JC Master Legal News Issue 866

Key Takeaways for This Issue

Registration of newly issued shares for companies listed on the New Third Board can now be processed electronically.

To support the optimization and reform of the New Third Board’s stock issuance regime, enhance the development of the technical support system for private placements, and further strengthen the Board’s capacity to serve small and medium-sized enterprises, the National Equities Exchange and Quotations Company has, guided by the principles of “process optimization, procedural simplification, and efficiency enhancement,” designed and developed a new BPM‑based module for share registration that interfaces with China Securities Depository & Clearing Corporation, thereby enabling electronic share registration for companies listed on the New Third Board. Following thorough communication and testing with China Securities Depository & Clearing Corporation, the module will be officially launched on April 15, 2019.

Is the housing market rebounding? A major signal was sent at the Central Politburo meeting.

The National Bureau of Statistics released housing price data for 70 cities in March, showing that in March, new commercial residential prices rose month-on-month in 65 cities. Meanwhile, the Ministry of Housing and Urban–Rural Development, together with the Development Research Center of the State Council, recently conducted a special survey on the performance of the real estate market in the first quarter of 2019.

Notice on the Extension of Preferential Policies for Value-Added Tax, Property Tax, and Urban Land Use Tax for Heating Enterprises

From January 1, 2019, to the end of the 2020 heating season, heating enterprises in the “Three North” region are exempt from value-added tax on revenue derived from providing heating services to individual residents (hereinafter referred to as “residents”).

If a private loan (borrowing) is suspected of constituting the crime of illegally absorbing public deposits, is the corresponding private loan (borrowing) contract valid?

According to the provisions of the Contract Law, private loan contracts concluded on the basis of genuine intent are protected by law. Where a private lending transaction is suspected of, or constitutes, the crime of illegally absorbing public deposits, thereby exposing one party to potential criminal liability, such circumstances do not automatically affect the validity of the private loan contract or the corresponding security agreement. Moreover, if the adjudication of a private lending dispute does not necessarily depend on the outcome of any related criminal proceedings, there is no need to stay the civil proceedings.

Xi Jinping presided over the 14th collective study session of the Political Bureau of the CPC Central Committee and delivered a speech.

While presiding over a study session, Xi Jinping, General Secretary of the CPC Central Committee, emphasized that the May Fourth Movement was a momentous event of milestone significance in modern and contemporary Chinese history, and that the May Fourth Spirit is the precious spiritual legacy forged by that movement. Today, as we commemorate the May Fourth Movement and carry forward the May Fourth Spirit, it is imperative to strengthen research into both the Movement and its spirit, so as to guide young people, inspired by the May Fourth Spirit, to strive unremittingly toward securing a decisive victory in building a moderately prosperous society in all respects, achieving great success in socialism with Chinese characteristics for the new era, and realizing the Chinese Dream of national rejuvenation.

Table of Contents

Table of Contents

Finance & Capital Markets

Registration of newly issued shares for companies listed on the New Third Board can now be processed electronically.

Stock market investors should be vigilant against being lured into illegal investment schemes.

Financial Watch: China Will Continue to Serve as a “Stabilizer” for the Global Economy — International Institutions Are Optimistic About China’s Economic Prospects

“Investor Protection: Know the Rules, Recognize the Risks” Case — Futures Trading Requires Proper Qualifications; Stay Away from Illegal Platforms

Corporate & Commercial

Is the housing market rebounding? A major signal was sent at the Central Politburo meeting.

JD.com aims to acquire Wuxing Electrical Appliances, reportedly having conducted due diligence for two months; the home appliance retail sector may soon see a wave of consolidation.

Taxation

Notice on the Extension of Preferential Policies for Value-Added Tax, Property Tax, and Urban Land Use Tax for Heating Enterprises

After the VAT rate reduction, how should a red‑character VAT invoice be issued?

Litigation & Arbitration

Anhui has issued “two notices” to maintain a vigorous offensive against organized crime and evil forces.

If a private loan (borrowing) is suspected of constituting the crime of illegally absorbing public deposits, is the corresponding private loan (borrowing) contract valid?

The “Jinguizi” trademark case went to trial, with third party Liu Chunyan participating in the proceedings.

Other

Xi Jinping presided over the 14th collective study session of the Political Bureau of the CPC Central Committee and delivered a speech.

Finance & Capital Markets

Registration of newly issued shares for companies listed on the New Third Board can now be processed electronically.

To support the optimization and reform of the New Third Board’s stock issuance regime, enhance the development of the technical support system for private placements, and further strengthen the Board’s capacity to serve small and medium-sized enterprises, the National Equities Exchange and Quotations Company has, guided by the principles of “process optimization, procedural simplification, and efficiency enhancement,” designed and developed a new BPM‑based module for share registration that interfaces with China Securities Depository & Clearing Corporation, thereby enabling electronic share registration for companies listed on the New Third Board. Following thorough communication and testing with China Securities Depository & Clearing Corporation, the module will be officially launched on April 15, 2019.

The newly added share‑registration module will deliver the following benefits: First, it enhances the efficiency of share registration. Electronic letters bearing official seals have replaced paper letters, allowing issuers to download them directly and thereby reducing both labor and time costs associated with collecting paper documents, thus improving the efficiency of fundraising proceeds utilization. Second, it improves data accuracy. Structured share‑registration data is transmitted and processed online between the National Equities Exchange and Quotations Company and China Securities Depository & Clearing Corporation; the data submitted by the issuer through the CSDC system is automatically cross‑checked against the data received from the NEEQ. Third, it streamlines information disclosure. A new “Announcement on the Listing and Public Transfer of Shares of a Listed Company” will be prepared in the CSDC system and disclosed on the official website of the NEEQ.

In the preliminary phase, the BPM system underwent extensive testing starting in December 2018 and, in collaboration with CITIC Securities, SW China Securities, and Yangtze River Securities, conducted joint integration tests with China Securities Depository & Clearing Corporation to ensure the stable operation of all system functions.

Going forward, the National Equities Exchange and Quotations Company will, under the leadership of the China Securities Regulatory Commission, steadfastly uphold its mission of serving small and medium-sized enterprises and micro‑enterprises, earnestly implement all reform initiatives, and continuously refine its reform measures and infrastructure, thereby accumulating experience and creating favorable conditions for further deepening reform.

Stock market investors should be vigilant against being lured into illegal investment schemes.

In recent years, some criminals have been luring stock market investors into illegal securities and futures trading under the guise of stock recommendations, thereby defrauding them of their money and undermining social stability and the order of the capital markets. Their main modus operandi is as follows:

First, they recruit people into stock‑recommendation chat groups. Criminals use online advertisements and posts on WeChat Moments to engage in false and misleading marketing, luring investors with promises of free recommendations for “hot stocks” or “limit‑up stocks,” thereby drawing them into stock‑advisory WeChat and QQ groups. Within these groups, so‑called “teachers” and “analysts” often steer discussions, sharing trading tips and flaunting their purported trading successes.

Second, they lure investors into new‑type investments. After their touted “hot stocks” fail to deliver, the fraudsters cite reasons such as “poor market conditions” or “low profit margins in stock trading” to promote foreign exchange, precious metals, oil, philatelic and numismatic collectibles, commodities, or overseas indices—new investment products that they tout as requiring low initial outlays, offering high returns, and providing flexible, convenient trading, making them suitable for ordinary investors or as a complement to equity portfolios. Meanwhile, “plants” in WeChat and QQ groups pose as genuine investors, sharing screenshots of purported trading profits and boasting of substantial gains, thereby enticing other investors to download trading software or apps, open accounts, and deposit funds to join the scheme.

Third, they devise various schemes to defraud investors of their funds. Most of these new‑style platforms offer leveraged trading, with leverage ratios as high as dozens or even hundreds of times; even minor market fluctuations can result in substantial losses. Some platforms or their affiliated marketing offices lure investors into frequent trading through “trade‑calling” and similar tactics, raking in hefty brokerage fees. Others deliberately issue reverse “trade‑calls,” causing investors to suffer rapid losses and margin calls. Still others demand additional funds under the pretext of assigning “senior analysts” to help recoup losses, thereby exacerbating investors’ losses. And once investors realize they’ve been scammed after losing all their capital, the platforms promptly block them or kick them out of communication groups. In some cases, these platforms engage in outright betting against their clients: the investors’ losses directly translate into revenue for the platform itself, its members, and its marketing personnel. Moreover, certain platforms operate virtual trading systems, replicating historical price charts from overseas markets via back‑end manipulation; once investors enter such trades, they almost invariably lose their entire investment.

In accordance with relevant national regulations, except for trading venues approved by the State Council and the financial regulatory authorities under the State Council to engage in financial product trading, no other trading venue may adopt continuous centralized auction mechanisms such as centralized bidding, electronic matching, or market-making; nor may it conduct standardized contract trading through centralized methods, nor may it carry out marketing activities targeted at the general public. Any new‑type trading activities conducted on the aforementioned platforms violate the state’s prohibitive provisions, and some even allegedly involve fraudulent or other illegal and criminal activities.

We hereby remind all investors to conduct investment and trading only through legitimate, authorized financial institutions. There is no such thing as a free lunch—please remain vigilant, exercise due diligence, and refrain from engaging in illegal securities or futures investments driven by short-term greed, lest you suffer financial losses. If you discover that you have been victimized by such unlawful securities or futures activities, promptly report the matter to your local people’s government or file a police report.

Financial Watch: China Will Continue to Serve as a “Stabilizer” for the Global Economy — International Institutions Are Optimistic About China’s Economic Prospects

According to data recently released by China’s National Bureau of Statistics, the Chinese economy grew by 6.9% in the first half of the year, continuing its steady yet progressive momentum and maintaining an overall improving trend. In response, numerous international institutions have promptly raised their forecasts for China’s economic growth this year. These organizations generally believe that, as China’s economic rebalancing process advances steadily and the outlook remains well supported, China will continue to serve as a “stabilizer” for the global economy.

The International Monetary Fund (IMF) recently released an update to its World Economic Outlook, raising its growth forecasts for China over the next two years by 0.1 and 0.2 percentage points, to 6.7% and 6.4%, respectively.

This marks the IMF’s third upward revision this year of its 2017 growth forecast for China. The IMF noted that the increase reflects China’s robust economic performance since the first quarter, as well as expectations of continued fiscal support going forward.

Both JPMorgan Chase and Nomura Securities have revised up their forecast for China’s economic growth this year from 6.7% to 6.8%. JPMorgan believes that a slowdown in infrastructure and real estate investment, coupled with the impact of financial deleveraging, could weigh on China’s economy in the second half. However, overall, the steady expansion of consumption and the service sector, along with the continued pickup in private investment, provide strong support for China’s economic outlook. The office notes that concerns about a hard landing or systemic financial risks have eased significantly compared with a year ago, suggesting that China is poised to remain a “stabilizer” for the global economy.

Nomura Securities has revised its third-quarter GDP growth forecast for China upward, from 6.6% to 6.8%, while keeping its fourth-quarter projection unchanged at 6.6%. The office notes that in the second half of the year, China’s economy will face uncertainties such as a deceleration in residential sales and downward pressure on exports, which could lead to a gradual slowdown—but not a sharp stall.

Both Standard Chartered Bank and Citibank have revised their forecast for China’s economic growth this year, raising it from 6.6% to 6.8%. Standard Chartered noted that, according to monthly data on China’s economic performance, seven leading economic indicators have recently shown varying degrees of improvement, suggesting that the likelihood of a sudden slowdown in the coming months is extremely low. Although China’s economy may face certain challenges in the second half of the year, the outlook remains optimistic, with expectations that this year will mark the first acceleration in economic growth since 2010.

Citibank has also revised its forecasts for China’s economic growth in the third and fourth quarters of this year, raising them from the previous estimates of 6.5% and 6.4% to 6.7% and 6.6%, respectively. The bank noted that, amid the drag of a high base effect, China’s economy is expected to moderate slightly in the second half of the year but will nonetheless maintain robust growth, making it “all but certain” that the growth target will be met.

In addition, the Asian Development Bank has revised up its forecast for China’s economic growth this year from 6.5% to 6.7%, and raised its projection for next year’s growth from 6.2% to 6.4%.

The Asian Development Bank’s “Asian Economic Outlook” report indicates that domestic consumption and the growth of imports and exports have bolstered China’s growth prospects. On the one hand, steady increases in household incomes and expanding public spending continue to underpin robust domestic consumption; on the other, prices for certain commodities have rebounded moderately from their 2016 lows, and a recovery in external demand has fueled a rebound in imports and exports during the first half of the year.

“Investor Protection: Know the Rules, Recognize the Risks” Case — Futures Trading Requires Proper Qualifications; Stay Away from Illegal Platforms

In recent years, illegal futures activities have been rampant, with venues conducting illicit futures trading under the guise of commodity spot markets persisting despite repeated crackdowns. Such practices have seriously infringed upon investors’ legitimate rights and interests, tarnished the reputation of the futures market, and generated adverse social repercussions. In the first half of 2017, the Inter-Ministerial Joint Conference on Rectifying and Regulating Various Trading Venues convened its third meeting and a follow-up work‑exchange session, laying out policy measures to standardize local trading platforms. Meanwhile, courts in several regions have successively handed down judgments in accordance with the law against related illegal futures‑trading activities, providing investors with practical guidance for identifying such schemes and serving as a strong deterrent.

Take a certain electronic trading platform as an example. As a trading venue retained after a cleanup and rectification, the platform relies on spot transactions and employs standardized contract auction‑based electronic matching, T+0 settlement, daily net‑zero settlement, leverage, margin requirements, and forced liquidation, with fee‑based revenue as its primary profit model. However, the platform’s general manager, Xie, along with deputy general managers Zheng and Chen, and other implicated personnel, unilaterally established so‑called “market makers,” outsourcing certain trading products and business lines—such as xylitol, caustic soda, glycerin, hydrogen peroxide, formaldehyde, and oxalic acid—to these market makers. These market makers further recruited agents, who, working together, engaged in public marketing via the internet, WeChat, telephone, and other channels. Leveraging the platform’s back‑office data, they first provided “accurate intelligence” to entice clients into increasing their investments with small profits, then switched to disseminating false market information to manipulate prices in the opposite direction, resulting in substantial losses for investors. The market makers and the platform divided the investors’ losses according to an 85%–15% split, with the market makers further apportioning the 85% of losses they received among themselves and their agents. According to statistics, Xie, Zheng, Chen, and others collectively obtained illicit gains totaling RMB 79.7232 million. In November 2015, the three were sentenced by the People’s Court for fraud to life imprisonment, thirteen years’ imprisonment, and seven years’ imprisonment, respectively, and were also imposed with corresponding fines.

In past cases and court rulings, illicit actors have often used commodity spot trading as a façade to lure investors into illegal futures‑related activities, resulting in financial losses. Investors should remain highly vigilant and pay particular attention to the following two points: First, commodity spot transactions typically involve direct, bilateral negotiations between buyers and sellers to determine contract terms such as product type, price, quantity, and delivery date; they must not employ centralized trading methods prohibited under Document No. 38 [2011] issued by the State Council and Document No. 37 [2012] issued by the General Office of the State Council, including call auctions, continuous auctions, electronic matching, anonymous trading, and market‑making. Second, commodity spot trading generally entails physical delivery of the underlying assets, rather than settling trades through cash settlement of price differentials. If anyone urges you to participate in “commodity spot trading” that does not conform to these characteristics, be cautious of becoming entangled in illegal futures activities, and consider reporting such conduct to your local public security authorities.

Article 6 of the Regulations on the Administration of Futures Trading explicitly stipulates: No entity or individual may establish a futures trading venue or organize futures trading and related activities in any form without the approval of the State Council or the futures regulatory authority under the State Council. However, in practice, due to its unique trading mechanisms, futures trading is often exploited by unlawful actors who set up spot‑trading platforms or centers under various pretenses, thereby potentially constituting the crime of illegal business operations. In fact, identifying illegal futures activities requires consideration from four key perspectives: First, assess the qualifications of the entity. As stated above, engaging in futures business requires approval from the China Securities Regulatory Commission (CSRC) and the acquisition of the relevant business license; otherwise, the entity is operating illegally. Investors can consult the CSRC website or the China Futures Association website to verify information on licensed futures offices and their practitioners, or they may conoffice such details with the local CSRC bureau. Second, scrutinize the marketing approach. Some unscrupulous actors style themselves as “experts” or “futures gurus,” frequently touting promises like, “Follow my advice and you’ll make a fortune,” emphasizing returns while ignoring risks. Investors should understand that all financial products, including futures, operate under the fundamental principle that high returns are invariably accompanied by high risk—there is no such thing as a risk‑free windfall. Legitimate futures offices, guided by suitability requirements, strive to match appropriate products with suitable investors and are prohibited from engaging in such misleading advertising. If investors encounter such exaggerated claims, they should remain vigilant. Third, examine the website domain. Illegitimate futures websites typically use meaningless combinations of letters and numbers, or employ imitation tactics—altering or adding characters to the official domain of a licensed futures office. Investors can check the CSRC or China Futures Association websites to identify authorized futures offices’ legitimate domains and detect fraudulent sites. Avoid accessing unauthorized websites to prevent falling into traps and being defrauded. Fourth, verify the payment account. Legitimate futures offices conduct business solely in the company’s name and maintain bank accounts registered under the corporate entity; in contrast, illicit operators often open personal‑named accounts for receiving funds. If someone asks an investor to remit money to an account held in an individual’s name, the investor should officely refuse.

Commercial & Corporate

Is the housing market rebounding? A major signal was sent at the Central Politburo meeting.

Last week, the National Bureau of Statistics released housing price data for 70 cities in March. The figures show that, in March, new commercial residential prices rose month-on-month in 65 of those cities.

Meanwhile, yesterday the Political Bureau of the CPC Central Committee convened a meeting to analyze and assess the current economic situation and outline priorities for economic work. The meeting called for upholding the principle that housing is for living in, not for speculation, and for effectively implementing a long-term regulatory framework that adopts city-specific policies, tailored measures, and places primary responsibility on local governments.

Notably, the Central Politburo meeting held on December 13, 2018, did not address real estate; this time, however, it once again reafofficeed the principle that “housing is for living, not for speculation.”

Meanwhile, the Ministry of Housing and Urban–Rural Development, in collaboration with the Development Research Center of the State Council, recently conducted a special survey on the performance of the real estate market in the first quarter of 2019. According to the findings, the real estate market remained generally stable, with residential sales experiencing a steady decline, housing prices remaining broadly unchanged, and market expectations trending toward greater rationality. However, in certain hot-spot cities, residential sales have rebounded and land‑market activity has picked up, warranting close attention.

In accordance with the requirements for monthly analysis, quarterly evaluation, and annual assessment set forth in the plan for steadily implementing a long-term mechanism for the real estate sector, the Ministry of Housing and Urban–Rural Development issued early warnings for cities that experienced significant fluctuations in housing and land prices during the first quarter of 2019.

National Bureau of Statistics: In March, new commercial residential prices rose month-on-month in 65 cities.

Recently, the National Bureau of Statistics released data on new commercial residential sales prices in 70 large and medium-sized cities for March: in first- and second-tier cities, month-on-month price increases eased slightly, while in third-tier cities they rose. Overall, new‑home prices rose month over month in 65 cities in March.

According to preliminary estimates, new commercial residential sales prices in the four first-tier cities showed mixed trends: Beijing and Guangzhou recorded month-on-month increases of 0.4% and 0.8%, respectively, while Shanghai and Shenzhen saw month-on-month declines of 0.1% and 0.3%, respectively.

Turning to the secondary housing market, Beijing, Shanghai, and Shenzhen saw month-on-month price increases (up 0.4%, 0.3%, and 0.7%, respectively), while Guangzhou was the only city to register a decline, falling by 0.5%. Meanwhile, in the 31 second-tier cities, new commercial residential sales prices rose 0.6% month-on-month, with the pace of increase easing by 0.1 percentage point compared with the previous month; in the 35 third-tier cities, new commercial residential prices climbed 0.7% month-on-month, with the rate of increase expanding by 0.3 percentage points from the prior month. Notably, cities such as Nanchong, Changde, Jinzhou, and Qinhuangdao recorded month-on-month price gains exceeding 1%.

The achievements of real estate market regulation still need to be consolidated.

According to an analysis by the Economic Daily, there may be two reasons behind the rebound in housing prices in March.

First, since the end of last year, many localities have made minor adjustments to their real estate market‑regulation policies under the principle of “tailoring measures to individual cities and providing targeted guidance.” These localized tweaks have, on the one hand, boosted local housing sales and pushed up transaction prices; on the other hand, they have signaled a possible easing of policy, thereby influencing public expectations.

Second, for some time now, certain localities have incorporated housing and home‑purchase benefits into their talent‑attraction policies, using them as attractive incentives. While this has helped draw in out-of‑town professionals with relatively low entry barriers, it has also, to a certain extent, boosted housing demand, thereby contributing to upward pressure on home prices. Moreover, the recently released “Key Tasks for New‑Type Urbanization in 2019” by the National Development and Reform Commission includes provisions related to household registration system reform, which will likewise exert some influence on real‑estate market expectations.

The recovery in the housing market has also given rise to various irregularities in real estate sales, such as inflating prices, imposing additional charges beyond the listed price, and withholding properties from the market.

On April 10, the Hefei Municipal Housing Security and Real Estate Administration issued an urgent notice to further standardize the sale of commercial housing, stating that it will strengthen oversight of the real estate market and, in accordance with the law, rigorously investigate and prosecute illegal and non-compliant practices such as inflating housing prices, imposing additional charges beyond the listed price, withholding properties from sale, engaging in false advertising, and forcing bundled sales.

The Politburo meeting once again emphasized “housing is for living, not for speculation.”

Equally noteworthy was the meeting of the Political Bureau of the CPC Central Committee held on April 19, which reviewed economic performance in the first quarter and outlined the next phase of economic policy. The discussion on real estate at the meeting consisted of just over 40 characters, divided into two clauses: “We must uphold the principle that housing is for living in, not for speculation, and effectively implement a long-term regulatory framework featuring city-specific policies, tailored measures for each city, and clear accountability for local governments.” Though brief, this statement conveys a wealth of information.

The Central Politburo meeting held on December 13, 2018, did not address real estate issues; this time, however, it once again reafofficeed the principle that “housing is for living, not for speculation.” This indicates that the central authorities have taken note of the volatility in the property market during the first quarter.

Zhang Dawei, chief market analyst at Centaline Property, believes that, amid a recent mild spring recovery in some segments of the real estate market and localized price fluctuations, the Politburo’s renewed emphasis on “housing is for living, not for speculation” will deter speculative investors and help stabilize the market.

Yan Yuejin, Research Director at the E-House Institute Think Tank, also believes that the principle of “housing is for living, not for speculation” continues to be emphasized. Given that the housing market performed relatively well in the first quarter and is expected to keep rising in the second quarter, reinforcing this message at this juncture aims to guard against risks such as overheating and price spikes in the real estate sector.

“The Politburo meeting also clarified the concept of a long-term regulatory mechanism, which primarily encompasses a ‘one city, one policy’ approach, tailored measures for each city, and the principal responsibility of local governments. We expect that, in the second quarter of this year, relevant cities will introduce policies under the ‘one city, one policy’ framework, and oversight of local governments’ fulfillment of their principal responsibilities will be strengthened,” said Yan Yuejin.

There have been moves at both the local and central levels.

In response to the latest developments in the housing market, several localities have recently implemented relevant measures.

Recently, Beijing’s state‑managed housing provident fund loans have adopted the same “property‑and‑loan‑based” policy as the city‑managed fund; meanwhile, Changsha, Hunan, will discontinue the preferential stamp duty rate for second homes and, starting April 22, will levy a 4% rate. These measures in both localities are sure to help curb investment‑driven and speculative home purchases, better address genuine housing demand, and exert some downward pressure on the rebounding housing market prices.

In addition to local governments introducing new regulatory measures, central government ministries and commissions are also advancing real estate regulation.

To implement the central government’s requirements on real estate regulation, achieve city-specific policies and targeted, differentiated regulation, ensure a stable supply of residential land, guide market expectations, and promote the steady and sound development of the real estate land market, the Ministry of Natural Resources recently issued a notice mandating the effective formulation and implementation of the 2019 “five‑category” regulatory targets for residential land.

The notice requires that cities at or above the prefecture level, the seats of prefectures and leagues, and counties (county-level cities) with a population of one million or more, based on the inventory‑clearance cycle for market housing as of March 2019 and in light of local land‑market conditions, effectively optimize the supply of residential land and implement differentiated regulatory policies. Building on last year’s categorized targets for residential‑land supply, they are to adjust and set 2019 targets for residential‑land supply under five categories: “significant increase,” “increase,” “remain unchanged,” “moderate reduction,” and “reduce or even suspend.”

Specifically, for projects with a digestion period of 36 months or longer, land supply should be halted; for those with a digestion period of 36 to 18 months, land supply should be appropriately reduced; for projects with a digestion period of 18 to 12 months, land supply should remain at the current level; for projects with a digestion period of 12 to 6 months, land supply should be increased; and for projects with a digestion period of less than 6 months, land supply should be significantly expanded and accelerated.

In addition, the “Key Tasks for New‑Type Urbanization in 2019” was recently issued. Some observers believe that the relaxation of household registration policies in megacities could lead to a concentration of population in urban areas and even trigger volatility in the real estate market.

JD.com aims to acquire Wuxing Electrical Appliances, reportedly having conducted due diligence for two months; the home appliance retail sector may soon see a wave of consolidation.

The home appliance retail industry is undergoing a new wave of consolidation.

Recently, JD.com is reportedly set to acquire Wuxing Electrical Appliances. The two parties have already engaged in substantive discussions, and JD.com has dispatched a team to Wuxing Electrical Appliances to conduct a comprehensive due diligence review.

An informed source revealed, “JD.com’s team has been conducting due diligence on Wuxing Electrical Appliances for nearly two months and is now in its final stages; a decision could be announced soon. This time, JD.com is particularly focused on Wuxing’s network of outlets and other assets in third- and fourth-tier markets and below.”

Regarding this merger and acquisition, JD.com declined to comment at this time, while a representative from Five Star Appliance also chose not to offer any remarks.

However, a spokesperson for Wuxing Electrical stated: “Wuxing Electrical has established close cooperation with JD.com, integrating across branding, traffic, technology, and operations. In addition, some physical stores have already been launched, and the two parties are jointly exploring a new retail model.”

She revealed, “Five Star Appliances is also striving to expand further and has long been open to mergers and acquisitions, targeting regional chain retailers. The company plans to deepen its penetration across additional channels.”

JD.com and Five Star Appliance’s “romantic connection” first took root over a year ago.

Although the capital partnership between the two parties is still in its exploratory phase, over the course of last year they have achieved deep integration across business, technology, and operations.

JD.com and Five Star Electrical Appliances have been collaborating since 2017, achieving comprehensive cross-channel and cross-category cooperation. They have opened JD Five Star Boundaryless Retail Experience Stores in numerous locations nationwide, and have rapidly replicated this model in physical stores, with 20 outlets already operational in cities such as Luoyang, Hangzhou, Suzhou, and Fuzhou. Plans to open additional stores in other regions and provinces are also underway.

Partnering with a retail company that boasts an extensive network of brick-and-mortar stores and other resources has proven highly rewarding for JD.com. Yan Xiaobing, Senior Vice President of JD Group and President of the E‑Commerce and Entertainment Business Group at JD.com, noted that during last year’s “Double 11” shopping festival, more than 50 flagship stores of Wuxing Electrical Appliances coordinated with JD.com, resulting in a substantial surge in foot traffic and a 200% month-over-month increase in sales.

According to insiders, JD.com faced multiple competitors in its acquisition of Wuxing Electrical Appliances. However, the cooperation the two parties struck last year laid the groundwork for this merger. “When JD.com and Wuxing Electrical Appliances first partnered, they were already exploring an acquisition—but they never reached an agreement on price. Now, though, there has been a breakthrough; if all goes smoothly, a deal could be finalized soon.”

So what drew the two parties together? In recent years, as the online‑channel dividend has gradually faded, JD.com has been aggressively expanding its offline presence, seeking to quickly strengthen its footprint in brick‑and‑mortar stores and rural‑town channels. To that end, it has set its sights on Wuxing Electrical’s extensive sales network and store assets, which have long been established across regional markets.

“At present, Wuxing Electrical’s outlets are concentrated in second- to fourth-tier cities. The company established an early presence in East China and enjoys strong market momentum. In Jiangsu alone, Wuxing accounts for 40% of the chain‑store market share, with its network extending from provincial capitals all the way down to towns. It also boasts robust coverage in Anhui and Zhejiang, while in recent years it has been rapidly expanding in southwestern provinces such as Henan, Sichuan, and Yunnan. Its outlet‑expansion strategy centers on provincial capitals and radiates outward to surrounding areas,” said an industry insider.

According to reports, Wuxing Electrical currently operates more than 220 brick-and-mortar chain stores across seven provinces, including Jiangsu and Zhejiang.

Industry observers note: “Wuxing enjoys a certain level of brand influence and a loyal customer base in regional markets, which are its key strengths. However, if JD.com were to partner with it solely through franchised outlets or similar arrangements, there would be inherent uncertainties; meanwhile, expanding through company‑owned stores would not be particularly cost‑effective. By contrast, acquiring a well‑established offline brand outright would enable JD.com to pursue a comprehensive, omnichannel strategy and expand into the offline market more efficiently.”

However, the deal remains uncertain at this stage. “JD.com and the shareholders of Wuxing Electrical Appliances have been in lengthy negotiations over the acquisition. Beyond pricing, the discussions also involve the interests of major shareholder Jiayuan Chuangsheng, CITIC Trust, and the existing management team. Moreover, Wuxing Electrical Appliances itself harbors ambitious growth plans and is continually seeking expansion opportunities, further complicating JD.com’s acquisition efforts.”

Meanwhile, Wuxing Electrical Appliances also needs to leverage JD.com’s brand recognition and traffic advantages to swiftly achieve its internet‑based transformation and expansion.

Five Star Electrical Appliances was originally part of the Best Buy Group. In 2006, Best Buy entered the Chinese retail market by acquiring a majority stake in Jiangsu Five Star Electrical Appliances. Eight years later, Best Buy once again announced that it would sell its Five Star Electrical Appliances business to Jiayuan Group.

In the same year, Wuxing Electrical Appliances unveiled its five-year strategic plan: over the next five years, the total number of stores across all formats will exceed 850, and the sales volume of its brick-and-mortar outlets will triple. In other words, by 2019, Wuxing Electrical Appliances aims to achieve RMB 40 billion in sales.

Five Star Electrical’s ambition to grow has never waned. An insider at Five Star revealed: “At the store level, the company aims to expand to 4,000 outlets by 2025, vigorously developing township‑level stores through the ‘Wanzhentong’ franchise model, which combines company‑operated locations with franchised outlets that penetrate rural and small‑town markets. Meanwhile, the company is currently building 20 JiaYuan Five Star Plaza centers, each projected to generate annual sales of RMB 80 billion.” “The company maintains an open stance toward collaborations—both within the industry and across sectors—and has already established extensive partnerships with upstream home‑appliance manufacturers as well as retail channels like JD.com. As Five Star seeks to continue scaling up, it has also been actively exploring M&A opportunities within regional chain networks, having already engaged with several target companies.”

However, industry insiders believe that Wuxing Appliance has long sought to build a “broad‑category home‑appliance” ecosystem and is accelerating its expansion. At the same time, it is unlikely to readily divest its core assets, and the numerous projects currently under development carry significant uncertainties—factors that could bolster Wuxing’s negotiating position in any potential acquisition by JD.com.

The partnership between JD.com and Wuxing Electrical Appliances is a microcosm of the transformation and restructuring underway in the home appliance retail sector.

At present, the era of e‑commerce windfall has come to an end, online store customer‑acquisition costs have surged, and online growth has hit a ceiling. Meanwhile, brick‑and‑mortar retailers have yet to find a viable path forward, ushering in a wave of transformation and restructuring across the retail sector.

Internet‑based retailers have begun seeking breakthroughs in the offline space, launching aggressive expansion campaigns. Over the past two years, JD.com has accelerated its offline footprint in the home‑appliance sector, extending its reach to fourth- and fifth‑tier markets. Meanwhile, brick‑and‑mortar players like Five Star Electrical Appliances, which have long maintained a strong offline presence, are also pursuing online growth by ramping up partnerships with digital platforms to achieve complementary resource integration.

“The红利 of online internet traffic has largely been exhausted; the next wave of opportunities lies in third- and fourth-tier markets. At this juncture, retail companies with extensive brick-and-mortar networks in these lower-tier markets are gaining a distinct advantage, leading to a rise in consolidation—where larger players acquire smaller ones—as well as strategic alliances and M&A activity. Today, whether it’s Gome, Suning, or JD.com, which is primarily an online‑centric platform, all are embracing the trend of integrating offline and online channels, actively expanding their physical footprints. Yet even this traditionally rooted offline retail sector will face further pressure.”

Suning.com, which boasts extensive offline resources, has been in a critical phase of transformation over the past four years, with its core business profit—excluding non-recurring items—remaining in the red. According to the company’s financial reports, in recent years more than 90% of Suning.com’s revenue has come from retail sales in its traditional core businesses, such as 3C products, home appliances, and digital IT devices.

Industry analysts note: “In recent years, Suning’s operating revenue has grown rapidly, primarily driven by the expansion of its traditional business—from brick-and-mortar stores to online platforms—which has increased the number of sales outlets and, in turn, boosted revenue growth.”

Meanwhile, Gome is also marking a pivotal year of transformation this year, accelerating the development of new business lines and expanding its presence in lower-tier markets.

“It has become an industry consensus that consumer spending power in third- to sixth-tier markets is on the rise, and their market size is growing far faster than that of first-tier cities. With urbanization accelerating, this market is set to expand even further. Gome is stepping up the rollout of county‑level stores and new‑retail outlets to achieve more comprehensive channel expansion,” said a Gome insider.

He revealed, “At present, we are expanding into third- to sixth-tier markets through a combination of county‑level stores and new‑retail outlets, with plans to open approximately 700 such stores in total in 2019. For county‑level stores, Gome primarily adopts a self‑operated model. As for new‑retail outlets, Gome is leveraging a franchise approach to integrate family‑run shops in fourth- and fifth‑tier markets, empowering these outlets with Gome’s supply‑chain capabilities to accelerate channel and outlet penetration in township‑level markets.”

Industry insiders believe that “market competition and shifting industry dynamics are compelling companies to undergo comprehensive, end-to-end transformation. In this process, the value of brick-and-mortar retail is being reevaluated. At present, e‑commerce platforms are actively partnering with physical retailers: on the one hand, the benefits of online traffic growth are peaking, and on the other, offline channels remain the primary shopping environment for Chinese consumers, giving rise to new forms of value in physical retail.”

Taxation TAXATATION

Notice on the Extension of Preferential Policies for Value-Added Tax, Property Tax, and Urban Land Use Tax for Heating Enterprises

To the Finance Departments (Bureaus) of Beijing, Tianjin, Hebei, Shanxi, Inner Mongolia, Liaoning, Dalian, Jilin, Heilongjiang, Shandong, Qingdao, Henan, Shaanxi, Gansu, Ningxia, Xinjiang, and Qinghai Provinces (Autonomous Regions, Directly Administered Municipalities, and Cities under Separate Planning); to the Finance Bureau of the Xinjiang Production and Construction Corps; and to the Tax Bureaus of the State Taxation Administration in Beijing, Tianjin, Hebei, Shanxi, Inner Mongolia, Liaoning, Dalian, Jilin, Heilongjiang, Shandong, Qingdao, Henan, Shaanxi, Gansu, Ningxia, Xinjiang, and Qinghai Provinces (Autonomous Regions, Directly Administered Municipalities, and Cities under Separate Planning):

To support residential heating, the following policies regarding value-added tax, property tax, and urban land use tax for heating enterprises in the “Three North” region (hereinafter referred to as “heating enterprises”) are hereby notified:

I. From January 1, 2019, to the end of the 2020 heating season, value-added tax shall be exempted on heating fees collected by heating enterprises from individual residents (hereinafter referred to as “residents”).

Revenue from heating fees collected from residents includes fees directly charged by heating enterprises, those collected through other entities, and those paid on behalf of residents by their employers.

Revenue from heating fees that is exempt from value-added tax shall be accounted for separately in accordance with Article 16 of the Interim Regulations of the People’s Republic of China on Value-Added Tax. For enterprises that produce and supply heat to residential consumers through heat‑supply operators, the amount of value-added tax exempted shall be calculated based on the proportion of heating fee revenue actually received from residents to the operator’s total heating fee revenue.

For the purposes of this Article, the heating period refers to the interval from the commencement of heating in the second half of the current year to the conclusion of heating in the first half of the following year.

II. From January 1, 2019, to December 31, 2020, heating enterprises that collect heating fees from residents shall be exempt from property tax and urban land use tax on the factory buildings and land used for providing residential heating; with respect to other factory buildings and land owned by such heating enterprises, property tax and urban land use tax shall be levied in accordance with applicable regulations.

For specialized heating enterprises, the property tax and urban land use tax exemptions shall be calculated based on the proportion of heating fees collected from residential users to their total heating fee revenue.

For enterprises engaged in both heating supply and other business activities, the exemption from property tax and urban land use tax shall be calculated using different methods, depending on whether the premises and land used for heating can be clearly distinguished from those used for other production and operational activities. If such distinction is possible, the exemption shall be determined by applying the proportion of heating‑related revenue derived from residential customers to the enterprise’s total heating‑related revenue. If such distinction is not feasible, the exemption shall be calculated based on the proportion of heating‑related revenue generated from residential customers to the enterprise’s total operating revenue, applied to all its premises and land.

For self‑heating entities, the property tax and urban land use tax on the factory buildings and land used for heating shall be exempted, calculated in proportion to the share of residential heating area in the total heated floor area.

III. For the purposes of this Notice, “heating enterprises” refer to both heat‑production enterprises and heat‑distribution enterprises. Heat‑production enterprises include specialized heating enterprises, enterprises that engage in heating as a secondary business, and self‑heating entities.

IV. For the purposes of this Notice, the “Three North” region refers to the following areas: Beijing Municipality, Tianjin Municipality, Hebei Province, Shanxi Province, Inner Mongolia Autonomous Region, Liaoning Province, Dalian City, Jilin Province, Heilongjiang Province, Shandong Province, Qingdao City, Henan Province, Shaanxi Province, Gansu Province, Qinghai Province, Ningxia Hui Autonomous Region, and Xinjiang Uygur Autonomous Region.

After the VAT rate reduction, how should a red‑character VAT invoice be issued?

On April 1, 2019, the policy lowering the value-added tax rate was officially implemented. For taxpayers engaging in VAT‑liable sales activities or importing goods, the tax rate applicable to transactions previously subject to 16% has been reduced to 13%, and the rate for those previously subject to 10% has been reduced to 9%.

If a taxpayer finds themselves in a situation requiring the issuance of a red‑character invoice, how should they proceed? Let’s take a look at these five questions and answers!

Taxpayer A: Prior to the VAT rate adjustment, our company had already issued VAT invoices at the original rates of 16% and 10%. After April 1, 2019, if a sales discount occurs and a red‑character invoice needs to be issued, what VAT rate should be applied?

Answer: Red‑letter invoices should be issued at the original applicable tax rate. For a 16% rate, issue a negative‑amount invoice for 16%; for a 10% rate, issue a negative‑amount invoice for 10%.

Taxpayer B: Our company issued a special VAT invoice to a customer. Due to a sales return, we need to issue a red‑character invoice; however, the customer has already claimed the input tax credit. What should our company do?

Answer: The purchaser shall complete and upload the “Information Form for Issuing a Red‑Character VAT Special Invoice” in the new VAT invoice management system. When filling out the Information Form, no details of the corresponding blue‑character special invoice shall be entered. Instead, the VAT amount indicated on the Information Form shall be temporarily transferred out of the current period’s input VAT. Upon receipt of the red‑character special invoice issued by the seller, it shall be submitted together with the Information Form as supporting documentation for accounting purposes.

Taxpayer C: Our company has issued a special VAT invoice to the customer and delivered it. Subsequently, we discovered an error in the invoicing information and need to issue a red‑character invoice. However, the customer has misplaced both the invoice copy and the credit copy (and has not yet claimed the input tax credit). What should our company do?

Answer: The purchaser shall complete and upload the “Information Form for Issuing a Red‑Character VAT Special Invoice” in the new VAT invoice management system. When completing the Information Form, the corresponding details of the original blue‑character special invoice must be entered.

Taxpayer D: Our company has issued a special VAT invoice to the customer and already delivered it. Subsequently, due to the termination of the taxable service, we need to issue a red‑character invoice. The customer has not yet claimed the input tax credit and has promptly returned both the invoice copy and the credit‑claiming copy. How should we proceed?

Answer: The seller shall complete and upload the “Information Form” in the new system. When completing the “Information Form,” the seller must enter the corresponding information for the blue‑colored special invoice.

Taxpayer E: Our company has issued a special VAT invoice to a customer but has not yet delivered it. Due to a partial return of goods, we need to issue a red‑character invoice. How should I proceed?

Answer: The seller shall complete and upload the “Information Form” in the new system. When completing the “Information Form,” the seller must enter the corresponding information for the blue‑colored special invoice.

LITIGATION & ARBITRATION

Anhui has issued “two notices” to maintain a vigorous offensive against organized crime and evil forces.

On April 18, the Anhui Provincial Anti-Black-and-Evil Campaign Office and the Provincial Government Information Office held a press conference to provide policy explanations on two notices: the “Notice on Urging Party Members, Cadres, and Public Officials Involved in Corruption Related to Black-and-Evil Activities or Acting as ‘Protective Umbrellas’ to Proactively Report Their Misconduct to the Organization within a Specified Timeframe,” issued by the Provincial Commission for Discipline Inspection and Supervision; and the “Notice on Once Again Urging Criminals Associated with Black-and-Evil Forces to Surrender Within a Specified Timeframe,” jointly issued by the Provincial Higher People’s Court, the Provincial People’s Procuratorate, the Provincial Public Security Department, and the Provincial Department of Justice (collectively referred to as the “Two Notices”). The briefing also included legal interpretations and reasoned explanations supported by relevant case examples.

To further consolidate the achievements of the special campaign to eradicate organized crime and evil forces, we urge those involved in such criminal activities to turn themselves in as soon as possible and seek lenient treatment; we also call on Party members, cadres, and public officials implicated in corruption linked to organized crime and acting as “protective umbrellas” to proactively come forward and confess their wrongdoing. At the same time, we encourage the general public to actively report leads related to organized crime and evil forces, thereby deepening and advancing this campaign. In accordance with the requirements of the April 10th “Mobilization Meeting of the 14th Central Supervision Group on Eradicating Organized Crime and Evil Forces for Anhui Province,” and following deliberation by the Provincial Leading Group for the Special Campaign, the Provincial Commission for Discipline Inspection and Supervision has issued the “Notice on Urging Party Members, Cadres, and Public Officials Involved in Corruption Linked to Organized Crime and Evil Forces or Acting as ‘Protective Umbrellas’ to Confess Their Wrongdoing Within a Specified Timeframe.” Meanwhile, the Provincial Higher People’s Court, the Provincial People’s Procuratorate, the Provincial Public Security Department, and the Provincial Department of Justice have jointly issued the “Notice on Further Urging Criminals Associated with Organized Crime and Evil Forces to Turn Themselves in Within a Specified Timeframe,” setting a one-month deadline to encourage offenders and their “protective umbrellas” to surrender voluntarily, thus maintaining a robust offensive against organized crime and evil forces.

At the press conference, the spokesperson outlined the fundamental principles underlying the issuance of the notices. The policy of combining leniency with strictness is both a consistent guideline of the Party and the state and a basic criminal policy of China, clearly stipulated in relevant Party regulations, disciplinary rules, and national laws and regulations, and must be earnestly implemented in the handling of all cases. With the release of these two notices, the Commission for Discipline Inspection and the Supervisory Commission will, for individuals involved in cases who voluntarily turn themselves in, truthfully confess their offenses, or actively report corruption linked to organized crime and evil forces, as well as “protective umbrellas” and networks of influence, adhere to the “five distinctions,” apply the “four forms” of supervision and discipline enforcement, and adopt a “three‑fold differentiated approach,” thereby maximizing opportunities, offering favorable policies, and providing viable avenues for redemption. Meanwhile, political and legal organs, when dealing with offenders involved in organized crime and evil activities, will, based on the specific circumstances of each case, distinguish among the nature of the offense, the details of the crime, and the degree of harm to society, implementing differentiated treatment—showing leniency where appropriate and imposing strict penalties where warranted—so as to ensure that justice is meted out proportionately and that each case stands up as an unassailable conviction.

Adhering to the principle of leniency for those who plead guilty and accept punishment, the newly revised Criminal Procedure Law has enshrined this approach as a key principle. Its underlying spirit is to grant more favorable treatment and streamline procedures in cases where defendants plead guilty and accept punishment, thereby establishing a criminal justice system that integrates substantive norms with procedural safeguards. The recent joint notice issued by the four provincial-level political and legal departments fully implements this principle, with the primary objectives of encouraging suspects and defendants to voluntarily and truthfully confess their crimes, sincerely repent and accept punishment, and actively reform themselves; promptly ascertaining the facts of the offense, accurately and effectively punishing crime, repairing social relations, and upholding social stability; and further differentiating offenders, reducing conflict and confrontation, and promoting social harmony.

We must steadfastly rely on the people. The campaign to eradicate organized crime and evil forces is a people’s war; the people and these criminal elements are irreconcilable, and the public knows best whether a given area is rife with such threats. We urge all citizens to place their trust in the Party and the government’s resolve to combat organized crime and evil forces, set aside their concerns, and courageously stand up to fight these criminals. They should actively report leads on crimes involving organized crime and evil forces, ensuring that these nefarious elements have nowhere to hide. Our province will, in accordance with the law, safeguard the personal information and safety of whistleblowers, continuously increase rewards for reporting, and vigorously promote the spirit of acting righteously in the face of danger, so that perpetrators of organized‑crime offenses are struck with fear, left with no foothold, and unable to escape—truly submerged in the vast tide of the people’s war.

The spokesperson stated that, going forward, taking the central supervision as an opportunity, they will further strengthen their confidence and resolve, proactively open up a “second front” within the prison system, and thoroughly investigate leads related to organized crime and evil forces—pursuing each case to its logical conclusion in depth and sweeping up all such activities across the board. They will promptly adjust the primary focus of operations, maintain a vigorous offensive, concentrate on three key areas—case handling, dismantling protective networks, and cutting off illicit financial flows—and carry out targeted strikes. At the same time, oversight, disciplinary enforcement, and accountability will be strengthened: not only will measures be taken against criminal gangs and evil forces, but also the underlying webs of influence and “protective umbrellas” behind them will be dismantled, ensuring that the special campaign to eradicate organized crime and evil forces continues to deepen. Furthermore, Party members, cadres, and public officials implicated in corruption linked to organized crime or acting as “protective umbrellas” are urged to seize this opportunity, abandon any illusions, and, within the prescribed time limit, voluntarily come forward to confess their wrongdoing. Criminals involved in organized crime and evil activities are warned to recognize the gravity of the situation, turn back from the brink, immediately cease all illegal and criminal activities, and surrender themselves to authorities in order to seek lenient treatment. Relatives of fugitives are likewise exhorted to act with a sense of justice, promptly persuade their loved ones to turn themselves in, and thereby earn merit and seek redemption. Those who remain obstinate and persist in defying the law will be severely punished; those who harbor or shield criminals, or tip them off about law enforcement actions, will be rigorously investigated and held legally accountable.

If a private loan (borrowing) is suspected of constituting the crime of illegally absorbing public deposits, is the corresponding private loan (borrowing) contract valid?

Background: The parties to a private loan agreement (commonly referred to as a loan contract) have entered into such an agreement, and one of the parties may face criminal penalties for allegedly committing the crime of illegally absorbing public deposits.

Question: Is the private loan contract valid? Should the proceedings in a private loan dispute be stayed?

Analysis: When the parties enter into a private loan agreement, they may genuinely act on the basis of a bona fide expression of intent to lend and borrow, without violating any mandatory provisions of laws or regulations, nor concealing an unlawful purpose under a lawful form. The criminal offense of illegally absorbing public deposits is not equivalent to an individual private lending transaction; a private loan contract does not necessarily harm national interests or the public interest. In many cases, such transactions may constitute a legitimate private lending relationship: the lender provides monetary assets lawfully owned by them, the borrower voluntarily borrows those funds, and both parties independently determine the counterparty and the terms of the transaction—without either subjective intent or fault aimed at harming other lawful interests, nor any actual or potential risk of causing harm to such interests. Under the Contract Law, private loan contracts founded on a genuine expression of intent are protected by law. Even if a private loan is suspected of, or constitutes, the crime of illegally absorbing public deposits, thereby exposing one party to criminal liability, this does not automatically affect the validity of the private loan contract or any corresponding security agreement. Moreover, if the adjudication of a private‑loan dispute does not depend on the outcome of a related criminal proceeding, there is no need to stay the civil proceedings.

The “Jinguizi” trademark case went to trial, with third party Liu Chunyan participating in the proceedings.

“The big windmill turns creakily, creak‑creak… the scenery here is truly beautiful…” When “Golden Beetle” is mentioned, most people recall the program “Big Windmill,” which has accompanied the growth of hundreds of millions of Chinese children. However, the name “Golden Beetle” has sparked a trademark dispute.

“Jin Guizi,” whose real name is Liu Chunyan, learned in 2018 that a children’s education institution in Nanjing had registered her stage name “Jin Guizi” as a trademark and was using it. She filed an application with the former Trademark Review Board of the State Administration for Industry and Commerce (hereinafter referred to as the Trademark Review Board), requesting that the “Jin Guizi” trademark be declared invalid, and her request was granted. Dissatisfied with this decision, the registrant of the “Jin Guizi” trademark, Li, instituted administrative litigation before the Beijing Intellectual Property Court.

On April 17, the Beijing Intellectual Property Court held a public hearing in accordance with the law, and both Li and the third party, Liu Chunyan, appeared in court to participate in the proceedings.

Plaintiff: The golden tortoise beetle is an insect.

The court found that the “Jin Guizi” trademark at issue was filed for registration by the plaintiff, Li, on August 5, 2013, and was approved for use in Class 41, covering services such as “education” and “training.” The third party, Liu Chunyan, filed a request for invalidation of the disputed trademark on the ground that its registration infringed upon her prior right to her name.

Based on the claims and defenses advanced by the parties during the court‑investigation phase, the central issues in this case are: Is “Jin Guizi” indeed Liu Chunyan’s stage name? And does the registration of the disputed trademark infringe upon Liu Chunyan’s prior right to her name?

During the court debate, the parties engaged in a vigorous exchange of arguments centered on these two points of contention.

Li claimed that the “golden beetle” is an extremely common insect in nature, and that when people see or hear the term “golden beetle,” their first reaction is usually to think of an insect. As a television host and voice actress, Liu Chunyan’s stage name “Golden Beetle” is well known within the film and entertainment industries, but it has by no means attained the same level of recognition in the educational sphere.

Li stated that he has been operating the “Jinguizi” early‑education brand in the Nanjing area for more than a decade. At present, his “Jinguizi Early‑Education Institutions” network comprises nine franchised centers across Jiangsu and Anhui provinces, enjoying a degree of brand recognition.

Defendant: The disputed trademark—likely to mislead the public—has been declared invalid.

The defendant, the National Intellectual Property Administration, argues that, based on the evidence submitted by Liu Chunyan, “Jin Guizi” is her stage name and had attained a certain degree of recognition in the education and entertainment sectors prior to the filing date of the disputed trademark, thereby establishing a relatively stable association with her. Without authorization, Li applied to register a trademark containing the same words as Liu Chunyan’s stage name, “Jin Guizi”; such conduct cannot be regarded as mere coincidence and reflects an improper intent to exploit another person’s name for economic gain. Consequently, the registration and use of the disputed trademark are likely to mislead the relevant public into believing that the services it designates are in some specific connection with Liu Chunyan, thereby infringing upon her prior right to her name. Accordingly, the disputed trademark should be declared invalid.

Liu Chunyan: Damage to her right to her name and her reputation

Third party Liu Chunyan stated that since 1992, she has used “Jin Guizi” as her stage name to host the program “Qiqiaoban.” In 1995, she hosted “Da Fengche,” a show that enjoyed widespread popularity at the time and left an indelible mark on several generations. As “Jin Guizi” has been her long‑standing, widely promoted stage name, the relevant public and the media have come to regard it as a symbolic representation of her identity—indeed, it is even better known than her legal name, Liu Chunyan.

Liu Chunyan stated that, in actual use, the disputed trademark has already caused confusion and misidentification among the relevant public, thereby harming her right to her name and her reputation. She explained that she has focused on the “Jin Guizi” trademark because it appears in the field of children’s education, an area she has long devoted herself to. Over the years, whether through her programs or in everyday life, she has been committed to promoting the principles of joyful education and learning through play. To a certain extent, audiences have come to associate “Jin Guizi” with children, children’s education, and every aspect of childhood.

“Many people don’t know my real name and have always called me ‘Golden Beetle.’ In fact, the Golden Beetle is just an insect, quite different from the seven‑spotted ladybug. To make it more appealing to children, I blended the two into a perfect artistic fusion and reimagined them, dedicating over thirty years of my career to continually breathe new life and vitality into the Golden Beetle.”

As both the plaintiff, Li, and the third party, Liu Chunyan, appeared in court in person, the presiding judge, at the concluding stage of the proceedings, specifically invited the two parties to present their respective views on the case.

Li stated that she is a stay-at-home mom turned entrepreneur who founded the “Jin Guizi” educational institution during her pregnancy, initially aiming to put her professional expertise into practice and share her educational philosophy with a wider audience. Liu Chunyan, however, contends that Li’s actual use of the “Jin Guizi” trademark is based on the improper exploitation of another party’s reputation. Such use also constitutes an infringement of another person’s right to their name and, under the Anti-Unfair Competition Law, amounts to an act of unfair competition.

Other

Xi Jinping presided over the 14th collective study session of the Political Bureau of the CPC Central Committee and delivered a speech.

On the afternoon of April 19, the Political Bureau of the CPC Central Committee held its 14th collective study session on the historical significance and contemporary value of the May Fourth Movement. While presiding over the session, General Secretary Xi Jinping of the CPC Central Committee emphasized that the May Fourth Movement was a momentous event of milestone significance in modern and contemporary Chinese history, and that the May Fourth Spirit is a precious spiritual legacy forged by that movement. Today, as we commemorate the May Fourth Movement and carry forward the May Fourth Spirit, it is imperative to strengthen research into both the Movement and its spirit, so as to guide young people, inspired by the May Fourth Spirit, to strive unremittingly toward securing a decisive victory in building a moderately prosperous society in all respects, achieving great success in socialism with Chinese characteristics for the new era, and realizing the Chinese Dream of national rejuvenation.

Comrade Li Yuqi, a specially appointed professor at the Central Youth League School and a researcher at the China Youth Research Center, provided an explanation on this issue and offered his views and recommendations.

While presiding over the study session, Xi Jinping delivered a speech. He pointed out that this year marks the 100th anniversary of the May Fourth Movement. The purpose of convening this collective study session of the CPC Central Politburo is to revisit that passionate and inspiring era of a century ago and to deepen our understanding of the historical significance and contemporary value of the May Fourth Movement.

Xi Jinping emphasized that the May Fourth Movement, which erupted a century ago, was a great patriotic revolutionary movement of thorough anti-imperialist and anti-feudal character, spearheaded by advanced young intellectuals and joined by the broad masses of the people. Our Party has always attached great importance to the study and interpretation of the May Fourth Movement and the May Fourth Spirit. In the new era, we must continue to strengthen research on the May Fourth Movement and the May Fourth Spirit.

Xi Jinping pointed out that we must strengthen research into the historical significance of the May Fourth Movement and profoundly elucidate its far-reaching impact on contemporary China’s development and progress. We must adhere to a broad historical perspective, situating the May Fourth Movement within the context of the Chinese nation’s over 5,000-year civilization, the Chinese people’s more than 170 years of struggle since modern times, and the Communist Party of China’s over 90 years of endeavor. By integrating historical, practical, and theoretical perspectives, we should conduct research across such fields as China’s political, intellectual, cultural, and social history since the May Fourth Movement, summarize historical patterns, reveal historical trends, and clearly explain why the May Fourth Movement has exerted such profound and far‑reaching influence on contemporary China’s development and progress; why Marxism has become the guiding ideology for China’s revolution, construction, and reform; why the Communist Party of China has been able to shoulder the historic mission of leading the people in achieving national independence, people’s liberation, and national prosperity and people’s happiness; and why socialism has taken root in China and continues to evolve and improve. In this way, we can guide the people to draw lessons from history and learn from it, thereby strengthening their confidence in the path, theory, system, and culture of socialism with Chinese characteristics.

Xi Jinping emphasized the need to strengthen research into the contemporary value of the May Fourth Spirit and to thoroughly elucidate the significance and requirements of carrying forward this spirit in the new era. Drawing on the past century since the May Fourth Movement, we must conduct in-depth studies of the profound implications of the patriotic, progressive, democratic, and scientific ideals championed by the movement for realizing the Chinese Dream of national rejuvenation. Moreover, research on the May Fourth Spirit should be integrated with the study of both the national spirit and the spirit of the times, as well as with the exploration of the revolutionary culture and the advanced socialist culture forged by the Party together with the people throughout the processes of revolution, construction, and reform, thereby transforming it into a powerful spiritual force that inspires the people to forge ahead with courage and determination.

Xi Jinping pointed out that we must strengthen research on the Chinese youth movement since the May Fourth Movement and gain a deep understanding of the developmental patterns of contemporary Chinese youth movements. We need to clarify the relationship between the Communist Party of China and the Chinese youth movement, reinforce political guidance for young people, and lead them to consciously uphold the leadership of the Party, heed the Party’s call, and follow the Party’s lead. We must provide clear answers as to why the central theme of the contemporary Chinese youth movement is striving to realize the Chinese Dream of national rejuvenation, and why today’s youth must integrate their personal aspirations with the grand ideal of national rejuvenation and with the guiding principles of socialism with Chinese characteristics. We should identify the key areas where the contemporary Chinese youth movement can make the greatest impact within the broader context of the Party and the state, and inspire young people to serve as a vital force and vanguard in all sectors of society. Furthermore, we must conduct in-depth studies into the characteristics and underlying principles governing the growth and development of today’s youth, understand their strengths and weaknesses, and guide them to reconcile lofty ideals with down-to-earth action. At the same time, we should encourage all sectors of society to care for and serve young people, proactively carry out youth work, and create a favorable environment that fosters their growth, talent development, and innovation and entrepreneurship.

Xi Jinping pointed out that efforts must be intensified to collect, organize, and preserve historical materials and cultural relics related to the May Fourth Movement, so as to leave a lasting historical record for future generations to inherit and carry forward the spirit of May Fourth. It is imperative to promptly and thoroughly gather relevant historical documents and safeguard the associated cultural heritage. Furthermore, we should strengthen the systematic classification, organization, and scholarly research of these materials, and employ modern technological means to protect and showcase the historical records of the May Fourth Movement. At the same time, we must bolster the research workforce, enhance professional expertise, and produce more in-depth, substantive research findings.

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