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Issue 37-January 2020 Veritas Update
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Issue 37-January 2020 Veritas Update


Latest Headline

The First Phase of Economic and Trade Agreement Between China and the United States is Officially Entered Into

New Law Express

 New PRC Securities Law was Approved, Leading the Reform of Capital Market Regulation

Notice of the State Administration of Foreign Exchange on Further Promoting the Facilitation of Cross-border      Trade and Investment

Regulation on the Optimization of Business Environment is effective from 1 January 2020

Our Firm’s Trend

Veritas Law Corporation held team building with communication and learning activity in Qiandao Lake


Latest Headline

The First Phase of Economic and Trade Agreement Between China and the United States is Officially Entered Into

China and the United States formally entered into the first phase of Economic and Trade Agreement (the “Agreement”) in Washington, D.C on January 15, 2020. On the basis of the principles of equality and mutual respect, China and the United States reached the first phase of the Agreement. The Agreement has solved the concerns of both sides and achieved mutual benefit and win-win results to a certain extent. The Agreement entered into by China and the United States will relieve the trade friction and eliminate market uncertainty. It is an Agreement that can stabilize expectations, enhance confidence, create opportunities and promote prosperity. The Agreement is also conducive to maintaining the stable and healthy relationships between China and the US, creating a good international environment and promoting peace and development around the world.

Pursuant to the Agreement, China and the United States will provide each other fair, effective and non-discriminatory market access treatment in banking, securities, insurance, electronic payment and other fields. On the one hand, the People's Bank of China expressed that the finance services chapter in the Agreement entered into by China and the United States is consistent with the expansion of the opening up of the financial industry, which will help China's economic development with high quality. Expanding the opening up of financial industry is the internal requirement of deepening the reform of financial supply and the high-quality development of financial service and economy. By introducing financial institutions, businesses and products and increasing the supply of financial elements, the opening up of the financial industry is conducive to the overall utilization of 'two markets and two resources.' The opening up also contributes to meet the personalized demand for financial services due to the differentiate economy. Taking the insurance industry as an example, the insurance industry is currently one of the industries attracts highest enthusiasm of foreign investment due to its moderate volume. Moreover, the middle social income level would promote the insurance market to enter a period of rapid growth. Therefore, foreign investors have been paying more attention to China's insurance market. With the acceleration of the opening up of the financial industry, China increased the shareholding ratio of foreign investors within life insurance companies from 50% to 51% last year. From January 1, 2020, the restriction of foreign-invested shareholding ratio within foreign life insurance companies has been formally lifted. Recently, more and more foreign companies have apparently intended to invest in China's insurance market. The Agreement will increase the participation of foreign investment in China's insurance industry, assist to cultivate more talents and improve risk management standards. In addition, given that interest rate risk and commission structure are currently regulatory priorities, the opening up of China's insurance market is unlikely to lead to radical price competition.

In addition, the Agreement pushed the government of U.S. to lower the additional tariff imposed on China, including suspending the tariff that the US government previously decided to implement on December 15, 2019, and also including reducing the additional tariff rate imposed on China from 15% to 7.5% that came into effect on September 1, 2019. The Agreement entered into between China and the United States will gradually reduce the rate of additional tariffs, and will continually bring out the benefits of cost reduction. The Agreement would be generally conducive to the development of imported food enterprises because of the stability of the expected exchange rate and the controllable prediction of import cost. The amount of U.S. agricultural products will reach in the peak of export growth, especially meat, dairy products and food raw materials. From the macro perspective, the expected overall market growth tends to be benign, which would rapidly contribute to consumption promotion.

As the world's top two economies, China and the United States both have clear national interests and political and economic realities. Trade friction is an embodiment of the competition between two countries. The respective core considerations of two countries determine the bottom line of trade frictions. During the first stage of trade frictions, the United States attempts to win the initiative in timing by adopting the foreign trade policy with high pressure, while China tries to realize the flexibility of the policy  under the circumstance that the hidden internal and external risks would both likely be come into effect. With the rapid transformation of global environment, the asymmetry of competition strategy between the two countries is obviously weakened. For China, the Agreement would prompt to reduce the bilateral conflicts in the areas of economy and trade since the competition between the two countries has focused on the areas of finance, technology and governance. On the one hand, such reduction would mitigate the short-term external impact exerted on China's economy. On the other hand, the reduction would help  obtain long-term institutional benefits through deepening structural reform in the context of the reconstruction of global value chain.

On the eve of the signing of the Agreement, the U.S. Treasury Department has revoked the definition of 'currency manipulator' imposed on China on January 13, 2020. The RMB exchange rate has been significantly increased. On January 15, the RMB exchange rate (middle price) increased another 109 points ended at 6.8845. The  RMB exchange rate has been rapidly increasing since 2020. From the low point (7.1854) on September 3, 2019, the exchange rate of RMB against the US dollar has increased by more than 3000 points.

What about the next stage of RMB exchange rate? Based on the opinions of many experts, due to the Agreement, as well as the factors such as increased demand of foreign exchange before the Spring Festival and previously large depreciation, the RMB exchange rate will maintain the status of appreciation in the short term during the 'recovery period,' but it has not been away from the trend of depreciation cycle. Therefore, the trend of RMB exchange rate needs to be treated reasonably and objectively. If China and the United States are expected to make further progress in the economic and trade negotiations and to reach mutual agreement in the tariff issue in the future, coupled with the fact that the current Chinese economic recovery would continue in the short term, the RMB exchange rate is expected to return to the appreciation status and improve the multiple sectors of domestic capital market. Therefore, the improvement of the risk preference and capital inflow due to the increased RMB exchange rate will enhance the stock index.


New Law Express


New PRC Securities Law was Approved, Leading the Reform of Capital Market Regulation

The new PRC Securities Law (the “Law”) was approved at the closing meeting of the 15th session of the Standing Committee of the 13th National People's Congress on December 28. After more than four years of deliberation by the Standing Committee of the National People's Congress, the amendment of the PRC Securities Law was finally accomplished. The Law directly focuses on the critical issues of capital market and improves the systems of securities issuance, investors protection and legal liability.

Registration system is an important part of the amendment to the Law. First, the requirements of the securities issuance have been simplified and optimized. The previous requirement of 'having sustainable profitability' for the public offering of shares stipulated by the previous Securities Law is changed into 'having sustainable operation capability.' Taking the public issuance of bonds as an another example, the amount of net assets that the company was required to own when issuing public bonds has been revoked. Second, the procedures of securities issuance has been adjusted. The Law clearly stipulates the State Council’s securities regulatory authority or the departments authorized by the State Council are the statutory registration authority, thus the issuance examination committee has been abolished. The Law also clearly provides that the stock exchange and other institutions can examine the application for securities issuance in accordance with the provisions. At the same time, the State Council is delegated to issue specific measures for the registration of public issuance of securities. Third, the information disclosure during the course of securities issuance has been strengthened. The Law introduces a new chapter to systematically regulate the information disclosure.

Safeguarding the legitimate rights and interests of investors is an important foundation for the healthy and stable development of the capital market. The Law introduces a chapter to specially regulate investor protection which contains many innovative provisions. Such provisions includes distinguishing between ordinary investors and professional investors, thus adopting different protection measures in accordance with different levels of investors; establishing the system of accumulating shareholders' rights, which allows specific entities to publicly request shareholders of listed companies to entrust such entities to attend the shareholders' meeting on behalf of the shareholders, and to exercise shareholders' rights such as proposal right and voting right on behalf of the shareholders; establishing the system of bondholders' meeting and bond trustee; establishing the compulsory mediation system for the disputes between regular investors and securities companies; and improving the cash dividend system of listed companies.

The Law also explores to establish a securities civil litigation system in accordance with Chinese current situations. First of all, the Law fully exercises the function of investor protection institutions and allows the institutions to represent more than 50 investors in civil litigations. Second, the Law permits investor protection institutions to register in the court as a party of litigation in accordance with the confirmation of the securities registration and settlement institution. Third, the Law establishes a litigation mechanism of 'implied participation' and 'express withdraw' to provide convenient institutional arrangements for the protections of the investors’ legitimate rights and interests.

The chapter of legal liability in the Law contains the most articles. From the perspective of administrative punishments, in order to against fraudulent issuance, the Law stipulates that if the securities have not been issued, the issuer shall be fined no less than RMB 2 million but no more than RMB 20 million; if the securities have been issued, the issuer shall be fined no less than 10% but no more than one time of the amount of illegally raised funds. In addition, the Law has greatly increased the administrative punishments against the illegal commissions such as false statement, insider trading and market manipulation. At the same time, the Law has improved the banning system of securities market and expanded the scope of banning. Apart from being forbidden from engaging in securities business and being forbidden from serving as directors, supervisors and senior executives in listed companies, the individuals who have been prohibited from entering into the stock market have also been forbidden from engaging in securities transactions in the stock exchanges for from a certain period of time to the lifetime.


Notice of the State Administration of Foreign Exchange on Further Promoting the Facilitation of Cross-border Trade and Investment

In order to thoroughly implement the 19th National Congress of the Communist Party of China on implementing 'high-level trade and investment liberalization and facilitation policies' and the State Council's requirements for the continuous promotion of 'streamlining administration, instituting decentralization while improving regulation and optimizing government services', according to the spirit of the Executive Meetings of the State Council, State Administration of Foreign Exchange promulgated Notice of the State Administration of Foreign Exchange on Further Promoting the Facilitation of Cross-border Trade and Investment (Hui Fa [2019] No.28, hereinafter referred to as the “Notice”), further deepening the reform of cross-border trade and investment and foreign exchange management, simplifying related business operations, facilitating market entities such as banks and enterprises to handle foreign exchange business, and effectively supporting the development of the real economy.

The Notice covers 12 measures of facilitation of cross-border trade and investment. For cross-border trade and investment, 1) expanding the regions to carry out the pilot program to facilitate foreign exchange receipts and payments for trade, thereby most benefiting the honest enterprises, 2) simplifying the related payments procedures of trades for micro or small cross-border e-commerce enterprises engaging in trade in goods, 3) optimizing the method to report foreign exchange businesses for trade in goods, 4) simplifying the accounting procedures for export revenue and allowing an enterprise to decide on its own whether to open a to-be-verified account, 5) facilitating the Directory of Enterprises with Foreign Exchange Receipts and Payments for Trade by any branch of an enterprise, 6) allowing enterprises contracting projects to carry out the centralized management of their funds overseas. For the cross-border investment and financing, 1) allowing non-investment foreign-funded enterprises to make domestic equity investment with their capital funds in accordance with the law, 2) expanding the pilot program to facilitate payment with the income under capital account and facilitating the use of capital account foreign exchange income and RMB funds obtained from foreign exchange settlement for domestic payments, 3) facilitating the use of foreign exchange settlement for the transfer of proceeds from the transfer of equity of domestic enterprises by domestic institutions to foreign investors, and allowing foreign investors' deposits to be used for capital contributions and settlement of foreign exchange settlements, 4) allowing the banks to conduct deregistration of corporate foreign debts and cancelling the requirement for non-financial enterprises to register their foreign debts for each transaction under the pilot program, 5) cancelling the restriction on the number of foreign exchange capital accounts to be opened, 6) launching the pilot programs on cross-border transfers of non-performing debts and trade financing of banks.


Regulation on the Optimization of Business Environment is effective from 1 January 2020

Regulation on the Optimization of Business Environment (hereinafter referred to as the 'Regulation') signed by Premier Li Keqiang came into effect on January 1, 2020. The Regulation conscientiously summarize the experiences and practices of optimizing the business environment in China in recent years, and make corresponding provisions from the aspect of improving the institutional mechanism.

First is to clarify the principles and directions for optimizing the business environment. 'Business environment' is referred to the system and mechanism factors and conditions involved in market economic activities carried out by enterprises and other market players under the Regulation. The principle of market-orientation, rule of law and internationalization shall be followed in the optimization of business environment, with demands of market players as the guidance and in-depth transformation of government functions the core. Efforts should be made to innovate systems and mechanisms, strengthen synergy and linkage, and improve upon legal safeguards, with the international advanced level as benchmark, so as to create a stable, fair, transparent and predictable environment for investment and business development for various market players.

Second is to strengthen the protection of market players. The Regulation is clearly stipulated that the State shall protect all types of market players equally, ensure that all types of market players equally use various production elements and the development support policies of the State shall apply equally to all types of market players pursuant to the law, safeguard the market players’ rights of business autonomy, property and other legitimate rights and promote the establishment of a unified national market rights protection service platform, etc.

Third is to optimize the market environment. The Regulation stipulates the provisions for reducing business registration time, ensuring equal market access, maintaining fair competition in the market order, implementing tax reduction and fee reduction policies, regulating enterprise-related charges, resolving financing difficulties, and simplifying the cancellation process of enterprises.

Forth is to enhance the ability and level of government services. The Regulation stipulates the provisions for promoting the construction of a national integrated online government service platform, streamlines administrative licensing and optimize approval services, optimizing engineering construction project approval processes, standardizing administrative approval intermediary services, reducing permits, facilitating cross-border trade facilitation, and establishing government-enterprise Communication Mechanisms, etc.

Fifth is to regulate and innovate the regulation and law enforcement. The Regulation stipulates the provisions for improving regulatory rules and standards, building a new credit-based regulatory mechanism, implementing the 'regulation through inspection of randomly selected objects by randomly selected inspectors and the public release of inspection results', implementing inclusive and prudential regulation, “Internet + Regulation”, implement the administrative law enforcement publicity, the whole process record of administrative law enforcement, and the legal review system for major administrative law enforcement decisions, etc.

Sixth is to strengthen the protection of legal guarantee. The Regulation stipulates the provisions for implementing the reform, abolition, and adjustment of laws and regulations, formulating laws and regulations and listening to the opinions of market entities, seting a policy adaptation period for market entities, improving the mechanism for diversified dispute resolution, strengthening publicity and educating on the rule of law, and promoting the construction of public legal services, etc.


Our Firm’s Trend

Veritas Law Corporation held team building with communication and learning activity in Qiandao Lake

To enrich our firm’s business communication, enhance spirit of team work and cohesion and perform positive, healthy and upbeat mental outlook providing customers quality and professional service, from Jan 19 to 21, 2020, Shanghai Veritas Law Corporation organized all members to Qiandao Lake, Chun'an in Zhejiang for 3 days and 2 nights team building activity temporarily forgetting busy pace of metropolitan life, hugging great Spring once sincerely and feeling the power of nature.

In the morning of Jan 20, by Lawyer He Lijuan's organization and leadership, the law business communication activity has achieved complete success. During the meeting, each lawyer introduced popular or pragmatic focusing problems now in law field, for whose specific area combined latest laws and regulations. The meeting mainly involved the following: 1. Personal Information Security and Data Protection, the presenter introduced the laws and regulations of collecting and transferring the personal information under cybersecurity law and data security and put forward some compliance recommendations regarding the writing of the Privacy Policy based on the practice. actual writing of the privacy policy he legal requirements for the collection and departure of personal information are introduced, and several compliance suggestions are put forward based on the actual writing of the privacy policy. 2. Case Statement- Understanding and Application of Article 42 of the Electronic Commerce Law. The lawyer in our firm combined with actual jurisprudence and focused on how brands can protect their products online from infringement and how to avoid risks in the context of the rapid development of e-commerce platforms. 3. Interpretation of Enforcement Laws and Judicial Interpretations. The lawyer in our firm combined with his years of implementation practice experience, shared with us how to apply, suspend, and terminate the implementation procedures, and introduced the reasons for the difficulty in implementation and how to act as a lawyer to exhaust the implementation methods as much as possible to fight for the client's best interests. 4. Interpretation of Foreign Investment Law, Implementation Regulations and Relevant Judicial Interpretations. The content of the presentation covers preferential policies for foreign investment access, analysis of VIE structure, foreign investment supervision and development prospects of foreign investment law. The lawyer focused on the changes in the company structure of foreign-funded enterprises and the governance model of quasi-national treatment plus negative lists after the new law was introduced. 5. Market Access and Corporate Operational Compliance and Solutions for the Catering Services Industry. The content contained the foreign investment access policy and the protection of intellectual property rights, which also involved the ways of overseas catering to explore the domestic market and risk prevention.

New Year New Hope! Thanks to you with us all the way in 2019!

Let's seize the day and live it to the fullest, and greet the arrival of the year 2020 together!



About Veritas

Shanghai Veritas Law Corporation is a comprehensive law corporation in China that provides perfect and comprehensive legal services to clients. With our professional skills and in-depth understanding of business, we provide a complete set of value-added legal service solutions for clients at home and abroad to help them achieve business goals.

We boast an excellent legal team paying close attention to client needs continuously, providing clients with practical solutions and pioneering professional advice. We strive to provide excellent services and take pride in establishing friendly and long-term partnership with our clients.

Through our international partners' offices in more than 20 cities including New York, Los Angeles, Singapore, Taiwan, Myanmar, Vietnam, Malaysia, India, Indonesia, Sri Lanka, Mexico, London and Oman, we are committed to providing professional services for Chinese enterprises to develop business in Asia, the United States, the Middle East, Latin America, the United Kingdom and other countries.