China Law Insight : China Law Insight: China Commercial and Intellectual Property Lawyers and Attorneys, Full Service Law Firm: King & Wood

作者：董铁英 钟珊 金杜律师事务所公司组

一、 风险管理及内部控制制度建立的背景

企业风险管理及内部控制制度的建立不是一蹴而就形成的，是经过了一个漫长的企业发展历程并在付出了沉重的政治、经济和社会诸多方面的代价而逐步建立的。众所周知的安然财务造假案、雷曼投资失败案、三鹿毒奶粉案以及紫金矿业污染案等等都是导致企业风险管理日益受到各国政府及企业自身重视的始作俑者。

我在英国石油2006～2008年从事集团内控审计师的工作过程中了解到，美、英、法、德、日等国家从20世纪70年代起，就已经逐步系统地认识到各种不同类型的企业和组织机构所面临的风险的多样性、复杂性以及由此会对企业和组织机构本身乃至国家经济的负面影响，随即组建了相应的机构着手研究企业和各类组织机构的风险管理。逐步出台了1992年美国反虚假财务报告委员会下属发起人委员会COSO发布的《企业内部控制——整合框架》（“COSO内控框架”）和2004年，COSO发布的《企业风险管理—— 整合框架》（“COSO风险管理框架”），成为各国立法机构制定政策法规及各类企业和组织机构制定风险防控目标以及采取相应措施的重要指引。

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By Liu Xiang Wen Xia Dongxia and Li Xinyu King & Wood's Corporate Group

Under PRC laws, the legal representative of a company is the person who acts in the name of the company and represents the company in the exercise of its rights and obligations. The legal representative is a fundamental part of a company's corporate governance structure. To an extent, the person who is appointed to the position of the legal representative is authorized to conduct many of the company's affairs. However, the legal representative must fulfill certain duties while exercising his/her rights. This article will briefly introduce the potential legal risks that a legal representative may face under civil, criminal and administrative laws and how such risks are often prevented or minimized based on China's legal practices.

I. The legal representative of a company should also be its board chairman or its general manager

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作者：刘相文 夏东霞 李欣宇 金杜律师事务所公司组

根据我国法律，公司的法定代表人是指依法代表法人行使民事权利，履行民事义务的主要负责人，对外以公司名义行事。法定代表人是公司法人治理结构最重要的组成部分。从某种意义上讲，担任了公司的法定代表人，即掌控了公司的核心权力。然而，法定代表人在行使权力的同时，也必须承担相应的法律责任。本文拟从民事、刑事和行政三个方面，对公司法定代表人可能承担的法律责任做简要分析，并结合我国司法实践对法定代表人法律风险的防范提出建议。

一、公司的法定代表人应由公司的董事长或总经理担任

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By You Yang and Lin Kaiyi King & Wood's Real Estate Group

This article continues to discuss Risk Management for China's Real Estate Pooled Investment Funds. The first part of this article was published on Chinalawinsight on December 2011.

B. Inherent Risks of Real Estate Trust Products

Inherent risks are closely related to the characteristics of real estate trust products and thus ingrained in such products as follows:

a. Real estate pooled funds generate returns through specific assets

Real estate pooled funds generate and distribute returns by structuring the priority of beneficial interests: according to the financing agreement between trust companies and real estate developers, trust companies raise funds from the public for specific acquisition projects and guarantee investors' beneficial interests as a priority payment. The parent companies or actual controllers (usually real estate developers) of the specific acquisition project transfer shares to the trust companies to gain secondary beneficial interests. Therefore, real estate developer's interests are bound to the priority interests of investors and trust companies distribute returns to beneficiaries in a particular order.

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作者：尤杨 蔺楷毅 金杜律师事物所房地产组

本文分两部分刊登， 2011年12月19日金杜法律博客(Chinalawinsight)刊登的了本文的第一部分。文章第二部分将继续对《浅论房地产集合资金信托产品的风险及控制》进行解读。

2、各类房地产信托产品的固有风险

尽管房地产信托产品种类繁多，但是各类信托产品都有其固有风险，这些风险与该类信托产品的特性紧密结合，根植于该类信托产品之中。例如：

(1) 以特定资产收益权为投资对象的信托计划

这类信托常与结构化信托相结合，典型的结构化特定资产收益权信托的模型是：信托公司与交易对手达成协议后，信托公司向公众募集资金并赋予其优先级受益权，并以募集来的资金收购项目公司的特定房地产项目的收益权。同时，项目公司的母公司或实际控制人将项目公司的股权转让与信托公司，并获得次级受益权，借此将房地产开发商的利益与优先级受益权人的利益进行绑定。在信托计划到期后，信托公司首先向优先级受益人分配信托利益，之后再向次级受益人分配剩余信托利益。

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作者：徐萍 金杜律师事务所外商投资组

长期以来，可变利益实体结构（即Variable Interest Entity，“VIE”结构）一直是外国投资者进入中国外商投资限制领域的常用模式。与此同时，VIE结构一直以来也是中国境内企业在境外资本市场实现上市的常用做法。

第一个通过VIE结构上市的著名案例便是新浪，其于2000在美国纳斯达克成功上市。实际上，VIE结构的另一种常用的说法就是“新浪模式”。新浪使用VIE结构成功绕开了中国电信增值产业对于外商投资的限制。从那以后，无论是外国投资者还是国内投资者在中国很多限制或禁止外商投资的领域开始复制使用VIE结构。

VIE结构实质上是指一种安排，根据该安排，在中国境内的一家全资或合资外商投资企业（“控股公司”）取得另一家实际运营公司（“运营公司”）的控制权，而该运营公司则持有必要的许可以在限制或禁止外商投资的领域内开展业务。由于这些产业被中国政府规定为限制或禁止外商投资的产业，所以外国投资无法直接向该运营公司进行投资。相应的，外国投资者会在控股公司和运营公司之间采取多种合同安排，以便使该控股公司获得对运营公司的运作和管理的实际控制权。该运营公司的利润也将流回控股公司，并其业绩将最终纳入控股公司。
 

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作者 宁宣凤、吉凯伦、尹冉冉

        2011年12月30日，商务部发布了《未依法申报经营者集中调查处理暂行办法》（“暂行办法”），将于2012年2月1日正式实施。该暂行办法就达到申报标准但未依法申报的经营者集中，规定了调查处理程序。

        根据暂行办法，任何单位和个人均有权向商务部举报涉嫌应报未报的经营者集中，商务部也可能通过其他途径获得相关信息。如果有初步事实和证据表明存在未依法申报嫌疑，商务部就应当立案，并书面通知被调查的经营者。

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By Susan Ning, Ji Kailun and Hazel Yin

On 30 December 2011, the Ministry of Commerce ("MOFCOM") promulgated the Interim Measures on Investigation and Punishment of Failure to Duly Notify Concentrations of Undertakings (《未依法申报经营者集中调查处理暂行办法》, "Interim Measures"), effective from February 1, 2012.¹   The Interim Measures set down the procedures for MOFCOM to investigate and penalize companies for failure to notify a notifiable transaction in violation of the Anti-Monopoly Law ("AML").

According to the Interim Measures, MOFCOM shall initiate an investigation ("case acceptance") if there is prima facie evidence, either presented by any third party or it obtains through other channels, indicating that a company fails to notify a notifiable transaction. 
 

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By  Zeng Xianwu Bai Lihui King & Wood's Foreign Direct Investment (FDI) Group

To achieve the initial public offering ("IPO"), there are two options for Chinese companies, onshore listing (also known as A-share listing) and offshore listing (also known as red-chip listing).  Since the conditions and qualifications for A-share listing are usually a little higher and the procedure is more time-consuming than for the offshore listing, Chinese companies which cannot meet the A-share listing's requirements or which need to complete IPO rapidly, usually would prefer the red-chip listing.  For the red-chip listing, there are two commonly-used structures for Chinese companies: the straight-forward offshore listing structure and the VIE structure.  In addition, for the purpose of attracting foreign investors and for circumventing restrictions on foreign direct investment, during the Pre-IPO restructuring, the VIE structure is also widely used by Chinese companies and foreign companies alike.

In 2011, after a series of public events, the variable interest entity ("VIE") structure re-attracted a lot of attention and concerns from the PRC authorities, entrepreneurs, investors and other market participants.  This essay will describe the circumstances in which the VIE structure was created, how it has been used and the changes in the regulatory environment which might affect the feasibility of utilizing the VIE structure.

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By Susan Ning, Liwei Wang and Hazel Yin

On 27 December 2011, the Ministry of Commerce ("MOFCOM") made a press release on its major merger enforcement work in 2011.¹  Mr. Shang Ming, Director General of MOFCOM's Anti-monopoly Bureau and Chairman of the General Office of the State Council's Anti-monopoly Commission, gave a briefing at the press release and responded to press inquiries.

According to Mr. Shang, from January to mid-December, 2011, MOFCOM received a total of 194 merger control filings, an increase of 43% compared to the same period last year. Among the received filings, 179 filings have been accepted and 160 filings have been reviewed and closed.

Of the 160 closed cases, 151 cases were granted unconditional approval (94%), 4 cases were granted conditional approval (3%), and 5 cases were withdrawn by the applicants after case acceptance (3%). A breakdown of the filings by the industrial classification for national economic activities is as follows:

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By Susan Ning and Yun Wang

On 29 December 2011, the Ministry of Industry and Information Technology ("MIIT") finally promulgated the Various Provisions on Regulating the Order of Internet Information Service Market ("Rules").  Viewed by many as been driven by the QQ/360 disputes in late 2010, the Rules mainly set out the code of conducts for an internet information service provider ("IISP") vis-à-vis its competitors and consumers. The Rules also create a dispute resolution mechanism between IISPs.

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By King & Wood's Securities Group

Following the promulgation of the Notice on Further Regulating the Administration of Development and Filing of Equity Investment Enterprises in Pilot Areas (the "Pilot Rules") by the National Development and Reform Commission (the "NDRC") on 31 January 2011 and positive feedback from the six pilot areas, the NDRC is now determined to apply its administration and filing system to equity investment enterprises ("EIEs") across the nation. 

On November 23, 2011, the NDRC promulgated its first set of nationwide rules on the administration of equity investment enterprises, the Notice on Promoting Regular Development of Equity Investment Enterprises (the "Notice"). The main objective of the Notice is to standardize the establishment and operation of private equity funds.  This Notice evolved from the Pilot Rules and has addressed five major topics.  Together with the Notice, the NDRC also issued a set of forms for filing and guidance for EIEs' constitutional documents (i.e. guidance on articles of association/partnership agreement of EIEs, guidance on the fund raising prospectus, etc.).

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By Zeng Xianwu King & Wood's Foreign Direct Investment (FDI) Group

Since the reform and opening-up policy was introduced in 1978, especially in the past ten (10) years, the People's Republic of China (the "PRC" or "China") has undergone significant changes.  China is a growth engine for the worldwide economy, fueling global expansion via higher output and trading relationships with other nations as well as greater contributions from domestic consumption.  Over last nine (9) months of 2011, China has already attracted contractual inbound foreign direct investment of USD177.8 billion.  Notwithstanding China's status as one of the world's largest economies, and the massive amounts of foreign money invested in China, the basic laws and rules in China governing foreign investment seems mysterious for those who want to invest in China or are accustomed to laws of their countries.

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By Susan Ning, Sun Yiming and Hazel Yin

It was reported ¹ that on December 15, 2011, the Intermediate Court of Changsha, Hunan Province dismissed a consumer's complaint that automobile producer Dongfeng Nissan and its 4S store ² abused their dominant position in violation of China's Anti-monopoly Law ("AML") by reaping exorbitant profits and expelling their competitors.  The case was originally filed in November 2010 and the court hearing was held in May 4, 2011.  It is the first antitrust lawsuit in the automobile industry and yet another defeated attempt by Chinese consumers in bringing AML private actions.

The plaintiff, Mr. Liu Dahua, is a Nissan car owner.  In October 2009, He had his car repaired at a local 4S store of Nissan.  Finding that the 4S store charged much higher price for repair services than other local auto repair factories, Mr. Liu asked the 4S store to sell the spare parts separately so he could do the repairs elsewhere.  However, the 4S store turned down his request saying that Dongfeng Nissan did not allow its 4S stores to sell spare parts alone, meaning that customers could only purchase the spare parts as well as the repair services together from Dongfeng Nissan's 4S stores.

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Susan Ning and Ding Liang

On December 16, 2011, the Beijing Lawyers Association organized a seminar inviting Mr. Zhou Zhigao, an official from the Price Supervision, Inspection and Anti-monopoly Bureau (Price Supervision and Anti-monopoly Bureau) of the National Development and Reform Commission (NDRC), to speak on anti-price monopoly legislation and enforcement. 
 

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By  Susan Ning, Ji Kailun and Yin Ranran

On December 12th, 2011, the Ministry of Commerce ("MOFCOM") conditionally approved the acquisition of the hard disk drive ("HDD") business of the Korean Samsung Electronics ("Samsung") by the US Seagate Technology ("Seagate")¹. This is the 4th conditional approval of this year and the 10th conditional approval by MOFCOM since China's Anti-Monopoly Law ("AML") entered into effect in 2008.

According to MOFCOM's announcement, this review process lasted for almost 7 months starting from May 19th when the notification was first submitted to MOFCOM. The review process entered into the Extended Phase II and was cleared on the next business day of the expiry date of this phase.²  
 

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By Susan Ning and Ding Liang

On November 14, the National Development and Reform Commission ("NDRC") announced its decision to fine two private pharmaceutical companies nearly RMB 7 million for violating the Anti-monopoly Law (AML) (please see our previous article entitled NDRC Fined Two Pharmaceutical Companies for Abusive Conducts).  The NDRC's news release did not clearly indicate which article(s) of the AML the two companies have violated and the method the NDRC adopted to calculate the fine. 

On December 16, Mr. Zhou Zhigao, an official from the NDRC's Price Supervision, Inspection and Anti-monopoly Bureau discussed the reasoning behind this case in a seminar.  According to Mr. Zhou, the two pharmaceutical companies were fined under Article 17(3) of the AML because they abused their dominance by refusing to deal with reserpine manufacturers.  He also discussed the method used in that case to calculate the fine.

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By You Yang and Lin Kaiyi King & Wood's Real Estate Group

A real estate pooled investment fund ("RE Pooled Fund") is where trust companies raise funds from investors (who act as both "settlors" and "beneficiaries" in the trust) and work with real estate developers to provide beneficiaries with profits in return. RE Pooled Funds generate returns through specific assets, equity investments, loans, or a hybrid thereof.

With housing purchase restrictions being implemented in China's major cities, real estate developers working with trust companies are facing serious cash flow pressure and some of them have even experienced operating difficulties. When real estate developers are unable to provide trust companies with high investment returns on schedule, and investors continue to hold expectations of high returns regardless of investment risk, trust companies are inclined to pay investors at their own expense and solve investment return problems with real estate developers internally rather than disclose investment risk to the investors. This is partly because trust companies value their reputation and the reputation of their investment products and want to avoid upsetting trustees and commercial banks who engage in selling the trust company's products. Trust companies may also be concerned about the potential for class-action lawsuits by investors. However, such trust companies may one day be unable or unwilling to pay investors out of their own pockets, or investors may no longer be satisfied with being paid investment returns, leading to a very unsustainable situation.

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作者：尤杨 蔺楷毅 金杜律师事物所房地产组

房地产集合资金信托产品是指信托公司从多个委托人（也是“投资人”，相对于单一信托而言）处募集资金，用于与房地产公司合作开发房地产项目，获得收益后支付给委托人作为投资回报的信托计划，常见形式有特定资产收益型、股权投资型、贷款型以及复合型等。

伴随近期全国各主要城市商品房限购政策的出台和执行，不少处于信托计划中的房地产开发商面临着非常严峻的现金流压力，部分公司已经陷入经营困境。当这类房地产开发商没有能力向信托公司按期支付高额投资回报时，投资人却不愿面对投资风险，执着的向信托公司讨要预期回报，信托公司虽然有苦难言，却又不愿公开披露风险，惟恐得罪投资人和代理销售信托产品的商业银行，更不愿酿成集体诉讼，断了将来继续发行信托产品的信誉和财路，只能自己掏腰包堵上投资人的窟窿，再内部消化与房地产开发商的那些理不清的纠葛。试想一下，如果有一天信托公司再也没有能力或者不想堵投资人的窟窿，又或者投资人的风险意识、维权意识觉醒，不再满足于被敷衍的支付投资回报，转而追究事实真相和责任，事态将会如何发展？这样的平静还能继续维持吗？

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金杜律师事务所外商直接投资组

继上海、北京、重庆出台外商投资股权投资企业试点文件后，天津的QFLP(合格境外有限合伙人)试点工作也已展开。2011年11月15日，天津市发展和改革委员会、天津市人民政府金融服务办公室、天津市商务委员会、天津市工商行政管理局联合发布《关于本市开展外商投资股权投资企业及其管理机构试点工作的暂行办法》("《办法》")及其实施细则。 《办法》对由外商投资的股权投资基金和股权投资基金管理企业的设立、资金募集和投资、风险控制、信息披露、备案管理等方面进行详细规范，同时鼓励该试点在天津滨海新区先行先试。

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By Susan Ning, Sun Yiming, Liu Jia and Yin Ranran

On December 13, it was reported that the National Development and Reform Commission (NDRC) asked China Telecom to submit more detailed "rectification proposal" in relation to its pledge for suspension of antitrust probe¹.   Earlier on December 2, China Telecom and China Unicom announced that they have applied to the NDRC for suspension of its antitrust investigation into their internet access pricing practices, by promising to adjust the internet access prices and overhaul their broadband services (see our article entitled "China Telecom and China Unicom Seek to Settle Antitrust Probe").

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By King & Wood's Labor & Employment Group

The State Administration of Work Safety passed the Decision on the Amendment to the Interim Punishment Rules for the Regulations on Reporting and Investigating Work Safety Accidents (hereinafter the "Decision") on August 29^th, 2011. The Decision will be effective as of November 1^st, 2011.

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By Susan Ning, Ding Liang, Liu Jia and Sun Yiming

On November 14, the National Development and Reform Commission ("NDRC") announced its decision to fine two private pharmaceutical companies nearly RMB 7 million for violating the Anti-monopoly Law ("AML")¹. The penalty decision was released right after the NDRC publicly confirmed its investigation over China Telecom and China Union for alleged abuse of dominance in the broadband market. It seemed that the NDRC could not wait to show its determination to enforce the AML with another striking case.

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By Susan Ning, Sun Yiming, Liu Jia and Yin Ranran

On 2 December 2011, China Telecom and China Unicom announced that they have applied to the National Development and Reform Commission (NDRC) for suspension of its antitrust investigation into their internet access pricing practices, by promising to adjust the internet access prices and overhaul their broadband services.

According to their announcements ¹, China Telecom and China Unicom stated that they have proactively cooperated with the NDRC's investigation and have engaged in "self-evaluation" of the challenged pricing practices.  Both companies acknowledged "room for improvement" for their interconnection services and pricing practices.

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作者：金杜律师事务所外商投资组

对于讨论日久的PE监管问题，中国发改委在日前给出了说法，发改委于12月8日发布《关于促进股权投资企业规范发展的通知》（“《通知》”）。《通知》是我国首个全国性股权投资企业管理规则，规定股权投资企业的资本只能以私募方式募集。《通知》规范了股权投资企业的设立、资本募集与投资领域，要求股权投资企业遵照《公司法》和《合伙企业法》有关规定设立。资本只能以私募方式，向特定的具有风险识别能力和风险承受能力的合格投资者募集，资本募集人须向投资者充分揭示投资风险，不得承诺固定回报。股权投资企业的所有投资者只能以合法的自有货币资金认缴出资。资本缴付可以采取承诺制，即投资者在股权投资企业资本募集阶段签署认缴承诺书，在股权投资企业投资运作实施阶段，根据股权投资企业的公司章程或者合伙协议的约定分期缴付出资。

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By Susan Ning, Sun Yiming and Liu Jia

On December 7, the Provisional Measures on Investigating and Penalizing Violation of Notification Obligations for Concentrations between Business Operators (Provisional Measures) were reviewed and discussed at the No. 57th Ministerial Affairs Meeting of the Ministry of Commerce (MOFCOM) and were passed in principle.¹  

It was discussed at the meeting that currently companies frequently ignore their merger control notification obligations under the Anti-Monopoly Law which has caused negative social impact.  Under such circumstances, the Provisional Measures are expected to strengthen MOFCOM's enforcement in relation to investigation and punishment for those companies who fail to honor their notification obligations.

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By Yan Jun and Chen Haiting King & Wood's Real Estate Group

With urbanization surging in China, conflicts triggered by urban housing demolition constitute a grave threat to social stability. In order to cope with the legislative demands posed by new situations, China's State Council ("CSC") made amendments to the Administrative Regulations on Urban Housing Demolition and Relocation(1)("2001 Regulations") and promulgated the Regulations on Expropriation and Compensation of Housing on State-owned Land on January 21, 2011 ("New Regulations").

Compared to the 2001 Regulations, the New Regulations set forth some principles in housing expropriation. The New Regulations stipulate that compensation standards should be set no lower than market prices, and require increased transparency during the expropriation process. The New Regulations specify circumstances under which compulsory expropriation can be conducted for the sake of the public interest. Though there are still some debatable points to be clarified, the New Regulations have made significant improvements in the regulation of public rights and the protection of private rights. The promulgation of the New Regulations caters to the economic and social development of China, which fully reflects China's legislative progress in building a more democratic society. This article will explore the major changes and highlights of the New Regulations.

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By King & Wood's Labor Group

On November 21, 2011, the Legislative Affairs Office of the State Council released a notice to solicit public comments on the Regulations on Special Labor Protection for Female Employees (the "Draft Regulations"). The deadline for receiving comments on the Draft Regulations is December 23, 2011. The appendix of the Draft Regulations lists the scope of work prohibited to be assigned to female employees.

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作者：金杜律师事务所劳动组

2011年11月21日，国务院法制办公室（国务院法制办）发布通知，就《女职工特殊劳动保护条例（征求意见稿）》向社会各界征求反馈。本次意见征即截止至2011年12月23日，征求意见稿将女职工禁忌劳动范围作为条例的附录加以列示。

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作者：颜俊 陈海婷  金杜律师事务所房地产组

随着城市化的进一步推进，拆迁引发的矛盾愈发突出，这已成为社会一大不稳定因素。为适应新形势下的法治要求，国务院启动了对2001年修订的《城市房屋管理拆迁条例》（“旧条例”）（1）的修法程序，并于2011年1月21日公布并实施了《国有土地上房屋征收与补偿条例》（“新条例”）。

与旧条例相比，此次新条例的主要变化是明确了补偿标准市场化、征收程序透明化、公共利益明晰化、强制征收司法化等新制度、新原则，虽然还有不少值得探讨和需要进一步完善的地方，但新条例已有明显的进步以及不少的亮点。新条例在规范公权、保护私权方面有了突破，是一部与当前经济社会发展相适应，充分反映了中国民主法治水平的行政法规。本文将对新条例的一些主要变化和亮点作简要说明。

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By Susan Ning, Ji Kailun and Yin Ranran

Only 10 days after its conditional clearance of the Alpha V/Savio deal¹, the Ministry of Commerce (MOFCOM) published, on 10 November 2011, the third conditional merger clearance of this year approving the proposed joint venture between General Electric (China) Ltd. (GE China) and China Shenhua Coal to Liquid and Chemical Co., Ltd. (CSCLC)². 

This is the first conditional decision relating to a Chinese Stated-owned enterprise (SOE) and the number of MOFCOM's conditional clearance decisions is lifted to nine in total.  According to MOFCOM's announcement, the review process lasted for about 7 months starting from April 13 when the notification was first submitted to MOFCOM.

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By Susan Ning, Sun Yiming and Liu Jia

On November 9, 2011, an earlier rumor indicating that China Telecom is under antitrust investigation for alleged abuse of dominance in the broadband market was confirmed by the National Development and Reform Commission ("NDRC"), the authority in charge of price-related breaches of the Anti-Monopoly Law ("AML").  This is by  far the first time for China's antitrust enforcement authority to conduct an antitrust investigation on large state-owned companies.  It is speculated that billions of antitrust fines could possibly be levied if the violation is established.

This article is a follow-up of our previous article entitled "Chinese Antitrust Enforcement Agencies Ready to Show Teeth to Large State-owned Enterprises? ", which includes a comprehensive analysis of the claimed violation.

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by Susan Ning and Liwei Wang

On September 11, 2011, the name of the previous Guangdong Provincial Price Bureau was officially changed to the PriceSupervision and Inspection and Antitrust Bureau of Guangdong Province (广东省价格监督检查及反垄断局, Guangdong PAB).  In connection with the expanded scope of its administrative authority, the agency will recruit additional officials for the purpose of supporting its price inspection and antitrust functions.  In addition, the administrative hierarchy of the post-reform Guangdong PAB is elevated, indicating heightened administrative authority.

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By Susan Ning, Liu Jia and Yin Ranran

On 31 October 2011, the Ministry of Commerce (MOFCOM) publicly announced the eighth conditional merger clearance since the enactment of the Anti-monopoly Law (AML) in 2008. According to its announcement ¹ ,  MOFCOM cleared the proposed acquisition by Alpha Private Equity Fund V (Alpha V) of Savio group (an Italia based textile machinery producer, Savio) with four conditions. This is also the second conditional merger clearance this year ² .

Set out below are the salient issues in relation to this conditional clearance decision.

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By Susan Ning and Liu Jia

On 31 October 2011, the Ministry of Commerce (MOFCOM) publicly announced the eighth conditional merger clearance since the enactment of the Anti-monopoly Law (AML) in 2008.  According to its announcement¹ , the review process lasted for 3.5 months starting from 14 July 2011 when the notification was submitted to MOFCOM. 

Set forth below is a chart outlining the review process.

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作者：胡梅 瞿淼 郁斯敏 金杜律师事务所争议解决组

2011年7月22日，美国华盛顿州通过了修改其《反不正当竞争法》的议案，新增一章名为《产品销售-窃取或盗用信息技术》的新法（以下简称“新法”）。根据该法律规定，在生产、经营中使用假冒盗版信息技术产品（包括假冒硬件产品和软件产品）并拒不改正的产品制造商，无论其违法行为发生在何处，只要其产品在华盛顿州销售或者许诺销售，都将可能构成不正当竞争，从而导致其在美国华盛顿州被政府或其竞争者起诉，并可能因此导致货物在美国被扣押、被禁止销售、以及被判令支付赔偿金，甚至惩罚性赔偿。该法案的颁布和实施虽然远在美国华盛顿州，但却对于全球所有向美国出口的制造业企业均有影响。中国被视为“世界工厂”而美国又是“中国制造”产品的最大出口市场，众多的中国制造企业均应注意该法案可能对其生产经营活动所产生的实质性影响，避免由于在生产经营过程中使用假冒盗版IT产品导致向美国出口受阻并引发其他法律风险。

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By King & Wood's Foreign Investment Group

On October 12, 2011, the Ministry of Commerce (MOFCOM) promulgated the Circular on Issues Relating to RMB Cross Border Direct Investment dated (the "Circular"). The Circular provides that outbound investors (including investors of Hong Kong, Macao and Taiwan) can make direct investment with RMB funds they obtained legally outbound (the "Offshore RMB").

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作者：金杜律师事务所外商投资部

2011 年10 月12 日，商务部正式颁布了《商务部关于跨境人民币直接投资有关问题通知》（ “《通知》”）。《通知》规定，境外投资者（含港澳台投资者）可以合法获得的境外人民币依法开展直接投资活动。

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By Susan Ning and Huang Jing

On 7 September 2011, the Shanxi Combined Transportation Group Company (SCTG) filed an administrative law suit with the Taiyuan Xinghualing District People's Court against the Taiyuan Bureau of Railways (the "SCTG Case"). On 15 September 2011, the Taiyuan Xinghualing District People's Court accepted the SCTG Case.

SCTG alleged that it had submitted two applications to the Taiyuan Bureau of Railways for establishing new railway ticket agent stores on 25 January 2011; but Taiyuan Bureau of Railways did not respond to such applications.  According to SCTG, Taiyuan Bureau of Railways' conduct was a violation of the Anti-monopoly Law (AML), and constituted administrative omission.   Thus SCTG filed the administrative lawsuit.

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By Susan Ning, Liu Jia, Sun Yi Ming and Yin  Ranran

In early November, Taobao Mall (Tmall), part of the e-commerce operations of Alibaba Group and considered as China's biggest business-to-consumer (B2C) retail platform, suffered from a stormy protest from small vendors against its new rules.  Meanwhile, antitrust concerns arise in relation to its suspected abuse of dominance in the e-commerce industry.

This article provides an overview of the whole incident, outlines details to do with Tmall' s conduct and examines whether such conduct could be considered as an abuse of dominance in violation of the Anti-monopoly Law of China (AML).

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By Xu Ping  King & Wood's Foreign Direct Investment Group

The variable interest entity ("VIE") has long been a popular structure for foreign parties to invest in sectors which are restricted by China's industrial policy to foreign investment. In addition the VIE structure has also been used as a means by which Chinese domestic entities could list offshore on international capital markets.

The first well known VIE structure was that of Sina.com in its 2000 listing on NASDAQ. Indeed the VIE structure is also commonly known as a "Sina Structure". Sina used the VIE as a workaround structure to avoid restrictions on foreign direct investment (FDI) in the value-added telecom services sector. Since then, both foreign and Chinese investors alike have replicated the VIE structure in many other sectors of China's economy where FDI is either restricted or prohibited to foreign investors.

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金杜律师事务所破产、重组和清算组

中国证监会于2011年1月发布了5个并购重组法律适用意见，内容包括上市公司严重财务困难认定、要约豁免申请条款选用、二级市场收购的完成时点、拟购买资产存在资金占用问题、上市公司在12个月内连续购买、出售同一或者相关资产的有关比例计算等。

中国证监会有关部门负责人表示，这些法律适用意见就市场参与主体对《上市公司收购管理办法》、《上市公司重大资产重组管理办法》有关法律理解上可能存在不一致的问题加以明确，并以证监会公告的形式对外发布，体现其严肃性和法律效力。

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By Yuan Min and Li Wenzhi  King & Wood's Insurance Group

In order to regulate transfers of insurance business by insurance companies, the China Insurance Regulatory Committee (CIRC) recently issued the Provisional Measures on Administration of Insurance Business Transfers by Insurance Companies (the "Measures"), which will become effective on October 1, 2011.

"Transfers of insurance business" refers to when an insurance company decides to transfer all or part of its insurance business to another insurance company through mutual consultation and negotiation. This transfer mechanism is a way for insurance companies to voluntarily exit from the insurance market.  The Measures do not apply to the following circumstances: (i) an insurance company that engages in the life insurance business and is transferring its insurance business as a result of being closed down or being declared bankrupt; (ii) an insurance company that fails to meet the prescribed solvency requirements and is forced by the regulatory committee to transfer its insurance business; and (iii) an insurance company in the reinsurance business.

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作者：袁敏、力文智 金杜律师事务所保险组

为规范保险公司保险业务转让行为，保监会近日颁布了《保险公司保险业务转让管理暂行办法》（以下简称《办法》），并将于2011年10月1日正式实施。

保险公司的保险业务转让，是指保险公司在平等协商基础上将其经营的全部或者部分保险业务自愿转让给其他保险公司的行为。保险业务转让制度是保险市场退出机制的重要组成部分。经营有人寿保险业务的保险公司在被撤销或者破产情形下发生的保险业务转让，因偿付能力不足而被监管机构强制要求的保险业务转让，以及再保险业务，都不适用该《办法》。

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By Susan Ning and Huang Jing

On 21 September 2011, Mr. Shang Ming, Director General of MOFCOM's Anti-Monopoly Bureau revealed the yearly merger control statistics at the BRICS International Competition Conference 2011 held in Beijing.

According to Mr. Shang, the merger control statistics for 2008, 2009 and 2010 are as follows: 

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By Susan Ning and Huang Jing

On 21 September 2011, Mr. Shang Ming, Director General of MOFCOM's Anti-Monopoly Bureau revealed the most recent legislative plan of MOFCOM' at the BRICS International Competition Conference 2011 held in Beijing.

According to Mr. Shang, MOFCOM will promulgate 3 new rules on merger control within this or next year. The 3 new rules are: Rules on Imposing Restrictive Conditions on Concentration of Operators (the "Rules on Remedies"), Rules on the Investigation and Handling of Violation of Notification Obligations for Concentration of Operators (the "Rules on Violation of Notification Obligations"), and Rules on the Investigation and Handling of the Concentration of Operators below the Notification Thresholds with Monopoly Suspicion (the "Rules on Mergers Below Thresholds").

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By Xu Xiaodan King & Wood’s Labor Group

The Provisional Measures on Social Insurance for Foreigners Working in China (the "Provisional Measures ") were issued on September 6, 2011 by the Ministry of Human Resources and Social Security and will come into effect on October 15, 2011. The Provisional Measures provide more specific rules on the requirement that foreigners working in mainland China should participate in the PRC social insurance scheme as stipulated in the PRC Social Insurance Law (promulgated on August 28, 2010, and came into effect on July 1, 2011). The Provisional Measures serve as a supplement to the provisions of the PRC Social Insurance Law.

Highlights:

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作者： 徐晓丹 金杜律师事务所劳动组

《在中国境内就业的外国人参加社会保险暂行办法》（“《暂行办法》”）已经于2011年9月6日由人力资源和社会保障部公布出台，并将于2011年10月15日起开始实施。该《暂行办法》针对2010年8月28日出台并于2011年7月1日实施的《中华人民共和国社会保险法》（“《社会保险法》”）中提出的在华就业的外国人应当参加社会保险的要求进行了具体规定，是对《社会保险法》的进一步补充。

要点如下：

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By Susan Ning, Sun Yiming and Liu Jia

Most recently, the hottest  topic on China's Anti-monopoly Law (AML) is a piece of news spreading on the internet, indicating that China Telecom, one of China's largest state-owned enterprises is under antitrust investigation conducted by a "relevant" competition authority for its suspected abuse of dominance in broadband market. If the abuse is successfully established, China Telecom may face huge fines under the AML. The news is also quoted by Xinhuanet.com, an authoritative website run by the government. However there has been no formal response from China Telecom or any competition authorities so far in this respect.

This article outlines details to do with China Telecom's conduct and examines whether or to what extent such conduct would be considered as an abuse of dominance and thus in violation of the AML.
 

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作者：尤杨、蔺楷毅 金杜律师事务所公司组

本文分两部分刊登， 2011年9月5日金杜法律博客（Chinalawinsight)刊登的了本文的第一部分。文章第二部分将继续对《房地产信托产品的风险概要》进行解读。

二、各类房地产信托产品的固有风险

尽管房地产信托产品种类繁多，但是各类信托产品都有其固有风险，这些风险与该类信托产品的特性紧密结合，根植于该类信托产品之中。例如：

1、以特定资产收益权为投资对象的信托计划

这类信托常与结构化信托相结合，典型的结构化特定资产收益权信托的模型是：信托公司与交易对手达成协议后，信托公司向公众募集资金并赋予其优先级受益权，并以募集来的资金收购项目公司的特定房地产项目的收益权。同时，项目公司的母公司或实际控制人将项目公司的股权转让与信托公司，并获得次级受益权，借此将房地产开发商的利益与优先级受益权人的利益进行绑定。在信托计划到期后，信托公司首先向优先级受益人分配信托利益，之后再向次级受益人分配剩余信托利益。

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By: Gao Chunkai, He Yunfan and Li Lingxiao of King and Wood's Foreign Direct Investment Group

I. Background

On May 20, 2011, the State Administration of Foreign Exchange ("SAFE") issued the Circular of the SAFE on Operating Rules Concerning Financing and Round-Trip Investment Undertaken by Domestic Residents through Overseas Special-Purpose Vehicles (1)( "Circular 19" or "New Operating Rules"), which took effect on July 1, 2011. This Circular provides new operating rules for the foreign exchange registration with the SAFE of round-trip investments made through special-purpose vehicles ("SPV") and non-SPVs.

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作者：高醇恺、李凌霄和贺云帆 金杜律师事务所外商直接投资组

一、背景介绍

国家外汇管理局（“外管局”）于2011年5月20日颁布了《境内居民通过境外特殊目的公司融资及返程投资外汇管理操作规程》（1）（“19号文”或“新操作规程”），为特殊目的公司、非特殊目的公司返程投资相关的外汇登记提供了新的操作依据。

外管局曾于2005年10月21日颁布了《关于境内居民通过境外特殊目的公司融资及返程投资外汇管理有关问题的通知》（2）（“75号文”），之后外管局综合司先后于2005年、2007年和2009年颁布了《国家外汇管理局综合司关于下发<关于完善外债管理有关问题的通知>及<关于境内居民通过境外特殊目的公司融资及返程投资外汇管理有关问题的通知>操作规程的通知》（3）（“124号文”）、《国家外汇管理局综合司关于印发<国家外汇管理局关于境内居民通过境外特殊目的公司融资及返程投资外汇管理有关问题的通知>操作规程的通知》（4）（“106号文”）及《国家外汇管理局综合司关于印发<资本项目外汇管理业务操作规程（2009年版）>的通知》（5）（“77号文”，与124号文和106号文统称“旧操作规程”）。目前就境内居民通过境外特殊目的公司融资及返程投资相关的外汇事宜主要是适用77号文。

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Susan Ning and Yin Ranran

On September 2, 2011, China's Ministry of Commerce ("MOFCOM") released on its website the Provisional Rules on Assessment of Competitive Effects of Concentration of Business Operators (MOFCOM 2011 Announcement No. 55, the "Rules").  With 14 articles, the Rules elaborated on the factors to be considered by MOFCOM in assessing the competitive effects of a business concentration, which have been listed in Article 27 of the Anti-monopoly Law ("AML")¹ .  The Rules are implemented as of today (September 5, 2011).

The Rules set out the basic methodology for its competitive analysis and the basic elements for application of each factor in a merger review process.  The Rules appear to identify market share/market control power and market concentration levels as the most important factors to be considered by MOFCOM in assessment of competitive effects of a concentration.

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By Susan Ning, Huang Jing and Yin Ranran

On 25 August 2011, the Ministry of Commerce (MOFCOM) released the MOFCOM Rules for Implementation of Relevant Issues regarding National Security Review Mechanism for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (NSR Rules).  From 1 September 2011, the Rules replaces the MOFCOM Interim Rules for Implementation of Relevant Issues regarding National Security Review Mechanism for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (NSR Interim Rules) issued on 4 March 2011 (see our article entitled "MOFCOM issues national security review interim rules").

Compared with the Interim Rules, the key change we see in the NSR Rules is that MOFCOM clearly states that the authority will assess the applicability of the national security review (NSR) process from the substance and actual impact of a transaction; and that foreign investors shall not evade the NSR regime via alternative transaction structures, including but not limited to warehousing arrangements, trusts, multi-tier investments, leases, loans, contractual control, or offshore transactions, etc.

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作者：尤杨、蔺楷毅 金杜律师事务所公司组

房地产集合资金信托产品是指信托公司从多个委托人（也是“投资人”，相对于单一信托而言）处募集资金，用于与房地产公司合作开发房地产项目，获得收益后支付给委托人作为投资回报的信托计划，常见形式有特定资产收益型、股权投资型、贷款型以及复合型等。

一、各类房地产信托产品的共同风险

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作者：张毅 金杜律师事务所公司组

2011年8月25日，商务部公布了《商务部实施外国投资者并购境内企业安全审查制度的规定》（下称“规定”），并将于2011年9月1日正式实施。《规定》表示，凡属于上述安全审查范围的企业，外国投资者应向商务部提出并购安全审查申请。对属于并购安全审查范围的并购交易，由商务部在15个工作日内书面告知申请人，并在其后5个工作日内提请联席会议进行审查。《规定》还称，外国投资者不得以任何方式实质规避并购安全审查，包括但不限于代持、信托、多层次再投资、租赁、贷款、协议控制、境外交易等方式。

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By Zhang Yi of King & Wood's Corporate Group

On August 25, 2011, the Ministry of Commerce (MOFCOM) promulgated the Provisions on Implementation of Security Review System Regarding Mergers and Acquisitions of Domestic Enterprises by Foreign Investors ( “Provisions”), which will become effective on September 1, 2011. The Provisions state that foreign investors must file an application for security review with MOFCOM for merger and acquisition (“M&A”) transactions that fall within the scope of security review. If a given M&A transaction is within the scope of security review, MOFCOM will inform foreign investors within 15 working days of the application being filed, and submit the application to the Joint Ministerial Panel for security review within 5 working days. The Provisions also state that foreign investors must not use any means, including but not limited to nominee shareholdings, trusts, multi-tier investments, leasing, loaning, control agreements, and offshore transactions, to evade M&A security review.

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By Susan Ning and Yin Ranran

On 27 July 2011, the Ministry of Industry and Information Technology ("MIIT") issued for public comments draft rules entitled Provisions on Administration of Internet Information Services (Draft for Comments) ("Draft Rules").

The Draft Rules are based on an earlier draft entitled Interim Rules for Supervision and Management of Internet Information Service Market ("Interim Rules") released by MIIT on 12 January 2011.¹   The Draft Rules mainly set out the code of conducts for an internet information service provider ("IISP") vis-à-vis its competitors and consumers.
 

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By Susan Ning, Huang Jing and Yin Ranran

On January 26, 2010, three GPS operators filed a complaint to the Guangdong Administration for Industry and Commerce ("Guangdong AIC") claiming that the municipal government of Heyuan city, Guangdong province ("Heyuan Government") abused its administrative power in the course of promoting the global positioning system ("GPS") for automobiles and eliminated and restricted competition in this industry.  After investigation, the Guangdong AIC officially proposed to the Guangdong Government asking for rectification of Heyuan Government's abusive conducts.

According to news reports, after receiving the complaint, the Guangdong AIC initiated investigations and identified the following facts:
 
 

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By Meg Utterback and Holly Blackwell of King & Wood's Dispute Resolution Group 

Whether you are building a manufacturing plant, a petrochemical plant or just fitting out an office, local rules and local authorities can play a significant role in your project. Local regulations and practice varies widely, from designer and contractor qualifications to requirements for building completion. Finding the right contractors for design and construction can make the difference in completing on time and on budget.

Here are some tips to avoid common pitfalls:

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作者：梁燕玲 金杜律师事务所公司组

近年来，中华全国总工会（“全总”）积极推动企业建会工作，许多企业纷纷收到了上级工会要求其建立工会的通知。此外，自去年以来，各地陆续发生了多起集体劳动争议和群体性事件，对企业的劳资关系处理及人力资源管理提出了新的挑战。有鉴于此，本文简要介绍了中国工会发展的最新动态及中国工会的特点，以期为企业建会工作提供有益参考。

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By Linda Liang of King & Wood's Corporate Group

In recent years, the All-China Federation of Trade Unions ("ACFTU") has been actively promoting the establishment of trade unions in enterprises. Many enterprises have received notices from trade unions at higher levels requiring them to set up their own unions. In addition, since last year, there have been several collective labor disputes and mass labor disturbances taking place around China, posing great challenges to the industrial relations and the human resource management of the enterprises. In view of the above, this article provides a brief summary of the latest development and characteristics of Chinese trade unions, with an aim of assisting enterprises dealing with issues they may face during the process of the establishment of trade unions.

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作者：梁燕玲 金杜律师事务所公司组

《中华人民共和国劳动争议调解仲裁法》（“《调解仲裁法》”）于2007年12月29日通过，并于2008年5月1日起生效。该法在很大程度上改变了原有的劳动争议调解仲裁制度。本文主要通过新旧制度的对比，分析该法带来的新变化。

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By Linda Liang of King & Wood's Corporate Group

The Law on Mediation and Arbitration of Labor Disputes of the People's Republic of China ("Mediation and Arbitration Law") was adopted on December 29, 2007 and became effective as of May 1, 2008. The law has significantly streamlined China's labor dispute mediation and arbitration regime. This article will analyze these changes by comparing the old and new systems.

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Susan Ning, Ding Liang

On July 27, 2011, the National Development and Reform Commission (NDRC), the Ministry of Commerce (MOFCOM) and the State Administration for Industry and Commerce (SAIC) signed Anti-trust Memorandum of Understanding (MOU) with their US counterparts, the U.S. Federal Trade Commission (FTC) and Department of Justice (DOJ).

The MOU provides for high-level consultations among all five agencies as well as separate communications between individual agencies.  The MOU also lists several specific areas for cooperation, including:
 

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Susan Ning, Ding Liang

According to officials of the National Development and Reform Commissions (NDRC), the Department of Price Supervision of NDRC was renamed as the Price Supervision and Anti-monopoly Bureau and the internal offices are under reconstruction[1].

The following is a diagram of the current State Council Anti-monopoly Enforcement Agencies's organizational structure:

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By Susan Ning and Yin Ranran

On June 30, the Ministry of Industry and Information Technology ("MIIT") issued the Opinion on Regulating Conducts of Basic Telecoms Enterprises on College Campuses ("MIIT Opinion").  The MIIT Opinion governs specified conduct by basic telecom enterprises¹  -in relation to unfair competition issues within college or university campuses.

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作者：张如积、张宇、蓝兵 金杜律师事务所公司组

一、《商品房销售明码标价规定》出台的背景

针对我国房地产市场在发展过程中出现的商品房价格上涨过快、市场过热等问题，自2010年4月以来，我国中央和地方相继出台了一系列政策予以调控。在前述政策基础上，2011年3月16日，国家发改委进一步出台了《商品房销售明码标价规定》（发改价格[2011]548号，“548号文”），并于2011年5月1日起实施。

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By Zhang Ruji, Zhang Yu and Lan Bing of King & Wood's Corporate Group

1.Background of the "The Provisions on Selling Real Estate at Expressly Marked Prices";

Starting in April 2010, China's central and local governments issued a series of policies to regulate and control the soaring prices of real estate and the overheated real estate market in China. Based on these policies, on March 16, 2011, the National Development and Reform Committee (“NDRC”) issued The Provisions on Selling Real Estate at Expressly Marked Prices (“Provision No.548”), which was implemented on May 1, 2011.

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By Susan Ning, Liu Jia and Yin Ranran
The QQ / 360 battle broken out towards the end of 2010 (see our article entitled "The QQ / 360 Disputes - Who, What, Where, When and Preliminary Antitrust Analysis") has stirred lasting and heated discussions about anti-monopoly issues in the emerging Internet industry in China. 
 

About one month ago, Renmin University of China organized the thirteenth Anti-Monopoly Law Summit Forum, which was focused on discussion of fair competition in the Internet industry of China and protection of netizens' interests.  Officials from various government agencies, such as the Law Committee of the National People's Congress, Legislative Affairs of the State Council, the Ministry of Industry and Information Technology ("MIIT"), the State of Administration for Industry and Commerce ("SAIC'), the Ministry of Commerce, and the National Development and Reform Commission, as well as judges from the Supreme People's Court participated in the forum..

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Susan Ning and Yin Ranran

Recently, the Ministry of Commerce (MOFCOM) announced that its Anti-monopoly Bureau is to put up a signboard for the "Office of State Council's Anti-Monopoly Commission (AMC)".  According to Mr. Yao Jian, a spokesman for MOFCOM, the State Council has approved the formal establishment of the AMC Office (even though the AMC Office has been operational within MOFCOM since the enactment of the Anti-Monopoly Law (AML) in 2008).  

As the third anniversary of the AML draws near, Mr. Yao expects that this move will further enhance effective enforcement of the AML and the coordination among the various ministries under the AMC.

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By Susan Ning, Shan Lining and Angie Ng

Pursuant to the Anti-Monopoly Law, transactions which are construed as "concentrations" (i.e. mergers, acquisitions and joint ventures) and which meet with specified turnover thresholds ¹; must be notified to, and cleared (from an antitrust law perspective) by MOFCOM, before business operators can go ahead with these transactions (notifiable concentrations). 

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By Susan Ning, Zheng Ziqing and Angie Ng

On 3 June 2011, the Ministry of Commerce (MOFCOM) published, for public comments, draft rules which explain how MOFCOM will evaluate concentrations pursuant to the merger control regime.  These rules are entitled "Provisional Rules on the Assessment of the Effects of Concentrations on Competition" (Draft Rules).  The public has been invited to submit comments on these Draft Rules by 13 June 2011.

In fact, Article 27 of the Anti-Monopoly Law (AML) outlines a list of factors that MOFCOM would take into account, when assessing concentrations.  These are: (a) the market shares of the business operators involved in the concentration and their control over the market; (b) the degree of market concentration; (c) the impact of the concentration of business operators on market entry and technological advancement; (d) the impact of the concentration on consumers and other relevant business operators; (e) the impact of the concentration of business operators on the development of the national economy; and (f) any other factors deemed by MOFCOM to be relevant for consideration.  The Draft Rules expand on these factors.  There are altogether 14 provisions in the Draft Rules.  The following table provides an illustration of how the Draft Rules "expand" on the factors set out in Article 27 of the AML.
 

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Susan Ning and Yin Ranran

On 3 June 2011, Mr. Shang Ming, Director General of MOFCOM's Anti-Monopoly Bureau revealed the latest figures to do with merger control at the 7th International Symposium on Competition Law and Policy hosted by the Chinese Academy of Social Sciences.

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By Susan Ning, Liu Jia and Angie Ng

The National Development and Reform Commission (NDRC) has co-organised a conference focusing on price related monopoly agreements with the European Commission Directorate-General for Competition (DG Competition).  The conference took place from 1 to 2 June 2011.

Antitrust authorities from the following jurisdictions attended this conference: the European Union, the United States of America, Germany, Spain, Ireland, Australia, Greece.  From China, officials from several government agencies attended the conference, including officials from: the Law Committee of the National People's Congress, the Supreme People's Court, Legislative Affairs of the State Council, the NDRC, the Ministry of Industry and Information Technology, the Ministry of Commerce, the State of Administration of Industry and Commerce, and pricing authorities based in Beijing, Tianjin and Shanghai.  Other attendees include representatives from China Consumers' Association, China Cleaning Industry Association and academics.

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By Susan Ning, Chai Zhifeng and Angie Ng

On June 2, 2011, Ministry of Commerce (MOFCOM) publicly announced the first conditional merger clearance in 2011. At its [2011] No. 33 Announcement, MOFCOM cleared Uralkali's proposed acquisition of Silvinit (the Parties) (both potash producers based in Russia) with conditions.  This is the 7th conditional merger clearance since the enactment of the Anti-monopoly Law (AML) in 2008.   MOFCOM is obliged by statute to publish conditional clearances. 

The following are the salient points to note vis-à-vis this conditional clearance:

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By: Susan Ning, Angie Ng and Shan Lining

Last week (between 26 to 27 May 2011), it was reported in the press that Unilever has raised the prices of specific products (including Lux and Hazeline branded shampoos and shower gels) by 10% in some cities including Beijing, Shanghai and Guangzhou (Unilever's price increases).  This was touted as a surprising move given that Unilever was recently fined by the price authority, the National Development Reform Commission (NDRC) in relation to conduct to do with its proposed price increases just earlier in the month (see below for more details to do with this fine) (Unilever's price signaling conduct).

This article outlines details to do with Unilever's price signaling conduct and subsequent price increases and examines whether or to what extent such conduct would be considered in breach of the Price Law and the Anti-Monopoly Law in China.

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By: Susan Ning, Shan Lining and Angie Ng

On 6 May 2011, the National Development and Reform Commission (NDRC) announced that a manufacturer of household and personal care products (the Manufacturer) has been fined a total of RMB2 million for breaching the Price Law.  The NDRC also appeared to have made some Anti-Monopoly Law (AML) references in relation to this case.

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By Susan Ning, Liu Jia and Angie Ng

On 25 April 2011, the Supreme People's Court (the Court) published draft rules which govern Anti-Monopoly Law (AML) private actions (Draft Rules)¹.   These Draft Rules are entitled "Provisions on Issues Concerning the Application of Law in relation to Trials of Monopoly Civil Dispute Cases".  The Court will consult on these Draft Rules till 1 June 2011.

We note that these Draft Rules provide for applicants to file "joint" applications with others against respondents.  This article outlines what the Draft Rules say about joint applications and outlines how this interacts with the joint application regime pursuant to China's Civil Procedure Law.

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By Susan Ning, Shan Lining, Ji Kailun and Liu Jia

On 25 April 2011, the Supreme People's Court (the Court) published draft rules which govern Anti-Monopoly Law private actions (Draft Rules).  These draft rules are entitled "Provisions on Issues Concerning the Application of Law in relation to Trials of Monopoly Civil Dispute Cases".

This article outlines the salent provisions of, and points to some interesting features of, these Draft Rules.

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By Susan Ning, Yin Ranran

On 25 April 2011, the Supreme People's Court issued for public comments draft rules which govern civil action in relation to Anti-Monopoly Law (AML) disputes.  These rules are entitled "Provisions on Issues Concerning the Application of Law in the Trial of Monopoly Civil Dispute Cases"("Draft Rules").  Prior to the release of these Draft Rules, there haven't been any detailed rules in relation to AML civil action.  The court will consult on this Draft Rules till 1 June 2011.

The Draft Rules contain 20 articles covering jurisdiction, standing of plaintiffs, burden of proof, evidentiary rules, relationship of antitrust administrative investigations and the judicial process, form of civil liabilities and the statute of limitations.  The objective of these Draft Rules is to ensure proper adjudication of civil monopoly disputes cases, prevent monopolistic conduct, protect fair competition in the market and safeguard the interests of consumers and public interest.

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By Susan Ning and Yin Ranran

On 2 April 2011, the National Development and Reform Commission (NDRC) hosted a conference with 17 industry associations (relating to businesses selling major consumer products such as household electrical appliances, food, beverages and dairy products) in Beijing.  Specifically, the NDRC's Price Department and Economic and Trade Department convened the conference as an effort to address the recent price hikes in commodities (see our articles entitledPrice Hikes for Washing Powders, Soaps and Shampoos Expected in April and Businesses Should Be Cautious in Making Advance Price Increase Announcement ). 

The NDRC hosted conference was also regarded as an effort of NDRC to address China's increasing consumer price index (CPI) – which is a major indication of the rate of increase of inflation in China.  According to data released by the National Bureau of Statistics on April 15, China's CPI rose 5.4% in March 2011 (from a year ago), hitting a 32-month high.
 

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By Susan Ning, Liu Jia and Angie Ng

It's been slightly over a month since the enactment of a national security review (NSR) process for foreign acquisitions of domestic businesses.  Thus far, it is not clear how many (if any at all) foreign-local deals have undergone the NSR process,  Pursuant to the rules and regulations¹  which govern the NSR process, there is no obligation on the part of the Chinese government to publish any determinations (whether deals are approved or not) in relation to deals which undergo the NSR process.

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By Susan Ning, Huang Jing and Angie Ng

We understand from press reports that the China Automobile Dealers Association (CADA) has complained that a large automobile manufacturer has allegedly been imposing unreasonable restraints on its distributors, including determining a minimum resale price and allocating territory.  There has been some suggestion in the press that the conduct allegedly undertaken by the automobile manufacturer is in breach of the Anti-Monopoly Law (AML).

This article identifies the AML provision governing such vertical restraints; and also outlines how certain vertical restraints in relation to the motor industry are being dealt with in Europe.

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By Susan Ning, Yin Ranran and Angie Ng

An instant noodle manufacturer recently announced that it decided to increase prices for its "container instant noodle" (referring to both instant noodles packaged into a variety of "cup-like" or rectangular containers) from 1 April 2011. In China, this instant noodle manufacturer is considered one of the leading brands in relation to the instant noodle industry.  According to press reports, the instant noodle manufacturer has announced that due to increased transportation and raw materials (e.g. flour and palm oil) costs, it intends to raise the prices for most of its container instant noodles to RMB 0.5 per unit – this amounts to an increase of between 10% to 15% from current prices. [Note:  In the past month, several manufacturers of household and daily care products also made announcements that they were intending to increase prices of specified products due to an increase in price in raw materials.  See our article entitled Price Hikes for Washing Powders, Soaps and Shampoos expected in April

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By Susan Ning, Yin Ranran, and Angie Ng

Recently, there has been a flurry of press reports on the proposed price increases by several major manufacturers of household and personal care products, including multinationals such as Procter & Gamble and Unilever, as well as domestic manufacturers such as "Liby" and "Nice".  Pursuant to the press reports, all four manufacturers mentioned above have separately announced that the retail prices for their respective brands of washing agents (including washing powders, soaps and shampoos) will increase by as much as 10% commencing from early April 2011.  Commentators have said that this is the largest price hike that they have seen in relation to the household and personal care products industry, in the past 3 years. 

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By Susan Ning, Shan Lining and Angie Ng

The radiation leaks in Japan's Fukushima Daiichi nuclear plant (caused by the earthquake-tsunami in Japan on 11 March) has made consumers in China paranoid about the salt they will consume in the near future.  Once news of the leak in the nuclear plant broke, there was a mad "scramble" to purchase table salt – as Chinese consumers were concerned that in the near future, the sea water around China would be contaminated as a result of the radiation leakage.  According to press reports, around the same time, some table salt retailers proceeded to raise the retail prices of iodized table salt.

The Chinese Government controls prices in relation to table salt.  Specifically, the ex-works and wholesale prices of table salt are set by the National Development and Reform Commission (NDRC, the central price authority); in addition provincial price authorities also control to some extent, the retail prices of salt.  In some provinces, provincial price authorities set maximum retail prices – this means that table salt retailers are not to charge above a price set by these authorities.

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By Susan Ning, Huang Jing and Shan Lining

On March 4 2011, just one day before the implementation of the national security review mechanism¹, the Ministry of Commerce (MOFCOM) released the MOFCOM Interim Rules for Implementation (Interim Rules). These Interim Rules came into effect on 5 March and are set to expire on 31 August 2011.

The Interim Rules provide more details in relation to how the national security review process is initiated, documents to be submitted and more details the initiation of a national security review, the required documents, and the review decisions.
 

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By Susan Ning, Yin Ranran, Huang Jing

There have been concerns about Chinese government's foreign investment policy ever since the State Council announced the formal establishment of the national security review ("NSR") regime in China.  At a press conference of the Fourth Session of the 11th National People's Congress held on March 7, 2011, China's Minister of Commerce Chen Deming reiterated that China's "opening-up" policy will remain unchanged.  According to Chen, whereas China is in the process of further opening up to the world, introducing the NSR regime ensures that national security concerns will be addressed in a transparent manner and it is in line with international practice. 

The NSR regime is not particular to China.  The United States first instituted the NSR process in the 1980s.  Other jurisdictions, such as Australia, Germany, Canada, also have similar processes (see our article entitled More on China's national security review regime - the American regime vs the Chinese regime).  Through our research, we find that during the past few years, the following contemplated outbound investments by Chinese companies underwent the NSR process:

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By Yuan Min, Wang Jianzhao , and Kirby Carder, King & Wood Insurance Department, Beijing Office

Last Sunday during a press conference held during the National People's Congress, China Insurance Regulatory Commission (CIRC) Chairman Wu Dingfu announced that the CIRC is currently creating its policy for the use of insurance premium funds to invest government subsidized affordable housing projects. He specifically stated that China does not have a legal barrier to insurance companies investing insurance funds in affordable housing projects, and he also said that the CIRC plans making Shanghai the first city where this is possible. However, he cautioned that the main priority in insurance fund investment must still be risk management because any investments must provide a return so that an insurance company's duty to pay its policyholders claims can be met.

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By Yuan Min, Wang Jianzhao , and Kirby Carder, King & Wood Insurance Department, Beijing Office

During a press conference held last week during the National People's Congress, China Insurance Regulatory Commission (CIRC) Chairman Wu Dingfu annouced that the the CIRC will set up an insurance exchange in Shanghai as part of the Chinese government's goal of making Shanghai an international finance center. This official announcement shows that the CIRC is serious about setting up an exchange. Yet, at present this announcement probably should just be considered a statement of their intentions because the CIRC did not offer any details on what the purpose of that exchange will be or who will participate in that exchange.

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By Susan Ning, Liu Jia and Angie Ng

In March every year, lawmakers and political advisers from the National People's Congress (NPC) (Chinas equivalent of Parliament) and the Chinese People's Political Consultative Committee (CPPCC) (China's top advisory body) conduct sessions in Beijing to take stock of social, legal and economic issues in China for the preceding year; and discuss objectives (in relation to the same issues) for the year going forward¹.    These sessions are often referred to as the "two sessions".

Two statements which have arisen during these two sessions; are of particular interest (from an antitrust law perspective):
 

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By Yuan Min, Wang Jianzhao , and Kirby Carder, King & Wood Insurance Department, Beijing

On February 18th, 2011 the China Insurance Regulatory Commission ("CIRC") Chairman Wu Dingfu made an announcement that the CIRC will be focusing more attention on regulating bank assurance based insurance policy sales. He noted that insurance purchasers are being given misleading advice about the best insurance policies for for their needs when they are consulting with insurance agents at Chinese banking institutions. The Chairman stated that protecting insurer purchasers interests is one of the CIRC important interests, and is one of the cornerstones to the sustained growth of the Chinese insurance industry.

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By Susan Ning, Angie Ng and Shan Lining

On 3 February 2011, China's State Council released a notice which governs a national security review process for foreign acquisitions of domestic companies¹.   This national security review process will be implemented on 5 March 2011.

Since the release of the notice, there has been a flurry of articles and commentaries in both the legal and business media circuit.  Foreign businesses who wish to invest in China are concerned that this is potentially another tedious clearance process (on top of the corporate, regulatory and antitrust clearance processes) to pass before they are free to close their proposed transactions.

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By Susan Ning, Shan Lining and Angie Ng

On 5 March 2011, China will implement its first National Security Review (NSR) regime.  This NSR regime will govern foreign acquisitions of domestic companies.  The precise boundaries of this NSR regime has been set out in a notice (specifically, a Notice on Establishing National Security Review by Foreign Investors issued by the State Council¹. ). 

We know, from the notice mentioned above that, broadly, a foreign-local transaction may only be caught if: (a) the foreign company acquires de facto control over a local company; and (b) the local company is involved in selling goods or services in relation to either national defense security or national economic security.  [Note that if a foreign company acquires a local company involved in selling goods or services in relation to national defense security, the threshold set out in (a) (i.e. de facto control) does not need to be established.  In other words, the transaction will come under the purview of the notice, despite there being no de facto control.]

This article outlines the above mentioned two thresholds (i.e. de facto control) and what is meant by national defense and national economic security in more detail.
 

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By: Susan Ning, Liu Jia and Yin Ranran

Recently, the Jiangsu Administration for Industry & Commerce ("Jiangsu AIC") issued sanctions against the Concrete Committee of the Construction Materials and Construction Machinery Industry Association of Lianyungang City ("Association") and 16 concrete manufacturers for breach of the Anti-Monopoly Law, by way of having entered into a monopoly agreement.  

This is the first publicly released enforcement decision by the SAIC (which delegated power onto the AIC) in respect of the Anti-Monopoly Law (AML), since the enactment of the AML in August 2008¹. 

The State Administration for Industry & Commerce ("SAIC") possesses the jurisdiction to govern and enforce non-price prohibitions in respect of the AML. And, according to the Article 10 of the AML and the Article 2 of the Procedural Rules by Administration of Industry and Commerce regarding Investigation and Handling of Cases relating to Monopoly Agreement and Abuse of Dominant Market Position, where necessary, SAIC may delegate to relevant AIC of a province, an autonomous region, or a municipality ("Provincial AIC") the authority of anti-monopoly law enforcement with regard to monopoly agreement and abuse of dominant market position.

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By Susan Ning, Liu Jia and Angie Ng

We understand from media reports that on 18 February 2011, Hudong¹  (a Chinese internet search engine) made an Anti-Monopoly Law (AML) complaint to the State Administration for Industry and Commerce (SAIC) against Baidu²  (arguably the most often or commonly used internet search engine in China; often referred to as China's equivalent of "Google"). 

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By Richard  Wigley of King & Wood's Intellectual Property Group

China's packaged software market is estimated to "grow from $4.7 Billion in 2008 to $8.3 Billion by 2013, with a five-year CAGR of 12.1%"¹. China's domestic software industry has, however, long suffered from the effects of rampant software piracy, making it difficult for domestic industry players to proportionally benefit from China's economic rise over the past 30 years. Though the trials and travails of major global software companies, such as Microsoft, in China have been well-documented, domestic software companies, though with a seeming "home market" advantage, have often found it difficult to build viable business models in this environment. This environment for domestic software companies, however, appears to be changing for the better.

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By Yuan Min, Wang Jianzhao and Kirby Carder, King & Wood Insurance Department

Recently, the Shanxi Provincial China Insurance Regulatory Commission ("CIRC") provided a report on the results of its insurance industry transparency project. The overall goal of the project was to promote the stable, secure, and sustained development of the insurance industry in Shanxi province by meshing together government regulation, internal insurance ocmpany protocols, insurance industry self-regulation, and public participation in the insurance industry.

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By Susan Ning, Shan Lining, Yin Ranran and Angie Ng

On February 3, 2011, the State Council released the Notice on Establishing National Security Review Mechanism for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors ("Notice").   According to the Notice, China will implement a national security review process in relation to foreign funded mergers and acquisitions ("M&A") of domestic enterprises 30 days after the issuance of the Notice. A ministerial joint committee ("Joint Committee") led by the National Development and Reform Commission ("NDRC") and the Ministry of Commerce ("MOFCOM") will be set up to administer and enforce the national security review process. 

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By Susan Ning and Shan Lining

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ByYuan Min, Wang Jianzhao , and Kirby Carder, King & Wood Insurance Department, Beijing

The State Council has ordered the Foreign Enterprise Representative Institution Registration and Administration Regulations (Order of State Council No. 584) (《外国企业常驻代表机构登记管理条例》) to come into force on March 1st, 2011. This new regulation alters the rules for a foreign insurance institution to register a representative office in China, and it regulates the activities that a foreign insurance institution representative office can engage in once it is properly registered.

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By Xu Ping, Leading partner of King & Wood's Corporate Group

On February 3, 2011, the General Office of the PRC State Council issued the Notice Regarding the Establishment of National Security Review Mechanism for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (“国务院办公厅关于建立外国投资者并购境内企业安全审查制度的通知”) (the "Notice"), which will take effect 30 days after its promulgation. The Notice represents another major step that the Chinese government has taken in recent years in the area of regulating mergers and acquisitions (M&A) of domestic companies by foreign investors in China.

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By Susan Ning, Chai Zhifeng and Yin Ranran

In November 2009, the Ministry of Commerce of China ("MOFCOM") issued the decision to clear the Panasonic/Sanyo deal with conditions, one of which is for Panasonic to divest its nickel-hydride car batteries business in Japan.  On February 9, 2011, the sale was sealed with Panasonic selling this business to Hunan Corun New Energy Co., Ltd. for about RMB 40 million.

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By Susan Ning and Huang Jing

Partly driven by the QQ-360 disputes (see our article entitled " The QQ / 360 Disputes - Who, What, Where, When and Preliminary Antitrust Analysis"), the Ministry of Industry and Information Technology  (MIIT) released the Interim Rules for Supervision and Management of Internet Information Service Market (Draft for Comment) (Draft Rules), on 12 January 2011.

The objective of the Draft Rules is to safeguard the competitive environment in relation to the internet information service industry, and to safeguard consumers' interests. Broadly, the Draft Rules sets out the code of conduct for internet information service providers (IISP), and dispute resolution mechanisms. 

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By Susan Ning and Liu Jia

Two and half years after the enactment of the Anti-Monopoly Law (AML), the anti-trust authorities in China (i.e. the National Development and Reform Commission (NDRC) and the State Administration for Industry and Commerce (SAIC)) issued detailed rules prohibiting abuse of dominance within their respective remit.

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By Susan Ning and Ding Liang

Since the enactment of the Anti-Monopoly Law (AML), the antitrust enforcement authorities in China (i.e. the National Development and Reform Commission (NDRC)) and the State Administration for Industry and Commerce (SAIC)) have issued procedural rules, detailing how they will go about an investigation and adjudication of an alleged breach of the Anti-Monopoly Law (AML).

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By Susan Ning and Liu Jia

As the Spring Festival approaches, the National Development and Reform Commission ("NDRC") has ordered local price authorities to step up enforcement efforts against price fraud conducts by retail stores, upon widespread consumer complaints.  On 26 January 2011, NDRC issued an announcement titled "Retail stores such as Carrefour are suspected of price fraud, local price authorities will hand out grave penalities" , condemning price fraud conducts by retail stores, based on investigations by local price authorities.

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By Susan Ning and Shan Lining

In January 2011, the National Development and Reform Commission (NDRC) and the State Administration of Industry and Commerce (SAIC) released the Rules on Anti-Price Monopoly (the NDRC Anti-price Monopoly Rules) (see our article entitled "Rules on Anti-Price Monopoly – effective 1 February 2011") and the Rules in relation to Conduct amounting to Monopoly Agreements (the SAIC Monopoly Agreement Rules) (see our article entitled "3 rules which shed light on non-price violations of the Anti-Monopoly Law – effective 1 February 2011") respectively on the 4th and 7th day of the month.
 

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By: Susan Ning, Shan Lining, Liu Jia and Angie Ng

On 7 January 2011, the State Administration of Industry and Commerce (SAIC) published the following 3 rules which accompany the Anti-Monopoly Law (AML):

(a) Rules in relation to Conduct amounting to Monopoly Agreements (Monopoly Agreement Rules);
(b) Rules in relation to Conduct amounting to Abuse of Dominance (Abuse of Dominance Rules); and
(c) Rules in relation to Conduct amounting to Abuse of Administrative Powers (Abuse of Administrative Powers Rules).
 

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By Susan Ning, Chai Zhifeng and Angie Ng

On 4 January 2011, the National Development and Reform Commission (NDRC) fined the Zhejiang Fuyang Paper Making Industry Association (the Association) for facilitating its members in relation to engaging in monopoly acts, in breach of both the Anti-Monopoly Law (AML) and the Price Law (PL)¹.

This is the first enforcement action (in respect of price-related breaches of the Anti-Monopoly Law) by the NDRC in 2011.

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Mark Schaub , King & Wood's Corporate Group and Shanghai office

On March 1st 2011 New Regulations take effect on Registration of Resident Representative Offices of Foreign Enterprises (“Regulations”).

The Regulations clarify the Circular on Further Strengthening the Registration Administration of Foreign Enterprises' Resident Representative Offices issued by the State Administration for Industry and Commerce (SAIC) and the Ministry of Public Security on January 4, 2010, and will replace the Measures for the Administration of Registration of Resident Representative Offices of Foreign Enterprises that were promulgated by SAIC all the way back in March 15, 1983 (“Previous Regulations”).

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By: Mark Schaub and Luo Bin, King & Wood's Corporate Group and Shanghai Office

On December 14, 2010, the State Administration of Taxation (“SAT”) promulgated an Announcement on Issues Concerning the Verification of Taxation Basis of Individual Income Tax Payable on Equity Transfer Income (“Announcement”). The Announcement will come into effect on January 14, 2010.

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By Susan Ning, Zheng Ziqing and Angie Ng

At the brink of the New Year, it is timely to take stock of the antitrust merger control work we've undertaken for our clients and provide some observations re the merger control regime in China:

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By Susan Ning and Ding Liang

On 29 December 2010, the National Development and Reform Commission (NDRC) issued rules entitled Procedural Rules on Administrative Enforcement of Anti-price Monopoly (procedural rules).  These procedural rules provide further guidance as to how Chapter 6 of the Anti-Monopoly Law (AML), entitled "Investigation of Alleged Monopoly Acts" operate.  Chapter 6 of the AML outlines the investigation powers of the antimonopoly authorities. 

This is the first time that the NDRC has issued any procedural rules in respect of the AML.

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By Susan Ning, Ding Liang, Shan Lining and Angie Ng

On 29 December 2010, the National Development and Reform Commission (NDRC) issued rules entitled "Rules on Anti-Price Monopoly"(rules).  These are the first rules to provide further guidance in relation to the price-related prohibitions of the Anti-Monopoly Law (AML). [Note: The NDRC issued these rules in draft form for the first time in September 2009.]  The rules will be effective as of 1 February 2011.

Broadly, the rules expand on and provide further guidance to the prohibitions against anticompetitive agreements and against an abuse of dominance within the AML.
 

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By Susan Ning, Huang Jing and Angie Ng

We often receive queries from clients in relation to whether group restructures need to be notified to the Ministry of Commerce (MOFCOM) for antitrust merger control clearance.

This article provides some general guidance as to when a group restructure needs to be notified to MOFCOM for antitrust merger control clearance.

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By: Susan Ning and Ding Liang

On 22 December 2010, the Minister of Commerce Chen Deming stated in his annual working report at the 2010 National Commerce Work Conference that the Ministry of Commerce (MOFCOM) intends to combine the following processes: (a) administration of foreign investment; (b) anti-monopoly merger control review; and (c) national security review from next year. 
According to Minister Chen's report, the main objective in combining the above mentioned processes is to "protect the security of domestic industries".

It is not clear how the processes in (a) to (c) as mentioned above will be combined or integrated.  This article provides a brief overview of how the processes set out above are currently being conducted.

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Interview with Mark Schaub, a partner with King & Wood's Corporate Group.

Gasgoo.com: Mergers and Acquisitions (M&A in China) is not simply win-win for owners and companies. It’s also about win-win or win-lose for local governments. For example, small manufacturers provide jobs, taxes and gifts to local officials. If a larger manufacturer acquires a small one, jobs will move along with it. This is the main reason the industry is so spread out. No one wants to let go of jobs in their district. So what’s your opinion on dealing with the local government in an M&A case?

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By: Susan Ning and Shan Lining

On 20 December 2010, the Beijing Second Intermediary People's Court (the Court) issued a first instance ruling on an Anti-Unfair Competition Law dispute between Baidu (the largest Chinese search engine provider) and 360 (a large security software provider).  The Court ruled in favor of Baidu, ordering 360 to pay damages amounting to RMB385,000.

At the time of writing, we were unable to obtain a copy of the first instance judgment – thus, this article sets out the facts of the case, based on public or press reports:¹

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By: Susan Ning, Zheng Ziqing and Angie Ng

On 18 December 2010, Mr Shang Ming (Chief of the Antimonopoly Bureau, of the Ministry of Commerce or MOFCOM) delivered a speech at an academic conference entitled "International Symposium on Enforcement of China's Anti-Monopoly Law in the New Economy" held at Beijing's People's University.

During Mr Shang's speech, he revealed the following facts and figures about MOFCOM's merger control regime:

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By: Stephen Nelson and King & Wood's Tax Group

Recently, China clarifies that individuals shall be liable for individual income tax (‘IIT’) on income derived from assignment of trade-restricted shares. According to the Supplementary Notice on Individual Income Tax Issues regarding Transfer of Trade-Restricted Shares (Caishui [2010] No. 70) (“Circular 70”), “trade-restricted shares” refers to shares which have been locked up during initial public offerings and notably, the following shares would be classified as trade-restricted shares:

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By: Susan Ning, Shan Lining and Angie Ng

On 17 November 2010, the National Development and Reform Commission (NDRC) organized a "price monopoly" workshop in Chengdu to take stock of: (a) developments in relation to price related breaches of the Anti-Monopoly Law (AML); and (b) developments in relation to provincial level price authorities and their enforcement of the AML (see our article entitled "Provincial Price Authorities and the AML" dated 20 November 2010.[1]

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By:  Kenneth Y. Choy of King & Wood's Hong Kong office and Antitrust & Competition Group

Tai Po is a traditional village located in the northeastern part of the New Territories in Hong Kong. Its historical relics, old temples, quaint fishing village and natural scenery make it a popular destination for both tourists and local residents alike.

The Hong Kong government began building up Tai Po in the late 1970’s, transforming it from a sleepy fishing community into a bustling new town of 300,000. In the last decade, the Government decided to tear down the old to make way for new facilities in the area. As part of the development, the old Tai Po Temporary Market which had housed many small cooked food stalls was replaced with a brand new complex. Stallholders who operated the cooked food stalls were vacated by the Food and Environmental Hygiene Department, the governmental agency that manages cooked food markets and relocate to the new facility.

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By: King & Wood's Insurance Group

This August, the Chinese Insurance Regulatory Committee disclosed its provisional measures on equity investments made by Insurance Funds (“Equity Investment Measures”). With the introduction of the new PRC Insurance law in October 2009, domestic insurance companies have begun making equity investments into private companies. The new Equity Investment Measures lay out a detailed framework outlining the ways in which insurance companies may participate in direct and indirect equity investment activities, including investments in private joint-stock companies and LLCs.

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By: Susan Ning, Shan Lining, Liu Jia and Angie Ng

On 10 December 2010, the State Council published and enacted a set of revised penalty regulations[1] (vis-à-vis the Price Law 1997). 

Broadly, the penalties set out in these revised penalty regulations are more severe than the previous version. 

Of note is the fact that there is a new Article 5 which outlines more severe and specific remedies in relation to breaches amounting to price-fixing. In addition, the new Article 19 introduces criminal sanctions for breaches of the Price Law 1997 which severely disrupt the market order in China.

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By: Susan Ning, Zheng Ziqing and Angie Ng.

On 15 November 2010, the National Development and Reform Commission (NDRC) issued a notice entitled “Hubei Province Price Bureau to investigate and punish tying case”.[1] 

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【访谈对象】金杜律师事务所北京总部税务部合伙人董刚律师。

采写： 张天慧 何然 金杜出版部

【编者语】在市场经济条件下，税收作为国家进行宏观调控的重要工具，是调整经济结构的“有形之手”，对经济结构调整具有重要的引导作用。从整体上看，我国企业重组税收体系已经基本构建完成。新近出台的国务院27号文更强调通过税收促进企业兼并重组，深化体制机制改革，进一步贯彻落实重点产业调整和振兴规划。

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Interview with Tony Dong

By: He Ran and Zhang Tianhui of King & Wood's Publications

Unlike its invisible counterpart that made 18th century economist Adam Smith famous, the Chinese government's use of taxation is one of the most 'visible hands' controlling the Chinese domestic economy today. In this article, King & Wood partner Tony Dong gives his opinion on new tax regulation encouraging M&A, structural reform and restructuring activity found in the recently promulgated Decree No. 27.

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By: Susan Ning, Ding Liang and Huang Jing

On 22 November 2010, the National Development and Reform Commission (NDRC) announced¹ that it was in the process of determining remedies against eight oil companies for selling diesel above the maximum prices set by the Government.

The eight companies are: (a) Shaanxi Petroleum Chemistry Industry Trade Company; (b) Shaanxi Yanchang New Resources Co., Ltd; (c) Shanxi Yanlian Petroleum Chemistry Co., Ltd Xi’an Supply Store; (d) Shandong Jincheng Petroleum Chemistry Group Company; (e) Jiangsu Province Lianyungang PetroChina Sales Co., Ltd; (f) Sinopec Wuhan branch company; (g) Sinopec Luoyang branch company; (h) PetroChina Wuhan branch Company. [Note: The companies listed in (e) to (h) are State Owned Enterprises (SOEs).]

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By: Zhang Xiaomin, Yang Xiaoyu and Yang Wei

Recent government policy adjusting the number of central state-owned enterprises is likely to lead to numerous new opportunities for law firms hoping to participate in large scale restructuring and capital markets transactions. The Stated-Owned Assets Supervision and Administration Commission of the State Council (SASAC) recently stated that by the end of 2010, the number of central state-owned enterprises must be reduced to 80-100, of which 30-50 should be large internationally competitive corporations, and that by 2015, there should be no more than 1000 regional stated-owned enterprises.  Industry insiders expect the recent policy change to lead to widespread potential for large scale securitization and IPO projects.

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By: Susan Ning, Shan Lining and Angie Ng.

On 17 November 2010, the NDRC organized a “price monopoly” workshop in Chengdu.[1] Government officials from some 15 provincial level price authorities attended this workshop.

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 By Susan Ning, Tao Huang, and Yang Yang

As was the case throughout the world, the global economic downturn beginning in 2008 caused many in the Chinese market to face difficulties in fully performing executory contacts which had been formed prior to the crisis. As such, many parties to such contracts requested modification or even rescission of their contracts under the changed circumstances. As a response to these trends, the Judicial Interpretation on Contract Law II was issued by the Supreme People’s Court of the People’s Republic of China (hereinafter the “SPC”) to further clarify certain legal rules under current Chinese Contract Law . In particular, Article 26, Chapter 4 of the Judicial Interpretation on Contract Law II (hereinafter “Article 26” or the “Fundamental Change in Circumstances” Provision") provides guidance on a party’s right to modify or rescind a valid contract when a Fundamental Change of Circumstances occurs after contract formation. A Fundamental Change of Circumstances in this regard is differentiated from a force majeure event and does not cover changes that may arise from normal commercial risks, and under which the purpose of the contract would be frustrated or performance will result in extreme unfairness.

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By: Susan Ning, Shan Lining and Angie Ng.

On 12 November 2010, Professor Huang Yong (University of International Business and Economics) gave some comments to the media¹ on the QQ-360 disputes (see our previous article entitled “The QQ/360 disputes”).

Professor Huang made the point that industries like the technology and internet services industries develop and change so quickly that by the time either party (i.e. QQ or 360) or a third party brings a claim (pursuant to the Anti Unfair Competition Law (AUCL)) to the courts and receives remedies (e.g. damages), the industry might have changed so much that either one or both of these parties might have been “driven” out of the industry. By contrast, in his comments, Professor Huang spoke about “public enforcement” being a more “efficient” route of enforcing the AUCL.

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By: Susan Ning, Ding Liang and Angie Ng.

Recently, the disputes between Tencent’s QQ and Qihoo’s 360 software have caused quite a stir in the press (see our article entitled “QQ vs 360 – an anti unfair competition case”.

We set out the “whos”, “whats”, “where” and “when” or the background to these disputes. We also provide our preliminary views or analysis re these disputes vis-à-vis the Anti Unfair Competition Law (AUCL) and the Anti-Monopoly Law (AML).

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Interview of Roy Zhang of King & Wood's Banking Department by Zhang Tianhui and He Ran of King & Wood's Publications Group

Financing is a critical consideration in M&A transactions. For a long period of time, financing large scale strategic M&As of listed companies in China has been a bottleneck. As such, it is important for companies to study successful M&A experiences from abroad and develop additional venues and tools for financing and venues for such transactions.

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By: Susan Ning and Shan Lining.

On 30 October 2010, it was reported in the press¹ that the People’s Court has thus far accepted 11 antitrust cases (for the period 1 August 2008 to June 2010). Out of these 11 cases, 10 were antitrust civil cases (see our previous article entitled Two Years on, Ten Antitrust Private Actions) and 1 was an antitrust administrative action.

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By: Susan Ning and Liu Jia.

On 3 November 2010, it was reported in the press¹ that the Changsha Yuelu District People’s Court (in Hunan province) accepted the court’s first private antitrust claim. The antitrust claim was formally accepted by the court 1 November 2010 and is an abuse of dominance case.

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By Susan Ning, Ding Liang and Angie Ng, King & Wood's Competition Practice.

In late August 2010, it was reported in the press that at least 10 antitrust private actions have been heard in the courts in China (see Two years on, ten private antitrust action

This article describes one of the cases, Zhou Ze v. China Mobile Beijing (the Zhou Ze case), in detail. This was an alleged abuse of dominance case – which was later settled.

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By Susan Ning, Shan Lining and Angie Ng, King & Wood's Competition Practice.

On 26 October, a couple of Chinese airlines, including Air China, China Eastern Airlines, Shandong Airlines, Xiamen Airlines, Hainan Airlines, Capital Airlines and Shenzhen Airlines announced, separately, that they were going to raise passenger fuel surcharges for domestic flights.(1)  

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By Susan Ning, Huang Jing and Angie Ng, King & Wood's Competition Group

On 14 October 2010, the PRC National Copyright Administration (NCAC) published two pieces of regulations (the regulations) which govern the collection of copyright royalties for movies provided on the Internet, on flights and on public transport.(1)   Recently there have been concerns from internet cafes that these royalties are unreasonably high.(2)   There has also been some discussion in the press that these alleged “high” royalties could constitute an abuse of intellectual property rights, in breach of Article 55 of the Anti-Monopoly Law (AML).(3)

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By Susan Ning and Shan Lining, King & Wood's Competition Group

On 14 October 2010, Tencent Technology (Shenzhen) Co., Ltd (Tencent) launched an action against Beijing Qihoo Technology Co., Ltd (Qihoo) alleging that the latter has breached Article 14 of the Anti-Unfair Competition Law(1). Article 14 of the Anti-Unfair Competition Law prohibits entities from fabricating or spreading false facts, resulting in damaging the business reputation of a competing entity

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By Susan Ning, Huang Jing and Angie Ng, King & Wood's Competition Practice

We understand that the SAIC is currently working on draft guidelines (the guidelines) which will shed light on how Article 55 of the Anti-Monopoly Law (AML) will be enforced. It has been reported in the press that the SAIC has published a 4th draft of these guidelines and are currently consulting with the relevant stakeholders (we understand that these drafts are not publicly available).

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By Susan Ning and Ding Liang, King & Wood's Competition Group

In September 2010, Wuxi Baocheng Vehicle Cylinder Inspection Co. Ltd (WB) filed a civil suit to against Wuxi China Resources Gas Co., Ltd (WCR), alleging that the latter abused its dominance, in breach of the Anti-Monopoly Law (AML) (the “WB-WCR case”). WB is engaged in the business of inspecting and installing compressed natural gas vehicle cylinders. WCR owns and operates natural gas filling stations. WB alleged that WCR abused its dominance by refusing to fill natural gas for a vehicle that was installed with a natural gas cylinder installed by WB, in breach of Article 17(3) of the AML. (1)

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 By Helena Chen and Charles Law, King & Wood's Cross-Strait Research Group

Since the beginning of Ma's leadership in Taiwan in May 2008, cross-strait relations have grown considerably closer. For example, the First Cheng-Chiang Summit in June 2008 expanded direct passenger flights and facilitated mainland residents' travels to Taiwan. The Second Cheng-Chiang Summit in November 2008 explored issues relating to air transportation, shipping links, direct mail services, and food safety. In addition to establishing a consensus on jointly promoting PRC investment in Taiwan, the Third Cheng-Chiang Summit in April 2009 gave way to three agreements: Agreement on Joint Cross-Strait Crime-fighting and Mutual Judicial Assistance, Cross-Strait Financial Cooperation Agreement, andSupplementary Agreement on Cross-Strait Air Transport. As a result, Taiwan began amending and implementing laws and regulations concerning mainland investment in Taiwan.

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By Susan Ning and Ding Liang, King & Wood's Competition Group

In late August 2010, it was reported in the press that at least 10 antitrust private actions have been heard in the courts in China (see Two years on, ten private antitrust actions). This article describes one of the cases – Huzhou Yiting Termite Prevention Service Co., Ltd vs. Huzhou Termite Prevention Research Institute (an alleged abuse of dominance case) – in detail.

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宁宣凤、丁亮、Angie Ng ，  金杜反垄断及反不正当竞争组

据相关媒体报道，截止到2010年8月下旬，国内法院共受理了至少10件反垄断民事诉讼案件（参见“近两年内的十件反垄断案件”）。

本文将就北京书生公司诉上海盛大、上海玄霆公司滥用市场支配地位一案的判决进行详细解读。

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By Susan Ning, Ding Liang and Angie Ng, King & Wood's Competition Practice

In late August 2010, it was reported in the press that at least 10 antitrust private actions have been heard in the courts in China (see Two years on, ten private antitrust actions).

This article describes one of the cases – Sursen v Shanda and Xuanting (an alleged abuse of dominance case) – in detail.

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宁宣凤、Angie Ng、郑孜青，金杜反垄断与反不正当竞争组

由于中国是世界制造中心，在这里企业之间的纵向服务合同或协议（如生产商与经销商之间）非常普遍，因此，中国反垄断法中有关规范纵向限制（如限制转售价格行为）的法律规定显得尤为重要。

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By Susan Ning, Angie Ng and Zheng Ziqing, King & Wood's Competition Practice

Antitrust or competition law rules governing vertical restraints (such as resale price maintenance) are significant in China because as a manufacturing “hub”, vertical contracts or agreements such as manufacturer-distributor agreements are very common.

This article outlines the rules governing resale price maintenance (RPM), pursuant to the Anti-Monopoly Law (AML); and compares these rules to the rules governing RPM pursuant to the European competition law.

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汪蕊、黄大纲、邱少林   金杜知识产权组

一、引言

随着国内网络游戏市场的迅速扩大，中国已成为国内外网络游戏开发商（特别是大型角色扮演类网络游戏(MMORPG) 开发商）淘金的乐土。2009年，有35款“进口网络游戏”(1)获准在中国发布运营，其营业收入占到我国当年网络游戏产业销售总收入的38.8%，高达258亿元人民币。(2)

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By Wang Rui, Qiu Shaolin, and Duncan Hwang, King & Wood's IP Practice

With the rapid growth of China’s online video gaming market, China has become a particularly appealing target market for both Chinese and foreign online game developers, particularly those developing Massively Multiplayer Online Role-Playing Games (MMORPG). In 2009, 35 imported online games obtained approval for release in China, and imported games have accounted for 38.8% of China’s CNY 25.8 billion online gaming industry.

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 宁宣凤、丁亮、 Angie Ng，金杜反垄断及反不正当竞争组

据有关媒体报道，截止到2010年8月下旬，人民法院共受理了至少10件反垄断诉讼案件（详见“近两年内的10件反垄断诉讼案件”）。本文将就其中之一，也是中国法院受理的第一起反垄断诉讼案即“李方平诉中国网通”案作简要分析。（此案于2008年8月1日反垄断法实施当天立案。）

本案中原告诉被告滥用市场支配地位，2009年12月18日，北京市第一中级人民法院做出一审判决， 2010年6月9日，北京市高级人民法院维持了一审判决。

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By Susan Ning, Ding Liang and Angie Ng, King & Wood's Competition Practice

In late August 2010, it was reported in the press that at least 10 antitrust private actions have been heard in the courts in China (see Two years on, ten private antitrust actions).This article describes one of the cases - Li Fangping vs China Netcom – in detail. This was th

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宁宣凤、姜丽勇、郑孜青和Angie Ng  反垄断及反不正当竞争小组

Ⅰ简介：

在中国，由以下两个部门负责合并控制：

a商务部反垄断局：负责受理和审查经营者集中申报的具体执法工作。

b反垄断委员会（国务院的下属部门）：负责相关并购规定和指引的制定和发布。该委员会实际上是一个议事协调机构，指导和协调商务部、国家发展和改革委员会和国家工商管理总局三个执法机构的工作。

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Susan Ning, Jiang Liyong, Zheng Ziqing, and Angie Ng, Antitrust & Competition.

I INTRODUCTION

The following two authorities deal with mergers:

a the Anti-Monopoly Bureau within the Chinese Ministry of Commerce (‘Mofcom’) is the authority responsible for reviewing and clearing merger filings; and

b the Anti-Monopoly Commission (a division of the State Council) is the authority responsible for formulating and issuing merger guidelines (it is also the coordinating government agency between Mofcom and the two other antitrust enforcement agencies, the National Development and Reform Commission (NDRC) and the State Administration for Industry and Commerce (SAIC)).

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By Susan Ning, Liu Jia, Huang Jing and Angie Ng, King & Wood's Competition Group

BHP Billiton (BHP)(1), a global natural resources company, has recently launched a hostile bid (the bid) to purchase PotashCorp (Potash)(2), a leading potash producer based in Canada.
This proposed acquisition is likely to have an impact in the Chinese potash industry.

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By Susan Ning, Ding Liang and Shan Lining, King & Wood's Competition Group

At the end of last month, it was reported in the press (for example see an article dated 29 August published in the Legal Daily, that since the enactment of the Anti-Monopoly Law (AML) in 2008, at least ten antitrust private actions have been heard in the courts. 

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By Yuan Min, Partner, King & Wood's Insurance Group

Recently, the Associated Press reported that the New York State Attorney General has served subpoenas on two major multi-national life insurers as part of that office's inquiry into those companies policies for paying death benefits to life insurance policyholders' beneficiaries. This news comes after Bloomberg News reported that the United States' Department of Veterans' Affairs has begun an investigation into the possibility that life insurance companies are improperly benefiting by holding onto death benefit proceeds after these should have been paid to death benefit beneficiaries.

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 By Susan Ning, Jiang Liyong and Angie Ng, King & Wood's Competition Practice

On 5 July 2010, the Ministry of Commerce (MOFCOM) enacted regulations which set out the rules and procedures to do with divesting assets. These regulations are entitled “Interim Regulations on Implementing the Divestiture of Assets or Businesses in Concentration of Business Operators” (divestiture regulations). A copy of the divestiture regulations are located here.
 

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 By Susan Ning, Ding Liang and Jiang Liyong, King & Wood's Competition Practice

In mid-August, it was reported in the press(1)  that the National Development and Reform Commission (NDRC) had received complaints that the commercial banks in China have engaged in price-fixing conduct. Pursuant to the Anti-Monopoly Law, conduct amounting to price-fixing is prohibited.

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 By Susan Ning, Shan Lining and Liu Jia, King & Wood's Competition Practice

On 13 August 2010, the proposed acquisition of Alcon, Inc (Alcon) by Novartis AG (Novartis) was approved by the Ministry of Commerce (MOFCOM), with conditions. MOFCOM’s public announcement in relation to this acquisition is located here. This is the 6th merger that has been approved with conditions, since the enactment of the Anti-Monopoly Law (AML) in 2008.(1)

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 By Susan Ning, Shan Lining and Angie Ng, King & Wood's Competition Practice

On 12 August 2010, the PRC Ministry of Commerce (MOFCOM) hosted a “stocktake” briefing to mark the second anniversary of the Anti-Monopoly Law (AML).(1)  Director-General of the Anti-Monopoly Bureau Shang Ming chaired the briefing. MOFCOM’s transcript of this briefing is located here. The following were the salient points raised during the briefing.

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By Mark Schaub, Partner, Corporate, King & Wood Shanghai

Most companies engaging in a China project will likely need support from external consultants. This final section highlights the remaining members of the China deal team, including translators, accountants, and outside counsel.

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By Mark Schaub, Partner, Corporate, King & Wood Shanghai

Most companies engaging in a China project will likely need support from external consultants. However, selecting the external team is often more difficult than assembling the internal team — who do you need? How do you find good ones? And what role should they play? This portion highlights the infamous China consultant. What kind of role do they play and do you actually need them?

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By Mark Schaub, Partner, Corporate, King & Wood Shanghai

Many West European and US companies have thinned out their ranks of middle management in the never-ending pursuit of shareholder value. A China project is likely to be more time intensive and involved (and therefore expensive) than the foreign company initially forecasts. For this reason many foreign investors in China face difficulties in assembling a successful business project team to implement the project. Part I discusses the assembling of an effective in-house team.

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By Susan Ning, Ronald Arculli, Peter Waters, and Angie Ng of King & Wood and Gilbert + Tobin (1)

Hong Kong's Competition Bill (the Bill) was gazetted on 2 July 2010.(2) Formal public consultations on a cross-sector competition law for Hong Kong commenced in 2006. The Bill will be tabled in Hong Kong's Legislative Council (LegCo) on 14 July 2010. When the Bill becomes law, it will be known as the Competition Ordinance (CO).

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By Mark Schaub, Partner, Corporate, King & Wood Shanghai

On May 19, 2010, the People's Bank of China (“PBOC”) issued a new set of regulations for online payment service providers that will take effect on September 1, 2010. The new regulations bring payment services within the banking regulatory scheme.

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By Mark Schaub, Partner, Corporate, King & Wood Shanghai

China's first Renewable Energy Law came into effect on 1st January 2006 and serves as a basis to meet goals like reducing air pollution; protecting human health and the environment; strengthening and developing energy supply to rural areas; promoting investment and development of renewable energy; etc. The PRC Renewable Energy Law is also a framework for various provincial government agencies and local authorities which implement the law in a large number of more detailed plans, rules and regulations. After four years of rapid change and expansion of China's renewable energy sector, the Standing Committee of the National's People's Congress passed amendments to the Renewable Energy Law in December 2009, which now came into effect on 1 April 2010.

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By Mark Schaub, Partner, Corporate, King & Wood Shanghai

See also: King & Wood's Tax Practice.

On February 20, 2010, the State Administration of Taxation (SAT) issued the “Measures for the Administration of Taxation on Representative Offices of Foreign Enterprises” (Guo Shui Fa [2010] No. 18) (the “Rep Office Tax Measures”) to reform the taxation rules applicable to representative offices of foreign enterprises in China (“Rep Office”). The Rep Office Tax Measures, which are retroactively effective from January 1, 2010, revise existing Rep Office taxation rules inter alia by abolishing previous tax exemptions and increasing the minimum deemed profit rate. Prior to effectiveness of the Rep Office Tax Measures, Rep Offices were taxed in one of three ways, (i) based on their actual profits (“Actual Profit Method”), (ii) based on their “deemed profits” (“Deemed Profit Method”) or (iii) not subject to tax (“Tax Exemption”) when certain criteria were met. The major changes brought about by the Rep Office Tax Measures include:
 

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肖马克（合伙人）    金杜公司组               上海分所

每一家跨国公司都需要制定一个中国业务发展战略。中国经济在全球金融危机冲击下的坚韧表现使其对海外投资者愈发具有吸引力。不过问题是，投资公司应如何就个案项目中的潜在风险和机会做出真实的评估呢？

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By Mark Schaub, Partner, Corporate, King & Wood Shanghai

Every multinational company needs a China strategy. The country's resilient economic
performance during the global downturn has made it even more attractive to some overseas
investors, but how should such companies arrive at a realistic appraisal of the potential
risks and opportunities of a specific deal?

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By Ariel Ye and James Rowland, King & Wood's Cross Border Litigation & Arbitration Group

Many foreign business operators report that they are concerned about the risks associated with entertaining their business partners in China, even when providing meals or offering to pay for travel and accommodation costs of a low value.
 

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By Andrew Tan, Partner, Corporate, King & Wood–Hong Kong

The Hong Kong Environmental Protection Department (EPD) announced on 1 December 2009 that the Supplementary Notes on the Implementation of Projects under the Clean Development Mechanism (CDM) by Hong Kong enterprises on the Mainland have been released by both the Central and the HKSAR Governments. These notes open up new opportunities for Hong Kong companies (as well as others through companies in Hong Kong) to participate in CDM projects in mainland China.

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By Xu Ping, Partner, King & Wood's FDI Department

In continued support of foreign direct investment into China, on April 13, 2010, China's State Council released the Further Views on the Utilization of Foreign Capital (国务院关于进一步做好利用外资工作的若干意见). These new guidelines for foreign investment in China encourage foreign funds to flow into high-end manufacturing, hi-tech and eco-friendly sectors and to the central and western areas of the nation. The guidelines restrict investment into environmentally unsound projects and in sectors suffering from overcapacity. Meanwhile, the new guidelines also promise more favorable policies for foreign-funded companies, including an array of new tax incentives.

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By Zhang Yi and Alan Du, King & Wood's Corporate Group

The Oriental Morning Post reported that a Trial Plan for the Participation of Foreign Investment into RMB Equity Investment Funds (the “Trial Plan”) was approved by the Shanghai government on March 15, 2010. This development will be fully publicized in April and first implemented in the Pudong New Area. The Trial Plan will open a gateway for the conversion of foreign exchange into RMB, which has been a major factor hindering foreign general partners (GP) and limited partners (LP) from becoming involved in the RMB PE fund industry.

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By Wang Fengli and Wang Jiangang, King & Wood's Dispute Resolution Group

For many people, their main wealth management strategy involves purchasing financial products promoted by banks. Since the first impact of the global financial crisis was felt in 2008, the performance of different bank-issued financial products has varied greatly. Some Chinese investors have lost money as a result of buying financial products promoted by foreign-funded banks, and some have even sued those banks for compensation. Since financial products are generally quite complex, hurt investors often make their claim against a bank on the grounds that the bank failed to give clear notice about the risks inherent in the financial product which it was promoting and that the bank induced the investor into purchasing a product while concealing important facts.

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By John Lo, Partner, Corporate, King & Wood–Hong Kong

Hong Kong is blessed with many favorable elements for business growth. The most prominent factors often cited for Hong Kong's business success include its gateway role to China, the rule of law, and a location where goods, services and finance move freely. Such a positive environment has led to many success stories, particularly in the tech sector.

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By John Lo, Partner, Corporate, King & Wood–Hong Kong

Nurturing the growth of a science and technology focused sector became a significant part of the government policies of the first post-1997 administration. Under the guidance of the late Professor Tien Chang-lin, former chancellor of University of California, Berkeley, the government issued a technology blueprint for Hong Kong shortly after the changeover, which led to a new period of innovation and growth in the tech sector.

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By John Lo, Partner, Corporate, King & Wood–Hong Kong

Hong Kong has a strong venture capital industry and a vibrant capital market, which together afford a much needed financial backdrop for financing growth businesses. This business friendly environment provides funds for start ups as well as exit strategies for more mature companies.
 

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By Tony Dong and Alice Zhang, King & Wood's Tax Department

It is common for multinational companies to deploy offshore holding structures or set up special purpose vehicles ("SPVs") in tax havens to make investments, enter into cross border transactions or to list their IPOs. There are various reasons for companies to utilize offshore SPVs, and tax optimization is clearly one of the top considerations. For example, a company may take advantage of preferential tax treaty provisions or align profits to a low-tax jurisdiction or tax haven. However, in recent years, governments around the world have been tightening their tax administration of cross-border tax avoidance arrangements with TPG's recent tax dispute in Australia is the latest example. The Chinese government has been actively involved in the game, and the State Administration of Taxation ("SAT") has issued a series of regulations in 2009 to strengthen tax scrutiny on non-residents.

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By John Lo, Partner, Corporate, King & Wood–Hong Kong

To a large extent, angel investment in Hong Kong has so far revolved around individual investors rather than institutions. It is useful to examine local angel financing activities by looking at the angel profiles.To date, no systematic research has been conducted regarding the number or makeup of business angels in Hong Kong. General observations indicate that the following groups, not in any order, have been spearheading the efforts: (a) former VC practitioners; (b) individuals who have made money from entrepreneurial activities or as angels; (c) second generation of the leading business families; (d) professionals such as lawyers, doctors and accountants; (e) tech executives and professionals; (f) well-to-do manufacturers who made their initial fortunes with investments in China; and (g) returnees or overseas Chinese with exposure to angel investment elsewhere.
 

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By John Lo, Partner, Corporate, King & Wood–Hong Kong

Hong Kong has perhaps one of the most heterogeneous and interesting mix of startups in the world in terms of founder makeup, location of operational base and target markets.  Founders of a Hong Kong startup, for example, could be made up of individuals from a wide variety of personal backgrounds, including locals, returnees mostly from North America, foreign expats, and PRC residents and returnees, especially those hailing from the Pearl River Delta. While a “Hong Kong startup” may be taken to mean the use of a Hong Kong incorporated operating or holding company, depending on the background or special strength of its founders, its actual seat of management or key operational base could be in Hong Kong, in China, or sometimes even the U.S. The initial targeted market of startups could also vary widely from the local market, to China, Southeast Asian region or other overseas markets.
 

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By John Lo, Partner, Corporate, King & Wood – Hong Kong

Angel investment in Hong Kong may be on the verge of an exciting transition from being an occasional engagement of a wealthy few to a more widespread, organized form of startup financing involving many more people with the wherewithal to invest.
 

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By Stephen Nelson, Partner and Head of King & Wood's Taxation Practice

It is not uncommon for foreign investors to sell the shares of intermediate holding companies that hold the equity in Chinese companies as a way to exit their investments in China, in order to get around government approval procedures, as well as to avoid PRC tax on their capital gains. It certainly appears that these offshore transfers may be examined by the China tax authorities going forward, and may no longer escape the Chinese tax net. Recently, the State Administration of Taxation (the “SAT”) issued the circular Guoshuihan [2009] No. 698, “Strengthening the Tax Administration of Equity Transfers by Non-resident Enterprises” ("Circular 698”), which, for the first time, explicitly requires disclosure to the tax authorities of offshore indirect transfers of equity in PRC companies. The tax authorities may then examine the transferred offshore holding company in order to ascertain whether the structure has a reasonable commercial purpose – if not, the offshore gain could be held subject to Chinese tax.

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林燊，金杜律师事务所税务主管合伙人

过去实践中，为了绕过中国商务局、税务局等部门的审核监管，境外投资方通常会考虑采用转让设在境外（例如BVI, 香港）的控股公司的股权而达到转让国内企业股权的目的。时过境迁，这种做法现在很有可能会受到中国税务机关的挑战。近日，国家税务总局下发《关于加强非居民企业股权转让所得企业所得税管理的通知》（国税函[2009]698号，简称“698号文”），该文件第一次将间接转让（即前述的转让境外控股公司）以明文规定的形式纳入中国税务审查的范畴。税务机关将审查境外股权结构是否具有合理商业目的，如果没有，那么转让境外股权取得的资本利得仍有可能需要在中国缴税。因此，这将对境外控股公司架构及境外并购重组交易产生重大影响。

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By Mark Schaub, Partner, Corporate, King & Wood - Shanghai

Three consumer credit companies have obtained regulatory approval for their establishment from the China Banking Regulatory commission (CBRC). The main shareholder in each of these consumer credit companies are domestic banks namely Bank of China (BOC), Bank of Beijing and Bank of Chengdu.

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By Zhang Yi, Partner, & Alan Du, Counsel, Corporate Group, Shanghai

The Administrative Measures for Establishment of Partnership Enterprises in China by Foreign Enterprises or Individuals (the “Measures”) was issued by State Council on 2 December 2009. The Measures, effective from 1 March 2010, will allow foreign investors to directly act as partners of partnerships in China.

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林燊，金杜律师事务所税务主管合伙人

中国政府对境外控股公司的反避税管理又向前迈进了一步。国家税务总局日前下发文件，即《关于如何理解和认定税收协定中”受益所有人”的通知》（国税函[2009]601号，简称“601号文”），指导地方税务机关调查认定申请人是否满足“受益所有人”的条件，以决定申请人能否享受税收协定中有关股息、利息、特许权使用费、财产转让收益等优惠待遇。该文件的发布引起广泛关注，跨境交易的税务筹划及利用境外控股公司享受税收协定优惠的安排将受到很大限制。

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By Stephen Nelson, Partner and Head of King & Wood's Taxation Practice

China’s crack down on tax anti-avoidance took another major step forward with the release of a new Circular by the SAT which may severely restrict the ability of offshore holding companies to take advantage of tax treaty benefits. The SAT’s “Notice on Interpretation and Determination of Beneficial Owner under Tax Treaties” (Guoshuihan [2009] No. 601, or “Circular 601”), directs local tax authorities to investigate whether an applicant satisfies the requirements to qualify as a beneficial owner, which is a pre-requisite to enjoy the benefit of a reduced withholding tax on dividends, interest, royalties or capital gains under a double tax arrangement.

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The People's Government of Shanghai Pudong New Area promulgated on June 2, 2009, the Pilot Measures for the Establishment of Foreign-invested Equity Investment Management Enterprises in the Pudong New Area of Shanghai ("Pilot Measures"). The Pilot Measures provide guidance on registration and incorporation of equity investment management companies in Pudong New Area to be established by foreign equity investment capital firm including private equity investment and venture capital.
 

By Zhang Yi, Partner at King & Wood's Corporate Group

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By Xu Jing, Partner at King & Wood's Intellectual Property Group

Malicious litigation is broadly thought to be using a legal right to litigate to protect an interest when no substantive right has been violated. Currently, Chinese law does not provide any specific provisions on how to determine whether a party has abused its right to litigate, nor does the law define the concept of malicious litigation. Moreover, Chinese law does not provide specific remedies for a victim of malicious litigation to repair the damages suffered from a malicious litigation.

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Chinese outbound investment has grown rapidly in the last few years, particularly in the energy, mining, banking, IT and creative industries. On August 18, 2009 China Petroleum & Chemical Corporation (Sinopec) announced the USD 7.2 billion acquisition of the Swiss Addax Petroleum Corporation. This was the largest international acquisition by a Chinese company to date. Additionally, CNPC has made several large international acquisitions - for example, in May, 2009, CNPC acquired a 45% stake in Singapore Petroleum for USD 1.2 billion while companies such as China Minmetals, China Nonferrous Metals, Baosteel, and ICBC have also made significant outbound investments recently. With the increasing internationalization of Chinese companies, commercial disputes are almost inevitable. In our experience, when dealing with international arbitration and litigation proceedings, we see Chinese companies employing a number of different strategies:

By King & Wood's Cross Border Dispute Resolution team

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Emissions trading refers to a mechanism for trading legal emissions rights as commodities with the aim of controlling the overall emission of pollutants into the environment and optimizing the allocation of emissions quotas. As a concept, emissions rights trading dates back over thirty years. However, it was not until the advent of the Kyoto Protocol which became effective in 2005, that the international community established the “Clean Development Mechanism” (“CDM”), a global emissions reduction regime. Under this mechanism, every developed country is required to commit to a certain amount of emissions reduction by a specified deadline. Those countries which generate more emissions than their certified emission reduction (“CER”) may purchase CER credits from the countries which have unused CER credits or which are not subject to emissions reduction commitments. In other words, enterprises in different countries may buy and sell rights to emit carbon dioxide by means of climate exchanges in a similar manner as they would trade stocks in stock exchanges.

By Xu Ping, Partner, FDI

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A Chinese company's top executive is usually the company's legal representative, and he or she is legally entrusted with the company seal, which is the company's official symbol. The company seal provides the legal capacity to make and execute agreements, provide guarantees, transfer assets, and legally bind the company. When a legal representative is replaced, the displaced legal representative must return the company seal to the company so that the new legal representative can represent the company. However, if the displaced legal representative refuses to return the seal, the company could be liable for all the agreements that the former legal representative binds the company to. In other words, even if the articles of association can be used to remove an executive it does not necessarily mean that the foreign investors have been able to regain control of the company in practice. Therefore, retrieving the terminated legal representative's unlawfully held company seal is an important step toward the foreign investors recapturing control of the company.

By Zhang Shouzhi, Xu Xiaodan and Li Xiang, King & Wood's Cross-Border Dispute Resolution Practice, Beijing

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China's rapid economic development and its emerging middle class allow franchises to operate in China under the following model:

The franchisor
• owns a well-known brand with a global reputation;
• has a strong desire to expand its brand in China;
• currently lacks sufficient capital and the traditional franchising model is no longer suitable to support such expansion.

The franchisee:
• has a well-developed distribution network;
• already owns second-line brands for the same or similar products which have already established certain market share in China;
• has ready capital and other operational resources.

By Cecilia Lou, Partner at King & Wood's Intellectual Property Group