JC Master Legal News Issue 859

Key Takeaways for This Issue

The major institutional rules for establishing the STAR Market and piloting the registration-based system have been officially released.

On March 1, 2019, the China Securities Regulatory Commission (CSRC) promulgated the Measures for the Registration of Initial Public Offerings on the STAR Market (Trial) (hereinafter referred to as the “Registration Measures”) and the Measures for the Ongoing Supervision of Listed Companies on the STAR Market (Trial) (hereinafter referred to as the “Ongoing Supervision Measures”), which took effect from the date of their publication. With the CSRC’s approval, the Shanghai Stock Exchange and China Securities Depository & Clearing Corporation subsequently issued the relevant business rules.

The Ministry of Industry and Information Technology has exposed 695 non-compliant apps, with nearly 90% involved in forced bundling and promotional practices.

With the widespread adoption of mobile internet applications, large-scale personal data breaches have become increasingly common, and a growing number of users are complaining that the apps they use collect excessive personal information. As a result, cybersecurity has drawn mounting public attention. With this year’s Two Sessions approaching, several members of the Chinese People’s Political Consultative Conference have indicated that they will place a strong emphasis on protecting personal information. In fact, at last year’s Two Sessions, at least 25 deputies and members submitted proposals or suggestions related to personal data protection.

Real estate tax legislation is drawing nearer, with foundational work steadily being refined.

In 2018, the term “real estate tax” was repeatedly invoked at numerous junctures—ranging from legislative bodies to the State Council’s government work report, and from fiscal and taxation authorities to statistical agencies—striking a nerve in the market time and again. Entering 2019, the Ministry of Housing and Urban–Rural Development issued a draft for public comment on the newly revised “Residential Project Code,” proposing that residential properties be traded based on usable floor area within the unit. Subsequently, some institutions and media outlets interpreted this as paving the way for future taxation by floor area and for exemptions from real estate tax. The Real Estate Tax Law is currently being drafted and refined; however, given its broad scope and the many points of contention among stakeholders, the legislative process must proceed steadily.

Two departments: The Measures for the Real-Name Management of Construction Workers will be officially implemented starting in March.

Effective March 1, the Measures for the Administration of Real-Name Registration of Construction Workers (Trial), jointly issued by the Ministry of Housing and Urban–Rural Development and the Ministry of Human Resources and Social Security, will officially come into force. The Measures stipulate the full implementation of a real-name registration system for rural migrant workers in the construction sector, requiring construction enterprises to enter into labor contracts with hired workers in accordance with the law, provide them with basic safety training, and register them on the relevant real-name management platform before permitting them to enter construction sites to engage in construction-related activities.

March 3: The Second Session of the 13th National Committee of the Chinese People’s Political Consultative Conference opened at 3:00 p.m.

The Second Session of the 13th National Committee of the Chinese People’s Political Consultative Conference will open at 3:00 p.m. on March 3 at the Great Hall of the People in Beijing. At the opening session, more than 2,000 members of the National Committee will hear and deliberate on the Work Report of the Standing Committee of the National Committee and the Report of the Standing Committee on the handling of proposals since the First Session of the 13th CPPCC National Committee. On the afternoon of the 3rd, the delegations to the Second Session of the 13th National People’s Congress convened to elect their heads and deputy heads; review the draft list of the Presidium and the Secretary-General; and consider the draft agenda of the session.

Table of Contents

Table of Contents

Finance & Capital Markets

The major institutional rules for establishing the STAR Market and piloting the registration-based system have been officially released.

The China Securities Regulatory Commission is soliciting public comments on the Measures for the Supervision and Administration of Futures Companies.

The China Securities Regulatory Commission has successfully completed the handling of proposals submitted by deputies to the 13th National People’s Congress and by members of the 13th National Committee of the Chinese People’s Political Consultative Conference.

The Shanghai Stock Exchange’s Southern Center officially opened in Guangzhou today.

Shenzhen Grain Holdings Completes Its Overall Listing; the Shenzhen Stock Exchange Actively Supports the Development of the Guangdong-Hong Kong-Macao Greater Bay Area.

Corporate & Commercial

The Ministry of Industry and Information Technology has exposed 695 non-compliant apps, with nearly 90% involved in forced bundling and promotional practices.

Chery, Tesla, and others face recall crises; the rapid growth of the new-energy vehicle sector harbors hidden risks.

Housing market sentiment shows a slight uptick as regulators step in to stabilize expectations.

Huawei Denies Allegations of Stealing Robotics Technology; Experts Say U.S. Opposition to Huawei Is Overblown

Xiaocheng Technology’s chairman lost a lawsuit over an equity transfer dispute, and the company’s board secretary, caught in the crossfire, received a warning letter.

Taxation

Real estate tax legislation is drawing nearer, with foundational work steadily being refined.

Three departments have clarified the payment ratios and limits for the collection of securities transaction stamp tax on behalf of the government.

Tax incentives for imported rare-disease medications offer hope to patients.

Four departments have introduced tax reductions to support entrepreneurship and employment among key groups, clarifying the applicable procedures.

Litigation & Arbitration

Two departments: The Measures for the Real-Name Management of Construction Workers will be officially implemented starting in March.

The Regulations on Emergency Response to Production Safety Accidents will come into effect on April 1.

Supreme People’s Procuratorate: Establish a comprehensive, synchronized, dynamic, and efficient mechanism for supervising case handling.

Other

March 3: The Second Session of the 13th National Committee of the Chinese People’s Political Consultative Conference opened at 3:00 p.m.

The Ministry of Industry and Information Technology will revise the “Normative Conditions for the Copper Smelting Industry.”

Finance & Capital Markets

The major institutional rules for establishing the STAR Market and piloting the registration-based system have been officially released.

On March 1, 2019, the China Securities Regulatory Commission (CSRC) promulgated the Measures for the Registration of Initial Public Offerings on the STAR Market (Trial) (hereinafter referred to as the “Registration Measures”) and the Measures for the Ongoing Supervision of Listed Companies on the STAR Market (Trial) (hereinafter referred to as the “Ongoing Supervision Measures”), which took effect from the date of their publication. With the CSRC’s approval, the Shanghai Stock Exchange and China Securities Depository & Clearing Corporation subsequently issued the relevant business rules.

From January 30, 2019—when the key institutional rules for establishing the STAR Market and piloting the registration-based system were made public for public comment—until the conclusion of the consultation period, the China Securities Regulatory Commission (CSRC), the Shanghai Stock Exchange, and China Securities Depository & Clearing Corporation received more than 700 submissions through channels such as email, letters, and hotline calls. In addition, they convened symposiums and distributed questionnaires to solicit views from relevant stakeholders. The broader public and market participants paid close attention to the establishment of the STAR Market and the pilot registration system, offering numerous suggestions for revision. The CSRC and related authorities carefully reviewed each piece of feedback, incorporating reasonable proposals aimed at further clarifying registration requirements and procedures, optimizing share‑sale restriction regimes, and improving information disclosure. Accordingly, they revised and refined relevant regulatory frameworks, including the Measures for Registration Administration and the Measures for Ongoing Supervision.

The revised and improved Measures for Registration Management comprise 8 chapters and 81 articles. The key provisions are as follows: First, it clarifies the overarching principles of the pilot registration system on the STAR Market and stipulates that stock issuance shall be subject to the registration regime. Second, with information disclosure as the central focus, it streamlines and optimizes existing issuance requirements, emphasizing materiality and strengthening risk‑prevention measures. Third, it establishes a systematic framework for the review process of stock issuance and listing on the STAR Market, enabling end-to-end electronic processing of acceptance and review, with all critical milestones made publicly available, thereby enhancing review efficiency and reducing the administrative burden on issuers. Fourth, it reinforces information‑disclosure requirements, holds market participants accountable, and strictly enforces the obligations of issuers and other relevant parties in this regard; moreover, it formulates differentiated disclosure rules tailored to the characteristics of STAR Market companies. Fifth, it specifies that the offering price of new shares on the STAR Market shall be determined through bookbuilding among qualified offline investors. Sixth, it institutes a comprehensive, end-to-end regulatory framework, imposing stricter accountability on issuers, their controlling shareholders and actual controllers, sponsors, securities service institutions, and other responsible parties found to have engaged in violations or non‑compliance.

The revised and improved Measures for Ongoing Supervision comprise 9 chapters and 36 articles. The key provisions are as follows: First, the applicable principles are clarified: STAR Market‑listed companies (hereinafter referred to as “STAR Market companies”) shall be subject to the general rules governing ongoing supervision of listed companies; in cases where these Measures conflict with other relevant regulations issued by the China Securities Regulatory Commission, the Measures shall prevail. Second, corporate governance requirements specific to STAR Market companies are set forth, with particular emphasis on charter provisions and information disclosure for companies that issue shares with special voting rights. Third, a targeted information‑disclosure regime is established, strengthening the disclosure of industry‑specific information and operational risks, while enhancing the flexibility and inclusiveness of the disclosure framework. Fourth, a share‑reduction regime combining both stringent and flexible measures is formulated: the lock‑up period for shareholders of companies that were not yet profitable at the time of listing is appropriately extended, as is the lock‑up period for core technical teams; moreover, the Shanghai Stock Exchange is authorized to further specify details regarding the methods, procedures, pricing, proportions, and subsequent transfers associated with shareholder share reductions. Fifth, the system for major asset restructurings is refined: M&A and restructuring transactions involving STAR Market companies shall be reviewed by the Shanghai Stock Exchange, with a registration‑based approach applied when shares are issued; it is stipulated that the target companies in such transactions must meet the STAR Market’s requirements regarding industry and technology and demonstrate synergies with the acquirer’s existing core business. Sixth, the equity‑incentive system is improved: the scope of eligible participants has been expanded, and price restrictions on restricted stock have been relaxed. Seventh, a rigorous delisting regime has been put in place: tailored to the characteristics of the STAR Market, delisting criteria related to financial performance, trading activity, and compliance have been optimized and refined, while the stages of suspension of listing, resumption of listing, and relisting have been eliminated. In addition, the Measures address matters such as spin‑off listings, the use of raised funds, pledge of controlling shareholders’ equity, and legal liabilities.

To ensure the effective implementation of the establishment of the STAR Market and the pilot registration-based system, the China Securities Regulatory Commission has formulated “Guideline No. 41 on Content and Format of Information Disclosure by Companies Issuing Securities to the Public—Prospectus for STAR Market Companies” and “Guideline No. 42 on Content and Format of Information Disclosure by Companies Issuing Securities to the Public—Application Documents for an Initial Public Offering and Listing on the STAR Market,” which were promulgated together with the Measures for Registration Administration. In response to public feedback, the Shanghai Stock Exchange has revised and refined six ancillary business rules, primarily addressing listing requirements, review criteria, bookbuilding procedures, share reduction mechanisms, and ongoing supervision. Meanwhile, China Securities Depository & Clearing Corporation has made adaptive amendments to its securities registration rules and issued corresponding detailed regulations governing share registration for STAR Market stocks.

Going forward, the China Securities Regulatory Commission will work closely with relevant parties to steadily advance efforts in areas such as review and registration, market organization, and technical preparations, thereby ensuring the successful implementation of the establishment of the STAR Market and the pilot registration‑based reform.

The China Securities Regulatory Commission is soliciting public comments on the Measures for the Supervision and Administration of Futures Companies.

To meet the new requirements of the futures market’s development and strengthen the regulation of futures companies, the China Securities Regulatory Commission has revised the Measures for the Supervision and Administration of Futures Companies (hereinafter referred to as the “Measures”). Recently, the Commission has publicly solicited comments from the public on the Measures.

The key revisions to the “Company Measures” include: First, raising the qualification requirements for major shareholders of futures companies, particularly controlling shareholders and the largest shareholder, by clarifying criteria related to the length of continuous operation and sustained profitability, and introducing additional standards concerning the source of capital contributions, the relevance of core business activities, and operational capabilities. Second, strengthening equity management at futures companies and reinforcing shareholder obligations, specifying the responsibilities of prospective investors and transferring shareholders during equity transfers, and adding regulatory requirements for controlling shareholders to conduct periodic assessments of their own financial condition and submit reports. The measures also refine reporting obligations for futures companies, their shareholders, and ultimate controllers, and introduce enhanced oversight of related-party transactions. Third, improving the management of domestic and overseas subsidiaries of futures companies by mandating that such entities establish robust compliance and risk-control frameworks for their operations and business activities, thereby preventing illegal or non-compliant conduct by subsidiaries. Fourth, refining the requirements for futures companies regarding client account opening and trading behavior. Fifth, enhancing regulations on information system management, clearly defining the institutional requirements for the compliant operation of futures companies’ information systems.

The China Securities Regulatory Commission will, based on the feedback received from public consultation, further revise the Measures for Companies and, after completing the requisite procedures, promulgate and implement them.

The China Securities Regulatory Commission has successfully completed the handling of proposals submitted by deputies to the 13th National People’s Congress and by members of the 13th National Committee of the Chinese People’s Political Consultative Conference.

The year 2018 marked the first term of the 13th National People’s Congress and the National Committee of the Chinese People’s Political Consultative Conference, as well as the inaugural year for fully implementing the spirit of the 19th National Congress of the Communist Party of China. The CPC Leadership Group of the China Securities Regulatory Commission attached great importance to handling the proposals and motions submitted during the Two Sessions, elevating its political awareness and recognizing such work as a vital manifestation of governing in accordance with the Constitution and administering according to law, and of responding to public concerns and serving the people through sound, democratic decision-making. In 2018, the CSRC concluded, with both quality and efficiency, 204 proposals and motions from the NPC and 146 proposals from the CPPCC.

During the handling of proposals and suggestions, the China Securities Regulatory Commission (CSRC) engaged in proactive planning, unified its approach, adhered to rigorous standards, and refined its institutional framework to ensure high-quality outcomes. First, it conscientiously studied, implemented, and carried out the directives issued by the National People’s Congress and the National Committee of the Chinese People’s Political Consultative Conference on the management of proposals and suggestions, upholding the principle of quality above all else to ensure that each one is addressed thoroughly and effectively. Second, it improved its systems by revising the rules governing the handling process, streamlining workflows, clarifying responsibilities, and establishing a robust mechanism for performance evaluation and reward‑and‑penalty measures. Third, it organized training sessions and strengthened oversight: dedicated professional workshops were held to thoroughly explain the procedural guidelines and articulate specific requirements; a ledger was established to enhance end-to-end monitoring; and regular follow-up inspections were conducted to ensure steady progress. Fourth, it intensified communication and engagement to genuinely satisfy deputies and members: prior to processing, it proactively reached out through various channels to gain a deeper understanding of the contextual background and underlying intentions behind their views; during the process, it actively invited deputies and members to participate in symposiums and field investigations; and after completion, it closely tracked and evaluated outcomes, promptly addressing any questions or concerns. Fifth, it placed great emphasis on information disclosure and the practical application of results: in compliance with requirements for public release of responses to proposals and suggestions, it promptly made 53 such responses publicly available, thereby enhancing transparency. By integrating the formulation of proposals with their implementation, it ensured that these inputs were translated into concrete reform measures.

The China Securities Regulatory Commission (CSRC) regards handling proposals and suggestions as an important means of building social consensus, forging synergy for reform, enhancing the quality of its work, and improving its working style. It fully leverages this process to solicit opinions, respond to public concerns, draw on collective wisdom, and accept oversight, thereby making it a key driver of the capital market’s long-term stability and sound development—working in concert with all stakeholders to plan, study, and advance reforms. Overall, under the guidance of the departments responsible for handling proposals and suggestions at the National People’s Congress and the Chinese People’s Political Consultative Conference, and with strong support from relevant ministries and commissions, the CSRC successfully completed its work on processing the 2018 “Two Sessions” proposals and suggestions.

The Second Session of the 13th National People’s Congress and the Second Session of the 13th National Committee of the Chinese People’s Political Consultative Conference are about to convene. Guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, the China Securities Regulatory Commission will thoroughly study and 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, fully carry out the arrangements made at the Central Economic Work Conference, further elevate its political awareness, officely uphold the “Four Consciousnesses,” strengthen the “Four Confidences,” and resolutely safeguard the “Two Upholds.” In strict accordance with the handling requirements of the NPC and the CPPCC, the Commission will earnestly summarize its experience in handling proposals, continuously refine its working methods, and improve its handling mechanisms. It will also further strengthen its ties with deputies and members, innovate and diversify communication channels to enhance exchanges, conduct follow-up oversight to ensure timely progress on pledged commitments, and adhere to the principle of “responding promptly to the people’s calls,” so that NPC suggestions and CPPCC proposals can play an even greater role in helping the capital market better serve high-quality economic development.

The Shanghai Stock Exchange’s Southern Center officially opened in Guangzhou today.

On the morning of March 1, 2019, the Shanghai Stock Exchange’s Southern Center was officially inaugurated and established in Guangzhou. Ouyang Weimin, Vice Governor of Guangdong Province; Jiang Feng, General Manager of the Shanghai Stock Exchange; Li Ming, Vice Mayor of the Guangzhou Municipal People’s Government; He Xiaojun, Director of the Guangdong Provincial Local Financial Regulatory Bureau; Qiu Yong, Director of the Guangdong Securities Regulatory Bureau; and Qiu Yitong, Director of the Guangzhou Municipal Local Financial Regulatory Bureau, jointly unveiled the plaque marking the opening of the SSE Southern Center.

To further leverage the Shanghai Stock Exchange’s role in supporting national strategies such as the development of the Guangdong–Hong Kong–Macao Greater Bay Area and innovation-driven growth, since 2018 the Exchange has deepened its strategic cooperation with Guangdong Province and has been comprehensively advancing the establishment of the SSE Southern Center. Centered in Guangzhou, the SSE Southern Center will serve Guangdong, Fujian, Hainan, and other regions, providing them with capital market‑related services. In particular, in the context of launching the STAR Market and piloting the registration‑based IPO system, the SSE Southern Center will facilitate access to relevant policies for technology‑innovation enterprises in these regions, helping them connect with the STAR Market.

In his address, Ouyang Weimin stated that Guangdong should seize the significant opportunities presented by the STAR Market and the broader development of the capital markets, build on this momentum, take proactive measures, and actively encourage high-quality technology enterprises in the province to list on the STAR Market. This will enable the region to better leverage the capital markets to advance its innovation-driven development strategy and steadily promote high-quality economic growth. Jiang Feng outlined the progress of the Shanghai Stock Exchange’s establishment of the STAR Market and the pilot registration-based IPO system, urging eligible science and technology innovators to submit applications for listing on the STAR Market. Representatives from relevant enterprises, financial institutions, and intermediary agencies attended the unveiling ceremony.

Shenzhen Grain Holdings Completes Its Overall Listing; the Shenzhen Stock Exchange Actively Supports the Development of the Guangdong-Hong Kong-Macao Greater Bay Area.

On February 28, Shenzhen Deep Grain Holdings Co., Ltd., a state-owned enterprise under the Shenzhen municipal government (hereinafter referred to as Deep Grain Holdings), held a ceremony marking its restructuring and name change. The entire asset base of Shenzhen Grain Group Co., Ltd. (hereinafter referred to as Deep Grain Group) was injected into the listed company’s platform, and the securities abbreviations of the listed company were officially changed from “Shen Shen Bao A” and “Shen Shen Bao B” to “Deep Grain Holdings” and “Deep Grain B.”

The full‑scale listing of Shenzhen Grain Holdings represents a concrete step taken by Shenzhen state‑owned assets to accelerate their “Listed Company Plus” strategy and proactively pursue resource restructuring and integration, while also marking the first-ever case of a local grain enterprise achieving an overall public listing. In October 2018, ShenShenBao successfully completed a share issuance to acquire 100% equity in Shenzhen Grain Group, thereby enabling the comprehensive public listing of the grain and oil business under Shenzhen state‑owned assets. As a result of this full‑scale listing, Shenzhen Grain Holdings has added grain and oil storage, trading, and processing to its core operations; its total assets have grown by more than 4.7 times, and its net assets have increased by over 3.2 times. For 2018, the company is expected to report a net profit ranging from RMB 280 million to RMB 392 million.

An official from the Shenzhen Stock Exchange stated that the overall listing of Shenzhen Grain Holdings represents the latest achievement of the Exchange’s proactive efforts to support the development of the Guangdong–Hong Kong–Macao Greater Bay Area. The Shenzhen Stock Exchange will earnestly implement the strategic plans of the CPC Central Committee and the State Council, fully leverage its role as a foundational platform and its strengths in capital formation, and devote itself to advancing national strategies such as innovation-driven development and the construction of the Guangdong–Hong Kong–Macao Greater Bay Area. It will continue to optimize the environment for mergers and acquisitions and corporate restructuring, steadily increase support for industrial consolidation, actively promote the restructuring and listing of state-owned enterprises as well as the overall listing of state‑owned and private enterprise groups, and support the use of capital markets to enhance competitiveness and strengthen market players. Furthermore, the Shenzhen Stock Exchange will adopt more concrete measures to refine and improve the fundamental systems of the capital market, bolster its capacity to provide financial services to the real economy, and foster high‑quality development among listed companies.

Commercial & Corporate

The Ministry of Industry and Information Technology has exposed 695 non-compliant apps, with nearly 90% involved in forced bundling and promotional practices.

With the widespread adoption of mobile internet applications, large-scale personal data breaches have become increasingly common, and a growing number of users are complaining that the apps they use collect excessive personal information. As a result, cybersecurity has drawn mounting public attention. With this year’s Two Sessions approaching, several members of the Chinese People’s Political Consultative Conference have indicated that they will place a strong emphasis on protecting personal information. In fact, at last year’s Two Sessions, at least 25 deputies and members submitted proposals or suggestions related to personal data protection.

Zhou Hanmin, a member of the National Committee of the Chinese People’s Political Consultative Conference, Vice Chairman of the Central Committee of the China National Democratic Construction Association, and Vice Chairman of the Shanghai Municipal Committee of the CPPCC, has proposed that the General Provisions of the Civil Law and other civil regulations further clarify civil liability for infringements upon personal information. For acts that do not warrant criminal penalties, administrative liability should be explicitly defined, with administrative authorities imposing administrative sanctions on the relevant enterprises and responsible individuals. In addition, Peng Jing, a member of the National Committee of the CPPCC and director of Chongqing Jingsheng Law Office, suggested that in the future, apps should be subject to tiered and categorized regulation, approval procedures should be refined, and app stores’ management responsibilities should be strengthened, while also enhancing security assessments of app providers. Notably, she plans to submit three proposals this year related to personal information protection: “Suggestions on Refining Relevant Provisions on Personal Information Protection in the Context of Implementing the E‑Commerce Law,” “Suggestions on Strengthening Categorized Regulation of Apps to Ensure Mobile Network Security for Minors,” and “Suggestions on Regulating Internet Information Collection Practices to Protect Personal Information Security.”

By the end of 2018, China’s 4G subscriber base had reached 1.17 billion. Many users download mobile apps through the app stores preinstalled on their Android phones or via third-party app markets. However, various issues with these apps have caused significant inconvenience for consumers. On February 27, the Ministry of Industry and Information Technology (MIIT) released a list of apps found to be in violation during its fourth-quarter 2018 inspections. Among the 43 non-compliant apps, 40 were found to engage in “forced bundling and promotion of unrelated applications,” while two—Wannengkan (V9.5.3), from Baidu Mobile Assistant, and Xiaoneiwai (V6.7.2154), from PC141 Software Download Station—were accused of “collecting and using users’ personal information without consent.” The MIIT regularly conducts technical assessments of apps available in mobile app stores and publicly discloses lists of non‑compliant applications. Over the past four years, a total of 695 apps have been identified as violating regulations and included on such lists.

On the list published by the Ministry of Industry and Information Technology, what exactly is the “forced bundling and promotion of unrelated apps” that keeps popping up—and how does it trick users? An industry insider, surnamed He (a pseudonym), told a Nanfang Daily reporter that “forced bundling” refers to the practice of pre‑installing or promoting apps that are entirely unrelated to the intended application, without the user’s knowledge. This can take the form of silently downloading an installation package into a specific folder on the user’s phone, or presenting an app as an optional add‑on. In the most egregious cases, the app is bundled and installed automatically. “In most instances of forced bundling,” He explained, “the app’s installation package is quietly downloaded while the user’s phone is connected to Wi‑Fi.”

Statistical results show that “forcing users to bundle and promote unrelated apps” is currently one of the most common types of violations. He Hua believes the main reason may be that, compared with infringements on users’ personal information and property security, the harm caused by forced bundling is less apparent. In addition, some users do not even notice they are being “forced to bundle” during the app‑downloading process, so they typically neither file complaints nor report the issue—unless the app displays a pop‑up prompting them to install additional software. “Forced bundling is essentially a form of advertising,” Peng Gen, Technical Director at Beijing Hanhua Feitian Technology Co., Ltd., told a Nanfang Daily reporter. He explained that revenue from promotional placements is the primary driver behind bundling other apps with an original application. Most PC‑ and mobile‑based apps are free; by helping smaller‑traffic apps gain exposure, this practice boosts their download numbers and user base—another way to monetize. Peng Gen also pointed out that apps forcibly bundled onto users’ devices offer little in the way of security. Many high‑traffic apps, in pursuit of promotional income, may fail to vet the safety of the apps they promote.

Last March, the Beijing Consumer Association released its “Survey Report on Personal Information Security in Mobile Apps.” The findings revealed that 89.62% of respondents believe mobile apps excessively collect personal information, while 79.23% consider personal data on these apps to be insecure. Many apps engage in unauthorized or excessive collection of users’ personal information—yet current technical detection methods are still unable to identify such practices. In everyday life, some mobile apps over-collect and improperly use personal data, leading to widespread leaks or theft of sensitive personal information and even triggering various types of cyber‑fraud schemes, thereby posing serious risks to people’s safety and property. For example, in 2018, more than 30 Xiaohongshu users reported online that they had been targeted by phone scams allegedly originating from Xiaohongshu customer service, with losses ranging from several thousand to tens of thousands of yuan. Cheng Juanjuan, an attorney at Beijing Kangda Law Office, pointed out that when an app infringes upon personal privacy, affected individuals may demand that the app cease the infringement and seek compensation for damages, holding the responsible parties accountable. She also recommended strengthening relevant laws and regulations, including the Cybersecurity Law, as well as industry standards, while increasing penalties for illegal activities by apps to raise the cost of non‑compliance.

Chery, Tesla, and others face recall crises; the rapid growth of the new-energy vehicle sector harbors hidden risks.

Recently, Chery Automobile Co., Ltd. filed a recall plan with the State Administration for Market Regulation in accordance with relevant regulations, deciding to recall 8,580 all‑electric Tiggo 3xe vehicles manufactured between December 28, 2017, and October 26, 2018. According to reports, in vehicles within the scope of this recall, the mounting bolts connecting the differential rear suspension bracket to the subframe may loosen during use, resulting in unusual noises from the chassis when accelerating. Under extreme operating conditions, these loose bolts could detach, causing the rear suspension assembly—including the differential—to drop in position and allowing the halfshafts at both ends of the differential to shift. This can lead to failure of the halfshaft drivetrain and interruption of vehicle propulsion while driving, posing a safety risk. In fact, as sales of new‑energy vehicles grew against the trend in 2018, the number of recalls for such vehicles also reached a record high. Statistics show that a total of 135,751 new‑energy vehicles were recalled throughout 2018, highlighting widespread public concern over a series of quality issues affecting these vehicles.

According to data from Chery Holding’s official website, Chery’s new‑energy vehicle sales reached 90,500 units in 2018. In terms of product lineup, the company currently offers five new‑energy models spanning four market segments: the compact electric car Chery eQ1, the all‑electric sedan Arrizo 5, the plug‑in hybrid Arrizo 7, the MPV Karry K60, and the all‑electric SUV Tiggo 3x. Recently, Chery recalled its Tiggo 3xe all‑electric vehicle due to quality issues. According to Sohu Auto’s big‑data analysis, the Tiggo 3xe sold 10,300 units in 2018. Regarding this recall, Chery publicly stated that it will weld the rear suspension bracket bolts—areas prone to loosening—to the subframe assembly on vehicles within the recall scope, creating a permanent connection to eliminate safety risks, and will provide a lifetime free warranty on the welded joints. In fact, Chery New Energy achieved profitability as early as 2014, making it one of the few new‑energy automakers to turn a profit. However, the reporter notes that, at present, the EQ series remains Chery New Energy’s primary profit driver. In the first half of 2018, Chery New Energy posted strong performance, with sales reaching 33,300 units—a year‑on‑year increase of 258.7%—of which the EQ series accounted for 18,700 units. Although sales of the Tiggo and Arrizo models are also substantial, they are unlikely to become major revenue contributors for Chery New Energy in the near term. Ren Wanfu pointed out that Chery’s EQ series was launched early and is priced competitively, effectively capturing market share through affordability. “Right now, everyone is focused on achieving profitability, but the top priority remains refining the products; once sales take off, profits will follow naturally. For automakers, it’s essential to conduct extensive testing before launch to ensure safety, while also ramping up R&D investment to maintain high product quality.”

In fact, it’s not just Chery New Energy—other automakers have also repeatedly faced recalls of their new-energy vehicles. A rough tally shows that in 2018, recalls of battery‑electric cars involved multiple manufacturers, including JAC Motors (5.300, +0.02, +0.38%), Zotye Auto (5.130, −0.09, −1.72%), and BAIC New Energy, among others. According to recall data released by the State Administration for Market Regulation, the total number of new‑energy vehicle recalls in China reached 135,751 units in 2018 alone. Specifically, BAIC New Energy recalled 69,358 vehicles, Zotye Auto 31,338, Tesla 8,905, JAC Motors 4,248, Land Rover China 3,406, and BMW Brilliance 2,001. Reasons for these recalls ranged from Takata airbag defects and failures of brake‑assist vacuum pumps to more typical battery‑related issues. Along with these recalls, a host of underlying problems in the new‑energy sector have come to light. To date, electric vehicles still grapple with numerous pain points, with battery range being the most pressing concern. While many automakers tout impressive range figures, there are frequent instances of exaggeration. Additionally, long charging times, a severe shortage of charging stations, and high battery‑replacement costs continue to draw complaints from consumers. Meanwhile, fires involving new‑energy vehicles have remained a major public‑relations issue. In 2018, more than 40 such incidents were reported; the State Administration for Market Regulation has convened the Defective Products Management Center to launch investigations into 10 cases, conducted five on‑site fire‑accident inquiries in collaboration with relevant authorities, and urged manufacturers to carry out five recalls. These recalls covered 35,600 defective vehicles across 24 models from five companies, with electrical‑control and mechanical faults accounting for the majority of identified defects.

Data released by the Passenger Car Association show that in January 2019, retail sales of new-energy vehicles reached 96,500 units, up 198% year on year, continuing the strong growth trend from 2018. However, despite their seemingly bright prospects, new-energy vehicles face significant challenges: beyond underlying quality concerns, shifting government policies are putting automakers to the test. For some time, market rumors have suggested that new‑energy subsidies would be further reduced in 2019; although the specific measures have yet to be formalized, it is widely acknowledged that the pace of subsidy cuts will accelerate. Previously, four ministries, including the Ministry of Industry and Information Technology, announced that between 2017 and 2018, subsidies would decline by 20% compared with 2016 levels, and that from 2019 to 2020, the reduction would deepen to 40% relative to 2016. In practice, however, the subsidy phase‑out has proceeded even faster than planned: subsidies were cut by 20% in 2017, and underwent another substantial adjustment in 2018. This accelerated reduction places considerable pressure on new‑energy vehicle manufacturers, many of whom have resorted to overstating range figures in order to qualify for subsidies.

On the one hand, vehicle range fails to meet standards; on the other, the gradual phasing out of subsidies for new‑energy passenger cars has been more rapid than expected, putting further pressure on per‑vehicle profitability. As one industry insider put it bluntly, without government subsidies, few new‑energy automakers would be profitable. The new‑energy market was essentially nurtured by policy support, and with national subsidies slated to phase out entirely by 2020, it remains uncertain whether the sector will continue to thrive at the same pace once that support is gone.

Housing market sentiment shows a slight uptick as regulators step in to stabilize expectations.

An executive at a major Beijing‑based property developer said that the recent surge in activity in hot housing markets stems, on the one hand, from a loosening of the external policy environment and a shift in market expectations, and, on the other, from pent-up demand that has been suppressed by policy for an extended period now seeking to be unleashed. However, unless there is a fundamental easing of regulatory measures, the extent of this release will remain relatively limited.

Following the 2019 Spring Festival, real estate markets in major cities have once again shown signs of warming. On the one hand, a flurry of new household‑registration policies across regions, coupled with consecutive cuts in first‑home mortgage rates and, in some cities, the quiet easing of property‑market controls, have all served as positive catalysts for market activity. On the other hand, with the traditional “mini spring boom” approaching, pent-up demand is beginning to stir.

On February 25, Wang Zhaoxing, Vice Chairman of the China Banking and Insurance Regulatory Commission, stated that financial risks in sectors such as real estate will continue to be closely monitored, and prudent lending standards will remain in place for real estate development loans and individual mortgage loans. This move is seen as a signal aimed at stabilizing market expectations. Analysts generally note that the current market is gaining significant momentum, making “stabilizing expectations” the primary policy focus at this stage. During the Two Sessions, regulators are expected to reiterate their commitment to anchoring expectations, while local governments’ tailored policies—“one city, one policy”—are likely to be rolled out in the aftermath of the meetings.

Some local governments have also introduced policies to manage market expectations. On February 28, multiple departments in Baoding jointly convened a meeting, emphasizing the need to regulate housing‑purchase financing practices. “Real estate developers and intermediary agencies are strictly prohibited from illegally providing down‑payment financing; they may not advance the down payment on behalf of buyers or circumvent this prohibition by offering installment plans for the down payment. Furthermore, no platform or institution may offer down‑payment financing to homebuyers, nor may they, in any form, encourage buyers to obtain such financing through other entities to pay their down payments. Organizing ‘crowdfunding’ schemes for home purchases is likewise forbidden.”

A recent report by CICC notes that, while the central government’s policy stance is likely to remain broadly stable, under the “city-specific policies” framework local governments may enjoy greater autonomy and room for easing measures. During the March Two Sessions window, some of the most active first- and second-tier cities are expected to successively roll out and publicly announce their specific policy plans.

Huawei Denies Allegations of Stealing Robotics Technology; Experts Say U.S. Opposition to Huawei Is Overblown

On February 28, Huawei denied U.S. allegations that it had engaged in a company-wide conspiracy to steal trade secrets from American competitors. According to the U.S. Department of Justice, at a hearing held in Seattle on the same day, lawyers for the Chinese telecom giant rejected charges of fraud, attempted theft, and obstruction of justice. Federal prosecutors accused Huawei of not only violating U.S. sanctions against Iran but also of stealing technical details related to “Tappy,” a smartphone‑testing robot developed by the U.S. subsidiary of Deutsche Telekom.

Last week, U.S. Secretary of State Mike Pompeo stated that the U.S. government would not share intelligence with allied nations that use Huawei’s systems, citing concerns that such systems could provide the Chinese government with “backdoors.” Huawei has dismissed these worries as exaggerated and insisted it would never embed technical backdoors. The company also denied any wrongdoing in the “Tappy” case. In 2017, a Seattle civil court ordered Huawei to pay $4.8 million in damages, finding that the company had improperly misappropriated trade secrets belonging to Deutsche Telekom and violated the supply agreement between the two offices. However, the jury also determined that Huawei’s misconduct was neither “intentional nor malicious.”

Since last year, the United States has launched a vigorous diplomatic offensive against the Chinese telecom giant Huawei, asserting that any country adopting Huawei’s next-generation wireless network systems would be providing Beijing with avenues for “espionage”—and even more serious threats. However, security experts contend that the U.S. government may be exaggerating this threat. They argue that the U.S. accusations lack concrete details and obscure the underlying facts. Jan-Peter Kleinhans, a researcher at Germany’s New Responsibility Foundation, notes that if the Chinese sought to undermine global networks, “they could do so regardless of the equipment you use.” Some experts believe that the most common U.S. concern—that Huawei might install so‑called backdoors in its equipment, enabling Chinese intelligence agencies to conduct surveillance, eavesdrop, or disrupt data transmission—is highly unlikely. Moreover, under pressure from the United States, European allies remain reluctant to impose a blanket ban on Huawei.

Xiaocheng Technology’s chairman lost a lawsuit over an equity transfer dispute, and the company’s board secretary, caught in the crossfire, received a warning letter.

On February 26, the CSRC’s official website published an administrative regulatory measures decision issued by the Beijing Securities Regulatory Bureau to the board secretary of Beijing Xiaocheng Technology Co., Ltd. (“Xiaocheng Technology”). However, the matter dates back to a share‑transfer dispute involving Cheng Yi, chairman of Xiaocheng Technology.

According to the court judgment, Cheng Yi serves as Chairman of Xiaocheng Technology and has been its legal representative since May 26, 2011. Yu Qin held the position of General Manager at Fugen Company, a subsidiary of Xiaocheng Technology, from June 2009 to November 2009, and served as Executive Deputy General Manager of Xiaocheng Company from December 2009 to March 2010. On June 1, 2009—prior to Xiaocheng Technology’s IPO—Cheng Yi (Party A) and Yu Qin (Party B) entered into a Share Transfer Agreement, under which Party B agreed to purchase 1.5 million shares of Beijing Fuxing Xiaocheng (300139) Electronic Technology Co., Ltd. (the former name of Xiaocheng Technology) held in Party A’s name. Furthermore, Party B stipulated that the purchased shares would be registered under Party A’s name…

On August 24, 2009, following the China Securities Regulatory Commission’s acceptance of Xiaocheng Technology’s IPO application, Yu Qin remitted RMB 4.5 million to Cheng Yi via bank transfer. On August 25, 2009, the two parties entered into another Equity Transfer Agreement, which stipulated: “The Parties agree that Party B shall purchase 1 million shares of Beijing Fuxing Xiaocheng Electronic Technology Co., Ltd. held in Party A’s name; after such purchase, Party B shall register these shares under Party A’s name; Party B shall receive profit distributions in proportion to its capital contribution and shall comply with the relevant provisions of the Company’s Articles of Association; should Party B transfer its equity interests, all proceeds from such transfer shall belong to Party B…” Subsequently, after Xiaocheng Technology went public and underwent multiple capitalization of capital reserves into share capital and rights issues, the 1 million shares specified in the Equity Transfer Agreement increased to 5 million shares. Later, on August 24, 2014, Cheng Yi reversed course and paid RMB 2 million to Yu Qin via bank transfer. Regarding the nature of this payment, the two parties hold opposing views: Yu Qin contends that they had previously agreed that Cheng Yi would pay him RMB 36 million to resolve the disputes arising under the Equity Transfer Agreement, and that this sum constituted a settlement payment; however, the parties ultimately failed to fully implement the aforementioned settlement. By contrast, Cheng Yi maintains that, believing the agreement at issue could no longer be performed, the payment represented a refund of the equity transfer consideration he had made to Yu Qin.

Subsequently, the two parties engaged in a series of reciprocal lawsuits and evidentiary challenges over the dispute concerning 5 million shares. Ultimately, on September 11, 2017, the Haidian District People’s Court of Beijing rendered a first-instance judgment: it conofficeed that 5 million shares of Beijing Xiaocheng Technology Co., Ltd. held by Cheng Yi shall be transferred to Yu Qin; furthermore, Beijing Xiaocheng Technology Co., Ltd. was ordered to assist in completing the registration procedures for the transfer of these 5 million shares within ten days from the date this judgment takes effect… Thereafter, Cheng Yi, Chairman of Xiaocheng Technology, dissatisfied with the first-instance ruling, filed an appeal with the No. 1 Intermediate People’s Court of Beijing, but his appeal was dismissed.

Regarding the legal dispute over the share transfers involving two senior executives, Wang Hanjing, the secretary of the board at Xiaocheng Technology, became aware of the matter as early as May 2017 but failed to promptly disclose information concerning the share transfers, nominee holding arrangements, and related litigation. Accordingly, the Beijing Securities Regulatory Bureau determined that, in her capacity as the company’s board secretary, Wang Hanjing did not faithfully and diligently perform her duties, thereby violating Articles 3 and 58 of the Measures for the Administration of Information Disclosure by Listed Companies. As a result, the Bureau issued a warning letter to her and reminded her to strictly comply with applicable laws and regulations, earnestly fulfill her responsibilities as board secretary, and ensure that the information disclosed by the listed company is true, accurate, complete, and timely.

Taxation TAXATATION

Real estate tax legislation is drawing nearer, with foundational work steadily being refined.

In 2018, the term “real estate tax” was repeatedly invoked at numerous junctures—ranging from legislative bodies to the State Council’s government work report, and from fiscal and taxation authorities to statistical agencies—striking a nerve in the market time and again. Entering 2019, the Ministry of Housing and Urban–Rural Development issued a draft for public comment on the newly revised “Residential Project Code,” proposing that residential properties be traded based on usable floor area within the unit. Subsequently, some institutions and media outlets interpreted this as paving the way for future taxation by floor area and for exemptions from real estate tax. The Real Estate Tax Law is currently being drafted and refined; however, given its broad scope and the many points of contention among stakeholders, the legislative process must proceed steadily.

Despite being repeatedly discussed at the central level, the property tax is widely regarded as unlikely to be implemented in the near term. In early 2018, Xia Lei, deputy director of the Evergrande Research Institute, published a research report arguing that the introduction of an individual residential property tax would require six key prerequisites: conducting a nationwide housing census; establishing a unified national real estate registration system; clearly defining the nature of housing; completing real estate tax reform—restructuring taxes and levies across the construction, transaction, and holding stages to avoid double taxation; enacting the “Regulations on Urban Housing Security” to explicitly delineate residents’ “basic housing standards”; and revising the “Tax Collection and Administration Law” to provide a legal basis for tax administration in accordance with the law.

With regard to laying a solid foundation for the implementation of the real estate tax, all related initiatives were in an accelerated phase of advancement in 2018:

In the field of real estate registration, in June 2018, the Ministry of Natural Resources announced that the nationwide unified basic platform for managing real estate registration information had achieved full national connectivity, a milestone widely regarded as marking the transition of the “incremental” real estate registration system into full operational phase. Recently, the State Taxation Administration further stated in an official document that it would strengthen coordination with real estate administration authorities, actively promote the online signing and filing of real estate transaction contracts, share real estate registration data, integrate business processes related to real estate transactions, tax payment, and certificate issuance, and advance cross-departmental joint services—measures that are also accelerating the registration of existing real estate stock. In addition, the Interim Regulations on Real Estate Registration, which have been in effect for nearly four years, are set to be upgraded, with relevant legislative work expected to commence promptly. As for a nationwide housing census, Yan Yuejin, Research Director at the E-House Research Institute Think Tank Center, noted that China has not conducted a new national housing census since 1984, a gap attributable to the inherent complexity of such an undertaking; however, he added that progress in this area is likely to be made in the coming years.

At the legislative level, in September 2018, the Standing Committee of the 13th National People’s Congress included the Real Estate Tax Law in Category I of its legislative plan—projects deemed relatively mature and slated for submission for deliberation during the term of the committee. From a legal perspective, Professor Meng Qingguo of Wuhan University School of Law has noted that the real estate tax is a broad umbrella concept encompassing multiple levies—such as property tax, deed tax, land value-added tax, urban land use tax, and cultivated land occupation tax—imposed at various stages of real estate transactions and ownership. Among these, the property tax (also known as the property tax), which targets the holding phase of residential properties and is widely regarded as having a significant impact on the housing market, represents only one small component. Meanwhile, Zhang Dawei, chief analyst at Centaline Property, points out that implementing a real estate tax involves numerous hurdles; foremost among them is the legislative process, followed by the establishment of a nationwide networked registration system for real estate information and a dynamic housing‑price appraisal framework. Notably, the latter—dynamic housing‑price assessment—remains a major technical challenge to the effective rollout of the real estate tax.

Legislative work is steadily advancing, and the question of whether a property tax will be imposed has largely been settled. However, how such a tax should be levied remains open to considerable debate. Former Minister of Finance Xiao Jie once published a signed article in the “Study Guide to the Report of the 19th National Congress of the Communist Party of China,” advocating that “the legislation and implementation of a property tax should proceed in accordance with the principles of ‘legislation first, full authorization, and phased advancement.’” Recently, Minsheng Securities released a report noting that the central government’s emphasis on “full authorization” and “city‑specific policies” regarding the property tax suggests that, at the legislative level, the focus is primarily on resolving the legal and institutional issues surrounding this tax. Meanwhile, detailed collection rules will grant local governments substantial discretion, enabling them to determine specific factors such as the timing of implementation, applicable tax rates, and the scope of taxpayers.

The report argues that, in advancing the scope of future property tax collection, it is highly likely that pilot programs will be gradually expanded, starting with first-tier and hot second-tier cities. Meanwhile, third- and fourth-tier cities are expected to set relatively high exemption thresholds for taxable area, resulting in reduced or zero taxation. Within a given city, the rollout is likely to follow a phased approach, extending from the central urban areas to the suburbs. Looking at China’s existing pilot programs for levying property tax on residential housing, both Shanghai and Chongqing have begun with new‑build properties; Chongqing has since progressively extended coverage to existing stock, imposing the tax on stand-alone commercial residences. Shanghai determines the exemption threshold based on per capita floor space, while Chongqing sets an exemption limit for each individual property.

Zhang Dawei, meanwhile, stated that in the future, it is highly likely that exemptions will be based on per‑capita floor space rather than on the number of properties. This is because granting first‑home exemptions on a household basis would inevitably lead to a sharp increase in divorces. He proposed instead exempting a certain threshold of per‑capita floor space, with any area exceeding that threshold subject to property tax calculated at assessed value. At the same time, several experts noted that, from a tax‑rate perspective, the initial property tax levied on individuals would adopt a progressive rate structure, though the overall tax burden would remain relatively moderate.

Three departments have clarified the payment ratios and limits for the collection of securities transaction stamp tax on behalf of the government.

To further standardize and strengthen the management of handling fees for tax collection by withholding, remittance, and entrusted collection (hereinafter referred to as “the Three Types of Collection”), the Ministry of Finance, the State Taxation Administration, and the People’s Bank of China recently issued the “Notice on Further Strengthening the Management of Handling Fees for Withholding, Remittance, and Entrusted Collection of Taxes,” which clarifies the regulations governing such handling fees.

The notice specifies the payment rates and caps for handling fees on taxes collected by “three generations.” Specifically, when tax authorities entrust stock exchanges or securities registration and clearing institutions to collect stamp duty on securities transactions, the tax authorities shall pay a handling fee not exceeding 0.03% of the amount collected, with an annual cap of RMB 10 million per collector; any amount exceeding this cap will not be paid. For commissions paid to relevant entities for the resale of stamp duty stamps, the handling fee shall not exceed 5% of the resale proceeds.

Tax incentives for imported rare-disease medications offer hope to patients.

To encourage the development of the rare‑disease pharmaceutical industry and reduce medication costs for patients, starting March 1, China will implement preferential value‑added tax policies for the first batch of 21 rare‑disease drugs and four active pharmaceutical ingredients. This move will bring greater hope to patients with rare diseases in China.

The World Health Organization defines rare diseases as conditions or disorders affecting between 0.65‰ and 1‰ of the population. Examples include albinism, characterized by white hair, and Gaucher disease, which causes an abnormally distended abdomen. Currently, approximately 6,000 to 8,000 rare diseases have been internationally recognized; the vast majority are congenital and chronic, and 30% of patients with rare diseases have a life expectancy of less than five years on average.

Due to the wide variety of rare diseases, patients with rare conditions in China have already formed a relatively large population. The role of rare diseases in healthcare reform and the medical insurance systems supporting these patients have increasingly drawn attention from all sectors of society.

The recently held Executive Meeting of the State Council stated that access to medications for more than 20 million patients with rare diseases must be ensured. Effective March 1, the first batch of 21 rare-disease drugs and four active pharmaceutical ingredients will be subject to a reduced value-added tax rate of 3% at the import stage, similar to that applied to anti-cancer drugs, while domestic sales may opt for the simplified 3% VAT calculation method.

From including the encouragement of rare‑disease drug development in national planning, to the issuance of documents such as the “Opinions on Deepening Reform of the Review and Approval System to Encourage Innovation in Pharmaceuticals and Medical Devices” that introduce measures to support the research, development, and market access of rare‑disease medicines, and further to the promulgation of the first National Rare Disease Catalogue, the establishment of a Rare Disease Alliance, and the formation of a collaborative network for the diagnosis and treatment of rare diseases, the country has steadily accelerated its efforts to standardize the diagnosis and treatment of rare diseases and ensure access to essential medications for patients.

“Without multidisciplinary management, patients with rare diseases often have to shuttle between different departments, which not only delays diagnosis but may also lead to inappropriate medication or unnecessary surgery,” said Zhang Shuyang, Secretary-General of the Chinese Alliance for Rare Diseases and Vice President of Peking Union Medical College Hospital. At present, Shanghai and Beijing have successively established centers for the diagnosis and treatment of rare diseases, working to explore and advance multidisciplinary care, develop clinical practice guidelines, and conduct policy research on rare diseases.

Four departments have introduced tax reductions to support entrepreneurship and employment among key groups, clarifying the applicable procedures.

Recently, the State Taxation Administration, the Ministry of Human Resources and Social Security, the State Council Leading Group Office of Poverty Alleviation, and the Ministry of Education jointly issued the “Notice on Specific Operational Issues Concerning the Implementation of Tax Policies Supporting and Promoting Entrepreneurship and Employment among Key Groups.” The Notice revises and refines the relevant policy provisions and clarifies the procedures for applying tax incentives to self‑employed individuals and enterprises that hire members of key groups.

Employment is the most vital aspect of people’s livelihood for a population of over 1.3 billion, and it also serves as the fundamental pillar of economic development. To further support and promote entrepreneurship and employment among key groups, four departments have issued a public notice that revises and refines relevant policy measures:

First, the deduction standards have been raised. For key groups—including individuals who have been registered as unemployed for more than six months, zero‑employment households, registered urban residents receiving minimum living allowances of working age, college graduates, and rural residents registered as impoverished—the annual tax deduction per household for self‑employment has been increased from RMB 8,000 to RMB 12,000. Similarly, the annual tax deduction per employee hired by enterprises from these key groups has been raised from RMB 4,000 to RMB 6,000.

Second, industry restrictions have been lifted. The scope of industries eligible for preferential policies—previously limited to commercial enterprises, service‑oriented enterprises, processing‑type enterprises within labor‑employment service offices, and small enterprises with processing activities located in streets and communities—has been expanded to encompass all entities that are VAT taxpayers or corporate income tax taxpayers, thereby providing a unified tax policy to support employment across all market players.

The Notice also clarifies the procedures for applying tax preferential policies to self-employed individuals and enterprises that hire priority groups.

Individuals registered as impoverished households who engage in self‑employment may file their tax returns independently and enjoy relevant tax incentives. Persons who have been registered as unemployed for at least six months, members of zero‑employment households, urban residents receiving minimum living allowances who are registered as unemployed, and college graduates within the year of their graduation may, upon presenting their Employment and Entrepreneurship Certificate (or Employment and Unemployment Registration Certificate—hereinafter the same) and their individual business registration license (and, if the “two‑certificate integration” has not yet been completed, also their Tax Registration Certificate), submit an application to the human resources and social security department at or above the county level (including county level—hereinafter the same) in the area where they intend to start their business. Eligible individuals engaged in self‑employment shall file their tax returns independently and avail themselves of applicable tax benefits.

Enterprises that benefit from tax incentives for hiring priority groups shall submit an application to the human resources and social security authorities at or above the county level. Upon verification, the human resources and social security authorities will mark the “Enterprise Tax‑Incentive Employment” designation on the Employment and Entrepreneurship Certificates of eligible priority‑group individuals, and issue a Certificate of Enterprise Recognition for Hiring Priority Groups to qualifying enterprises. Eligible enterprises may independently file their tax returns and claim the applicable tax benefits.

The Notice changes the management approach for preferential policies from filing to record‑keeping: For registered impoverished individuals engaging in self‑employment, they may directly claim the benefits when filing their tax returns with the competent tax authority, without needing to retain any supporting documentation; for persons who have been registered as unemployed for at least six months, members of zero‑employment households, and registered unemployed individuals of working age from families receiving urban subsistence allowances, as well as for college graduates engaged in self‑employment, they must keep their Employment and Entrepreneurship Certificates on file for inspection; and for enterprises that hire key groups and thereby qualify for preferential treatment, they must retain the Employment and Entrepreneurship Certificate, the Certificate of Conofficeation of Enterprise Employment of Key Groups, and the Schedule of Actual Working Hours for Key Group Members in the Current Year for record‑keeping purposes.

LITIGATION & ARBITRATION

Two departments: The Measures for the Real-Name Management of Construction Workers will be officially implemented starting in March.

Effective March 1, the Measures for the Administration of Real-Name Registration of Construction Workers (Trial), jointly issued by the Ministry of Housing and Urban–Rural Development and the Ministry of Human Resources and Social Security, will officially come into force. The Measures stipulate the full implementation of a real-name registration system for rural migrant workers in the construction sector, requiring construction enterprises to enter into labor contracts with hired workers in accordance with the law, provide them with basic safety training, and register them on the relevant real-name management platform before permitting them to enter construction sites to engage in construction-related activities.

The real-name system for construction workers is a comprehensive management framework that uses authentic identity verification to oversee the employment, training, skills development, and protection of workers’ rights and interests. It applies to both building construction and municipal infrastructure projects. The real-name information for construction workers comprises basic personal details, employment records, and integrity‑related data.

With regard to specific measures, the project owner shall agree with construction enterprises on matters related to the implementation of real-name management for construction workers, urge these enterprises to put in place all necessary measures under this system, and create the conditions for their effective application. Furthermore, the project owner shall, in accordance with the project’s progress, remit construction workers’ wages in full and on time to the wage‑dedicated bank accounts opened by the construction enterprises, and, as required, prominently display “Construction Worker Rights‑Protection Notice Boards” at the construction site to ensure transparent disclosure of relevant information.

Construction enterprises shall be equipped with the hardware and facilities necessary to implement real-name management of construction workers. In principle, construction sites shall adopt closed‑site management, with access control systems in place and electronic time‑keeping using biometric technologies such as facial recognition, fingerprint scanning, and iris recognition. For projects that cannot meet the requirements for closed‑site management, attendance management shall be carried out through mobile positioning, electronic fencing, and other similar technologies. The retention period for relevant electronic attendance records and electronic archives, including images and video footage, shall be no less than two years.

To promote the effective implementation of real-name management for construction workers, the Measures stipulate that housing and urban–rural development authorities at all levels shall, in accordance with the “double-random, one-public” requirements, strengthen routine inspections of the enforcement of the real-name management system at construction sites within their administrative jurisdictions, and investigate and address complaints and reports related to such management. With respect to violations involving failure to conclude labor contracts in accordance with the law or wage arrears—issues that infringe upon construction workers’ labor rights and benefits—the human resources and social security authorities, in coordination with the housing and urban–rural development authorities, shall handle them in accordance with the law. As for illegal acts or case leads falling under the purview of other departments, they shall be promptly referred to the competent authorities for handling in line with their respective responsibilities.

Housing and urban–rural development authorities at all levels may include the real-name management system for construction workers as part of the criteria for evaluating standardized construction sites. Information under the real-name system may serve as a basis for relevant departments in resolving labor disputes involving construction workers. Relevant departments should formulate incentive measures to support construction enterprises that effectively implement real-name management; those that have not experienced wage arrears over a specified period may be granted reductions or exemptions from the migrant worker wage deposit.

For violations such as falsification, underreporting, or concealment discovered during supervision and inspection, housing and urban–rural development authorities at all levels shall order corrective action within a specified time limit, enter the relevant information into the real-name management platform for construction workers, and promptly transmit it to the competent departments. For those who refuse to rectify or fail to achieve adequate remediation, measures may include public exposure and verification of enterprise qualifications. Where wage arrears are found, the proportion of the wage‑guarantee deposit required from migrant workers may be increased, and the corresponding misconduct shall be recorded in the enterprise’s or individual’s credit file and publicly disclosed through the National Construction Market Supervision Public Service Platform.

The Regulations on Emergency Response to Production Safety Accidents will come into effect on April 1.

Recently, Premier Li Keqiang of the State Council signed a State Council decree promulgating the Regulations on Emergency Response to Production Safety Accidents (hereinafter referred to as the “Regulations”), which will take effect on April 1, 2019.

The CPC Central Committee and the State Council attach great importance to emergency response work related to production safety accidents. To address the salient issues in this area and to enhance the scientific, standardized, and law-based management of emergency response, the Regulations, drawing on the Law on Work Safety and the Law on Response to Emergencies, set forth provisions governing the emergency response system, preparedness measures, and emergency rescue operations.

First, the emergency response system is clearly defined. The Regulations stipulate that the State Council provides unified leadership over national emergency response to production safety accidents, while people’s governments at or above the county level exercise unified leadership over emergency response within their respective administrative areas. Industry supervisory departments at or above the county level assume responsibility according to their respective divisions of labor, with comprehensive supervisory authorities providing guidance and coordination; grassroots-level governments and their dispatched agencies shall assist the relevant departments of higher-level people’s governments in performing their duties in accordance with the law.

Second, emergency preparedness shall be strengthened. The Regulations stipulate that people’s governments at or above the county level, together with their departments responsible for safety production supervision and management, as well as the people’s governments of townships and towns and subdistrict offices—local government agencies—shall formulate corresponding emergency rescue plans for production safety accidents and publicly disclose them in accordance with the law. Production and business entities shall also develop relevant emergency rescue plans for production safety accidents and make them available to all employees. Furthermore, the Regulations set forth clear provisions regarding the establishment of emergency rescue teams and emergency on‑call systems, the provision of emergency education and training for workers, and the stockpiling of emergency rescue equipment and supplies.

Third, standardize on-site emergency rescue operations. The Regulations stipulate that, upon the occurrence of a production safety accident, the production and business entity shall immediately activate its emergency rescue plan, implement appropriate emergency response measures, and report the accident in accordance with applicable requirements. Upon receiving a report of a production safety accident, the relevant local people’s government and its departments shall, in accordance with the provisions of the plan, take emergency measures such as rescuing trapped personnel, providing medical treatment to the injured, assessing the trend of the accident, and preventing the escalation of hazards and the occurrence of secondary or derived disasters, and shall report the accident in compliance with relevant national regulations. Where deemed necessary by the relevant people’s government, an on-site emergency rescue command center may be established, with a chief commander appointed; all units and individuals participating in the emergency rescue shall comply with the unified command of the on-site command center.

The Regulations also stipulate the legal responsibilities of people’s governments at all local levels and production and business entities with respect to emergency preparedness and emergency response.

Supreme People’s Procuratorate: Establish a comprehensive, synchronized, dynamic, and efficient mechanism for supervising case handling.

In 2019, the Supreme People’s Procuratorate will take the strengthening of business‑data analysis and assessment as its guiding principle, with a focus on developing a case‑quality evaluation indicator system and establishing a robust oversight mechanism tailored to the new case‑handling model following the reform of internal institutional structures, thereby fully exercising its case‑management functions and striving to elevate the level of business supervision.

On the 2nd, Dong Guiwen, Director of the Case Management Office of the Supreme People’s Procuratorate, stated that the procuratorial organs will vigorously advance the standardization of case‑handling procedures, gradually establishing a mechanism for comprehensive, synchronized, dynamic, and efficient oversight of case handling. They are also working to formulate documents such as the “Standards for Unified Case Acceptance by the Case Management Departments of the Supreme People’s Procuratorate” and the “Key Points for Monitoring Case‑Handling Procedures under the Integrated Arrest‑Prosecution Model,” while accelerating efforts to dispose of case‑related assets remaining at the Supreme Procuratorate and guiding case management departments nationwide to intensify their efforts to address accumulated case‑related assets in their respective jurisdictions.

“We will strengthen the top-level design of case‑quality management and guide procuratorial organs at all levels to strive to improve the quality of case handling and enhance its effectiveness,” said Dong Guiwen. He added that the Supreme People’s Procuratorate will take the lead in developing a case‑quality evaluation indicator system, clearly defining evaluation items and content, and will continue to provide guidance to local authorities to refine evaluation and review rules and grading standards in light of their specific circumstances, while exploring a gradual shift from focusing primarily on procedural issues to emphasizing substantive matters and the outcomes of case handling.

With regard to standardizing the work of people’s supervisors, it is reported that the Supreme People’s Procuratorate will focus on expanding channels for the public to participate in and oversee procuratorial work in an orderly manner, revise the “Regulations of the Supreme People’s Procuratorate on the Supervisory Work of People’s Supervisors,” convene symposiums on the work of people’s supervisors, and explore ways for people’s supervisors to take part in the evaluation and review of case quality, among other initiatives.

Other

March 3: The Second Session of the 13th National Committee of the Chinese People’s Political Consultative Conference opened at 3:00 p.m.

The Second Session of the 13th National Committee of the Chinese People’s Political Consultative Conference will open at 3:00 p.m. on March 3 at the Great Hall of the People in Beijing. At the opening session, more than 2,000 members of the National Committee will hear and deliberate on the Work Report of the Standing Committee of the National Committee and the Report of the Standing Committee on the handling of proposals since the First Session of the 13th CPPCC National Committee. On the afternoon of the 3rd, the delegations to the Second Session of the 13th National People’s Congress convened to elect their heads and deputy heads; review the draft list of the Presidium and the Secretary-General; and consider the draft agenda of the session.

The Ministry of Industry and Information Technology will revise the “Normative Conditions for the Copper Smelting Industry.”

To advance supply-side structural reform in the copper smelting industry, the Ministry of Industry and Information Technology has revised the “Normative Conditions for the Copper Smelting Industry (2014).” The new version is currently undergoing a public consultation phase. The draft proposes more stringent requirements for production processes in the copper smelting sector. As an important segment of China’s nonferrous metals industry, copper smelting faces mounting challenges: increasingly complex ore compositions and ever‑stricter environmental standards. Developing clean, efficient copper metallurgical technologies has thus become the industry’s strategic direction. Traditional pyrometallurgical copper smelting, plagued by low efficiency, high energy consumption, and severe pollution, is gradually being phased out.

In recent years, China’s copper smelting industry has made significant strides. Breakthroughs in process technology have also spurred a new wave of capacity expansion. Industry insiders report that, as of 2018, the country’s refined copper production capacity approached 12 million tonnes, with individual enterprises experiencing substantial scale-up. Under the requirements of the “Normative Conditions for the Copper Smelting Industry (2014),” more than 90% of the nation’s refined copper capacity is now compliant. To further promote high-quality development in the copper smelting sector, the draft for public comment stipulates that copper smelting enterprises using copper concentrates must adopt advanced technologies—such as flash smelting and oxygen-enriched intensified bath smelting—that offer high productivity, cutting-edge processes, low energy consumption, compliance with environmental standards, and efficient resource utilization. The use of equipment and processes explicitly prohibited by national regulations is strictly forbidden, and enterprises meeting the necessary conditions are encouraged to upgrade and modernize their existing conventional converter blowing processes.

Copper smelting enterprises that utilize copper‑containing secondary resources must also adopt advanced, energy‑efficient, environmentally friendly, and clean production processes and equipment. The use of chemical methods, as well as incineration technologies and facilities lacking flue‑gas treatment, is prohibited. At the same time, enterprises with the necessary conditions are encouraged to develop smart factories. A copper smelting data platform should be established, with widespread deployment of automated and intelligent equipment, and gradual implementation of enterprise resource planning (ERP), product data management (PDM), test data management (TDM), shop floor manufacturing execution system (EMS), and PI systems, to achieve intelligent management, smart scheduling, digital inspection, and online intelligent equipment diagnostics, ultimately enabling intelligent analysis and decision‑making.

The Ministry of Industry and Information Technology is responsible for the standardized management of enterprises in the copper smelting industry. Enterprises that fail to meet the relevant requirements will have their public announcement status revoked. In principle, such enterprises may reapply for compliance certification only after a period of 12 months from the date of revocation.

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