drugs will be prohibited from being sold at designated medical institutions participating in the municipal medical insurance scheme, but may still be sold at pharmacies designated for medical insurance.

In short, during Shanghai’s second round of volume‑based procurement, Kangzhi Pharmaceutical’s products were included on the list of qualified drugs. Although they did not ultimately win a contract, Kangzhi voluntarily reduced the price of its nimesulide dispersible tablets, thereby securing eligibility to participate in the second round of volume‑based procurement in Shanghai.

Kangzhi Pharmaceutical is a pharmaceutical company primarily focused on pediatric medicines, offering products in categories such as antipyretics, cold remedies, and anti-infectives. In 2002, China’s National Medical Products Administration approved the company’s marketing of these products. According to its 2018 interim report, revenue from the company’s pediatric antipyretic product line reached RMB 32.6066 million, up 22% year over year, accounting for 12% of its core business revenue.

According to data from sample hospitals in Shanghai, in 2017, Nimesulide produced by Kangzhi Pharmaceutical accounted for approximately 13% of the market share, while all other products were still entirely held by the winning bidders.

Volume‑based procurement has led to a sharp drop in drug prices; however, Kangzhi Pharmaceutical’s forced withdrawal has prompted industry-wide reflection. Industry insiders worry that supply disruptions could create gaps in drug availability and even result in shortages of life‑saving medications.

Industry insiders note that the most critical factors determining drug costs are the availability and pricing of raw materials. If a winning bidder does not produce its own raw materials, any price hikes or supply disruptions upstream could jeopardize contract compliance. For niche products, the impact may be manageable; however, for major drugs with nationwide market demand, other companies that did not win bids may have already scaled back or abandoned production plans, leaving their manufacturing facilities and raw-material sourcing unprepared, which makes it difficult to ensure stable market supply in the short term.

If Shanghai’s first three rounds of volume‑based procurement were merely one‑off initiatives, then the “4+7” cities’ volume‑based drug procurement can be seen as an expansion of that policy pilot.

On December 6, the “4+7” city‑wide volume‑based drug procurement initiative, led by the National Healthcare Security Administration, held its bid opening in Shanghai. This round of volume‑based procurement covers the four direct-administered municipalities—Beijing, Tianjin, Shanghai, and Chongqing—as well as seven provincial capitals or separately planned cities—Shenyang, Dalian, Xiamen, Guangzhou, Shenzhen, Chengdu, and Xi’an—marking the first-ever joint tendering and procurement effort at the national level.

Data show that in this round of volume‑based procurement, 25 products were ultimately shortlisted for award, while 6 remained unawarded. The average price reduction for the drugs reached 52%, with the largest cut applied to entecavir dispersible tablets manufactured by Zhengda Tianqing, which saw a price drop of over 90%, bringing the cost of a single tablet down to just RMB 0.62.

The “4+7” volume‑based drug procurement initiative in designated cities has sparked panic among pharmaceutical companies. In the secondary market, following the release of preliminary winning‑bid results, the A‑share pharmaceutical sector posted a sharp pullback.

For example, following the announcement of the preliminary winning bids, Lepu Medical, which did not secure a contract, was immediately locked at the daily limit-down and continued to close at that level for the next two trading days. As of the close on January 3, the company’s share price had already halved. Hengrui Medicine, a leading innovator in oncology drugs, has seen its stock fall by 20% since the news broke. Meanwhile, Huahai Pharmaceutical, which won bids for seven products, is widely regarded as one of the biggest winners from this volume‑based procurement; however, its share price has also declined sharply recently—though this should be viewed in the context of broader market conditions.

Regarding this volume‑based procurement, Jin Chunlin, Director of the Shanghai Center for Health and Development Research, has stated that, from the purchaser’s perspective, the ideal scenario is reasonable pricing rather than simply the lowest possible price; the most effective approach to price reductions is a gradual, spiral‑shaped decline.

For the first time in 15 years, Apple has cut its revenue forecast, sending shockwaves through the market.

On the first trading day of 2019, Apple announced a sharp downward revision to its revenue forecast for the first quarter of this year. Following the announcement, the stock plunged more than 7% in after-hours trading, wiping out over $56 billion in market value.

Apple’s disappointing earnings outlook has sent shockwaves through the market: investors have grown increasingly skeptical of the financial performance of companies across the supply chain, and today, shares of Apple‑related offices in the Asia-Pacific region—spanning both A‑shares and Hong Kong stocks—have plunged.

According to a preliminary estimate, including Apple’s market capitalization, the combined market value of all publicly listed companies in the global Apple supply chain shrank by more than RMB 400 billion in a single day!

Apple’s Downward Revision of Earnings Forecast Sends Shockwaves: A-Share and Hong Kong‑Listed Supply‑Chain Companies Plunge Across the Board

On Wednesday, U.S. local time, Apple CEO Tim Cook issued a letter to investors. In the letter, he stated that, due to a variety of factors, Apple has revised its fiscal 2019 first-quarter revenue forecast from $93 billion to $84 billion, and lowered its gross margin guidance from 38%–38.5% to around 38%.

Notably, over the past 15 years, Apple has never once lowered its revenue forecast.

This news quickly reverberated through the stock price, sending Apple’s after-hours shares plunging 7.55% on the day. By that measure, the company’s market capitalization evaporated by more than $56 billion.

In addition to the sharp post-market plunge overnight, Apple’s stock performance over the past few months has lagged behind that of mainstream tech companies.

In 2018, Apple’s stock price continued to climb, and its market capitalization briefly surpassed the US$1 trillion mark, making it the first publicly traded technology company worldwide to reach this milestone.

However, since October 2018, Apple’s stock price has peaked and begun to decline, hitting a recent low; in just three months, its cumulative drop at one point approached 40%.

Among the large-cap tech companies listed on the U.S. stock market, Apple’s share price has generally been one of the weaker performers.

Data show that in 2018, Apple’s stock price fell by 5.39% overall, while Microsoft’s shares rose 20.80%, Amazon’s surged 28.43%, and Google’s declined by just 0.80%—a much smaller drop than Apple’s.

As a result, Apple has long since lost its crown as the world’s most valuable company, having been overtaken in turn by Microsoft and Amazon.

Commercial & Corporate

Premier Li Keqiang presided over the State Council Executive Meeting to address the issue of “difficulty in business deregistration.”

On January 2, Premier Li Keqiang of the State Council presided over an executive meeting of the State Council, which outlined measures to align with international best practices and upgrade comprehensive bonded zones, thereby establishing new high-standard platforms for opening-up. The meeting also decided to introduce facilitation reforms to address the pressing issue of “difficult business deregistration” raised by enterprises.

The meeting noted that, in line with the CPC Central Committee and the State Council’s decisions and arrangements to foster a new pattern of comprehensive opening-up, improving the business environment in comprehensive bonded zones and further facilitating trade and investment will help stabilize foreign trade and foreign investment, maintain an appropriate scale of imports and exports, and create new high grounds for opening up. It will also contribute to nurturing the domestic market and unlocking the potential of domestic demand. The meeting adopted the following measures: First, facilitate domestic sales by enterprises. A pilot program to grant general VAT taxpayer status will be rolled out in comprehensive bonded zones. Processing and manufacturing enterprises within the zone will be permitted to undertake commissioned processing from entities outside the zone. For mobile phones, auto parts, and other products manufactured within the zone, no separate application for an automatic import license will be required when sold domestically. Second, promote research and innovation. Except for items prohibited from import, imported goods and articles used for R&D by enterprises within the zone will be exempt from licensing requirements. By comprehensively leveraging bonded‑zone policies, support will be provided for the development of R&D and innovation institutions within the zone. Newly established R&D or processing enterprises that meet the prescribed standards will be directly granted the highest credit rating. Third, advance logistics facilitation. Eligible goods used in enterprise production and operations may enter the zone, and bonded goods can be transferred directly between designated points without going through customs clearance. For cross‑customs‑area imports and exports of large equipment undertaken by leasing companies within the zone, off‑site customs supervision on behalf of the authorities may be implemented. Comprehensive bonded zones serving as ports of entry for complete vehicles will be allowed to conduct bonded storage, exhibition, and related services for imported automobiles. Fourth, cultivate new business models. Enterprises within the zone will be permitted to engage in bonded testing, global repair, and remanufacturing activities that are high‑tech, high‑value‑added, and environmentally compliant. Support will be given to the development of international service outsourcing and the promotion of cross‑border trade in services. Cross‑border e‑commerce retail import policies will be gradually applied across all comprehensive bonded zones. Qualified comprehensive bonded zones will also be encouraged to carry out physical bonded delivery of commodity futures contracts. Fifth, support comprehensive bonded zones in taking the lead in replicating and scaling up the pilot experiences of free trade zones, and in promoting the integration and upgrading of various types of special customs‑supervised areas.

To address the concerns of a broad range of market entities, the meeting decided to deepen the “delegation, regulation, and service” reform, accelerate efforts to resolve the longstanding challenge of “difficult business deregistration,” and promote corporate renewal and structural optimization. Specifically: First, streamline the deregistration process. Requirements such as filing the establishment of a liquidation committee and publishing creditor notices in newspapers will be replaced by free public announcements through the National Enterprise Credit Information Publicity System. The list of documents needed for deregistration will be significantly reduced, with only essential items like the liquidation report required. Non‑listed joint-stock companies and specialized farmer cooperatives will be included in the simplified deregistration pilot program, shortening the public notice period from 45 days to 20 days. Enterprises whose simplified deregistration was previously terminated will be permitted to reapply once they meet the eligibility criteria. Second, simplify procedures for tax, social security, commerce, customs, and other relevant authorities. Implement a categorized approach to tax deregistration: taxpayers who have never engaged in tax‑related matters, have not issued invoices, and owe no taxes may bypass formal tax clearance and apply directly for simplified deregistration. For enterprises with no outstanding social security contributions, their social security registration will be canceled concurrently. Third, leverage the integrated government services platform to establish a dedicated online portal for enterprise deregistration, thereby implementing a one‑stop online service. Strengthen corporate accountability and, in accordance with the law, impose joint punitive measures on untrustworthy market entities to prevent malicious evasion of debts. By adopting these reform measures, the time required for enterprise deregistration will be substantially shortened, with the simplified deregistration process cut by half.

Multiple departments have issued the “Guidance on Compliance Management for Enterprises Operating Overseas.”

On December 29, the National Development and Reform Commission released the “Guidance on Compliance Management for Enterprises Operating Overseas” (hereinafter referred to as the “Guidance”), which comprises eight sections, including general provisions, compliance management requirements, and the compliance management framework.

The Guidelines clearly stipulate that, in the context of overseas investment, compliance requirements are as follows: Enterprises undertaking overseas investments must ensure full‑process and comprehensive compliance in all aspects of their operations, and must thoroughly understand the specific requirements pertaining to market access, trade controls, national security reviews, sector‑specific regulation, foreign exchange management, antitrust, anti‑money laundering, and counter‑terrorism financing.

China Banking and Insurance Regulatory Commission: Guiding Opinions on Regulating Off-site, Unlicensed Branches of Banking Financial Institutions

The China Banking and Insurance Regulatory Commission recently issued the “Guiding Opinions on Regulating Off-site, Non‑Licensed Institutions of Banking Financial Institutions” (CBIRC Document [2018] No. 71).

The “Guiding Opinions” comprise thirteen articles, covering key areas such as basic principles, regulatory requirements, supervisory responsibilities, and transitional provisions. Articles 2 through 7 delineate the scope of application of the Guiding Opinions, define and classify off‑site unlicensed institutions, and, in accordance with the principle of substance over form, set out distinct regulatory requirements for off‑site licensed operating institutions and off‑site non‑operating unlicensed institutions, based on the degree of risk spillover and varying risk‑management needs. Articles 8 through 10 stipulate that, upon completion of rectification, the local supervisory authority assumes primary oversight responsibility for off‑site licensed institutions, while the legal‑person supervisory authority bears regulatory duties for non‑operating institutions, and require supervisory authorities to strengthen coordinated regulatory efforts. Articles 11 through 13 set forth the regulatory requirements applicable during the transition period.

Attachment: “Guiding Opinions on Regulating Off-site, Unlicensed Institutions of Banking Financial Institutions” (CBIRC Document [2018] No. 71)

To all Banking and Insurance Regulatory Bureaus, to all policy banks, large commercial banks, joint-stock banks, Postal Savings Bank of China, and foreign‑funded banks:

To further standardize the off-site, unlicensed operations of banking financial institutions, safeguard financial market order, and mitigate financial risks, the following guidelines are hereby issued:

I. Banking financial institutions’ off-site, unlicensed branches shall adhere to the following principles:

(1) Uphold Core Competencies. Banking financial institutions should focus on their core business and return to their fundamental purpose, formulate sound development strategies, avoid reckless expansion, and enhance the quality and effectiveness of their services to the real economy. Small and medium-sized financial institutions should adhere to their market positioning, deepen their engagement in local markets, and provide high-quality financial services to agriculture, rural areas, farmers, and small and micro enterprises.

(2) Risk‑based approach. Banking financial institutions shall enhance their corporate governance and risk management frameworks, strengthen oversight of branch offices located in different jurisdictions, and rigorously prevent all types of financial risks. Regulatory authorities shall fulfill their respective responsibilities to avoid regulatory gaps and overlaps.

(3) Tailored Policy Measures. Regulatory authorities shall, in light of the distinct characteristics of different types of banking financial institutions, provide categorized guidance and implement targeted measures for off-site, unlicensed entities. Adhering to the principle that substance prevails over form, they shall distinguish between operational and non‑operational entities and, based on varying degrees of risk spillover and differing risk‑management needs, establish corresponding regulatory requirements.

(4) A clear distinction between old and new. Existing off-site, unlicensed entities of banking financial institutions shall undergo planned rectification during the transition period. Newly established licensed off-site entities must strictly comply with administrative approval procedures, while newly established non‑operational off-site entities must strictly fulfill their reporting obligations.

II. For the purposes of these Guiding Opinions, “banking financial institutions” refer to commercial banks, rural credit cooperatives, and other deposit‑taking financial institutions established within the territory of the People’s Republic of China, as well as the China Development Bank and policy banks.

III. Off-site non‑licensed institutions refer to entities that, without approval from the banking regulatory authority, maintain a fixed place of business or assign dedicated personnel in another jurisdiction and, in substance, engage in commercial operations or provide back‑office services for related activities. Off-site non‑licensed institutions comprise off-site commercial non‑licensed institutions and off-site non‑commercial non‑licensed institutions (hereinafter referred to as “commercial institutions” and “non‑commercial institutions,” respectively).

An operating institution refers to an entity established by a banking financial institution in another jurisdiction that, in accordance with the principle of substance over form, conducts business activities directed at the public or counterparties and may give rise to the following impacts:

(1) It gives rise to credit risk, market risk, liquidity risk, operational risk, reputational risk, legal risk, country risk, strategic risk, and other related risks for banking financial institutions;

(2) Causing harm to the lawful rights and interests of depositors and other customers;

(3) Triggering systemic and regional financial risks;

(4) Other impacts on financial security and financial stability.

Operating entities include, but are not limited to, business units and their branches, business departments, management departments, representative offices, branch offices, business centers, operating teams, and other similar entities established by banking financial institutions in locations outside their headquarters, which engage in substantive business operations, product marketing, market development, project appraisal, risk assessment, and other related business activities.

A non‑operational institution refers to an entity established by a banking financial institution in another location that does not engage in business operations, but instead provides back‑office support for related functions. Such entities include, but are not limited to, regional approval centers, audit centers, disaster recovery centers, software development centers, and accounting processing centers set up by banking financial institutions in other locations.

IV. Banking financial institutions shall, in accordance with the requirements of the “Regulatory Guidelines for Specialized Institutions of Chinese‑funded Commercial Banks” (CBRC Document No. 59 [2012], hereinafter referred to as the “Guidelines”), and guided by the principle that substance prevails over form, apply for a financial license for specialized institutions or their branches—subject to administrative licensing procedures—for those operating entities that meet the licensing criteria. For those that do not meet the licensing criteria, such entities shall be incorporated into the management of local branch offices or be dissolved.

Banking financial institutions shall, in light of their own development strategies, risk management capabilities, internal control frameworks, and the operational status of non‑licensed entities operating across jurisdictions, regulate the conduct of their business‑oriented entities. With respect to applications for financial licenses for specialized institutions or their branches, institutions must strictly adhere to the requirements set forth in the Guidelines, strengthening oversight to ensure that their risk management and internal control systems are sound and effective.

Except with the approval of the banking regulatory authority under the State Council, banking financial institutions shall not establish specialized institutions or their branches in regions where they do not have a local branch.

V. Banking financial institutions establishing operating entities overseas shall engage in thorough communication with both domestic and foreign regulators and obtain the consent of the domestic legal‑person supervisory authority and the relevant foreign regulatory authorities. With respect to operating entities already established abroad that, following consultation with domestic and foreign regulators, have not obtained such consent, they shall be dissolved in a prudent and orderly manner.

Banking financial institutions shall ensure that their overseas operating entities strictly comply with the relevant regulatory requirements of both the domestic legal‑person supervisory authority and the foreign regulatory authorities, and strengthen risk prevention and compliance risk management for their overseas operations.

VI. Banking financial institutions establishing non‑operational entities within China shall, at least two months in advance, submit a report to both the institution’s supervisory authority and the supervisory authority of the jurisdiction where the non‑operational entity is to be established. The reporting materials shall include, but are not limited to, the necessity and feasibility of establishing the non‑operational entity, the office premises, assigned personnel, functional positioning, scope of business, a written resolution from the head office, the head office’s management approach, the delineation of responsibilities between the non‑operational entity and local branches, and the reporting procedures.

Banking financial institutions shall establish and improve management mechanisms for non‑business entities, covering risk management, internal controls, performance appraisal systems, and personnel management. Banking financial institutions must ensure that such non‑business entities strictly comply with the provisions governing their scope of business. It is strictly prohibited to engage in commercial activities in substance under the guise of a non‑business entity.

Banking financial institutions shall, on a regular basis, report to their legal‑person supervisory authorities information pertaining to non‑operational entities within China, with a reporting frequency of no less than once per year.

Banking financial institutions shall, in accordance with their own development strategies and internal control management levels, prudently establish non‑operational branches located outside their principal place of business, and appropriately determine the number of such branches. Banking financial institutions may not establish non‑operational branches in regions where they have no domestic branches, nor may they establish multiple non‑operational branches in the same location; exceptions apply to those established solely for the purpose of managing and providing services to rural and township banks.

The regulatory requirements governing the establishment of non‑operational entities by banking financial institutions overseas shall be prescribed separately.

VII. Except with the approval of the banking regulatory authority under the State Council, banking financial institutions shall, in principle, not establish off-site management headquarters.

VIII. The supervisory authority at the location of an off-site licensed institution of a banking financial institution shall assume primary regulatory responsibility for that institution, exercising duties such as market access oversight, off-site supervision, on-site inspections, and administrative penalties. Within the overarching framework of corporate‑level supervision, the legal entity’s supervisory authority shall, in accordance with the law, bring the risk management and internal control systems of the banking financial institution’s off-site licensed institutions under the head office’s unified management system.

9. The corporate supervisory authority shall assume primary regulatory responsibility for non‑operational entities of banking financial institutions. Both the corporate supervisory authority and the supervisory authority at the location of the non‑operational entity may, as required by their duties, exercise oversight over such entities, including, but not limited to, regulatory interviews, issuance of supervisory opinions, regulatory notices, on-site inspections, and administrative penalties.

X. Legal-person supervisory authorities and local supervisory authorities shall maintain unimpeded information flow, strengthen information sharing and regulatory coordination, pool regulatory resources, and effectively prevent and control financial risks.

XI. The transitional period for non‑licensed off‑site institutions of banking financial institutions shall run from the date of issuance of these Opinions to the end of 2019. In principle, banking financial institutions shall, within three months from the date of issuance of these Opinions, submit their rectification plans for existing off‑site non‑licensed institutions to their corporate supervisory authorities; upon approval, they shall complete the rectification during the transitional period. For those that genuinely encounter difficulties in completing rectification within the transitional period, with the consent of the corporate supervisory authority, the deadline may be appropriately extended. If rectification is not brought up to standard within the prescribed time limit, or if non‑licensed off‑site institutions are established in violation of regulations after the issuance of these Opinions, the banking regulatory authorities shall, in accordance with the Commercial Bank Law of the People’s Republic of China, the Banking Supervision and Administration Law of the People’s Republic of China, and other relevant provisions, impose appropriate regulatory measures.

XII. During the transitional period, with respect to existing commercial entities applying for a license, in addition to their annual institutional development plans for 2018 and 2019, banking financial institutions may submit batch licensing applications to their corporate supervisory authorities. The corporate supervisory authority shall, after fully soliciting the views of the local regulatory authority, determine the list of institutions eligible to apply for a license and forward this list to the local regulatory authority, which shall then proceed with the relevant administrative licensing procedures, including preparatory establishment or opening of operations. For existing commercial entities that are merged into local branches or dissolved, until such rectification is completed, it shall be ensured that both the scale of business and the number of employees are reduced rather than increased, and appropriate measures must be taken to reassign staff and proactively manage risks. As for existing non‑commercial entities that have not yet reported to the local regulatory authority, they shall complete the required reporting within two months from the date of issuance of these Guidelines.

Thirteen. During the transitional period, banking financial institutions shall strictly fulfill their principal‑management responsibilities and, in accordance with regulatory requirements, promptly formulate and implement relevant rectification plans. The relevant institutional supervisory departments of the China Banking and Insurance Regulatory Commission shall provide overall coordination and guidance, strengthen information sharing, and enhance regulatory synergy. Within the framework of corporate supervision, the corporate supervisory authority shall assume responsibility for the principal‑level oversight of non‑licensed institutions operating across jurisdictions. The local supervisory authority shall, in line with the principle of “accountability for the territory under its jurisdiction,” assume responsibility for the local‑level supervision of such cross‑jurisdictional, non‑licensed institutions within its jurisdiction.

Two departments have abolished the “Certificate of Business Performance and Production Capacity for Processing Trade Enterprises.”

On December 29, the Ministry of Commerce and the General Administration of Customs issued an announcement clarifying that, effective January 1, 2019, enterprises engaged in processing trade will no longer be required to apply for a “Certificate of Production Capacity,” nor will the competent commerce authorities issue such certificates to processing‑trade enterprises.

In accordance with the State Council’s work plan on “delegation, regulation, and service” and the spirit of the State Council’s “Several Opinions on Promoting Innovative Development of Processing Trade” (Document No. 4 [2016] of the State Council), in order to deepen the reform of the processing‑trade management system, further enhance facilitation, and improve ongoing and post‑event supervision, the requirement for the “Certificate of Business Status and Production Capacity of Processing‑Trade Enterprises” (hereinafter referred to as the “Production Capacity Certificate”) is hereby abolished nationwide. Processing‑trade enterprises shall now make their own commitments attesting to their corresponding production and operational capabilities. The relevant matters are hereby announced as follows:

I. Effective January 1, 2019, enterprises engaged in processing trade are no longer required to apply for a Certificate of Production Capacity, and the competent commerce authorities will no longer issue such certificates to processing‑trade enterprises.

II. Enterprises engaging in processing trade must possess the requisite production and operational capabilities. Processing enterprises shall have factories, processing equipment, and a workforce commensurate with their scope of business, while trading enterprises shall hold import‑export business licenses. Enterprises are expected to conscientiously fulfill their social responsibilities, including ensuring workplace safety, promoting energy conservation and low carbon emissions, and protecting the environment.

III. Enterprises engaging in processing trade shall log in to the “Processing Trade Enterprise Operational Status and Production Capacity Information System” (https://ecomp.mofcom.gov.cn/) and independently complete the “Processing Trade Enterprise Operational Status and Production Capacity Information Form” (hereinafter referred to as the “Information Form”), while committing to the accuracy of the information provided. The Information Form is valid for one year from the date of submission (or update); upon expiration or in the event of any changes to the relevant information, enterprises shall promptly update the Information Form.

IV. Enterprises that have already submitted the “Information Form” online shall apply to the competent customs authority for the establishment (or amendment) of their processing trade handbook (account book), without needing to submit a paper copy of the “Information Form.”

V. Enterprises that had obtained a Certificate of Production Capacity prior to January 1, 2019, and whose information has remained unchanged, may continue to use their valid Certificate of Production Capacity to handle processing trade procedures with the competent customs authority.

6. Enterprises that make false commitments shall have such violations recorded in their integrity files, and measures, including the downgrading of their customs credit rating, shall be imposed in accordance with the law.

VII. The competent commerce authorities and the customs administration shall continue to strengthen their services and guidance for processing‑trade enterprises, effectively promote and disseminate relevant policies, and ensure the smooth and stable operation of processing‑trade management.

Attachment: “Information Form on the Operational Status and Production Capacity of Processing Trade Enterprises”

The Ministry of Housing and Urban–Rural Development has amended the Regulations on the Administration of Construction Enterprise Qualifications and other departmental rules.

Recently, the Ministry of Housing and Urban–Rural Development issued the “Decision on Amending the Regulations on the Administration of Construction Enterprise Qualifications and Other Departmental Rules” (hereinafter referred to as the “Decision”).

Among these, the Decision explicitly stipulates that Article 14 of the Regulations on the Administration of Construction Enterprise Qualifications shall be amended to read: “When applying for construction enterprise qualifications, enterprises shall submit their applications through the website or approval platform of the qualification‑granting authority and provide electronic documentation pertaining to financial resources, professional technical personnel, technical equipment, and completed project performance.”

In order to implement the State Council’s requirements for deepening the “delegation, regulation, and service” reform and accelerating the promotion of “one-stop online processing” for government services, the Ministry of Housing and Urban–Rural Development has decided:

I. Article 14 of the Regulations on the Administration of Construction Enterprise Qualifications (Order No. 22 of the Ministry of Housing and Urban–Rural Development, as amended by Order No. 32 of the same Ministry) is hereby revised to read: “When applying for construction enterprise qualifications, an enterprise shall submit its application through the website or approval platform of the qualification‑granting authority and provide electronic documentation pertaining to financial resources, professional technical personnel, technical equipment, and completed projects.”

II. Article 11 of the Regulations on the Administration of Qualifications for Survey and Design of Construction Projects (Ministry of Construction Order No. 160, as amended by Ministry of Housing and Urban–Rural Development Orders No. 24 and No. 32) is hereby revised to read: “Enterprises applying for engineering survey or engineering design qualifications shall submit their applications through the official website or approval platform of the qualification‑granting authority, and shall provide electronic materials pertaining to financial resources, professional technical personnel, technical equipment, and completed project performance.” Articles 12 and 13 are deleted, and the numbering of the relevant provisions is adjusted accordingly.

III. Article 12 of the Regulations on the Administration of Qualifications for Engineering Supervision Enterprises (Order No. 158 of the Ministry of Construction, as amended by Orders No. 24 and No. 32 of the Ministry of Housing and Urban–Rural Development) is hereby revised to read: “When applying for engineering supervision enterprise qualifications, an enterprise shall submit its application through the website or approval platform of the qualification‑granting authority and provide electronic materials pertaining to professional technical personnel, technical equipment, and completed projects.”

IV. Article 6, Paragraph 1 of the Regulations on the Administration of Qualifications for Real Estate Development Enterprises (Order No. 77 of the Ministry of Construction, as amended by Order No. 24 of the Ministry of Housing and Urban–Rural Development) is hereby revised to read: “Newly established real estate development enterprises shall, within 30 days from the date of obtaining their business license, submit an application for filing through the website or platform of the qualification‑approval authority, and provide electronic copies of their business license, articles of association, qualification certificates of professional and technical personnel, and employment contracts.”

This Decision shall enter into force as of the date of its promulgation. The four departmental regulations listed above shall be amended accordingly and reissued in accordance with this Decision.

The State Administration for Market Regulation is soliciting public comments on the “Regulations Prohibiting Monopolistic Agreement Practices.”

On January 3, the State Administration for Market Regulation released the “Regulations on Prohibiting Monopolistic Agreement Practices (Draft for Public Comment)” (hereinafter referred to as the “Draft”) and invited public comments until February 3, 2019.

The Draft for Public Comment stipulates that if an operator violates these Regulations by entering into and implementing a monopoly agreement, the antitrust enforcement authority shall order it to cease the unlawful conduct, confiscate any illegal gains, and impose a fine ranging from 1% to 10% of its sales revenue in the preceding year. If the agreed‑upon monopoly agreement has not yet been implemented, a fine of no more than RMB 500,000 may be imposed. Should an industry association violate these Regulations by organizing operators within its sector to enter into a monopoly agreement, the antitrust enforcement authority may impose a fine of no more than RMB 500,000; in cases of serious violations, the authority may recommend that the competent registration and administration body for social organizations revoke the association’s registration in accordance with the law.

Taxation TAXATATION

State Taxation Administration: Harness the Role of Tax-Related Professional Services to Support Personal Income Tax Reform

The State Taxation Administration recently issued the “Notice on Leveraging the Role of Tax‑Related Professional Services to Support Personal Income Tax Reform” (Tax General Letter [2018] No. 687).

Among these, policy consultation and the burden of tax compliance have increased significantly, while tax authorities face severe capacity constraints. To address these challenges, it is possible, as needed, to invite tax professionals—such as tax accountants, certified public accountants, and lawyers—from tax‑related professional service offices to participate in 12366 expert advisory sessions, tax‑service‑hall guidance and consultation, self‑service tax processing, and consultation and support in tax‑experience zones, as well as in taxpayer‑education expert‑led seminars. Furthermore, tax‑related industry associations and institutions are encouraged to organize public‑interest activities to promote and provide guidance on personal income tax reform.

Attachment: “Notice on Leveraging the Role of Tax‑Related Professional Services to Support Personal Income Tax Reform” (Tax General Letter [2018] No. 687)

To the tax bureaus of all provinces, autonomous regions, municipalities directly under the central government, and cities separately listed in the national plan; to the Commissioner’s Offices of the State Taxation Administration stationed in various localities; and to all units within the Administration:

To implement the decisions and arrangements of the CPC Central Committee and the State Council on personal income tax reform, to fully leverage the role of tax-related professional services, and to support the effective implementation of the personal income tax reform, the following matters are hereby notified:

I. Fully leverage the professional roles of tax-related industry associations and institutions.

The implementation of the new personal income tax system poses unprecedented challenges to tax authorities’ taxpayer‑service operations. At present and in the period ahead, policy consultation, publicity, and guidance for taxpayers and withholding agents will be exceptionally demanding, and the volume of tax‑filing transactions at service halls is expected to increase substantially. Professional tax‑related services and other civil‑society actors play a vital role in supporting personal income‑tax reform. Tax authorities should fully mobilize these resources to alleviate the shortage of taxpayer‑service capacity and work collaboratively to ensure the smooth implementation of the personal income‑tax reform.

(1) Tax authorities shall carefully assess the alignment between local 12366 hotline consultation services, taxpayer service hall resources, and the growing demand from taxpayers. Where policy‑related inquiries and tax‑filing burdens have increased significantly, placing substantial strain on tax authorities and necessitating support from tax‑related professional services, tax authorities may, as needed, invite tax professionals—such as tax accountants, certified public accountants, and lawyers—from tax‑related professional service institutions to participate in 12366 expert consultation desks, taxpayer service hall guidance and advisory services, self‑service tax processing, consultation and assistance in tax‑processing experience zones, and expert‑led training sessions at taxpayer academies. Tax‑related professional service institutions may also, on a volunteer basis, take part in the aforementioned 12366 expert consultations, taxpayer service hall expert advisory and support activities, and related lectures.

(2) When formulating publicity and guidance plans for taxpayers and withholding agents, tax authorities may invite industry associations—including the Tax Accountants Association, the Certified Public Accountants Association, the Lawyers Association, and the Agency Bookkeeping Association (hereinafter referred to as “tax-related industry associations”)—as well as tax‑related professional service institutions to participate in the deliberation process. These tax‑related industry associations and professional service institutions shall, from the perspectives of taxpayer and withholding agent needs and professional services, submit their opinions and recommendations to the tax authorities.

II. Encourage tax-related industry associations and institutions to participate in public‑interest activities providing publicity and guidance on personal income tax reform.

Organizing public‑interest activities to support personal income tax reform is a social responsibility of tax‑related industry associations and professional tax service institutions. Tax authorities should encourage and guide these associations and institutions to actively organize and participate in public‑interest campaigns to promote and provide guidance on personal income tax reform.

(1) Encourage tax-related industry associations and tax‑professional service institutions to have their tax experts conduct free public outreach on personal income tax reform through platforms such as Weibo, WeChat, and online micro‑classes. By addressing pressing public concerns from a professional perspective, these experts can highlight the reform’s positive implications, play a constructive guiding role, and help foster a favorable public discourse.

(2) Encourage tax-related industry associations to establish volunteer service teams, “United Hearts Service Groups,” “Expert Lecturer Teams,” and other such initiatives, and to carry out public‑interest outreach and guidance activities under the Individual Income Tax Law—bringing these efforts into schools, communities, and industrial parks—to promote public awareness of relevant provisions of the Individual Income Tax Law.

(3) Tax-related industry associations and tax‑related professional service institutions are encouraged to organize public‑interest lecture series on individual income tax, providing free outreach to taxpayers and withholding agents on the Individual Income Tax Law, its Implementing Regulations, and reform measures such as the special additional deductions.

III. Tax-related professional service institutions shall conduct market-based services in a standardized manner.

Tax‑related professional service providers may offer market‑based services pertaining to the implementation of personal income tax reform, thereby complementing the basic tax services provided by tax authorities and meeting the personalized and specialized needs of taxpayers and withholding agents, thus facilitating the smooth rollout of the personal income tax reform.

(1) Tax‑related professional service institutions may, in accordance with the relevant provisions of the individual income tax reform, provide taxpayers and withholding agents with services such as individual income tax policy consultation, tax‑administration advice, tax return filing, agency for annual final tax settlement and clearance, and professional tax advisory. They shall also assist taxpayers and withholding agents in completing the submission of information for special additional deductions, preparing tax return forms, and handling annual final tax settlement and clearance procedures. In delivering these services, they should guide taxpayers to adopt the principles of honest declaration and lawful tax compliance, thereby jointly upholding the social integrity system.

(2) Tax‑related professional service institutions shall, in accordance with the relevant provisions of the Measures for the Supervision of Tax‑Related Professional Services (Trial), strictly adhere to professional ethics, standardize their practice, and enhance the quality of their services. They shall not take advantage of the implementation of the individual income tax reform to impose arbitrary or excessive fees. They shall not deceive taxpayers or withholding agents in order to seek improper economic gains, thereby infringing upon the legitimate rights and interests of such parties. Nor shall they solicit business in the name of tax authorities or by exploiting opportunities to participate in volunteer or public‑interest activities.

IV. Strengthening Services and Regulation

Tax authorities shall, in accordance with the Measures for the Supervision of Tax-related Professional Services (Trial) and relevant provisions, provide facilitative services to tax-related industry associations and tax-related professional service institutions for the conduct of public-interest activities, as well as for the normal operation of their business.

Tax authorities shall rigorously investigate and address issues involving “unlicensed intermediaries” and “illicit intermediary practices.” Institutions that, although not yet subject to oversight under the regulations governing tax‑related professional services, nevertheless provide paid individual income tax services, employ improper methods to solicit business, or otherwise infringe upon the legitimate rights and interests of taxpayers or withholding agents, must be brought under regulatory supervision within a specified time limit. With respect to tax‑related professional service providers and practitioners who, in response to reports or complaints from taxpayers or withholding agents, exploit the implementation of individual income tax reform to deceive taxpayers for illicit financial gain, appropriate regulatory measures shall be imposed in accordance with Articles 14 and 15 of the Measures for the Supervision of Tax‑Related Professional Services (Trial), including conducting admonitory interviews, ordering corrective action within a prescribed timeframe, suspending acceptance of tax‑related matters they represent, and placing such entities on the List of Discredited Tax‑Related Service Providers. In addition, credit scores shall be deducted, credit ratings lowered, and adverse records of professional conduct maintained for the relevant tax‑related professional service providers and practitioners.

Tax authorities should, by strengthening both service provision and oversight, promote the standardized practice of tax‑related professional service providers, rigorously prevent any harm to the legitimate rights and interests of taxpayers and withholding agents, ensure that such services play a positive role, and support the smooth implementation of personal income tax reform.

The Standing Committee of the National People’s Congress has amended the Enterprise Income Tax Law and other laws.

Recently, the Standing Committee of the National People’s Congress promulgated the Decision on Amending the Electric Power Law of the People’s Republic of China and Three Other Laws (hereinafter referred to as the “Decision”).

Among these, the Decision explicitly stipulates that Article 51, Paragraph 1 of the Enterprise Income Tax Law of the People’s Republic of China, which previously read, “Where a non-resident enterprise establishes two or more institutions or establishments within China, such establishment shall be subject to review and approval by the tax authorities,” is hereby amended to read, “Where a non-resident enterprise establishes two or more institutions or establishments within China and meets the conditions prescribed by the tax authority under the State Council.”

China has promulgated the Customs Tariff of the People’s Republic of China (2019 Edition).

Recently, the Customs Tariff Commission of the State Council issued an announcement promulgating the “Import and Export Tariff Schedule of the People’s Republic of China (2019)” (Customs Tariff Commission Announcement [2018] No. 11), which will take effect on January 1, 2019.

The Customs Tariff comprises three sections: “Notes for Use,” the “Import Tariff Schedule,” and the “Export Tariff Schedule.” The “Notes for Use” primarily provides explanations and clarifications regarding the scope of application of various tariff rates, country codes, units of measurement, and other related matters. The “Import Tariff Schedule” covers 8,549 tariff lines, while the “Export Tariff Schedule” covers 102 tariff lines. Where laws or administrative regulations prescribe different provisions for the adjustment of import and export tariff lines and rates, such provisions shall prevail.

State Taxation Administration: 20 tax-related certification requirements have been abolished.

The State Taxation Administration recently issued the “Announcement on the Cancellation of 20 Tax-Related Certification Requirements” (State Taxation Administration Announcement No. 65 of 2018), which takes effect from the date of its publication.

These include the special report issued by the intermediary agency along with its supporting documentation, expert technical appraisal opinions (reports) or the intermediary agency’s special report, proof of force majeure events, proof of participation in social insurance, the business license, and personal identification documents, among other relevant materials.

To implement the CPC Central Committee and the State Council’s directives on reducing documentation requirements to better serve the public and optimizing services, in accordance with the “Notice of the General Office of the State Council on Carrying Out the Review and Streamlining of Certification Requirements” (Guobanfa [2018] No. 47), and as stipulated in the “Notice of the State Taxation Administration on Implementing Several Measures to Further Support and Serve the Development of the Private Sector” (Shuizongfa [2018] No. 174), the State Taxation Administration has decided to abolish 20 tax‑related certification requirements (see the attached list) and hereby announces their cancellation. Effective from the date of this announcement, the certification requirements listed in the attachment shall no longer be enforced. The normative documents pertaining to these certification requirements will be revised in accordance with established procedures and issued separately at a later date.
Tax authorities at all levels shall earnestly implement the work related to the abolition of tax‑related certification requirements, refraining from retaining such requirements in any disguised form and from shifting their verification obligations onto taxpayers. They should promptly revise relevant regulations, forms, certificates, and administrative procedures affected by these abolitions, and clearly define the requirements for ongoing and post‑event supervision. Furthermore, they should uphold the principles of presumption of good faith, risk‑based monitoring, and credit‑based management, further reduce the documentation that taxpayers are required to submit to tax authorities, and explore the implementation of a notification‑and‑commitment system.
Tax authorities at all levels should take this cleanup initiative as an opportunity to further transform their management approaches, standardize regulatory practices, and optimize the business environment, thereby better facilitating market entities and boosting their vitality.
This announcement shall take effect from the date of its issuance.
This is hereby announced.

Attachment: Catalog of Tax Certification Items That Have Been Canceled

Litigation & Arbitration

The Supreme People’s Court has issued the Interpretation on Construction Engineering Cases, promoting the sound development of the construction market.

On January 3, the Supreme People’s Court issued the “Interpretation on Several Legal Issues Concerning the Adjudication of Disputes over Construction Project Contracting” (hereinafter referred to as the “Interpretation”), which took effect on February 1, 2019. The Interpretation sets forth provisions regarding the validity of construction project contracting agreements and the settlement of construction project payments, among other matters.

In particular, with respect to the determination of the amount of damages for an invalid construction contract, the Interpretation adheres to the principle of compensating actual losses. However, disputes over construction contracts are characterized by their special nature and complexity; in judicial practice, parties often find it difficult to substantiate the precise amount of their actual losses, thereby hindering their ability to obtain effective redress. Consequently, where actual losses are difficult to ascertain, the Interpretation provides that parties may request that the extent of the loss be determined by reference to the quality standards, construction schedule, payment terms for the project price, and other relevant provisions stipulated in the contract.

Attachment: “Interpretation (II) on the Application of Law in Adjudicating Disputes over Construction Project Contracting Agreements”

In order to ensure the proper adjudication of disputes arising from construction project contracting, to safeguard the lawful rights and interests of the parties involved, to uphold the order of the construction market, and to promote its sound development, this Interpretation is formulated in accordance with the General Provisions of the Civil Law of the People’s Republic of China, the Contract Law of the People’s Republic of China, the Construction Law of the People’s Republic of China, the Bidding Law of the People’s Republic of China, the Civil Procedure Law of the People’s Republic of China, and other relevant laws, and in light of judicial practice.
Article 1: Where the scope of works, construction period, quality of works, contract price, and other essential terms stipulated in a construction contract separately entered into by the tenderer and the successful bidder are inconsistent with those set forth in the winning bid contract, and one party requests that rights and obligations be determined in accordance with the winning bid contract, the people’s court shall uphold such request.
If, outside the scope of the winning bid contract, the tenderer and the successful bidder enter into separate agreements—such as purchasing construction‑related real estate at prices significantly above market value, constructing housing ancillary facilities free of charge, granting price concessions, or donating property to the project developer—in order to effectively reduce the contract price, a people’s court shall uphold a party’s request to declare such agreements invalid on the ground that they deviate from the substantive terms of the winning bid contract.
Article 2: Where a party requests that a construction contract be declared invalid on the ground that the employer has failed to obtain the construction project planning permit or other requisite planning approval procedures, the people’s court shall grant such request, unless the employer has obtained the relevant planning permits and approvals prior to the filing of the lawsuit.
If the employer is capable of obtaining the requisite approval procedures but fails to do so, and subsequently seeks to have the construction contract declared invalid on the ground that such procedures were not obtained, the people’s court shall not uphold such a claim.
Article 3: Where a construction contract is invalid, if one party seeks compensation for losses from the other, it shall bear the burden of proof with respect to the other party’s fault, the extent of the losses, and the causal relationship between the fault and the losses.
The extent of the loss cannot be determined. If one party requests that the loss be assessed by reference to the quality standards, construction schedule, payment terms for the project price, and other relevant provisions stipulated in the contract, the people’s court may render a judgment based on factors such as the degree of fault of both parties and the causal relationship between the fault and the loss.
Article 4: Where an unqualified entity or individual enters into a construction contract by borrowing the name of a qualified construction enterprise, and the project owner requests that both the lender and the borrower bear joint and several liability for losses arising from the substandard quality of the construction project or other damages caused by the lending of qualifications, the people’s court shall uphold such request.
Article 5: Where the parties dispute the commencement date of a construction project, the people’s court shall determine such date in accordance with the following circumstances:
(1) The commencement date shall be the date specified in the notice to commence issued by the employer or the supervisor. If, upon issuance of such notice, the conditions for commencement have not yet been met, the commencement date shall be the date when those conditions are satisfied. If the delay in commencement is attributable to the contractor, the commencement date shall be the date stated in the notice to commence.
(2) If the contractor has, with the employer’s consent, already commenced on-site construction, the date of actual commencement of construction shall be deemed the commencement date.
(3) If neither the employer nor the supervisor has issued a notice to commence work, and there is no relevant evidence establishing the actual commencement date, the commencement date shall be determined by comprehensively considering the dates specified in the commencement report, the contract, the construction permit, the completion acceptance report, or the completion acceptance filing form, together with an assessment of whether the conditions for commencement have been met.
Article 6: Where the parties have agreed that any extension of the construction period shall be conofficeed by means such as the signature or approval of the employer or the supervisor, if the contractor has not obtained such conofficeation but can prove that it submitted a request for an extension to the employer or the supervisor within the time limit stipulated in the contract and that the grounds for the extension comply with the contractual provisions, the people’s court shall uphold the contractor’s claim for an extension. If the parties have agreed that failure by the contractor to submit a request for an extension within the prescribed time shall be deemed as a waiver of the right to an extension, such agreement shall govern; provided, however, that this shall not apply where the employer subsequently consents to an extension after the expiration of the prescribed period, or where the contractor raises a valid defense.
Article 7: In a dispute over a construction contract brought by the contractor, if the project owner files a counterclaim alleging that the quality of the construction does not conform to the contractual agreement or statutory requirements and seeks compensation for liquidated damages or reasonable expenses incurred for repair, rework, or reconstruction, the people’s court may consolidate the two cases for joint adjudication.
Article 8: Where any of the following circumstances exists, the people’s court shall support the contractor’s request for the employer to return the quality guarantee deposit:
(1) The agreed-upon deadline for the return of the project quality deposit has expired.
(2) If the parties have not agreed on a time limit for the return of the construction quality deposit, such deposit shall be returned two years from the date the construction project passes its completion acceptance.
(3) If, due to reasons attributable to the employer, the construction project fails to undergo completion acceptance within the agreed time limit, the deadline for returning the quality guarantee deposit shall expire ninety days after the contractor submits the project completion acceptance report; if the parties have not agreed on a deadline for returning the quality guarantee deposit, such deadline shall expire two years from the date ninety days after the contractor submits the project completion acceptance report.
Upon the employer’s return of the construction quality deposit, such action shall not affect the contractor’s obligation to perform warranty services in accordance with the contract or applicable laws.
Article 9: Where the employer, having conducted a tender for a construction project that is not required by law to be subject to tendering, subsequently enters into a separate construction contract with the contractor that deviates from the essential terms of the winning bid contract, and the parties request that the winning bid contract be used as the basis for settling the construction price, the people’s court shall uphold such request, unless the employer and the contractor have entered into a separate construction contract due to objective circumstances that were unforeseeable at the time of the tendering process.
Article 10: Where the construction contract entered into by the parties is inconsistent with the scope of works, construction period, quality standards, and contract price as set forth in the tender documents, the bid documents, and the notice of award, and one party requests that the tender documents, the bid documents, and the notice of award be used as the basis for settling the contract price, the people’s court shall uphold such request.
Article 11: Where the parties have entered into several construction contracts for the same construction project, all such contracts shall be deemed invalid. However, if the construction project meets the required quality standards and one party requests that the contract price be settled by reference to the contract actually performed, the people’s court shall grant such request.
Where the contract actually performed is difficult to ascertain, if a party requests that the construction project payment be settled by reference to the most recently executed contract, the people’s court shall grant such request.
Article 12: Where the parties have already reached an agreement on the settlement of construction project payments prior to litigation, the people’s court shall not permit a party to request a forensic appraisal of the project cost during the course of the proceedings.
Article 13: Where the parties, prior to litigation, jointly entrust a relevant institution or person to issue a consulting opinion on the construction project’s cost, and one party subsequently challenges that opinion by requesting a judicial appraisal, the people’s court shall grant such request, unless the parties have expressly stated that they are bound by the consulting opinion.
Article 14: Where the parties dispute specialized issues such as construction costs, quality, or repair expenses, and the people’s court deems an expert appraisal necessary, it shall clarify this to the party bearing the burden of proof. If, after such clarification, a party fails to apply for an appraisal, or if, having applied for an appraisal, it neither pays the appraisal fees nor provides the relevant materials, it shall bear the legal consequences of failing to produce sufficient evidence.
In first-instance proceedings, if the party bearing the burden of proof fails to apply for an expert appraisal, or if such an application is made but the appraisal fees are not paid or relevant materials are refused to be provided, and then an appraisal is sought in second-instance proceedings, the people’s court, upon determining that an appraisal is indeed necessary, shall proceed in accordance with Article 170, Paragraph 1, Item 3 of the Civil Procedure Law.
Article 15. After the people’s court approves a party’s application for an expert appraisal, it shall, in accordance with the party’s request and the needs of ascertaining the facts of the case, determine the matters to be appraised, the scope thereof, the appraisal deadline, and other relevant details, and shall organize both parties to cross‑examine the appraisal materials at issue.
Article 16. The people’s court shall organize the parties to cross‑examine the expert opinion. If the expert relies on materials that are disputed by the parties and have not been subject to such cross‑examination as the basis for the expert opinion, the people’s court shall convene the parties to conduct a cross‑examination of those materials. If, upon such cross‑examination, the materials are deemed inadmissible as the basis for the expert opinion, the expert opinion rendered on the basis of those materials may not be used as evidence to establish the facts of the case.
Article 17: Where a contractor who has entered into a construction contract with the project owner requests, pursuant to Article 286 of the Contract Law, priority payment from the proceeds of the valuation or auction of the constructed project, the people’s court shall uphold such request.
Article 18: Where the contractor for a decoration and renovation project seeks priority payment from the proceeds of the valuation or auction of such project, the people’s court shall grant such request, unless the employer of the decoration and renovation project is not the owner of the building.
Article 19: Where the quality of a construction project is qualified, and the contractor requests priority payment of the contract price from the proceeds of the project’s valuation or auction, the people’s court shall grant such request.
Article 20: Where an unfinished construction project meets the required quality standards, and the contractor requests priority payment from the proceeds of a valuation or auction of the portion of the project it has undertaken, the people’s court shall grant such request.
Article 21 The scope of the contractor’s priority right to payment for construction project costs shall be determined in accordance with the provisions of the relevant administrative departments under the State Council regarding the scope of such costs.
Where a contractor seeks priority payment for interest, liquidated damages, or compensation for losses arising from delayed payment of construction project costs, the people’s court shall not grant such claim. Article 22: The period within which a contractor may exercise its right to priority payment for construction project costs is six months, commencing from the date on which the employer is obligated to pay such costs.
Article 23: If the employer and the contractor agree to waive or restrict the priority right to payment for construction project costs, thereby prejudicing the interests of construction workers, the people’s court shall not uphold the employer’s claim, based on such agreement, that the contractor is not entitled to the priority right to payment for construction project costs.
Article 24: Where the actual constructor brings a claim against the project owner, the people’s court shall add the sub‑contractor or the illegal subcontractor as a third party to the case. After ascertaining the amount of construction payment owed by the project owner to the sub‑contractor or the illegal subcontractor, the court shall render a judgment holding the project owner liable to the actual constructor within the scope of the unpaid construction payment.
Article 25: Where the actual constructor, pursuant to Article 73 of the Contract Law, brings a subrogation action on the ground that the subcontractor or illegally sub‑contracted party has failed to exercise its due claims against the project owner, thereby causing damage to the actual constructor, the people’s court shall uphold such action.
Article 26 This Interpretation shall come into force as of February 1, 2019.
This Interpretation shall apply to first-instance and second-instance cases that have not yet been concluded as of the date of its entry into force.
This Interpretation shall not apply to cases that had already been finally adjudicated prior to its entry into force, or to cases in which a party applies for retrial after its entry into force, or in which a retrial is ordered pursuant to the trial supervision procedure.
Any prior judicial interpretations issued by the Supreme People’s Court that are inconsistent with this interpretation shall no longer be applicable.

The Ministry of Public Security has issued rules on the collection and examination of electronic evidence in criminal cases.

On January 2, the Ministry of Public Security promulgated the “Rules on Electronic Data Collection in Criminal Cases by Public Security Organs” (hereinafter referred to as the “Rules”), which shall come into effect on February 1, 2019.

The Rules expressly provide that electronic data may be frozen if any of the following circumstances applies:

(1) Where the volume of data is so large that extraction is either impossible or impractical;

(2) The extraction process is lengthy, which may result in the electronic data being tampered with or lost;

(3) Network applications can provide a more intuitive presentation of electronic data;

(4) Other circumstances requiring freezing.

Reply on How to Determine the Commencement Date of “Within Five Years” for Recidivists After Completion of Their Sentence

On December 30, the Supreme People’s Procuratorate issued the “Reply on How to Determine the Starting Date of the ‘Within Five Years’ Period After Completion of Sentence Execution in Cases Involving Recidivists,” clarifying that, pursuant to Article 65, Paragraph 1 of the Criminal Law, “completion of sentence execution” refers to the date on which the offender is due to be released upon expiration of the imposed sentence. When determining whether a person is a recidivist and establishing the starting point of the “within five years” period following completion of sentence execution, such period shall be calculated from the date of the offender’s release upon completion of the sentence.

In the Wenzhou “courier sexual assault” case, the defendant was sentenced to 3 years and 6 months in prison in the first instance.

On the 29th, the People’s Court of Lucheng District, Wenzhou City, Zhejiang Province, handed down a first-instance verdict in accordance with the law in the case of sexual assault involving Zhang, a courier for a certain express delivery company, sentencing the defendant Zhang to three years and six months’ imprisonment for the crime of rape.
The defendant, Zhang, 23 years old this year, has a junior high school education and is a native of Shuicheng County, Guizhou Province. At the time of the offense, he was employed as a courier. The court found through trial that on the morning of September 14, 2018, the victim contacted a courier company in connection with a move and requested that a package be delivered. Around 4:00 p.m. that day, the defendant, Zhang, was dispatched by his employer to a residential complex in Lucheng District, Wenzhou, to collect the package from the victim’s residence. During this time, Zhang attempted to forcibly engage in sexual intercourse with the victim. Faced with the victim’s vigorous resistance, Zhang was unable to succeed. Subsequently, the victim reported the incident to the police, and Zhang was apprehended by responding officers.
The court finds that the defendant, Zhang, violated the will of the victim and used violence to commit rape, thereby constituting the crime of rape and warranting punishment. Although Zhang had already commenced the commission of the crime, his attempt was not completed due to reasons beyond his control, constituting an attempted crime. Taking into account all the circumstances relevant to conviction and sentencing, the court rendered the above‑mentioned judgment in accordance with the law.
The court held that although the defendant, Zhang, was dispatched by the courier company to collect a package from the victim, his act of rape constituted an individual criminal offense unrelated to his official duties; accordingly, the courier company is not a joint tortfeasor. The courier company has voluntarily entered into a settlement agreement with the victim.

Other

Ministry of Civil Affairs: Licensing for the establishment of elderly care institutions will no longer be required.

On January 3, the Ministry of Civil Affairs issued the “Notice on Implementing the Newly Amended Law of the People’s Republic of China on the Protection of the Rights and Interests of the Elderly” (hereinafter referred to as the “Notice”).

The Notice clarifies that licensing for the establishment of elderly care institutions will no longer be implemented. Effective from the date of promulgation of the newly amended Law on the Protection of the Rights and Interests of the Elderly, civil affairs departments at all levels shall cease to accept applications for such licenses. For applications received prior to the date of promulgation but not yet approved, the approval process shall be terminated, the application materials returned to the applicant, and an explanation provided. Civil affairs departments at all levels may no longer issue licenses or engage in disguised forms of approval under other designations. Licenses already issued to elderly care institutions that are still within their validity period shall remain valid; however, upon expiration of the license term, no new license will be reissued.

To the Civil Affairs Departments (Bureaus) of all provinces, autonomous regions, and municipalities directly under the central government; to the Civil Affairs Bureaus of all cities separately listed in the national plan; and to the Civil Affairs Bureau of the Xinjiang Production and Construction Corps:

The newly amended Law of the People’s Republic of China on the Protection of the Rights and Interests of Older Persons (hereinafter referred to as the “Law on the Protection of the Rights and Interests of Older Persons”) was reviewed and adopted at the seventh meeting of the Standing Committee of the 13th National People’s Congress on December 29, 2018, promulgated by Presidential Order No. 24 signed by President Xi Jinping, and entered into force as of the date of its promulgation. This amendment to the Law on the Protection of the Rights and Interests of Older Persons represents a key measure for deepening the reform of the elderly care service sector under the “delegation, regulation, and service” framework and for advancing the development of elderly care services. To ensure effective implementation, the following matters are hereby notified:

I. The licensing requirement for establishing elderly care institutions is hereby abolished. Effective from the date of promulgation of the newly amended Law on the Protection of the Rights and Interests of the Elderly, civil affairs departments at all levels shall no longer accept applications for establishment licenses for elderly care institutions. For applications received prior to the date of promulgation that have not yet been approved, the approval process shall be terminated, the application materials returned to the applicant, and an explanation provided. Civil affairs departments at all levels shall refrain from issuing such licenses or engaging in any disguised form of approval under other designations. Existing licenses for establishing elderly care institutions that are still within their validity period shall remain valid; however, upon expiration of the license term, no new license will be issued.

II. Conduct registration and filing management in accordance with the law. Civil affairs departments of local people’s governments at or above the county level shall clearly define internal responsibilities, strengthen coordination and information sharing with relevant departments, continuously enhance service convenience, and gradually achieve online “one-stop” processing for applications to establish elderly care institutions, offline “single‑window” access, and on-site processing requiring no more than one visit, thereby maximizing convenience for applicants. Following the abolition of the licensing requirement for establishing elderly care institutions, privately run non‑profit elderly care institutions shall, in accordance with the Interim Regulations on the Registration and Administration of Private Non‑Enterprise Units, legally apply to the civil affairs departments of local people’s governments at or above the county level for registration as social service organizations. In line with the principle of “one window, one online platform, one visit,” the first‑contact responsibility system shall be implemented; the windows responsible for administrative approval at the county level and above shall provide a unified external service, accept application materials submitted by sponsors, and solicit opinions from the elderly care services authorities. For privately run non‑profit elderly care institutions approved and registered by the civil affairs departments, the civil affairs departments shall assume the role of the competent supervisory authority; internally, the social organization registration department may be designated to perform the specific duties of the registration and management agency for elderly care institutions, while the elderly care services department shall fulfill the specific responsibilities of the competent supervisory authority. With respect to privately run non‑profit and for‑profit elderly care institutions approved and registered by non‑civil affairs departments (such as administrative approval bureaus), the civil affairs departments shall promptly interface with provincial sharing platforms or inter‑departmental data interfaces to obtain relevant information.

Upon registration, elderly care institutions may commence service operations and shall file with the civil affairs authorities, providing truthful, accurate, and complete registration information and completing the required registration form and commitment letter. The civil affairs authorities shall issue a registration receipt and provide written notice of the basic operational requirements for such institutions, as well as a list of current policies and measures supporting elderly care services in the relevant region. For elderly care institutions whose business‑supervising authority is assumed by the civil affairs authorities, the registration procedures may be correspondingly simplified. In the event of any changes to the registered particulars of an elderly care institution, the corresponding amendment filing procedures shall be promptly completed.

III. Strengthening In‑Process and Post‑Event Supervision of Elderly Care Institutions. All localities shall, in accordance with the State Council’s requirements for streamlining administration, delegating power, integrating regulation with service optimization, innovate approaches to managing elderly care institutions, and promote the establishment of a comprehensive regulatory system. The civil affairs departments of people’s governments at or above the county level are responsible for guiding, supervising, and managing elderly care institutions. If they identify risks that may endanger personal health or the safety of life and property, they shall order corrective action within a specified time limit; failure to comply by the deadline shall result in an order to suspend operations for rectification. Where the risks pertain to building safety, fire safety, food hygiene, medical services, or the safety of special equipment, the relevant authorities shall promptly forward the information to the housing and urban–rural development, emergency management, market regulation, and health departments, and actively cooperate in subsequent investigations and enforcement actions. In cases of serious violations, the registration and administration authorities shall be notified without delay, and such authorities shall impose administrative penalties or revoke the registration certificate in accordance with the law. Non‑governmental, non‑profit elderly care institutions are classified as donor‑funded legal entities; accordingly, the civil affairs departments must, in compliance with the Interim Regulations on the Registration and Administration of Private Non‑Enterprise Units and other applicable laws and policies, conscientiously fulfill their regulatory duties to prevent any change in their nature. Localities should proactively explore and establish sound credit‑based management systems, including credit evaluation, incentives for good faith, and sanctions for breaches of trust.

IV. Strengthen the revision of laws and policies and enhance public communication and guidance. Local civil affairs departments shall, in accordance with the provisions of the newly amended Law on the Protection of the Rights and Interests of the Elderly, incorporate into their legislative work plans local regulations and government rules that address licensing and management issues related to elderly care institutions; carry out reviews of relevant normative documents; and promptly revise and improve supporting policies—such as subsidies for construction and operation—that are directly linked to licensing and administrative oversight, thereby ensuring that policy gaps do not arise as a result of reforms to the administrative approval system. In line with the principle of “those who enforce the law shall also promote legal awareness,” local civil affairs departments should promptly publicize the key contents of the legal amendments and the reform measures through government websites, news media, or by displaying them in public places, so as to facilitate understanding and implementation by the general public, particularly by professionals in the elderly care sector and by older adults.

The Ministry of Civil Affairs will, in the course of revising the Measures for the Administration of Elderly Care Institutions, further clarify the relevant provisions on the guidance, supervision, and management of such institutions. Local civil affairs departments are requested to promptly report any significant issues or circumstances encountered during implementation, so that appropriate improvement measures can be formulated without delay. The sample forms provided at the end of this document, including the “Record Filing Form for Establishing Elderly Care Institutions,” are intended for reference in local work.

Attachment: 1. Registration Certificate for Establishing a Elderly Care Institution

2. Issuance of the Filing Receipt for Elderly Care Institutions

3. Notice of Basic Requirements for Elderly Care Institutions

4. Filing Commitment Letter

The General Office of the State Council has issued the “Guiding Opinions on Fully Implementing the Administrative Law Enforcement Publicity System, the Full-Process Recording System for Law Enforcement, and the Legal Review System for Major Law Enforcement Decisions.”

Recently, the General Office of the State Council issued the “Guiding Opinions on Fully Implementing the Administrative Law Enforcement Publicity System, the Full-Process Recording System for Law Enforcement, and the Legal Review System for Major Law Enforcement Decisions” (hereinafter referred to as the “Opinions”), setting forth clear requirements regarding the implementation of these three systems—administrative law enforcement publicity, full-process recording, and legal review of major decisions.

The Opinions point out that by focusing on key stages of administrative law enforcement—namely, the source, process, and outcomes—and comprehensively implementing the “three systems,” we can play a foundational, holistic, and groundbreaking role in promoting strict, standardized, impartial, and civilized law enforcement. This is of great significance for effectively safeguarding the legitimate rights and interests of the people and upholding the government’s public trust. Guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, we must fully implement the spirit of the 19th National Congress of the Communist Party of China and the Second and Third Plenary Sessions of the 19th CPC Central Committee, striving to make administrative law enforcement transparent, standardized, lawful, and impartial. We will continue to improve the legal framework, refine enforcement procedures, innovate enforcement methods, strengthen oversight, and comprehensively enhance enforcement effectiveness, thereby fostering an administrative law‑enforcement system characterized by unified powers and responsibilities, authority and efficiency, and a government governance system marked by clearly defined duties and administration in accordance with the law.

The Opinions emphasize the need to comprehensively implement the administrative law enforcement information disclosure system. In accordance with the principle of “who enforces the law shall disclose,” it calls for clearly defining responsibilities for the collection, transmission, review, and publication of disclosed information; standardizing the criteria and formats for such disclosures; and promptly making basic and outcome‑related administrative law enforcement information publicly available through government websites, official new media channels, public notice boards in service halls, service windows, and other platforms. Furthermore, a full‑process recording system for law enforcement must be fully implemented. This entails documenting, in written form, audiovisual records, and other formats, every stage of administrative law enforcement—including initiation, investigation and evidence collection, review and decision‑making, and service and execution—and systematically archiving these records to ensure traceability and retrospective management throughout the entire process. For on‑site enforcement activities and case‑handling venues that directly affect personal liberty, life and health, or significant property rights—such as the seizure or detention of assets, or compulsory demolition—full‑process audiovisual recording shall be mandated. Finally, a legal review system for major law enforcement decisions must be comprehensively put in place. Before issuing any major administrative law enforcement decision, administrative law enforcement agencies are required to conduct a rigorous legal review; no decision may be made without such review, or if the review is not passed.

The Opinions clearly state that we must comprehensively advance the informatization of administrative law enforcement, accelerate the interconnection and sharing of enforcement information, and effectively integrate enforcement data resources, thereby laying the foundation for more standardized administrative law enforcement, greater convenience for the public, more efficient government governance, and an improved business environment.

The Opinions stipulate that the principal officials of people’s governments at all local levels and their respective departments shall earnestly strengthen leadership over administrative law enforcement within their jurisdictions and departments, and ensure the effective implementation of the “three systems.” The progress in advancing these three systems shall be incorporated into the evaluation framework for building a law-based government and into the year-end performance‑assessment system. Units and personnel that fail to perform adequately shall be promptly urged to make rectifications; those whose shortcomings result in adverse consequences shall be publicly criticized, and accountability shall be pursued in accordance with disciplinary rules and laws.

Approval of the State Council on the Master Plan for Xiongan New Area, Hebei (2018–2035)

People’s Government of Hebei Province, National Development and Reform Commission:

We have received your “Request for Submission of the ‘Overall Plan for the Xiongan New Area of Hebei (2018–2035)’.” With the approval of the CPC Central Committee and the State Council, we hereby issue the following reply:

I. In principle, we approve the “Overall Plan for the Xiongan New Area of Hebei Province (2018–2035)” (hereinafter referred to as the “Overall Plan”). Guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, the Overall Plan thoroughly implements the spirit of the 19th National Congress of the Communist Party of China and the Second and Third Plenary Sessions of the 19th CPC Central Committee, resolutely carries out the decisions and arrangements of the CPC Central Committee and the State Council, and focuses on coordinating the promotion of the Five‑in‑One overall layout and the Four‑Pronged Comprehensive Strategy. It earnestly applies the new development philosophy, adheres to the requirements of high‑quality development, and officely upholds the original aspiration of making Xiongan a concentrated hub for the relocation of non‑capital functions from Beijing. The plan is guided by a global vision, international standards, Chinese characteristics, and a high‑level positioning; it prioritizes ecology and green development; places people at the center, emphasizing the safeguarding and improvement of people’s livelihoods; and seeks to protect and promote China’s fine traditional culture while preserving its historical and cultural heritage. This plan is of great significance for planning Xiongan New Area from a high starting point and building it to high standards, for creating “Xiongan Quality,” for fostering an “integrity‑based Xiongan,” for establishing a national model for promoting high‑quality development, and for serving as a new engine for building a modernized economic system.

II. Closely align with the strategic positioning of the Xiongan New Area. In accordance with the requirements of high-quality development, we will work to establish Xiongan New Area as one of Beijing’s two new wings, alongside the Beijing Municipal Sub-Center, and, leveraging the opportunities presented by the 2022 Beijing Winter Olympics and Paralympics, develop the Zhangbei region as Hebei’s other wing, thereby advancing coordinated development among Beijing, Tianjin, and Hebei. Following a phased approach to development, we will steadily advance the construction and development of Xiongan New Area, striving for higher‑level, more efficient, fairer, and more sustainable growth. The goal is to build Xiongan into a green, eco‑friendly, and livable new urban district; a leading zone for innovation‑driven development; a model area for balanced development; and a pioneering hub for open development, with the aim of creating a demonstration zone for innovative development that fully implements the new development philosophy.

III. Systematically承接 Beijing’s non-capital functions. We must officely grasp the key task of relieving Beijing of its non-capital functions, reform and innovate institutional mechanisms, develop and improve infrastructure, provide high-quality public services, further optimize the business environment, proactively align with the needs of relocation, and engage in scientific planning of functional layouts. Priority should be given to taking on non-capital functions such as universities, research institutes, medical institutions, corporate headquarters, financial institutions, and public institutions, thereby promoting the rational and orderly flow of production factors and strengthening the endogenous development momentum of the Xiongan New Area.

IV. Optimizing the Spatial Development and Conservation Pattern of Territorial Space. We must adhere to resource and environmental carrying capacity as a rigid constraint, coordinate the three major spatial domains—production, living, and ecology—strictly safeguard the ecological protection red line, rigorously protect permanent basic farmland, and tightly control urban scale and urban development boundaries. By integrating multiple plans into one, we will maintain the blue‑green space ratio in the Xiongan New Area at 70% and keep the long-term development intensity within 30%. We will treat the wetlands, water bodies, forests, farmlands, and grasslands as an integrated ecological community, shaping an ecological spatial structure characterized by “one wetland, three belts, nine patches, and multiple corridors.” Comprehensive, zoned spatial governance will be implemented, leveraging grid‑based, information‑driven, and refined management to strengthen spatial guidance and on‑the‑ground oversight of all development and conservation activities, thereby establishing a new development paradigm that is appropriately scaled, spatially orderly, and land‑use efficient and intensive.

V. Building a Beautiful and Sustainable Natural Environment. We must put Xi Jinping’s Thought on Ecological Civilization into practice, uphold the principles of respecting nature, adapting to nature, and protecting nature, carry out ecological conservation and environmental governance, and build a model city of ecological civilization for the new era. We will strengthen the holistic restoration of the Baiyangdian ecosystem and systematic environmental management, establish a multi-source water‑replenishment mechanism, gradually restore the lake’s surface area, effectively address non‑point source pollution in rural areas, ensure that water quality in the lake area meets standards, and progressively restore its role as the “Kidney of North China.” In the long term, we will plan and develop Baiyangdian National Park. We will launch large‑scale afforestation initiatives, create a high‑quality urban ecological environment, and safeguard regional ecological security. We will promote coordinated environmental governance across the region, fundamentally improve air quality, officely safeguard soil‑environmental safety, and strive to build a beautiful Xiong’an characterized by blue skies, green lands, and clear waters.

VI. Promote integrated urban–rural development. We will uphold coordinated urban–rural planning, balanced growth, and a livable, workable environment, shaping an urban–rural spatial layout characterized by “one core, five sub‑centers, and multiple nodes.” We will concentrate development in the initial zone, take the lead in developing the launch area, pursue intensive development of peripheral clusters, steadily advance new‑type urbanization, rationally guide the distribution of population and industries, and cultivate distinctive small towns on a case-by-case basis. We will implement the rural revitalization strategy, comprehensively build beautiful countryside, and foster the integrated development of agriculture, industry, and services.

VII. Shaping the Distinctive Character of the New Area. We must strengthen zoning‑based guidance to create an overall landscape and urban appearance that weaves blue and green spaces, exudes freshness and brightness, achieves a balanced density, and harmoniously integrates the city with the wetlands. Enhance urban design to cultivate an urban character that embodies Chinese elegance, the scenic charm of the wetland lakes, and a spirit of innovation. Adhere to a synthesis of Chinese and Western styles, with Chinese elements as the dominant feature, and blend tradition with modernity. Reinforce planning‑driven guidance and control, and meticulously and rigorously refine individual building designs to forge architectural forms that reflect classic Chinese traditional elements and highlight regional cultural identity. In principle, avoid constructing towering skyscrapers, and refrain from turning the area into a uniform “concrete jungle” dominated by glass curtain walls. Appropriately protect and make effective use of the historical and cultural heritage of the Xiong’an New Area.

VIII. Creating a Livable and Business‑Friendly Environment. We will attract high‑quality public service resources, build public service facilities to high standards, promote joint development and shared use, and establish a multi‑tiered, universally accessible, and people‑centric basic public service network. This will elevate the level of public services in the Xiong’an New Area and achieve equal access to basic public services across urban and rural areas. We will give priority to developing modern education, allocate medical and health resources at high standards, construct public cultural service facilities, build a comprehensive network of public fitness amenities, provide multi‑level public employment services, and innovate the social security service system. We will establish a housing system characterized by diversified supply, multiple channels of保障, and a combination of rental and purchase options, along with a long‑term mechanism for the stable and healthy development of the real estate market, while strictly prohibiting large‑scale commercial real estate development.

9. Building a Modern, Integrated Transportation System. In accordance with the principles of networked planning, intelligent management, and integrated services, we will accelerate the development of rail and road networks connecting Xiongan New Area with Beijing, Tianjin, other surrounding cities, and Beijing Daxing International Airport. We will also improve the expressway and trunk‑road networks linking Xiongan New Area to the outside world. Upholding the priority of public transit, we will adopt a comprehensive layout of urban transportation facilities to ensure seamless transfers and smooth interconnections among various modes of transport, thereby creating a convenient, safe, green, and smart transportation system.

X. Building a Green and Low-Carbon City. We will uphold green, low-carbon, and circular development, promote green and low-carbon production and lifestyles as well as urban construction and operation models, and advance resource conservation and recycling. We will establish red lines for water resource development and utilization, align urban planning and population size with water availability, and implement the strictest water resource management system. We will build sponge cities and develop compact, efficient, and reliable water supply and drainage systems. We will optimize the energy structure, construct green electricity supply systems and clean, environmentally friendly heating systems, promote the local use of renewable energy, and rigorously control carbon emissions. We will raise standards for green buildings and energy efficiency, and comprehensively advance the design, construction, and operation of green buildings. We will establish advanced waste‑management systems, fully implement waste sorting, and promote the resource‑based utilization of waste. We will rationally plan underground infrastructure networks and make orderly use of underground space.

Eleven, build a world-class innovative city. We will implement an innovation-driven development strategy, strategically position high-end, cutting-edge industries at the highest standards, reform and innovate talent-development mechanisms, attract top-tier domestic and international innovation resources, and optimize the innovation and entrepreneurship ecosystem in the Xiongan New Area. We will establish a modern industrial system characterized by coordinated development among the real economy, technological innovation, modern finance, and human resources. We will construct world-class platforms for scientific and technological innovation and state-of-the-art science-and‑education infrastructure, attract and nurture innovative enterprises, and foster a technology-innovation system that places enterprises at its core, is market‑oriented, and deeply integrates industry, academia, and research. We will advance collaborative innovation across the Beijing–Tianjin–Hebei region, promote military‑civilian integration in innovation, and proactively engage with global innovation networks. We will strengthen intellectual‑property protection and its comprehensive application, and facilitate the transfer and commercialization of scientific and technological achievements.

XII. Building a Digital and Intelligent City. We will ensure that the digital city and the physical city are planned and developed in tandem, proactively deploying smart infrastructure ahead of demand. We will construct a broadband, integrated, secure, and ubiquitous communication network, along with an intelligent multi-source sensing system, to establish a central hub for urban information management. We will provide comprehensive, end-to-end security for smart infrastructure, the central hub, and related applications, thereby establishing a robust urban cybersecurity framework. Furthermore, we will develop an intelligent urban operating model and governance system, refine the urban smart public‑service platform, and create a digitally intelligent city with advanced deep‑learning capabilities and world‑class leadership.

Thirteen, ensure the safe operation of the city. We must officely establish and implement the holistic national security outlook, focusing on building systems for urban safety, disaster prevention, public safety, and comprehensive emergency response, to construct a robust urban safety and emergency‑disaster‑prevention framework, elevate overall disaster‑resilience capabilities, and build a secure Xiong’an. Adhering to the principle of prioritizing prevention while integrating prevention, resistance, and rescue, we will unify routine disaster reduction with extraordinary emergency relief, scientifically set safety standards for flood control, earthquake resistance, fire protection, and other critical areas in the Xiong’an New Area, and ensure high‑standard defenses and high‑quality construction. We will also guarantee the stable and secure supply of clean energy sources such as electricity, natural gas, and district heating, thereby enhancing the level of energy security.

XIV. Strengthening the Planning, Organization, and Implementation of the Master Plan The Master Plan serves as the fundamental basis for the development, construction, and management of the Xiongan New Area and must be strictly enforced; no department or individual may arbitrarily amend or illegally alter it. It is imperative to officely enhance political awareness, a sense of the bigger picture, core consciousness, and alignment consciousness, adhere to a broad historical perspective, ensure continuity from one generation to the next, and make every effort to advance the planning and construction of the Xiongan New Area, guaranteeing that the blueprint is implemented to the very end. Under the unified guidance of the Leading Group for Coordinated Development of the Beijing–Tianjin–Hebei Region, the Hebei Provincial Party Committee and the Provincial Government shall earnestly fulfill their principal responsibilities, strengthen organizational leadership, and vigorously promote all aspects of the planning and construction of the Xiongan New Area. A planning system covering the entire territory, featuring tiered management, category-specific guidance, and integrated multi‑plan coordination, should be established, ensuring that every parcel of land is meticulously planned before construction commences. A Xiongan standards framework encompassing all sectors and stages of planning, construction, and development should be gradually put in place to create “Xiongan Quality.” During the implementation of the Master Plan, any major matters, policies, or projects shall be submitted for approval in accordance with prescribed procedures. The National Development and Reform Commission and the Office of the Leading Group for Coordinated Development of the Beijing–Tianjin–Hebei Region shall undertake comprehensive coordination, strengthen guidance, supervision, and inspection of the Master Plan’s implementation, and promptly report significant issues to the CPC Central Committee and the State Council. All relevant departments and units, as well as the municipalities of Beijing and Tianjin and other localities, are expected to proactively align with and support the planning and construction of the Xiongan New Area, thereby forging a concerted effort to drive its high‑quality development.

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