China has come to a new crossroads, where it needs to make important decisions on its future. It has chosen to go for a more efficient and open economy, writes Richard Li
This year marks the 40th anniversary of the decision of Deng Xiaoping, then leader of China, to enshrine “reform and opening up” as one of the country’s fundamental national policies in 1978. Four decades later, 2018 has witnessed another round of grand changes, which will see China open up further.
In March, China adopted a plan to reshape government organizations significantly. “The overhaul is the most comprehensive in recent years, with various ministries and agencies created, combined or dissolved,” says Greg Liu, a partner at Paul Weiss in Beijing.
Greg Liu believes that one important institutional change is the establishment of the State Administration for Market Regulation (SAMR) to replace three former agencies – the State Administration for Industry and Commerce (SAIC), the General Administration of Quality Supervision, Inspection and Quarantine, and the China Food and Drug Administration.
Judie Ng Shortell, another partner at Paul Weiss in Beijing, says the SAMR has also become China’s sole antitrust regulator, with the consolidation of the various antitrust functions that the SAIC, the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM) previously handled. “The consolidation is aimed at streamlining antitrust review and enforcement,” she says. “Whether SAMR will be more or less aggressive in enforcement of antitrust regulations remains to be seen.”
Another significant change is the merger in March of the China Banking Regulatory Commission (CBRC) and China Insurance Regulatory Commission (CIRC) into a new entity named the China Banking Insurance Regulatory Commission (CBIRC). “CBIRC is now China’s central regulator to supervise the banking and insurance industries, and this move is expected to reduce regulatory arbitrage and delineate the supervisory roles between the two sectors,” says Michael Chin, a partner at Simmons & Simmons in Hong Kong and Shanghai.
In addition to rejigging the regulatory bodies, China has also quickened its pace on further opening of its market. “Over the past 12 months, there have been quite a few official updates made in relation to the opening of sectors to foreign investments,” says Wang Yi, head of Norton Rose Fulbright’s Beijing office. “These updates have been positively received by international companies and financial institutions interested in investing in China. We have been instructed by various clients to restructure and expand their China businesses following the new opening. Granting more market access will, undoubtedly, continue to bring about great business opportunities for foreign companies that have kept their eye on the evolving Chinese economy.”
An acquisition/restructuring may, in fact, be a project that involves a system of intersecting regulation by multiple authorities. Many acquirers only focus on the progress of the review by the securities regulator, while giving relatively little weight to the requirements and progress of the review by other competent authorities that may be involved, often resulting in drawing out the time required for the acquisition/restructuring.
Partner, Grandway Law Offices
With the free flow of information and the rapid development of cross-border transmission, the global network environment has witnessed an earth-shaking change, and the legislation of different countries and regions on the protection of information has become a hot topic of discussion. The implementation of the EU’s closely watched GDPR has been the most important development in the information protection field in the past half year. The GDPR’s extraterritorial reach has greatly broadened its scope of application, something to which the management and the legal and compliance departments of enterprises need to
As the Stock Exchange of Hong Kong made substantial revision to the listing rules to accommodate TMT and biotech companies for listings in Hong Kong, we have seen a surge in listing applicants in these sectors to consider Hong Kong over other jurisdictions for a public offering.
Wilson Sonsini Goodrich & Rosati
China has recently established two international commercial courts in Shenzhen and Xi’an in June of this year. The courts, which aim to resolve any Belt and Road and Greater Bay initiative disputes, increase the options available to international investors and should be well received.
Holman Fenwick Willan
Environmental issues have been a huge focus of the Chinese government. [For the consumer goods sector], it has increased enforcement action, which has proved disruptive to supply chains, causing increased costs and delays.
Consumer sector clients should also be aware of the tightening regulations on the compliance front, particularly in relation to consumer protection, personal data protection, unfair competition and regulation of e-commerce activities, etc.
Herbert Smith Freehills
We have seen a clear trend of the combination between the traditional production and service sector and the internet sector. Many of our clients have developed or are in the process of developing web-based platforms to deliver better their products/services to consumers …
In these projects, we assist clients in analysing the various legal and regulatory requirements … including e-commerce law, telecommunication law, banking and insurance law, data privacy protection law, etc.
Beijing and Shanghai
In the banking and finance sectors, the things that require close attention are the risk of bad debts in the large volume of loans extended abroad by China and the relatively serious outflow of domestic funds. Between January and June this year, the loans extended abroad by certain large domestic banks have become unrecoverable. The recovery of foreign-related loans involves the issues of judicial assistance between countries and governing law. Accordingly, the review and management of loans extended to foreign parties should be strengthened.
Kangda Law Firm
After more than three years of rapid growth, China has become the country with the greatest volume of PPPs in the world, but, at the same time, this has given rise to numerous fraudulent PPP projects, saddling local governments with additional debts. During rectification, numerous PPPs face the prospect of being swept away or being required to undergo rectification. This has produced a large volume of legal matters that has become a new feature of the PPP sector this year.