JC Master Legal News Issue 857

Key Takeaways for This Issue

The China Securities Regulatory Commission convened a symposium to solicit opinions on the institutional rules related to the establishment of the STAR Market and the pilot registration-based system.

On February 13, 2019, Li Chao, a member of the CPC Committee and Vice Chairman of the China Securities Regulatory Commission (CSRC), chaired a symposium to solicit opinions and suggestions from industry experts, securities offices, fund management companies, venture capital institutions, and representatives of science-and‑technology‑innovation enterprises on the institutional rules related to the establishment of the STAR Market and the pilot registration system. Jiao Jinhong, Chief Counsel of the CSRC, attended the meeting, along with responsible officials from relevant departments of the CSRC and the Shanghai Stock Exchange.

A sample of Sanquan soup dumplings tested positive for the African swine fever virus; the food and drug administration is conducting an investigation.

On February 14, Sanquan Food responded to investor inquiries on the Shenzhen Stock Exchange’s Interactive Platform regarding reports that African swine fever virus nucleic acid was detected in its soup dumplings, stating that, as of now, the company has not received any official notification from the competent authorities and will conduct further verification of the incident.

Official response to “zero individual income tax filing equals no tax paid”: Tax records can be issued.

Following the implementation of the new Individual Income Tax Law, does filing a zero‑income return mean there is no tax record? According to the head of the 12366 Beijing Taxpayer Service Center of the State Taxation Administration, taxpayers who, on or after January 1, 2019, have earned taxable income and for whom the withholding agent has filed a full‑amount, full‑personnel withholding return with the tax authorities, or who have independently filed a tax return with the tax authorities in accordance with the tax laws—regardless of whether taxes were actually paid—may apply for an individual income tax “Tax Payment Record.” In other words, even if a zero‑income return is filed, such returns are still continuously recorded in the taxpayer’s tax history.

A former provincial-level official in Zhejiang, who retired 15 years ago, turned himself in, setting a record for the longest time elapsed between retirement and surrender.

According to the Zhejiang Provincial Commission for Discipline Inspection and Supervision, Chen Jianshe, former vice chairman of the Shaoxing Municipal Committee of the Chinese People’s Political Consultative Conference, is suspected of serious disciplinary and legal violations. He voluntarily turned himself in and is currently undergoing disciplinary review and supervisory investigation. Born in 1953 and a native of Xinchang, Zhejiang, Chen Jianshe previously served as vice mayor of Shaoxing and vice chairman of its CPPCC. He retired early in September 2004 at the age of 51. His decision to turn himself in 15 years after retirement sets a record for the longest interval between retirement and voluntary surrender.

National Health Commission: High-sugar beverages and snacks are restricted from being sold in primary and secondary schools as well as childcare facilities.

On the 15th, the General Office of the National Health Commission issued the “Healthy Oral Health Action Plan (2019–2025)” (hereinafter referred to as the “Action Plan”), which calls for launching a special campaign to reduce sugar intake. In conjunction with efforts to build healthy schools, primary and secondary schools, as well as childcare and early‑education institutions, will restrict the sale of high‑sugar beverages and snacks, while cafeterias will reduce the availability of sugary drinks and high‑sugar foods. The plan also aims to educate residents on making healthy food choices and mastering nutritious cooking techniques, encourage businesses to make “low‑sugar” or “sugar‑free” claims, and enhance consumers’ ability to accurately interpret nutrition labels and identify added sugars.

Table of Contents

Table of Contents

Finance & Capital Markets

The China Securities Regulatory Commission convened a symposium to solicit opinions on the institutional rules related to the establishment of the STAR Market and the pilot registration-based system.

Ministry of Finance: Government financing guarantee institutions shall not provide guarantees for the issuance of local government bonds.

Strategic cooperation has been established between the nine cities of the G60 Science and Technology Innovation Corridor and the Shanghai Stock Exchange.

Dispelling the Smoke Screen: The Shenzhen Stock Exchange Cracks Down Harshly on Manipulation of Financial Performance

Property developers’ financing sees a dramatic turnaround, with January bond issuance surpassing RMB 100 billion to hit a new record.

Corporate & Commercial

A sample of Sanquan soup dumplings tested positive for the African swine fever virus; the food and drug administration is conducting an investigation.

Hainan Yedao Group: “I’ve been drinking it since I was a child” does not violate advertising laws.

The Beijing–Shanghai High-Speed Railway has reduced its registered capital by RMB 90.6 billion; its legal representative has been changed, and four independent directors have been added.

Didi’s Winter Survival: Massive Layoffs Amid Staggering Losses; Delivery‑service Employees Are Already Submitting Resumes

Taxation

Official response to “zero individual income tax filing equals no tax paid”: Tax records can be issued.

Small and micro enterprises welcome the implementation of universal tax cuts during the first tax filing period.

Litigation & Arbitration

A former provincial-level official in Zhejiang, who retired 15 years ago, turned himself in, setting a record for the longest time elapsed between retirement and surrender.

Ding Shumiao was sentenced for bribing Liu Zhijun, and one of her five-star hotels was sold for 1.6 billion yuan.

Lottery shop owner fraudulently claimed a 4.83-million-yuan jackpot, choosing to go to prison rather than return the funds; the court has offered a reward for the recovery of the assets.

Other

National Health Commission: High-sugar beverages and snacks are restricted from being sold in primary and secondary schools as well as childcare facilities.

Finance & Capital Markets

The China Securities Regulatory Commission convened a symposium to solicit opinions on the institutional rules related to the establishment of the STAR Market and the pilot registration-based system.

On February 13, 2019, Li Chao, a member of the CPC Committee and Vice Chairman of the China Securities Regulatory Commission (CSRC), chaired a symposium to solicit opinions and suggestions from industry experts, securities offices, fund management companies, venture capital institutions, and representatives of science-and‑technology‑innovation enterprises on the institutional rules related to the establishment of the STAR Market and the pilot registration system. Jiao Jinhong, Chief Counsel of the CSRC, attended the meeting, along with responsible officials from relevant departments of the CSRC and the Shanghai Stock Exchange.

The participating delegates commended the overall institutional framework for establishing the STAR Market and piloting the registration-based system, noting that it remains aligned with the principles of market‑oriented and law‑based reform and underscores the STAR Market’s role as a testing ground for this major incremental reform. They also put forward suggestions and recommendations on such matters as clearly defining the STAR Market’s positioning, as well as on issues related to issuance, pricing, underwriting, listing, information disclosure, and ensuring that all relevant parties fulfill their respective responsibilities.

Li Chao stated that the opinions and suggestions put forward by all parties are highly valuable for refining the relevant systems and rules governing the STAR Market. The CSRC will carefully study and substantiate these inputs, fully incorporating and adopting reasonable proposals. Going forward, the CSRC and the Shanghai Stock Exchange will thoroughly implement the spirit of the Sixth Meeting of the Central Commission for Comprehensively Deepening Reform, promptly refine the pertinent systems and rules, and steadily and orderly advance work related to rule promulgation, personnel preparation, and technological upgrades, making every effort to ensure the successful implementation of the establishment of the STAR Market and the pilot registration‑based reform.

Ministry of Finance: Government financing guarantee institutions shall not provide guarantees for the issuance of local government bonds.

Recently, the General Office of the State Council issued the “Guiding Opinions on Effectively Leveraging the Role of Government‑Backed Financing Guarantee Funds to Provide Substantive Support for Small and Micro Enterprises and the Development of Agriculture, Rural Areas, and Farmers” (Guobanfa [2019] No. 6, hereinafter referred to as the “Guiding Opinions”). This represents an important measure to alleviate the difficulties and high costs of financing faced by private enterprises and small and micro businesses. Recently, a responsible official from the Ministry of Finance answered questions from reporters regarding the contents of the “Guiding Opinions.”

According to relevant officials, the “Guiding Opinions” address current issues in China’s financing guarantee sector—such as deviation from the core guarantee business, insufficient focus on supporting small and micro enterprises and agriculture, and excessively high guarantee fees—by taking the standardized operation of national and local financing guarantee funds as a starting point. The document clarifies that government-backed financing guarantee institutions should adhere to a quasi-public mandate, fill market gaps, and provide credit enhancement for small and micro enterprises and rural entities that lack information and creditworthiness, thereby helping to alleviate their difficulties in accessing affordable financing or even securing funding at all. Key provisions include:

First, return to the core business of guarantee services. The “four prohibitions” governing the operations of government-backed financing guarantee institutions are clearly defined: they must not deviate from their primary mandate by arbitrarily expanding their scope of business; they must not provide guarantees for the issuance of government bonds; they must not offer credit enhancement for financing by government‑funded platforms; and they must not make equity investments in non‑guarantee institutions. Institutions that have already engaged in guaranteeing government bond issuances or financing provided by government‑funded platforms are required to proactively divest such activities and carry out thorough asset verification and valuation.

Second, the focus is on supporting small businesses and agriculture. Government-backed financing guarantee institutions are required to strictly limit the scale and risks associated with idle funds, reduce their guarantee business for medium- and large-sized enterprises, and gradually increase the share of guarantees for small businesses and agriculture to over 80 percent, with priority given to micro and small enterprises and agricultural, rural, and farmer entities whose individual guarantee amounts do not exceed RMB 5 million.

Third, we will effectively reduce fees and extend benefits. Government-backed financing guarantee institutions are explicitly mandated not to pursue profit, and, on the basis of sustainable operations, they will maintain low fee rates. In principle, the National Financing Guarantee Fund’s reinsurance fees shall not exceed those charged by provincial-level guarantee and reinsurance institutions: for individual guarantees exceeding RMB 5 million, the fee shall not exceed 0.5% of the risk‑bearing liability; for individual guarantees of RMB 5 million or less, the fee shall not exceed 0.3% of the risk‑bearing liability. This will guide partner institutions to gradually bring average guarantee fees below 1%, thereby substantially lowering the overall financing costs for small and micro enterprises and for agriculture, rural areas, and farmers.

Strategic cooperation has been established between the nine cities of the G60 Science and Technology Innovation Corridor and the Shanghai Stock Exchange.

How can capital markets and regional collaboration generate synergistic effects? The strategic partnership between the nine cities of the G60 Science and Technology Innovation Corridor and the Shanghai Stock Exchange provides an exemplary model.

On February 15, the nine cities of the G60 Science and Technology Innovation Corridor and the Shanghai Stock Exchange held a strategic cooperation signing ceremony in the SSE trading hall, aiming to deeply integrate the national strategy for Yangtze River Delta integration with the major reforms of establishing the STAR Market and piloting the registration-based IPO system.

Under the cooperation agreement, the G60 Science and Technology Innovation Corridor and the Shanghai Stock Exchange will jointly develop the SSE G60 Science and Technology Innovation Corridor Index and establish the “Shanghai Stock Exchange Capital Market Services Base for the G60 Science and Technology Innovation Corridor.” On the same day, Zhou Bo, Executive Vice Mayor of Shanghai, and Huang Hongyuan, Chairman of the Shanghai Stock Exchange, jointly unveiled the plaque for the “Shanghai Stock Exchange Capital Market Services Base for the G60 Science and Technology Innovation Corridor.”

At the signing ceremony, Ma Chunlei, Deputy Secretary-General of the Shanghai Municipal Government, Director of the Shanghai Municipal Development and Reform Commission, and Director of the Yangtze River Delta Regional Cooperation Office, stated that he hopes the nine cities along the G60 Science and Technology Innovation Corridor will, in the course of precisely aligning with the pilot registration‑based reform of the STAR Market, better grasp the STAR Market’s strategic positioning, target emerging technology sectors, and strengthen the Shanghai Stock Exchange’s capital market service base for the G60 Science and Technology Innovation Corridor.

Dispelling the Smoke Screen: The Shenzhen Stock Exchange Cracks Down Harshly on Manipulation of Financial Performance

In recent years, some listed companies have resorted to various manipulative practices to meet promised earnings targets or achieve performance milestones, thereby seriously misleading investors. According to a responsible official at the Shenzhen Stock Exchange, in response, the Exchange has implemented a comprehensive regulatory approach, establishing a multi‑pronged oversight framework that includes proactive reminders and warnings, risk monitoring, investigative follow‑up, and disciplinary actions against violations, effectively cracking down on illegal and non‑compliant behavior aimed at manipulating corporate performance.

According to reports, the misuse of accounting judgments, non‑arm’s‑length transactions, and fictitious transactions are common methods used by listed companies to manipulate their financial performance.

First, there is the misuse of accounting judgments. Companies may deliberately select accounting estimates that favor their financial performance in order to manipulate earnings. For example, one company, despite a sharp increase in its return rate to 52% in the year preceding a periodic report and a sustained decline in product competitiveness, used the three-year average return rate (22%) as its estimate for the current year, raising serious concerns about the potential underestimation of the return rate. In its inquiry letter accompanying the annual report, the Shenzhen Stock Exchange questioned whether the company had adequately anticipated the risk of substantial sales returns during the year and requested that the auditors explain the audit procedures they had performed to verify the authenticity of the company’s revenue, thereby rigorously urging the company to adopt a more prudent approach to estimating its return rate. Ultimately, the company adopted the higher of the prior year’s return rate and the three-year average return rate as its estimate. Subsequent events conofficeed that the actual return rate reached 37%, significantly exceeding the original estimate.

Second, there were non‑arm’s‑length transactions. The company engaged in the transfer of benefits to the listed company through related parties or third parties that, while formally unaffiliated, were in fact linked by underlying arrangements of mutual interest. Specifically, a certain company transferred portions of its subsidiary’s equity—originally carried at a book value of RMB 1 million—at valuations of RMB 200 million and RMB 700 million, respectively, thereby recognizing total equity disposal gains of RMB 110 million. The remaining equity was remeasured at fair value, with the difference between fair value and book value recorded as capital gains, amounting to RMB 175 million in aggregate. In light of these circumstances, the Shenzhen Stock Exchange issued multiple inquiry letters to the company and requested the auditors to conduct a thorough review of the relevant transactions. Upon obtaining pertinent leads, the Exchange further implemented effective regulatory measures.

Third, there are fictitious transactions. Companies inflate their assets by transferring funds from within the entity to outside accounts under the guise of acquiring assets, only to have those funds flow back into the company as customer payments. This practice is used to artificially boost revenue, resulting in highly abnormal financial metrics. In response to suspicious leads, the Shenzhen Stock Exchange has meticulously investigated and traced the origins of such schemes, conofficeing that false transactions were employed to manipulate profits and imposing severe penalties on numerous companies.

An official from the Shenzhen Stock Exchange stated that accounting oversight has long been a central focus of the Exchange’s information-disclosure regulatory work. To ensure effective oversight of 2018 annual report disclosures, the Shenzhen Stock Exchange has developed a comprehensive review plan, devising targeted screening and inquiry protocols for risk areas such as companies with substantial goodwill balances and those whose target‑company performance closely meets earnings targets. High‑risk issuers are subject to double‑check reviews and heightened scrutiny, while regulatory tools are deployed judiciously, irregularity leads are promptly reported, inter‑agency coordination is strengthened, and efforts are officely directed at curbing earnings manipulation, thereby striving to maintain a clean and transparent market environment.

The China Securities Regulatory Commission has guided stock exchanges to refine the margin trading and short-selling mechanisms, thereby meeting investors’ diversified needs.

To further optimize the margin trading and short‑selling framework and enhance securities offices’ independent management capabilities, the Shanghai and Shenzhen Stock Exchanges are expediting revisions to the Detailed Rules for Margin Trading and Short‑Selling. The proposed changes would eliminate the uniform requirement that the liquidation threshold not fall below 130%, allowing securities offices to independently determine the minimum maintenance margin ratio in consultation with clients, based on the clients’ creditworthiness, the quality of collateral, and the office’s risk‑tolerance. At the same time, the scope of eligible collateral will be broadened, further increasing the flexibility for clients to provide additional collateral. In addition, to meet investors’ diversified demand for underlying securities, the exchanges are exploring an expansion of the range of eligible securities.

The China Securities Regulatory Commission is investigating recent cases of fabricating and disseminating false information.

Recently, a small number of unlawful individuals have exploited self-media platforms to deliberately disseminate false information targeting capital market regulatory policies and reform measures. After being republished by relevant media websites, such misinformation spread rapidly, severely disrupting market order and causing extremely adverse social repercussions. In response, the China Securities Regulatory Commission has mobilized inspection and enforcement teams to immediately launch comprehensive investigations into leads, conduct source-tracing analyses, and implement targeted surveillance and investigative measures. Preliminary findings indicate that Chen, Lin, Wang, and others, along with related media platforms, are suspected of fabricating and spreading false claims—such as “a press conference by the newly appointed chairman of the CSRC”—in violation of relevant provisions of the Securities Law. Moving forward, the Commission will rigorously hold all parties involved accountable for their unlawful conduct; cases involving criminal offenses will be referred to public security authorities in accordance with the law.

Fabricating and disseminating false information is a conduct strictly prohibited by securities and futures laws and regulations, and has long been a key focus of the CSRC’s inspection, enforcement, and crackdown efforts. In recent years, the CSRC has fulfilled its regulatory duties in accordance with the law, resolutely investigating and prosecuting acts of fabricating and spreading false information. Since 2016, it has handled a total of 17 such cases, imposed administrative penalties in 13 instances, and rigorously investigated and prosecuted entities and individuals including Tonghuashun Network, Zeng Gai Xiong, Cao Lei, and others; two cases have been referred to public security authorities for administrative sanctions.

We will continue to closely monitor, swiftly respond to, and rigorously investigate the fabrication and dissemination of false information in the securities and futures markets, doing our utmost to safeguard the order of information dissemination in the capital market. Media outlets and their professionals must uphold the principle of journalistic integrity and refrain from publishing or spreading rumors lacking factual basis. At the same time, we urge all investors to remain vigilant, refuse to believe or spread unsubstantiated rumors, and protect their own interests.

Property developers’ financing sees a dramatic turnaround, with January bond issuance surpassing RMB 100 billion to hit a new record.

Contrary to the persistent financing difficulties that have prevailed since last year, this year’s financing market has surged across the board, with total bond issuance in January alone exceeding RMB 100 billion, reaching a record high.

Starting at the end of 2018, the financing environment for property developers began to improve. Entering the new year, securing funding is no longer as difficult as reaching the heavens. According to data from CRIC Research Center, in January this year, the total amount of domestic and overseas bond issuance by property companies surged to RMB 109.579 billion, hitting a record high and rising 91.8% month-on-month.

Among individual companies, China Evergrande recorded the highest total financing amount, at RMB 20.15 billion, primarily due to its consecutive issuance of three tranches of offshore senior notes on January 22. Cinda Real Estate’s non‑public offering of its first tranche of 2019 corporate bonds was listed and issued on the Shanghai Stock Exchange on January 31, with a total issuance size of RMB 1.5 billion and a coupon rate of 5.5%. Yuzhou Properties issued US$500 million of senior notes at a coupon rate of 8.5%, while Midea Real Estate completed the issuance of RMB 3.06 billion in corporate bonds, bearing an annual coupon rate of 5.3%.

Among corporate bonds issued in January, offshore bonds accounted for the largest share at 67.6%, with a total issuance of RMB 74.04 billion—up 141.9% month-on-month—primarily driven by large-scale issuances of offshore senior notes by companies such as China Evergrande, Country Garden, and Yuzhou Property. Notably, China Evergrande alone raised approximately RMB 20.15 billion through offshore senior notes in a single month. Meanwhile, the volume of onshore corporate bond issuance declined: compared with December’s two-year high of RMB 22.02 billion, January’s issuance totaled RMB 17.84 billion, a 19% month-on-month decrease.

Notably, although the total amount of corporate bond issuance by property developers surged at the start of 2019, financing costs remained elevated. In January, the average cost of bond issuance for property offices stood at 6.98%, down 0.17 percentage points from the previous month. Meanwhile, overseas bond financing costs stayed high, reaching 7.86% this month—up 0.32 percentage points from the prior month—keeping overall financing costs at relatively high levels seen in recent years and leaving companies under continued pressure to manage their funding expenses.

Among them, the lowest financing cost in January was for a 1.5-billion-yuan ultra-short-term financing bond issued by China Merchants Shekou, with an interest rate of 2.98%; Xiamen C&D’s two bond issuances on the 10th and 11th also carried relatively low costs, at 3.3% and 3.4%, respectively. Meanwhile, some smaller‑sized property developers incurred comparatively higher overseas borrowing costs in January; the highest was for a senior offshore note issued by Evergrande Property on January 9, which carried an interest rate of 15.5%.

Except for January, property developers continued to raise capital intensively in February this year. On February 8, Greentown China issued two announcements stating that its US$400 million senior perpetual bonds are expected to be listed around February 11. At the same time, its US$100 million senior perpetual bonds, which are callable starting in 2022, are anticipated to receive approval for listing and trading on or about February 11, 2019. On February 11, China Aoyuan Group announced that it had issued US$225 million of 7.95% senior notes due in 2023. On February 13, China Overseas Property stated that the first tranche of its 2019 corporate bonds, with a total size of RMB 3.5 billion, would be listed on February 15. Also on February 13, Sunac China announced the issuance of US$800 million of senior notes due in 2022, bearing an annual interest rate of 7.875%.

In response, Li Jianlin of the E-House Research Institute noted that, prior to the New Year, property developers were grappling with a wave of financing difficulties; now, however, the clouds have parted and a surge in funding activity is unfolding. Overall, at the start of 2019, developers engaged in intensive fundraising, easing their broader liquidity pressures, and the floodgates for corporate financing have effectively opened.

Commercial & Corporate

A sample of Sanquan soup dumplings tested positive for the African swine fever virus; the food and drug administration is conducting an investigation.

On February 14, Sanquan Food responded to investor inquiries on the Shenzhen Stock Exchange’s Interactive Platform regarding reports that African swine fever virus nucleic acid was detected in its soup dumplings, stating that, as of now, the company has not received any official notification from the competent authorities and will conduct further verification of the incident.

According to available data, nucleic acid tests for African swine fever virus came back positive in 40 batches of products from 11 manufacturers, including Sanquan, Zhengrong, Kedi, and Jinluo. On February 15, the Gansu Provincial Department of Agriculture and Rural Affairs conofficeed this information to a reporter from The Beijing News, adding that the test results are still under further investigation. As of the market close on the afternoon of February 15, Sanquan Food’s share price closed at 7.55 yuan, down 3.58%.

Notably, this is not the first time that African swine fever has affected a publicly listed company. On August 16, 2018, an order issued by the Zhengzhou Municipal Government to impose a lockdown on areas infected with African swine fever circulated online. The lockdown decree stated that, following testing and conofficeation by the China Animal Health and Epidemiology Center, 30 out of 260 live pigs transported from the Heilongjiang Jiamusi Tangyuan County Heli Town trading market to the slaughterhouse of Zhengzhou Shuanghui Food Co., Ltd. had died, indicating an outbreak of African swine fever. Subsequently, both the Ministry of Agriculture and Rural Affairs and Shuanghui conofficeed the report.

According to the “Notice of the Ministry of Agriculture and Rural Affairs on Further Strengthening Supervision over the Inter‑Provincial Transportation of Live Pigs and Their Products,” in order to break the transmission chain of African swine fever and reduce the risk of cross‑regional spread, provinces bordering those where African swine fever has occurred are required to suspend the inter‑provincial movement of live pigs and temporarily close all domestic pig trading markets within their jurisdictions. The suspension shall remain in effect from the date an outbreak is reported in any neighboring province until the lifting of quarantine measures in all such neighboring provinces.

Hainan Yedao Group: “I’ve been drinking it since I was a child” does not violate advertising laws.

On February 16, Hainan Yeshu Group’s official Weibo account announced that the slogan “I’ve been drinking it since I was a child” does not violate the Advertising Law, has been approved by the China Advertising Association, and is also recognized by the administration for industry and commerce.

According to reports, this advertising slogan does not promote breast enlargement through coconut water; rather, it underscores consumers’ trust in Yeshu-brand coconut water, helping to safeguard our product against the onslaught of over 80 counterfeit and substandard coconut‑water brands from both within and outside the province, thereby enabling consumers to distinguish genuine products from fakes. As Yeshu was the first in the world to invent coconut water 30 years ago, it has been granted a Chinese invention patent and jointly awarded the “China Patent Invention Gold Award” by the World Intellectual Property Organization and the State Intellectual Property Office. A century ago, Moutai won the International Panama Gold Medal in the United States; and in 2016, a hundred years later, Yeshu coconut water likewise received the International Panama Special‑Class Gold Medal in the U.S. Its products are now exported to more than 30 countries and regions, including the United States, the United Kingdom, and Australia, establishing it as a global brand—something that should fill all Chinese people with pride and appreciation.

The Beijing–Shanghai High-Speed Railway has reduced its registered capital by RMB 90.6 billion; its legal representative has been changed, and four independent directors have been added.

Recently, the Beijing–Shanghai High-Speed Railway Company has amended several items in its corporate registration, including the legal representative, registered capital, shareholders, and senior management composition.

Specifically, the legal representative has been changed from Yu Bangli to Shao Changhong; the registered capital has been increased from RMB 130.6239612 million to RMB 400 billion, representing a reduction of over RMB 90.6 billion; the number of the 11 shareholders remains unchanged, with two shareholder names having been updated: China Railway Construction Investment Company has been renamed China Railway Investment Co., Ltd., and Shandong Railway Construction Investment Co., Ltd. has been renamed Shandong Railway Investment Holding Group Co., Ltd.

According to business registration information, Yu Bangli serves as Chairman of the Beijing–Shanghai High-Speed Railway, while Shao Changhong holds the positions of Vice Chairman and General Manager.

In this round of adjustments to the board of directors and the supervisory board, the number of directors (excluding independent directors) has been reduced from 16 to 4, with one of them previously serving as a supervisor. The chairperson of the supervisory board has been changed from Xiao Shijun to Gong Jianzhong. The supervisory board has expanded from four members to six, with all new members except for Wang Honggang, who previously served as a director. Notably, the newly appointed board of directors also includes four independent directors.

At present, it remains unclear whether the shareholding ratios and equity interests of the shareholders will change following this reduction in registered capital, and China Railway High-speed has not yet disclosed the reasons for the reduction.

Some analysts believe that the recent capital reduction by the Beijing–Shanghai High-Speed Railway brings it one step closer to an IPO. Since listings impose certain requirements on the quality of registered capital and its ratio to net assets, some companies adjust their registered capital prior to going public.

There have long been rumors that the Beijing–Shanghai High-Speed Railway would go public. China Railway Corporation has clarified that China Railway Special Freight Co., Ltd. (hereinafter referred to as CR Special Freight), which is set to launch a shareholding reform and file for an initial public offering (IPO) in 2019, disclosed in a December 2018 announcement that, in accordance with the requirements for shareholding reform and listing, it is currently undergoing capital reduction procedures, expected to be completed by January 2019. Upon completion of these procedures, the registered capital will be reduced to RMB 4 billion. Prior to and following the capital reduction, the target company’s total assets, liabilities, and equity, as well as each shareholder’s respective ownership ratio, will remain unchanged. At present, CR Special Freight has already concluded its capital reduction process.

The capital reduction procedures for the Beijing–Shanghai High-Speed Railway were also completed during the same period.

At present, it remains unclear whether the shareholding ratios and rights of each shareholder will change following this reduction in registered capital.

Didi’s Winter Survival: Massive Layoffs Amid Staggering Losses; Delivery‑service Employees Are Already Submitting Resumes

Recently, internal financial data circulated within Didi revealed that the company sustained substantial losses in 2018, with a full-year loss reaching RMB 10.9 billion. Meanwhile, Didi’s total spending on driver subsidies for the year amounted to RMB 11.3 billion. Didi has declined to comment on these figures.

Even earlier, in September 2018, Didi’s financial reports showed that its losses widened to RMB 4.04 billion in the first half of 2018, compared with RMB 2.5 billion for the full year of 2017—meaning the first-half loss alone exceeded last year’s total by a significant margin. The data also revealed that Didi spent RMB 11.78 billion on passenger subsidies and driver incentives in the first half of 2018, down from RMB 18.1 billion for the entire year of 2017.

By this account, the primary driver of Didi’s losses appears to be subsidies.

In an internal letter following the Hitch incident, Cheng Wei also noted that Didi has yet to turn a profit in its six-year history. In the first half of 2018, Didi’s ride-hailing business recorded an average take rate of approximately 16% on GMV, with the vast majority of revenue flowing back to drivers and passengers; the company’s overall gross margin on GMV stood at just 1.6%.

However, in reality, the reasons behind Didi’s widening losses in 2018 went beyond this.

2018 was anything but a calm year for Didi. It began with two major battles—ride-hailing and food delivery—against Meituan. In March 2018, Meituan Taxi officially launched in Shanghai, sparking a series of subsidy wars between the two companies. In April 2018, Didi’s food-delivery service rolled out a trial operation in Wuxi, while Meituan Food Delivery also kicked off its own subsidy campaign, leaving Wuxi users able to enjoy meals for as little as one yuan.

Secondly, Didi has embarked on large-scale expansion across multiple sectors, including internationalization, bike-sharing, new‑energy vehicles, financial services, and the automotive aftermarket. In terms of internationalization, it acquired Brazil’s 99, formed a joint venture with SoftBank to enter Japan’s ride‑hailing market, and expanded into several cities in Mexico and Australia. On the bike‑sharing front, it took an equity stake in ofo, acquired Bluegogo, and launched Qingju. In the new‑energy vehicle space, Didi partnered with 31 companies across the automotive supply chain to build a car‑operator platform and invested in electric‑vehicle service provider Shikong Electric, among others. In financial services, its finance division was restructured into a Financial Business Unit and launched a dedicated financial services channel. Finally, in the automotive aftermarket, Didi upgraded its in‑house car‑service platform to Xiaoju Car Service Co., Ltd. and injected $1 billion into the company.

Finally, following two ride-hailing safety incidents, Didi ramped up its investments in safety and customer service. For instance, in September 2018, Cheng Wei pledged that the platform would allocate an additional 140 million yuan to bolster its safety and customer-service teams, phase out the outsourcing model for customer support, and expand its in-house customer-service centers to 8,000 agents by the end of 2018.

Undoubtedly, compared to its investments in ride-hailing and food-delivery battles, international expansion, horizontal business diversification, and safety, Didi’s spending in 2018 was no less substantial than its subsidies for passengers and drivers. At an all‑hands meeting on February 15, CEO Cheng Wei announced that the company would prepare for a period of lean operations, with overall layoffs accounting for 15% of the workforce—roughly 2,000 employees.

According to Cheng Wei, in 2019 Didi will focus on its core mobility business—the most critical area at present—while continuing to ramp up investments in safety and compliance and improving operational efficiency. As a result, the company will “shut down, consolidate, and transform” non-core businesses and reduce headcount among employees whose roles overlap due to business restructuring or who fail to meet performance standards. At the same time, Cheng Wei revealed that, alongside laying off 2,000 employees, Didi will increase investment in key areas such as safety technology, product development, operations, offline driver management, and international expansion, and will continue to hire an additional 2,500 people.

While laying off 2,000 employees, why is the company still hiring 2,500? A Didi spokesperson explained that, under immense pressure to ensure safety and comply with regulatory requirements, the company has been compelled to restructure and pivot, dedicating all its resources to enhancing safety and ensuring compliance. Consequently, it must make corresponding adjustments to its organizational structure and talent capabilities.

During its December organizational restructuring, Didi appointed a Chief Safety Officer for the first time to bolster safety operations, reporting directly to Cheng Wei. Meanwhile, the newly established Didi Ride-Hailing Platform Company will, in the next phase, comprehensively advance the compliance of its ride-hailing services, focusing on building and strengthening its driver management system and ensuring robust offline processes—such as driver onboarding, training, and performance evaluation—that are critical to safety and user experience.

Beyond the safety and compliance of its ride-hailing business, international expansion remained a top priority for Didi in 2019. Today, foreign media reported that Didi is recruiting managers in Chile, Peru, and Colombia, signaling plans to further expand into Latin America. Meanwhile, Cheng Wei emphasized that safety and efficiency will also be key pillars of Didi’s global expansion.

Taxation TAXATATION

Official response to “zero individual income tax filing equals no tax paid”: Tax records can be issued.

Following the implementation of the new Individual Income Tax Law, does filing a zero‑income return mean there is no tax record? According to the head of the 12366 Beijing Taxpayer Service Center of the State Taxation Administration, taxpayers who, on or after January 1, 2019, have earned taxable income and for whom the withholding agent has filed a full‑amount, full‑personnel withholding return with the tax authorities, or who have independently filed a tax return with the tax authorities in accordance with the tax laws—regardless of whether taxes were actually paid—may apply for an individual income tax “Tax Payment Record.” In other words, even if a zero‑income return is filed, such returns are still continuously recorded in the taxpayer’s tax history.

Small and micro enterprises welcome the implementation of universal tax cuts during the first tax filing period.

In February, a series of joyful events marked the occasion as people across the country celebrated the peaceful and harmonious Spring Festival of the Year of the Pig. Small and micro enterprises also entered their first tax‑filing period since the implementation of new inclusive tax‑and‑fee reduction policies. Tax authorities have provided taxpayers with the convenient “file and enjoy” service, enabling small and micro businesses nationwide to more easily and comfortably benefit from the government’s tax‑and‑fee relief measures, adding even more festivity to the Lunar New Year.

On February 1, at the tax service hall of the Siming District Tax Bureau of Xiamen under the State Taxation Administration, Lin Luyan, a finance employee from the Jinhu Road branch of a Xiamen-based eyewear company, arrived early in the morning to wait for tax‑related services.

Since January 2019, the state has implemented a new round of universal tax and fee reduction measures for small and micro enterprises. Among these measures, value-added tax is exempted for small-scale VAT taxpayers with monthly sales below RMB 100,000, and such taxpayers are permitted to choose whether to file on a monthly or quarterly basis. Following the introduction of this new policy, the eyewear company where Lin Luyan works opted for monthly filing, making it one of the first enterprises to benefit from these universal tax reductions.

“In January this year, the company’s sales revenue exceeded 90,000 yuan. Under the previous policy, we would have had to pay around 2,700 yuan in value-added tax. Now, not only do we owe nothing, but we’ve also saved over 300 yuan in urban construction tax and education surcharge. With such a generous gift from the government before the New Year, it’s only natural that we want to pocket it as soon as possible,” Lin Luyan said with a smile.

The sense of gain brought by tax and fee reductions has continued from before the Lunar New Year well into the post-holiday period. On February 11, the first working day after the Spring Festival holiday, Chen Lixia, an accountant at a small and micro enterprise visiting the tax service hall in Youyang County, Chongqing, said, “In the past, I had to pay taxes on every invoice exceeding RMB 30,000 per month. Today, even though I issued an invoice worth RMB 96,000, I didn’t have to pay a single cent—tax exemption thresholds have tripled. It truly feels like receiving a big red envelope!” At 9:00 a.m., Chen Lixia arrived at the tax service hall and, in just a few minutes, obtained a standard VAT invoice issued on her behalf by the tax authorities.

The new inclusive tax and fee reduction policies for small and micro enterprises not only further lower VAT for small-scale taxpayers and income tax for small and low-profit enterprises, but also authorize the governments of all provinces, autonomous regions, and municipalities directly under the central government to reduce, by up to 50%, resource tax, urban construction and maintenance tax, property tax, urban land use tax, stamp duty (excluding stamp duty on securities transactions), cultivated land occupation tax, as well as the education surcharge and local education surcharge, for small-scale VAT taxpayers.

As of 5:00 p.m. on February 14, 29 provinces, autonomous regions, and municipalities—namely Beijing, Hebei, Shanxi, Inner Mongolia, Liaoning, Jilin, Heilongjiang, Jiangsu, Zhejiang, Anhui, Fujian, Jiangxi, Shandong, Henan, Hubei, Hunan, Guangdong, Guangxi, Hainan, Chongqing, Sichuan, Guizhou, Yunnan, Tibet, Shaanxi, Gansu, Qinghai, Ningxia, and Xinjiang—have explicitly stipulated that small and micro enterprises will receive the maximum 50% reduction in six taxes and two fees. Meanwhile, the five cities directly under the central government—Dalian, Qingdao, Ningbo, Xiamen, and Shenzhen—will implement the relevant policies in accordance with the regulations of their respective provinces.

Ms. Wu from Macao was among the first to benefit from local tax and fee reductions. Recently, when she paid her February property tax and obtained an invoice for the rental of her real estate at the Zhuhai Bonded Zone Tax Bureau of the State Taxation Administration, she found that whereas she had previously been required to pay over 2,200 yuan each month, this month she only had to pay 1,113.9 yuan. “Over the course of a year, I’ll save more than 10,000 yuan!” Ms. Wu remarked with emotion. “Our country’s tax policies are becoming increasingly favorable—this is a clear sign of our nation’s growing prosperity, and we feel truly proud of it.”

LITIGATION & ARBITRATION

A former provincial-level official in Zhejiang, who retired 15 years ago, turned himself in, setting a record for the longest time elapsed between retirement and surrender.

According to the Zhejiang Provincial Commission for Discipline Inspection and Supervision, Chen Jianshe, former vice chairman of the Shaoxing Municipal Committee of the Chinese People’s Political Consultative Conference, is suspected of serious disciplinary and legal violations, has voluntarily turned himself in, and is currently undergoing disciplinary review and supervisory investigation.

Chen Jianshe was born in 1953 in Xinchang, Zhejiang. He formerly served as Vice Mayor of Shaoxing City and Vice Chairman of the Shaoxing Municipal Committee of the Chinese People’s Political Consultative Conference.

Chen Jianshe retired early in September 2004 at the age of 51. Fifteen years after his retirement, he turned himself in, setting a record for the longest period between retirement and surrender.

Previously, Tan Liqun, the former deputy director of Guangzhou’s Land and Housing Administration, was placed under investigation in April 2014—11 years after her retirement.

Investigations into retired officials generally fall into two categories: first, cases in which they abused their power while in office and were subsequently brought to account after retirement; second, cases in which, after retirement, they sought to “continue contributing” by leveraging their former connections and influence to pursue personal gain, only to be investigated and prosecuted as a result.

Previously, some retired officials who came under investigation were implicated while cases involving serving officials were being pursued. Meanwhile, Chen Jianshe’s decision to turn himself in 15 years after retirement underscores that, under the CPC Commission for Discipline Inspection and the National Supervisory Commission’s sustained, high‑pressure anti‑corruption campaign, the psychological defenses of officials who have violated discipline or the law have further crumbled.

The China Discipline Inspection and Supervision News once published an article pointing out that retirement does not mean entering a “safe deposit box,” and the illusion that officials can achieve a “safe landing” upon retirement must be dispelled.

Ding Shumiao was sentenced for bribing Liu Zhijun, and one of her five-star hotels was sold for 1.6 billion yuan.

Recently, the Beijing No. 2 Intermediate People’s Court auctioned off a five-star hotel for over RMB 1.6 billion, setting a new record for the highest single‑lot transaction amount in online judicial auctions conducted by Beijing courts.

The hotel was originally owned by Ding Shumiao, a businesswoman from Shanxi. More than four years ago, Ding Shumiao was sentenced to 20 years in prison and fined 2.5 billion yuan for bribery and illegal business operations.

After meeting former Minister of Railways Liu Zhijun, Shanxi businesswoman Ding Yuxin (Ding Shumiao) became his “power broker,” swiftly transforming herself into the “queen of high-speed rail.”

Between 2007 and 2010, Ding Shumiao, in collusion with Zheng Peng, Hu Bin, Gan Xinyun, Hou Junxia, Guo Ying, and others, facilitated the successful bid of 23 bidding companies for 57 railway construction projects, including Lot 8 of the “New Guiyang–Guangzhou Railway Station‑Front Works.” By charging intermediary fees, Ding Shumiao and his accomplices illegally obtained a total of over RMB 3 billion, with Ding Shumiao personally amassing more than RMB 2 billion.

In December 2014, the Beijing No. 2 Intermediate People’s Court handed down a first-instance verdict, sentencing Ding Shumiao to 15 years’ imprisonment and confiscating RMB 20 million of her personal property for bribery; and to 15 years’ imprisonment and a fine of RMB 2.5 billion for illegal business operations. The court ultimately imposed a total sentence of 20 years’ imprisonment, a fine of RMB 2.5 billion, and the confiscation of RMB 20 million of her personal property.

The equity in Beijing Bohao Ruiting Hotel Co., Ltd. being auctioned this time is one of the illicit proceeds that must be disposed of in the Ding Shumiao case. The company operates a five-star hotel, and its core assets consist of real estate held in its name, including buildings with a total floor area of 50,068.98 square meters and land-use rights covering 6,607.06 square meters.

On January 5, 2015, the case was filed for enforcement, and the Beijing No. 2 Intermediate People’s Court initiated the valuation process. However, due to ongoing disputes over the scope and subject matter of the equity being enforced, the valuation work remained stalled until the relevant issues were resolved at the end of September 2018. On November 8, 2018, the valuation office issued its appraisal report, setting the assessed value at RMB 1.61064 billion.

On November 22, 2018, the Beijing No. 2 Intermediate People’s Court issued a notice on its judicial online auction platform to solicit bids prior to the auction. According to the relevant regulations, the court set the starting price at over RMB 1.12745 billion for the first auction.

However, prior to the conclusion of the auction, the Second Intermediate People’s Court received multiple telephone reports filed under real names, alleging serious violations such as bid-rigging, collusive bidding, and sabotage of the bidding process—actions that gravely undermined the fairness and impartiality of the auction. Following deliberation, the Court decided, in accordance with the law, to temporarily suspend the auction and initiated a thorough investigation into the matters raised in the reports, taking appropriate measures accordingly.

Thereafter, the Second Intermediate People’s Court, in accordance with the law, re‑initiated the auction of the equity interest and made corresponding adjustments to the reserve price and the deposit. Specifically, the reserve price was set at over RMB 1.44958 billion, an increase of more than RMB 300 million compared with the first round.

Ultimately, after 29 rounds of bidding, the highest bid of RMB 161,758.1096 million was successfully secured by the bidder, a certain financial advisory office based in Beijing.

Lottery shop owner fraudulently claimed a 4.83-million-yuan jackpot, choosing to go to prison rather than return the funds; the court has offered a reward for the recovery of the assets.

Six years ago, Mr. Li entrusted lottery shop owner Pan Pan to purchase a ticket on his behalf. After winning a jackpot of 4.83 million yuan, the prize was fraudulently claimed by Pan Pan and his relative, Wang Wenjun. Following multiple civil and criminal proceedings, both defendants refused to comply with the court’s ruling and failed to return the winnings. The Intermediate People’s Court of Fuyang City, Anhui Province, has placed them on the list of discredited persons subject to enforcement, offered a substantial reward for information leading to the location of the funds, and is providing a reward of up to 10% of the recovered amount to those who report such leads.

Boss bought a lottery ticket on behalf of an employee; after winning the jackpot, he arranged for someone else to claim the prize.

According to the court judgment, at around 7:00 p.m. on December 11, 2012, Li Yongzhi, a resident of Fuyang City, Anhui Province, placed a telephone order with Pan Pan, the owner of a lottery outlet located east of the Suguo Supermarket on Yinghe West Road in Yingquan District, asking him to purchase and print a Double Color Ball lottery ticket for issue No. 2012146. At 9:30 p.m. that same day, the winning numbers for that draw were announced, and the ticket purchased by Li Yongzhi turned out to be a winner. Taking advantage of the situation, Pan Pan concealed the fact that the ticket had won and instead handed it to his relative, Wang Wenjun, instructing him to claim the prize at the Anhui Provincial Welfare Lottery Center.

On December 13, 2012, Wang Wenjun went to Hefei to collect the post-tax prize of RMB 4,789,200. Between December 14 and 15, 2012, he withdrew the funds in cash from the bank and subsequently concealed them.

After discovering that the lottery ticket he had purchased had won a major prize, the purchaser, Li Yongzhi, filed a lawsuit against Wang Wenjun and Pan Pan on the grounds of a dispute over a mandate contract. The Fuyang Intermediate People’s Court ruled that the two defendants were jointly required to return RMB 4,839,775. Dissatisfied with the verdict, Wang Wenjun and Pan Pan appealed to the Anhui Provincial Higher People’s Court, which on August 18, 2014, issued a decision upholding the original judgment. Following the entry into force of the judgment, Wang Wenjun and Pan Pan failed to comply voluntarily. On March 17, 2015, the Fuyang Intermediate People’s Court placed both individuals on the list of discredited persons subject to enforcement.

On April 8, 2015, the Fuyang Intermediate People’s Court referred the case to the public security authorities for investigation, on the grounds that Wang Wenjun and Pan Pan had concealed and transferred lottery winnings totaling RMB 4,839,775 and refused to comply with the court’s judgment, thereby allegedly committing a crime.

In accordance with Articles 313 and 25 of the Criminal Law of the People’s Republic of China, the court found the defendant Wang Wenjun guilty of the crime of refusing to enforce a judgment or ruling and sentenced him to four years’ imprisonment and a fine of RMB 40,000; the defendant Pan Pan was likewise convicted of the same offense and sentenced to four years and six months’ imprisonment, together with a fine of RMB 50,000. Following their appeals, the second-instance court upheld the original verdict.

Preferring to go to prison rather than repay the debt, the court has offered a hefty 10% reward for information leading to the identification of assets.

According to reports, following the court’s ruling, Pan Pan and Wang Wenjun have yet to return the lottery winnings. After the court seized and auctioned off one of Pan Pan’s properties, a portion of the proceeds was returned to the lottery winner. At present, more than 4.65 million yuan remains unpaid.

In response to the defaulting conduct of both individuals, the court has intensified enforcement measures. On February 15, 2019, the Intermediate People’s Court of Fuyang City issued a reward notice stating that, in the case of Li Yongzhi’s application for enforcement against Pan Pan and Wang Wenjun regarding a dispute over an entrusted contract, the judgment debtors Pan Pan and Wang Wenjun have refused to perform the obligations set forth in the final judgment. They have therefore been lawfully placed on the list of discredited persons subject to enforcement and publicly announced. To safeguard the lawful rights and interests of the applicant and uphold judicial authority, and upon the applicant’s request, a reward notice has been issued in accordance with Article 22 of the Supreme People’s Court’s Provisions on Several Issues Concerning Property Investigation in Civil Enforcement.

Other

National Health Commission: High-sugar beverages and snacks are restricted from being sold in primary and secondary schools as well as childcare facilities.

On the 15th, the General Office of the National Health Commission issued the “Healthy Oral Health Action Plan (2019–2025)” (hereinafter referred to as the “Action Plan”), which calls for launching a special campaign to reduce sugar intake. In conjunction with efforts to build healthy schools, primary and secondary schools, as well as childcare and early‑education institutions, will restrict the sale of high‑sugar beverages and snacks, while cafeterias will reduce the availability of sugary drinks and high‑sugar foods. The plan also aims to educate residents on making healthy food choices and mastering nutritious cooking techniques, encourage businesses to make “low‑sugar” or “sugar‑free” claims, and enhance consumers’ ability to accurately interpret nutrition labels and identify added sugars.

The Action Plan also outlines an initiative to optimize oral health management. During the critical first 1,000 days of life, oral health education will be integrated as a core component of premarital health examinations, maternal and child health care, and antenatal education programs, reinforcing the principle that parents are the primary caregivers responsible for their children’s oral health. Healthcare professionals and caregivers will receive enhanced training in evidence-based infant and young child feeding practices. Furthermore, collaborative efforts between maternal and child health institutions and dental specialty organizations will be leveraged to prevent and reduce the incidence of dental caries in primary teeth.

The document emphasizes that, with regard to children’s oral health, the scope of the National Comprehensive Intervention Program for Children’s Oral Diseases should be dynamically adjusted, and newly allocated central government funds should be prioritized for implementation in poverty-stricken areas. The program’s demonstration and catalytic role should be fully leveraged to promote models of oral disease intervention—such as oral health screenings, pit and fissure sealants, and topical fluoride applications—jointly implemented by health and education authorities. Furthermore, efforts should be actively explored to adopt government procurement of services based on prevention and treatment outcomes as performance indicators, and local governments should be encouraged to designate comprehensive interventions for children’s oral diseases as priority projects addressing people’s livelihoods, striving to achieve full coverage of eligible children in regions where conditions permit.

The Action Plan specifies that by 2020, the oral health service system will be substantially in place, overall oral health service capacity will have improved, and the level of oral health care for key populations, including children and the elderly, will have steadily increased. By 2025, a supportive social environment for oral health will be largely established, public oral health literacy and the adoption of healthy oral‑health behaviors will see significant improvements, and oral health services will cover the entire population across the life course, thereby better meeting the health needs of the people.

JC Master Law Office

Address: 9th Floor, National Water Resources Building, No. 70 Qingjiang South Road, Nanjing City

Postal code: 210036

Phone: 025-84503333

Fax: 025-84505533

Website: www.jcmaster.com

This legal notice is provided solely for informational purposes and does not constitute legal advice or a legal analysis of any specific case. The transmission of this legal notice does not establish an attorney–client relationship between JC Master Law Office and the user or reader. JC Master Law Office assumes no responsibility for any third-party content accessible via the internet. If you do not wish to receive this legal notice, please notify us by email at jcm@jcmaster.com.

The copyright of this legal information is owned by JC Master Law Office ©. Without written permission, no organization or individual may reproduce, publish, or cite it in any form.