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Issue 42-June 2020 Veritas Update
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Issue 42-June 2020 Veritas Update


Latest Hot Spot

The Civil Code of the People's Republic of China Has Been Promulgated

New Law Express

Negative Lists of Foreign Investment Access of 2020 Have Been Issued

Pilot Reform of Foreign Debt Registration Administration Has Been Carried Out in Lin-gang Special Area of the Shanghai Pilot FTZ

Cyber Security Review Measures Jointly Released by Multiple Departments has been Implemented

Latest Hot Spot

The Civil Code of the People's Republic of China Has Been Promulgated

The third session of the 13th National People's Congress passed the Civil Code of the People's Republic of China (the “Code”). The Code will come into force on January 1, 2021. This is the first law named as the Code after the establishment of the New China with the largest volume so far. It is known as the encyclopedia of social life. The compilation and promulgation of the Code is a significant measure to comprehensively promote the policy of rule of law, speed up the construction of a socialist country compliance with the rule of law, and constantly improve the modernization of the national governance and capacity.

The Code creates new records in the New China legislative history which has a total of 7 chapters and 1260 articles. The Code is composed of one chapter in general and six chapters divided into different topics, such as property rights, contracts, personality rights, marriage and family, inheritance, tort liability and supplementary provisions. 

The general chapter basically keeps the structure and content of the General Provisions of the Civil Law, and only makes minor amendments to several articles, and moves the 'Supplementary Provisions' to the last part of the Code.

Compared with the previous Property Law, the property chapter of the Code has fewer changes in structure, and more amendments to the individual articles related to mortgage and usufructuary right. Among them, the most noteworthy is the 'separation of rights' on rural land, which means that the ownership belongs to the collective, the farmers own the contracting right, and the contractor obtains the management right after the transfer of the contracting right. In terms of the nature of the right, the ownership and contracting right belong to property right, while the management right belongs to non-property right.

There are many amendments in the contract chapter, and the main changes are as follows: (1) In the general provisions, the controversial amendment is that there is no article of disposition without ownership. (2) Four types of contracts have been added and one type of contract has been modified: 1. Guarantee Contracts. As 'guarantee provided by individuals', guarantee contract is included in the contract chapter and is no longer regulated by the Guarantee Law. 2. Factoring Contracts. Factoring is a way of financing. Factoring is divided into bank factoring and commercial factoring. Bank factoring is carried out by banks while commercial factoring is carried out by commercial institutions. With the development of market economy, the scope of application of factoring contracts will be more and more extensive. 3. Property Service Contracts. Previously, the exclusive ownership of buildings was stipulated in the Property Law, and the property service contract was regulated in the relevant judicial interpretations. Now it is included in the contract chapter. 4. Partnership Contracts. There are two types of partnership, one is contractual partnership and the other is partnership enterprise. In order to further regulate partnership, the Code makes specific provisions. (5) Change the name of 'Intermediary Contract' to 'Agency Contract', which can make people understand better.

There are following changes in the marriage and family chapter: (1) changes the Marriage Law into the marriage and family chapter, which not only adjusts the marriage relationships but also adjusts the family relationships; (2) incorporates the Adoption Law into the marriage and family chapter; (3) roughly stipulates the standard of the community debt of the spouses, but currently such legislation has a lot of controversy; (4) adds new article of  identification of parent-child relationship; (5) adds mandatory period before divorce to ensure rational divorce. In addition, because it involves the maintenance of minor children, therefore, the rights of children shall not be undermined while protecting the freedom of marriage.

The biggest change in the inheritance chapter is the establishment of the estate administrator, which is convenient to solve the problem of inheritance. The independent compilation of the right of personality is the greatest achievement of the Code, and it can also be deemed as contribution of the Code to the civil codes around the world.

The following changes of tort chapter shall be paid attention to: (1) Assumption of risk. Article 1176 of the Code stipulates that if one voluntarily participates in recreational and sports activities with certain risks and suffers damage caused by the acts of other persons, the victim shall not demand other participants to bear the tort liability, except for those who engages in intentional misconduct or gross negligence. (2) Private relief. Article 1177 of the Code has provided provisions regarding private relief which may be implemented inappropriately in real life, therefore the usage of private relief shall be strictly limited. (3) The liability of throwing the object from buildings. The article 1254 of the Code stipulates the security safeguards obligation of the property management company and the duties of the police to investigate the specific individual who throws the object from high-rise buildings.

New Law Express

Negative Lists of Foreign Investment Access of 2020 Have Been Issued

On June 24, the National Development and Reform Commission and the Ministry of Commerce issued the Special Administrative Measures for Foreign Investment Access (“Negative List”) (2020 version) and the Special Administrative Measures for Foreign Investment Access in the Free Trade Zone (“Negative List of FTZ”) (2020 version). In the past three years, the number of items in the Negative List has been reduced from 93 to 40. In 2020, the number of items in the Negative List has been further reduced from 40 to 33. The number of items in the Negative List of FTZ has been reduced from 37 to 30.

In accordance with the principle of reducing but not increasing, items in two negative lists of foreign investment access have been further reduced. Major changes include: first, accelerate the opening up of key areas of the service industry. In the financial sector, the restrictions on the proportion of foreign shares in securities companies, securities investment fund management companies, futures companies and life insurance companies will be lifted. In the field of infrastructure, the provisions that the construction and operation of urban water supply and drainage in a city with a population of more than 500,000 must be controlled by the Chinese entities shall be revoked. Second, the access to manufacturing and agriculture shall be relaxed. In the manufacturing industry, the restrictions on the proportion of foreign shares in the manufacturing of commercial vehicles shall be lifted, and the regulations prohibiting foreign investment in radioactive mineral smelting, processing and nuclear fuel production should be revoked. In the field of agriculture, the requirement that the Chinese entities shall control the breeding of new wheat varieties and seed production has been changed to that the share ratio of Chinese entities shall be no less than 34%. Third, continuing opening-up experiment in free trade zones. On the basis of the national opening-up measures, the free trade zones will continue to take the lead. In the field of medicine, the prohibition imposed on foreign investment in Chinese herbal pieces shall be abolished. In the field of education, wholly foreign invested vocational education institutions with educational system are allowed to be established.

Pilot Reform of Foreign Debt Registration Administration Has Been Carried Out in Lin-gang Special Area of the Shanghai Pilot FTZ

Recently, the Shanghai Branch of the State Administration of Foreign Exchange issued the Notice of the Shanghai Branch of the State Administration of Foreign Exchange on Carrying Out the Pilot Reform of Foreign Debt Registration Administration in Lin-gang Special Area of the Shanghai Pilot FTZ (“Notice”). According to the Notice, in the Lin-gang Special Area of the Shanghai Pilot FTZ, enterprises that meet the requirements can apply for foreign debt registration at one time instead of carrying out registration of foreign debts one by one.

It is reported that the foreign debt registration reform has revoked the one-by-one registration procedures of non-financial enterprises' foreign debts, greatly simplified the cross-border financing business procedures of pilot enterprises. The time, personnel and financial costs have been saved.

Specifically, first, pilot enterprises only need to register their foreign debts once within their own quota, and do not need to carry out registration for execution of contracts, withdraw of money, amendment or cancellation one by one. Second, pilot enterprises can directly borrow, use and repay foreign debts in the bank within the registered amount, and do not need to go to Shanghai Branch of the State Administration of Foreign Exchange for many times. Third, pilot enterprises can borrow foreign debts in many times within the quota of one-time foreign debt registration and recycle the foreign debt funds. Fourth, within the one-time quota of the foreign debt registration, pilot enterprises can borrow from different overseas entities.

The reform of one-off foreign debt registration not only adapts to the changes of cross-border financing demands of enterprises, but also helps enterprises to reduce transaction costs. At the same time, it is conducive to further promoting the convertibility of capital items, improving the ability and level of foreign exchange administration and service, as well as facilitating the construction of international financial center for Shanghai and Lin-gang Special Area of the Shanghai Pilot FTZ.

 Cyber Security Review Measures Jointly Released by Multiple Departments has been Implemented

The Cyber Security Review Measures (the “Measures”), jointly issued by 12 departments including Cyberspace Administration of China, the National Development and Reform Commission, the Ministry of Industry and Information Technology, and the Ministry of Public Security and so on, has been officially implemented since June 1.

Pursuant to the Measures, the cyber security review focuses on the assessment of the national security risks that may arise from the procurement of cyber products and services by infrastructure operators of key information, which mainly concentrates on the following factors: whether the key data of products and services are likely to be leaked, controlled and destroyed; the security, openness, transparency, diversity of sources of products and services, the reliability of supply channels and the risk of supply interruption due to political, diplomatic and trade factors; compliance with Chinese laws, administrative regulations and departmental rules by product and service providers; other factors that may endanger the security of critical information infrastructure and national security.

Measures also stipulated that when purchasing cyber products and services, important Internet and information system operators in telecommunications, radio and television, energy, finance, highway and waterway transportation, railway, civil aviation and other industries should consider applying for cyber security review according to the requirements.

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