21 April 2021

China Regulatory and Legal Round-up | February 2021

Foreign Investment and General Corporate

1. Release of the Overall Plan for the Construction of Hongqiao International Open Hub

On February 22, 2021, the National Development and Reform Commission (“NDRC”) released the Overall Plan for the Construction of Hongqiao International Opening Hub(《虹桥国际开放枢纽建设总体方案》)(“Overall Plan”) (see here for the full text in Chinese). The Overall Plan has been approved by the State Council.

The Overall Plan was formulated to:

  • facilitate the planning and development of the Hongqiao International Opening Hub at a high level; and
  • promote the reform and the collaborative opening in the Yangtze River Delta Region.

The development goal is for the Hongqiao International Opening Hub to be substantially established by 2025 and fully operational by 2035. The construction requirements include the following aspects:

  • to build a high standard international central business district;
  • to build a new international trade center platform for high-end resources allocation;
  • to enhance the management of comprehensive transport hubs; and
  • to significantly improve the ability to serve the Yangtze River Delta and connect the international community.

The relevant detailed regulations and policies are expected to be released.

2. Release of the Circular on Establishing and Improving the Long-term Mechanism for Optimizing the Business Environment in Tendering and Bidding

On February 20, 2021, the NDRC, the Ministry of Industry and Information Technology (“MIIT”), the Ministry of Housing and Urban-Rural Development, the Ministry of Transport, the Ministry of Water Resources, the Ministry of Agriculture and Rural Affairs, the Ministry of Commerce (“MOFCOM”), the National Radio and Television Administration, the National Energy Administration, the National Railway Administration and the Civil Aviation Administration of China jointly released the Circular on Establishing and Improving the Long-term Mechanism for Optimizing the Business Environment in  Tendering and Bidding(《关于建立健全招标投标领域优化营商环境长效机制的通知》)(“Circular”) (see here for the full text in Chinese). The Circular came into immediate effect upon the date of release.

The Circular was formulated with a view to continuously implement the spirit of the Regulations on the Optimization of Business Environment previously promulgated by the State Council and to further outline the requirements of relevant governmental organs and agencies to:

  • understand the importance of establishing a long-term mechanism for optimizing the business environment in tendering and bidding;
  • strictly regulate the formulation of tendering and bidding rules at a local level;
  • enhance the consolidation and integration of the local tendering and bidding rules;
  • comprehensively implement the supervision mechanism of "Dual Random and One Disclosure" (i.e. strictly combat illegal and non-compliant behaviour to ensure that the preferred bidder is selected in a reasonable way. To achieve this, the administrative authority will randomly select bids to investigate and the inspection result should be disclosed to the public in a timely manner);
  • maintain the flow of the channels for complaints raised during the tendering and bidding process;
  • establish a mechanism for soliciting clues, opinions and suggestions on improving the business environment; and
  • hold the relevant local governmental organs accountable for any violation or omission.

Customs and Foreign Exchange

3. Six departments issue a circular to further optimize cross-border RMB policies

On January 4, 2021, the People’s Bank of China, the NDRC, the MOFCOM, the State-owned Assets Supervision and Administration Commission of the State Council, the China Banking and Insurance Regulatory Commission (“CBIRC”) and State Administration of Foreign Exchange jointly issued the Circular on Further Optimizing Cross-border RMB Policies to Support the Stabilization of Foreign Trade and Foreign Investment (《关于进一步优化跨境人民币政策支持稳外贸稳外资的通知》) (“RMB Circular”) (see here for the full text in Chinese), which will be in effect from 4 February, 2021.

The RMB Circular outlines the following five features to optimize issues associated with cross-border RMB, and stabilize foreign trade and investments:

1. Promoting the facilitation of RMB settlement for trade and investment:

  • to carry out the pilot program of facilitating trade and investment nationwide at a higher level;
  • to support the cross-border RMB settlement in new trade forms; and
  • to adjust the requirements for business handling and examination in a timely manner.

2. Further simplifying the procedures for cross-border RMB settlement:

  • to optimize the formation mechanism for the list of cross-border RMB business subject to key supervision;
  • to support the review of electronic documents and optimize the centralized cross-border RMB receipt and payment arrangements under the current accounts of multinational enterprise groups; and
  • to carry out the pilot program of facilitating the cross-border RMB settlement for high-quality enterprises within the category of overseas contracted projects nationwide.

3. Further optimizing administration of cross-border RMB investment and financing:

  • to relax the restrictions on the use of RMB income under certain capital accounts;
  • to facilitate the re-investment of foreign-invested enterprises within the territory;
  • to cancel the management requirements for relevant special accounts for foreign direct investment;
  • to optimize the administration of domestic enterprises’ overseas RMB borrowing; and
  • to simplify the administration of domestic enterprises' overseas RMB lending.

4. Facilitating the cross-border RMB receipt and payment under individuals’ current accounts:

  • to support the development of cross-border RMB settlement under individuals’ current accounts; and
  • to facilitate the receipt of remittances from banks with the same names in Hong Kong and Macao through individuals’ RMB settlement accounts.

5. Facilitating the use of RMB settlement accounts by overseas institutions:

  • to expand the income scope of overseas institutions’ RMB settlement accounts, so as to receive RMB funds remitted from overseas accounts with the same name.

4. Duty exemptions for imported self-use production equipment in Hainan Free Trade Port

On February 24, 2021, the Ministry of Finance (“MOF”), the General Administration of Customs (“Customs”) and the State Taxation Administration issued the Circular on the Zero-tariff Policy for Self-use Production Equipment of the Hainan Free Trade Port (《关于海南自由贸易港自用生产设备“零关税”政策的通知》) (“Zero-tariff Circular”) (see here for the full text in Chinese).

Before the closure of Hainan Free Trade Port Customs,, imports of production equipment for self-use by enterprises registered at the Hainan Free Trade Port and with independent legal entity status shall be exempted from Customs duties, import value-added tax and consumption tax. This will be the case unless the commodities are expressly not exempted from tax by laws, regulations and the relevant provisions, prohibited from import by the State, and/or equipment listed in the appendix to the Zero-tariff Circular. The exempted production equipment shall be subject to the negative list administration, which shall be dynamically adjusted by the MOF, Customs and the STA in concert with the relevant departments.

On March 4, Customs issued the Customs Implementation Measures for the “Zero Tariff” Policy for Self-use Production Equipment in Hainan Free Trade Port (for Trial Implementation) (《海南自由贸易港自用生产设备“零关税”政策海关实施办法(试行)》) (see here for the full text in Chinese), which further clarified the supervision procedures for import declaration, transfer, and mortgage of the imported duty-free equipment.

Data Protection

5. Twenty-six Apps publicly denounced for excessive requests for permissions

On February 5, 2021, MIIT held a regulatory conference regarding App personal information protection (see here for the full text in Chinese) focusing on mobile Apps that excessively request permission to access microphone, photo album, contacts, etc. Scholars from various universities and institutions as well as 14 internet companies (including Alibaba, Tencent, JD, and Baidu) participated in the conference.

MIIT reported that, after a technical examination, it had ordered 179 Apps developers to rectify the issue of excessive requests within a prescribed time limit. MIIT also published a list of 26 Apps that failed to address the issue. They were ordered to rectify the issue by February 10, 2021, or otherwise be subjected to further administrative punishment (see here for the full text in Chinese).

6. Issue of Finalized Antitrust Guidelines for Platform Economy

On February 7, 2021, the Antitrust Committee of the State Council issued the Antitrust Guidelines in the Field of Platform Economy (《关于平台经济领域的反垄断指南》) (“Guidelines”) (see here for the full text in Chinese) signaling strengthened antitrust enforcement against monopolistic and unfair behaviors in China’s internet platform sector.

The Guidelines, drafted under China’s antitrust law, consist of six chapters with 24 articles, focusing on in-depth issues surrounding platform economy, including:

  • the definition of the relevant market;
  • monopoly agreements, including most favored nation clauses;
  • collusion by algorithm; and
  • discrimination by algorithm.

The Guidelines provide better guidance for enforcement of Chinese antitrust laws and compliance of companies in the platform sector.

IP

7. Release of Provisions on Providing Online Case Filing Services for Parties to Cross-border Litigations

On February 3, 2021, the Supreme People’s Court (“SPC”) released the Provisions on Providing Online Case Filing Services for Parties to Cross-border Litigations (《关于为跨境诉讼当事人提供网上立案服务的若干规定》) (“Provisions”) (see here for the full text in Chinese). The Provisions came into force on February 3, 2021 and outline mechanisms to allow people from other countries to file cases and access litigation services online. The Provisions outline:

  • The target and method of cross-border litigation services. Cross-border litigants including:
    • foreigners;
    • residents of the Hong Kong, Macao and Taiwan;
    • citizens of mainland China who habitually reside abroad or in Hong Kong, Macao and Taiwan; and
    • enterprises and organizations registered abroad or in Hong Kong, Macao and Taiwan,

may commence and conduct litigation after they register online and pass an identity verification process.

  • Procedures for video witnessing for entrustment. Cross-border litigants may apply to the SPC to entrust their Chinese mainland lawyer by video. The judge shall confirm the authenticity of the entrustment. Cross-border litigants and entrusted lawyers shall sign the documents while the judge witnesses via video. If this occurs, there will be no need for notarization and attestation.
  • Requirements for filing a case online. To file online, cross-border litigants shall submit their complaints, identity documents and the relevant notarization, certification and evidence. The court shall decide whether to register a case within seven working days in accordance with the laws. The court shall refuse to register a case if the materials submitted by the cross-border litigants contain content contrary to the laws.

8. Release of SPC Interpretation on the Application of Punitive Damages to Civil Cases of Intellectual Property Rights Infringement

On March 3, 2021, the SPC released the Interpretation on the Application of Punitive Damages in the Trial of Civil Cases of Intellectual Property Right Infringement (《关于审理侵害知识产权民事案件适用惩罚性赔偿的解释》) (“Interpretation”) (see here for the full text in Chinese). The Interpretation came into force on March 3, 2021, and notably includes:

  • The circumstances and timing for a punitive damages application. If the defendant willfully infringed the plaintiff’s IP rights and the circumstances are serious, the plaintiff has the right to request punitive damages. The plaintiff shall specify the punitive damages claim when filing the lawsuit, or may add the punitive damages claim before the first instance of court debate.
  • How to identify willful conduct and serious circumstances. Factors shall be comprehensively considered to include the type of object of infringed IP rights, ownership status and product visibility and the relationship between defendant and plaintiff or interested parties. Factors shall be comprehensively considered to include means and frequency of infringement, the duration, geographic scope, scale and aftermath of infringement act and the conduct of infringer in the lawsuit to identify whether the circumstances are serious.
  • The method for determining the punitive damages amount. The calculation base for punitive damages is the plaintiff's actual losses and the defendant's illegal gains or benefits acquired by infringement (exclusive of reasonable expenses). This base calculation is then adjusted based on the degree of subjective fault of the defendant and the seriousness of the infringement.

Labor

9. Shanghai guidelines for employment sharing emphasize the rights and obligations stipulated in the tripartite agreements

On February 5, 2021, Shanghai Municipal Human Resources and Social Security Bureau issued the Employment Sharing Guidance and Service Guidelines (《共享用工指导和服务工作指引》) (see here for the full text in Chinese) to provide clarity around:

  • the legal relationship between employment sharing enterprises and workers;
  • signing employment sharing agreements;
  • amendment of labor contracts;
  • protection of the legitimate rights and interests of employees;
  • the employment autonomy of sharing employment enterprises, the right of employees to choose employment and sharing employment training services; and
  • handling employment sharing labor disputes.

10. Publication of thirteen national vocational skills standards

On December 29, 2020, and January 15, 2021, the Ministry of Human Resources and Social Security issued a total of thirteen national vocational skills standards (国家职业技能标准) (see here for the full text in Chinese).

Of the thirteen national vocational skills standards:

  • Seven national vocational skill standards were published for the first time, including: administrative clerks (clerks of integrated government services); chain operation managers; corporate human resource managers (labor dispatch managers); electronic sports players; elderly ability assessors; urban rail transit attendants; and ship lock and ship lift transport managers.
  • The remaining six national vocational skill standards were updated, including: household appliances product maintenance workers; household electronic products maintenance workers; alumina production workers; aluminum electrolysis workers; metal extrusion workers; and casting and rolling workers.

Should you need any additional information, or if you would like to discuss how recent updates in Chinese law may affect your business, please feel free to contact us.

 

 

Disclaimer

This client alert is not intended to be legal advice. Readers should seek specific legal advice from KWM legal professionals before acting on the information contained in this alert.

 

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