China Cross-Border Law Newsletter ● Issue 1 (2019.06)
Table of Contents
1. China Updates Negative Lists for Foreign Investment.
2. Xi Jinping Announces Several Key Policies at G20 Summit.
3. CSRC will Launch Nine Measures to Expand Opening-up.
4. Shanghai-London Stock Connect Kicks Off.
5. Guangdong Unveils Preferential Individual Income Tax Policies to Attract International Talents.
6. AFE has issued the Notice on Further Promoting the Facilitation of Foreign Exchange Capital Settlement of Insurance Companies.
7. NDRC Requires Local State-owned Enterprises to Register External Debt Applications.
8. China Capital Market Marks Historic Moment with Inauguration of Science and Technology Innovation Board.
9. SPC Issues Guidelines to Provide Judicial Protections for Science and Technology Innovation Board and Registration-based IPO System.
10. NIPA Considers Encouraging Entrepreneurs to Participate in Policy-making Process.
1. China Updates Negative Lists for Foreign Investment
The National Development and Reform Commission and the Ministry of Commerce released three documents on June 30, 2019, effective from July 30, 2019. The three documents are the Special Administrative Measures (Negative List) for the Access of Foreign Investment (2019), the Special Administrative Measures (Negative List) for the Access of Foreign Investment in Pilot Free Trade Zones (2019), and the Catalogue of Industries Encouraging Foreign Investment (2019).
After the latest revisions, the two negative lists, one for the piloted FTZs and one for the rest of the country, contain fewer access-limiting measures. Pilot FTZs now have 37 listed items for foreign investors, down from 45, while non-FTZ areas are required to implement 40 items instead of 48.
The major adjustments of the 2019 negative lists are made in three aspects. Firstly, the service sec‐ tor will see greater opening-up in transport, infrastructure, culture, and value-added telecommunications. Secondly, market access will be eased in agriculture, mining and manufacturing industries.
Thirdly, the 2019 version of the pilot FTZ negative list for foreign investment has lifted restrictions on foreign investment in areas such as aquatic products fishing and publication printing, so as to give full play to the role of FTZs as a pilot ground for reform and opening-up.
The documents demonstrated China’s adherence to trade and investment liberalization and resolution to promote in-depth development of globalization, which will exert prominent positive impacts on global cross-border direct investment.
2. Xi Jinping Announces Several Key Policies at G20 Summit
Chinese President Xi Jinping delivered an important speech about the world economy and trade is‐ sues at a summit of the Group of 20 major economies held on June 28, 2019.
Xi Jinping said China will release the 2019 edition of negative list for foreign investment, and will expand market openness in agriculture, mining, manufacturing and service sectors. China will set up six new free trade zones, speed up the construction of Hainan free trade port and remove all restrictions to foreign investment beyond the negative list.
We will further reduce tariff levels independently, strive to eliminate non-tariff barriers to trade, and significantly reduce the institutional costs of import links.
The Foreign Investment Law, to be effective in January 1, 2020, will introduce punitive compensation, strengthen judicial protections against civil and criminal violations and enhance intellectual property protection.
3. CSRC will Launch Nine Measures to Expand Opening-up
During a speech at the Lujiazui Forum on June 13, 2019, Yi Huiman, Chairman of the China Securities Regulatory Commission (CSRC), announced that they would launch nine measures in succession to widen foreign investors' access to the financial industry
Specifically, QFII/RQFII rules will be amended to ease restrictions for foreign investors to enter the Chinese capital market; CSRC will support a pilot project in Shanghai which would lift the ceiling on foreign investors' ownership in securities companies and fund management companies; CSRC will consider expanding the business scope of foreign banks operating in China.
4. Shanghai-London Stock Connect Kicks Off
China Securities Regulatory Commission and the U.K.'s Financial Conduct Authority released a joint announcement on June 17, 2019 of the approval of the Shanghai-London Stock Connect. They have also signed the Memorandum of Understanding for Regulatory Cooperation between Shanghai and London to facilitate cross-border supervisory and enforcement cooperation under the Shanghai-Lon‐ don Stock Connect. Huatai Securities, which has been listed on the Shanghai Stock Exchange, will become the first Chinese company to trade its global depository receipts on the London Stock Exchange.
5. Guangdong Unveils Preferential Individual Income Tax Policies to Attract International Talents
Guangdong Department of Finance issued on June 22, 2019 the Circular about Implementing Preferential Individual Income Tax Policies at the Guangdong-Hong Kong-Macau Greater Bay Area. The circular has been effective from January 1, 2019 and might be amended one year later.
According to the circular, high-end and badly-needed overseas talents working in the GBA can be eligible to claim fiscal subsidies if their individual income tax rate is more than 15%. The subsidies will be granted by municipal governments of nine GBA cities in the mainland.
According to the circular, the fiscal subsidies will cover such forms of income as wages, remuneration for personal services, royalties, business income, as well as allowances for honorary talent pro‐ grams. The subsidies are designed to encourage foreign professionals to work and create their own businesses in the GBA.
6. AFE has issued the Notice on Further Promoting the Facilitation of Foreign Exchange Capi‐ tal Settlement of Insurance Companies
The Administration of Foreign Exchange (SAFE) recently has issued the Notice on Further Promoting the Facilitation of Foreign Exchange Capital Settlement of Insurance Companies, which will be imple‐ mented from July 1, 2019.
The Notice states that the insurance company may, in accordance with the actual business needs, directly undertakes foreign exchange capital settlement and foreign exchange funds raised through overseas listing in the financial institutions operating foreign exchange business.
After the relevant business has entered into record by the insurance agency and the insurance broker in the competent department in charge of the insurance industry, they may undertake transfer of funds in the original currency under the collection and payment insurance items through their foreign currency current accounts. Indemnity funds can be processed for settlement or purchase of foreign exchange.
7. NDRC Requires Local State-owned Enterprises to Register External Debt Applications
The National Development and Reform Commission (NDRC) issued on June 13, 2019 the Circular concerning Registration of External Debt Applications by Local State-owned Enterprises.
According to the circular, if a Chinese enterprise or its foreign subsidiary plans to issue foreign-currency debt, the Chinese company should file an application with the NDRC, and submit a letter of commitment to pledge the application documents are authentic. The letter should be signed by the company's decision-makers. If the company makes false commitment, the NDRC will keep that in the credit record and include the information into the national credit information sharing platform.
8. China Capital Market Marks Historic Moment with Inauguration of Science and Technology Innovation Board
The 11th Lujiazui Forum opened on June 13, 2019. China Securities Regulatory Commission(CSRC) and Shanghai municipal government held a ceremony to inaugurate the Science and Technology Innovation Board at the Shanghai Stock Exchange. Liu He, Vice Premier of the State Council, Li Qiang, Secretary of the Shanghai CPC Municipal Committee, Yi Huiman, Chairman of CSRC, and Shanghai Mayor Ying Yong attended the inauguration ceremony.
The ceremony marked the official implementation of the reform agenda of launching the board and introducing registration-based IPO system. In the next step, the CSRC will work together with other market participants to make preparations for the opening and smooth operation of the board. Liu He
urged the regulators to advance the registration-based IPO system and let market forces decide which companies can list on the stock market.
9. SPC Issues Guidelines to Provide Judicial Protections for Science and Technology Innova‐ tion Board and Registration-based IPO System
The Supreme People's Court released on June 21, 2019 the Opinions about Providing Judicial Protections for the Establishment of Science and Technology Innovation Board and the Trial Implementation of Registration-based IPO System. The SPC proposed a total of 17 measures from such aspects as increasing the cost of illegal activities in the capital market and improving civil litigation procedures in conjunction with the launch of registration-based IPO system.
The document proposed a raft of specific measures to optimize the representative litigation system, use information technology to increase judicial capacity and promote the use of standard judgement on common cases. These moves are helpful to reduce investors' litigation cost and protect their legi‐ timate rights and interests.
10. NIPA Considers Encouraging Entrepreneurs to Participate in Policy-making Process
The National Intellectual Property Administration released on June 6, 2019 the Work Plan for Government Information Disclosure in 2019.
The plan set five objectives of stabilizing expectations, strengthening policy interpretation, strengthening power supervision, advancing streamlined decision-making and policy implementation, and deepening information disclosure in key areas. The plan said NIPA will communicate with market players, explore the establishment of a mechanism that allows entrepreneurs to participate in the policy-making process, and seek advice from companies, industry associations and lawyer associations, so as to make policies more practical and feasible.
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