17 March 2020

China regulatory and legal round-up | March 16, 2020


General Corporate and Foreign Investment

National Development and Reform Commission urges local authorities to facilitate foreign investment

On March 12, 2020, the National Development and Reform Commission (“NDRC”) released the Notice on Deepening the Reform and Doing the Foreign-invested Projects related Work Well in Response to the Epidemic (《关于应对疫情进一步深化改革做好外资项目有关工作的通知》). NDRC requested the local government authorities to facilitate foreign investment by (i) actively assisting foreign-invested projects and foreign-invested enterprises in resuming production; (ii) equally applying all government policies to both domestic entities and foreign-invested enterprises; (iii) coordinating and promoting major foreign-invested projects and providing support to these projects at national and local levels; (iv) protecting the legitimate rights and interests of foreign-invested projects, and strictly implementing provisions of the Foreign Investment Law, including treating foreign investment the same as domestic investment, preventing compulsory IP transfer, protection of trade secrets; and (v) further expanding the number of industrial sectors that in which foreign investment is encouraged and revising the Catalogue of Industries for Encouraging Foreign Investment.

 Certification agencies’ qualification approval is simplified in pilot free trade zones

On February 17, 2020, the State Administration for Market Regulation issued the Notice on Further Promoting the Reform of Separating Permits from the Business Licenses during the Certification Agencies’ Qualification Approval in the Pilot Free Trade Zones (《市场监管总局关于在全国自由贸易试验区进一步推进认证机构资质审批“证照分离”改革的公告》), which seeks to simplify the certification agencies’ qualification approval process and to improve the transparency of the approval process in the pilot free trade zones.  Applicants applying for business permits to engage in certification business falling within the national uniform certification category will have a simplified approval process that can be completed within 20 business days.  Applicants applying for business permits to engage in other certification business will be subject to a “notification-commitment” process that can be completed on the same day that the application is accepted.

Further opening of service trade market to foreign enterprises in the Hainan Special Economic Zone

The Provisional Rules on Registration Administration of Foreign Enterprise for Conducting Service Trade Activities of Hainan Special Economic Zone (《海南经济特区外国企业从事服务贸易经营活动登记管理暂行规定》) came into effect on March 1, 2020.  In accordance with the Provisional Rules, after completing certain registration process, foreign enterprises will be allowed to carry out service trade activities directly in the Hainan Special Economic Zone without establishing foreign-invested enterprises, branches or representative offices. Additionally, after filing with the Hainan Special Economic Zone authorities, qualifications, licenses, and certifications obtained by foreign enterprises in their home countries will be recognized.

Administrative Measures for Government Procurement Information Release came into force on March 1, 2020

The Administrative Measures for Government Procurement Information Release 《政府采购信息发布管理办法》) [Note to editor: please add a hotlink here. http://www.ccgp.gov.cn/news/201912/t20191211_13537379.htm] came into effect on March 1, 2020.  The measures will regulate the information released during government procurement and improve transparency and fair competition.

The revised Administrative Measures for Food Production Licensing came into force

The revised Administrative Measures for Food Production Licensing (《食品生产许可管理办法》) [Note to editor: please add a hotlink here. http://gkml.samr.gov.cn/nsjg/fgs/202001/t20200103_310238.html] came into effect on March 1, 2020.  The revisions modify food production supervision, simplify the production license application materials, and shorten the time for license approval.

China Securities Regulatory Commission issues rules on refinancing listed companies

On February 14, 2020, China Securities Regulatory Commission released three documents regulating the refinancing of listed companies (collectively, the “Refinancing Rules”) [Note to editor, please add a hotlink here. http://www.csrc.gov.cn/pub/newsite/zjhxwfb/xwdd/202002/t20200214_370777.html], effective immediately.  The Refinancing Rules seek to (i) simplify refinancing issuance conditions and regulate the refinancing of listed companies; (ii) improve the governance and information disclosure of listed companies; and (iii) adjust the market-based pricing mechanism in order to make refinancing listed companies more efficient.

A series of measures issued by China Banking and Insurance Regulatory Commission came into effect

New regulations issued by China Banking and Insurance Regulatory Commission came into effect on March 1, 2020.  The following may be relevant to foreign investors in these industries:

  • The Interim Measures for the Management of Trust Companies’ Equity Interest (《信托公司股权管理暂行办法》) [Note to editor: please add a hotlink here. http://www.cbirc.gov.cn/cn/view/pages/ItemDetail.html?docId=889646&itemId=928&generaltype=0]. These measures set forth principles in shareholders penetration supervision and shareholders classification management, and define the equity management responsibilities for shareholders, trust companies, and supervisors at all stages.

Foreign Exchange

State Administration of Foreign Exchange issues a circular on improvement of foreign exchange risk management by foreign institutional investors in interbank bond market

On January 13, 2020, the State Administration of Foreign Exchange promulgated the Circular of the State Administration of Foreign Exchange on the Improvement of Foreign Exchange Risk Management by Foreign Institutional Investors in the Interbank Bond Market (《国家外汇管理局关于完善银行间债券市场境外机构投资者外汇风险管理有关问题的通知, (“Circular”), to facilitate foreign exchange risk management by foreign institutional investors in the interbank bond market.  On March 4, 2020, SAFE issued a Q&A regarding the Circular.  The Q&A covers 16 issues stipulated by the Circular and answers questions about practical operations, including the scope of foreign exchange risk exposure, modification of foreign exchange hedging channels, account openings, and fund transfers.

The Circular applies to direct investments in the interbank bond market.  Qualified foreign institutional investors may handle the hedging by trading directly with domestic financial institutions or trading in the interbank foreign exchange market directly or through prime brokers.  Foreign institutional investors can choose from the foreign exchange hedging channels or change the channel as necessary, but they have to choose either “trading in the interbank foreign exchange market” or “trading directly with domestic financial institutions”.  The multi-channel hedging of foreign exchange as prescribed in the Circular will reduce foreign institutional investors’ hedging costs through price parity.

People’s Bank of China adjusted the macro-prudential parameter 

On March 12, 2020, the People’s Bank of China (“PBOC”) and the State Administration of Foreign Exchange jointly issued the Notice on Adjusting Macro-Prudential Adjustment Parameter for Full-Caliber Cross-Border Financing (《关于调整全口径跨境融资宏观审慎调节参数的通知》).  The macro-prudential adjustment parameter for full-caliber external debt was adjusted from 1 to 1.25.  This is the first time that the PBOC has adjusted the macro-prudential parameter in the full-caliber cross-border financing formula.  The increase means that domestic enterprises and financial institutions can borrow more external debt.  This adjustment helps domestic institutions, particularly small and medium-sized enterprises and private enterprises, make full use of domestic and international resources.


Tax

VAT relief offered to small-scale taxpayers in China

The Ministry of Finance and the State Taxation Administration (“STA”) have issued Announcement [2020] No.13 and Announcement [2020] No. 5, which rolls out temporary value-added tax (“VAT”) relief measures for small-scale taxpayers.  From March 1 to May 31, 2020 there will be an exemption of VAT at 3% for small-scale taxpayers in Hubei province and also a reduction in the VAT collection rate from 3% to 1% for small-scale taxpayers in the rest of the country.

As compared to large enterprises, the spread of coronavirus has caused more pressure on small businesses who are struggling with the economic downturn. These VAT relief measures are expected to help small businesses resume operations and recover from the epidemic.


IP

State Council decides to establish remote litigation platforms and notary service platform for intellectual property rights

On February 21, 2020, the General Office of State Council issued the Circular regarding Implementing the Third Batch of Reform Measures to Support Innovation (《国务院办公厅关于推广第三批支持创新相关改革举措的通知》) which contains innovations promotion measures.  In aspect of innovation in science and technology management system, a patent-oriented decision-making mechanism shall be built for emerging industries based on industrial data and patent data.  In aspect of intellectual property protection, a cross-regional remote litigation platform for intellectual property disputes and a notary service platform providing all-round evidence services for intellectual property rights shall be built.


Labor

Issuance of Regulations on the Administration of Foreigners’ Permanent Residence (Draft for Solicitation)

On February 27, 2020, the Ministry of Justice issued the Regulations on the Administration of Foreigners’ Permanent Residence in the PRC (Draft for Solicitation)(《中华人民共和国外国人永久居留管理条例(征求意见稿)》) ("Draft for Comments"), soliciting public comments. The deadline for submitting public comments is March 27, 2020.

The Draft for Comments sets forth rules for foreign citizens applying for permanent residency in the People’s Republic of China.  Foreign citizens in the following categories may apply and the specific application requirements for each of these categories are different:

  • people with outstanding contributions to the country
  • people with internationally recognized outstanding achievements
  • people possessing talent urgently needed by the country
  • people who have lived in China for a period of time for education and work
  • people who have made investment in China, and the above-mentioned foreign applicants’ close family members. 

Foreign citizens who seek permanent residency because they have made investments in China must (i) make investments in China according to the Foreign Investment Law; (ii) have made steady investments in China for three years; (iii) possess a sound tax and credit record; and (iv) satisfy some other circumstances specified in the measures.

Foreign citizens who are granted permanent residency are given the same rights and bear the same obligations as Chinese citizens except they are not permitted to vote and are not given specific rights and obligations that are not permitted by law.

Read more.  “中国绿卡”风向标已竖起——《外国人永久居留管理条例(征求意见稿)》速览 


Data Protection

Ministry of Industry and Information Technology Issues the Guideline for Industrial Data Grading and Classification (Version for Trial)

On March 4, 2020, the Ministry of Industry and Information Technology issued the Guideline for Industrial Data Grading and Classification (Version for Trial)(《工业数据分类分级指南(试行)》) (the “Guideline”). [Note to editor: please add a hotlink here. http://www.miit.gov.cn/n1146295/n1652858/n1652930/n3757016/c7772152/content.html ].  The Guideline applies to the classification and grading of industrial data by competent authorities, industrial enterprisesand platform enterprises.  The Guideline divides industrial data into three levels based on the potential impact on industrial production and the economy if the data was tampered with, destroyed, disclosed, or used illegally.  With the implementation of the Guideline, industrial enterprises and Internet platform enterprises assume the responsibilities of data classification and grading and strengthening data management.  By unifying the standard of grading and classification of all industrial data, the Guideline achieves the goal of promoting the advanced utilization and orderly sharing of industrial data.

National Information Security Standardization Technical Committee Updates Personal Information Security Specification

On March 6, 2020, the National Information Security Standardization Technical Committee officially released eight national standards including the Information Security Technology - Personal Information Security Specifications (GB/T 35273-2020)(《信息安全技术——个人信息安全规范》) (the “Specification”). The Specification provides measures to strengthen protection of personal information in China by enhancing corporate compliance practices.  The Specification also includes new requirements on personal biometric informationuser portraits and personalized displays, and data fusion. It is a major amendment to the current version published in 2017 and will take effect on October 1, 2020.

****

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.

Key contacts

A Guide to Doing Business in China

We explore the key issues being considered by clients looking to unlock investment opportunities in the People’s Republic of China.

Doing Business in China
Share on LinkedIn Share on Facebook Share on Twitter
    You might also be interested in

    General Corporate and Foreign Investment SAMR issues its 2020 legislative plan On March 26, 2020, the State Administration of Market Regulation (“SAMR”) issued the Notice on Printing and...

    30 March 2020

    Measures to support foreign invested enterprises in response to the New Coronavirus Pneumonia epidemic. On February 18, 2020, the Ministry of Commerce of the PRC issued the Notice on Reacting to the...

    02 March 2020

    After more than two years of stop-start negotiations, China and the United States formally signed an agreement on a Phase One deal (the “Agreement”) in Washington, D.C. on January 15, 2020.

    17 January 2020

    A review of the protections available to international investors when investing in certain African states.

    21 March 2015

    This site uses cookies to enhance your experience and to help us improve the site. Please see our Privacy Policy for further information. If you continue without changing your settings, we will assume that you are happy to receive these cookies. You can change your cookie settings at any time.

    For more information on which cookies we use then please refer to our Cookie Policy.