Domestic information

1. Xinhua Trust declares bankruptcy, reducing 68 trust licenses by 1

On May 26th, nearly a year after entering bankruptcy proceedings, Xinhua Trust Co., Ltd. was officially declared bankrupt by the Chongqing Fifth Intermediate People's Court due to its inability to repay its due debts and insufficient assets to fully repay all debts, in accordance with the legal provisions for declaring bankruptcy. Xinhua Trust is one of the earliest trust companies established in China and was once part of the "Tomorrow Series". On July 17, 2020, Xinhua Trust was taken over by the former China Banking and Insurance Regulatory Commission due to triggering takeover conditions, with a takeover period of one year. On July 16, 2021, the former China Banking and Insurance Regulatory Commission decided to extend the takeover period of Xinhua Trust for one year. On June 16, 2022, the "Application for Bankruptcy Liquidation by Xinhua Trust Co., Ltd." was approved by the original China Banking and Insurance Regulatory Commission, agreeing that Xinhua Trust entered bankruptcy proceedings. (Source: Daily Economic News, National Enterprise Bankruptcy and Reorganization Case Information Network, Xinhua Trust Official Website)

Recommendation: The core reason for the bankruptcy of Xinhua Trust is the failure to properly handle and resolve various problems and risks that arise in the company's business activities, which indirectly clarifies the inevitability of the absence of a so-called "backstop". Admittedly, the bankruptcy of trust companies is still a rare phenomenon in the industry, but in essence, as one of the components of the market economy, trust companies will also face the process of "survival of the fittest". Therefore, it is necessary for trust companies to return to their original business principles, strengthen internal governance, operate steadily, prevent risks, and do a good job in protecting financial consumers.

2. The State Administration of Financial Supervision and Administration of China has officially taken an important step in the reform of financial regulatory institutions

On May 18th, the State Administration of Financial Supervision and Administration of China was officially listed, and China's financial regulatory system officially entered a new era led by the Financial Stability and Development Commission, the People's Bank of China, and the State Administration of Financial Supervision and Administration of China's "one bank, one bureau, one meeting". According to the Plan for the Reform of the Party and State Institutions, the State Administration of Financial Supervision and Administration, as an institution directly under the State Council, will be responsible for the supervision of the financial industry except for the security. The China Banking and Insurance Regulatory Commission will no longer be retained. (Source: Xinhua News Agency)

Recommendation: In recent years, China has continuously promoted the reform of the financial regulatory system. The establishment of the State Administration for Financial Supervision and Administration is an important step in exploring the establishment of a mixed operation regulatory system. Strengthening coordination and linkage in the face of sudden risk events, enhancing regulatory synergy, and helping to maintain the bottom line of avoiding systemic financial risks.

3. The People's Bank of China and the State Administration of Foreign Exchange: Continuously optimizing the centralized operation and management policies for cross-border funds of domestic and foreign currencies of multinational corporations

Recently, the People's Bank of China and the State Administration of Foreign Exchange decided to carry out pilot projects in Beijing, Guangdong, and Shenzhen to optimize and upgrade the policy of centralized operation and management of cross-border funds in local and foreign currencies for multinational corporations. The main content includes: firstly, optimizing and integrating the relevant policy requirements for the centralized operation of cross-border funds of existing multinational corporations to benefit more enterprises; The second is to increase the freedom of cross-border fund operation for enterprises, allowing multinational corporations to determine the collection ratio of foreign debts and overseas loans based on the principle of macro prudence; Thirdly, support multinational corporations to carry out cross-border fund centralized operation business in RMB; The fourth is to simplify the filing process and review materials related to fund use. (Source: Central Bank official website)

Recommendation: The continuous deepening of reform and opening up in the foreign exchange field by the two departments is conducive to the stable and orderly promotion of high-quality capital account opening, and to improving the level of cross-border trade and investment and financing facilitation, thereby better serving the high-quality development of the real economy.

4. China Securities Regulatory Commission and People's Bank of China: The Provisional Regulations on the Supervision of Important Money Market Funds have been officially implemented

On May 16th, in order to strengthen the supervision of important money market funds, the Provisional Regulations on the Supervision of Important Money Market Funds jointly issued by the China Securities Regulatory Commission and the People's Bank of China were officially implemented. According to the Provisional Regulations, money market funds that meet the conditions of a scale greater than 200 billion yuan or a number of investors greater than 50 million should be included in the evaluation scope. The China Securities Regulatory Commission will evaluate the participating products, determine the final list, and make it public. (Source: 21st Century Economic Report)

Recommendation: The implementation of the Provisional Regulations will impose certain restrictions on some large-scale products, and may even affect the returns of corresponding products. However, the overall security of the market will be significantly improved and systemic financial risks will be effectively prevented.

5. More than 50 companies have joined, and insurance fund trusts have become a powerful tool to attract high net worth individuals

Recently, another insurance company announced the landing of insurance fund trust business. Insurance fund trusts are becoming one of the important businesses for insurance companies to attract high net worth individuals, and may to some extent promote the transformation and development of some insurance companies' businesses. At present, most trust companies require an insurance trust of 1 million yuan to be established. The main insurance products that can establish an insurance trust are life insurance, large annuity insurance, and comprehensive insurance. The China Trust Industry Association suggests that in the future, products such as disability insurance trust, elderly insurance trust, high-risk occupational insurance trust, hospitalization insurance trust, and medical insurance trust can be explored and promoted. According to incomplete statistics, as of now, more than 30 life insurance companies have cooperated with more than 20 trust companies to carry out insurance fund trust business. (Source: Zhongxin Jingwei)

Recommendation: Insurance trust has the dual advantages of insurance and trust, which not only has the protection function and leverage advantage of traditional insurance industry, but also can achieve the purpose of asset isolation and wealth inheritance through trust. The combination of the two achieves a 1+1>2 effect, which can fully meet the deep needs of risk management and wealth management of high net worth individuals.

6. China Securities Regulatory Commission: Release of Guidelines for Overseas Issuance of Global Depositary Receipts by Domestic Listed Companies

On May 15th, the China Securities Regulatory Commission issued the "Guidelines for the Application of Regulatory Rules - Overseas Issuance and Listing Category No. 6: Guidelines for Overseas Issuance of Global Depositary Receipts by Domestic Listed Companies". Domestic listed companies that issue Global Depositary Receipts for the first time overseas should file with the China Securities Regulatory Commission within 3 working days after submitting their application for overseas issuance and listing. Before a domestic listed company submits an application for issuance and listing overseas, the sponsor shall submit a registration application for the issuance of new basic shares to the domestic stock exchange. The domestic stock exchange shall issue an audit opinion in accordance with the procedures for issuing stocks to specific targets by the listed company, and report it to the China Securities Regulatory Commission for registration. Domestic listed companies issue global depositary receipts again in the same overseas market, and the registration procedures for the issuance of new underlying shares are the same as for the initial overseas issuance of global depositary receipts; After the overseas issuance is completed, it shall be filed with the China Securities Regulatory Commission within 3 working days. (Source: Official website of China Securities Regulatory Commission)

Recommendation: Overseas issuance and listing is an important part of the opening up of the capital market to the outside world. The introduction of the "Guidelines" fills the institutional gap in the supervision of domestic companies' overseas issuance and listing, and also provides a more transparent and predictable institutional environment for domestic enterprises to go overseas for listing.

7. China Securities Regulatory Commission: Guiding Stock Exchanges to Revise Guidelines for Reviewing REITs

On May 12th, the China Securities Regulatory Commission (CSRC) guided stock exchanges to revise the Guidelines for the Review of REITs, highlighting the focus on "asset management", further optimizing the review of REITs, strengthening information disclosure requirements, clarifying the review and information disclosure standards for industrial parks and toll roads, improving the transparency of recommendation review for mature types of assets, accelerating the pace of issuance and listing, and promoting high-quality development of the REITs market. Under the guidance of the China Securities Regulatory Commission, the Shanghai Stock Exchange has revised and issued the "Guidelines for the Application of the Rules of the Shanghai Stock Exchange for Public Offering of Infrastructure Securities Investment Funds (REITs) No. 1- Audit Concerns (Trial) (Revised in 2023)"; The Shenzhen Stock Exchange has revised and issued the "Guidelines for Public Offering of Infrastructure Securities Investment Fund Business No. 1- Audit Concerns (Trial) (Revised in 2023)". (Source: China Securities Regulatory Commission official website, Shanghai Stock Exchange official website, Shenzhen Stock Exchange official website)

Recommendation: This revision focuses on "asset management", and focuses on building an audit and information disclosure rule system that conforms to the characteristics and laws of infrastructure REITs, so as to play a role of escort for REITs to give full play to the revitalization of existing assets, expand effective investment, and reduce the leverage ratio of real enterprises.

8. Impact of nearly 30 trillion yuan! New regulations for financial products are coming

It is reported that the Wealth Management Business Committee of the China Banking Association recently held a seminar to discuss the research and development of the "Code of Conduct for Historical Performance Display of Wealth Management Products". This means that the past performance display of wealth management products will usher in unified self-discipline norms. Specifically, the "Code of Conduct for Displaying Past Performance of Wealth Management Products" discussed at the meeting set three basic requirements, three display requirements, and three prohibited behaviors for displaying past performance of wealth management products. Specific requirements have been set for product performance display for each deadline. It is understood that the official document has not set a clear timetable for its release. (Source: "Usufruct Research" WeChat official account)

Recommendation: The focus of this meeting is on discussing the code of conduct, which is a further standard for the display of bank wealth management products by the China Banking Association, following the finalization of the "China Banking Industry Wealth Management Business Self discipline Standards" and the "Performance Comparison Benchmark Display Code of Wealth Management Products" at the end of last year. If this standard is passed, it will reverse the chaos of "reporting good news but not bad news" in the wealth management industry, truthfully present the past performance of wealth management products, effectively safeguard investors' right to know, and further implement the investment philosophy of "sellers are responsible, buyers are responsible".

9. China Securities Regulatory Commission Releases Ten Typical Cases of Investor Protection

On May 15th, the China Securities Regulatory Commission released typical cases of investor protection. This batch of typical cases consists of ten cases, involving issues such as manipulating the securities market, false statements of listed companies in bankruptcy and restructuring, false statements of delisted companies, shareholder subrogation litigation, performance of accounting firms, disclosure of fund occupation behavior, and judicial restructuring. Among them, the case of high damage to the interests of the company by the Great Wisdom Board of Directors and Supervisors was selected as a typical case in this case; In Case 6, Shenzhen Tangtang Certified Public Accountants signed a "drawer" agreement with * ST Xinyi in the audit of * ST Xinyi's annual report, promising not to issue "unable to express an opinion" or "negative opinion" in the audit report, and demanding that * ST Xinyi be compensated if punished by regulatory authorities. Due to a serious lack of audit independence, it became the first accounting firm to be "fined six for every one". (Source: Official website of China Securities Regulatory Commission)

Recommendation: The top ten cases released this time include the first securities infringement case in China that prioritizes civil compensation liability, and the first shareholder subrogation lawsuit filed by insurance institutions, reflecting a significant strengthening of investor protection efforts.

10. Tax authorities exposed seven typical cases of tax related violations

On May 26th, the tax department announced 7 typical cases of tax related violations. These cases involve fraudulent export tax refunds or withholding tax refunds, failure to handle personal income tax settlements in accordance with the law, false invoicing by pharmaceutical and software companies, illegal tax intermediaries, and malicious tampering with fuel tax control equipment by gas stations to evade taxes. This once again demonstrates the firm determination and consistent attitude of the tax department to continue to crack down on tax related violations with strict and swift measures. (Source: China Tax News)

Recommendation: The public exposure of the seven tax related illegal cases mentioned above reflects the tax department's determination to crack down on tax related illegal activities with a zero tolerance attitude. This also reminds taxpayers to pay taxes in accordance with rules and regulations, and tax intermediaries need to provide tax related services in accordance with rules and regulations.

11. In the first four months, a total of 468.9 billion yuan was added for tax reduction, fee reduction, and deferred tax refunds

On May 26th, the State Administration of Taxation held a regular press conference to introduce that in the first four months, the country had added 468.9 billion yuan in tax reductions and deferred tax refunds. Among them, two batches of tax and fee preferential policies that continue to optimize and innovate amounted to 308.3 billion yuan, while other policies such as value-added tax retention, offset, and refund amounted to 160.6 billion yuan, effectively reducing the burden on various business entities and further stimulating their vitality. (Source: People's Daily)

Recommendation: In order to stimulate the vitality of various market operators, the country further releases tax dividends. Various business entities can fully enjoy tax incentives in accordance with policy requirements, such as exemption from value-added tax for small-scale taxpayers with monthly sales of less than 100000 yuan; The policy of reducing income tax for small and micro enterprises; Policies such as exemption from vehicle purchase tax for new energy vehicles.

Overseas information

1. Hong Kong: Family Office Tax Concession Act Passed

The Hong Kong Legislative Council passed the "Tax (Amendment) (Tax Relief for Family Investment Control Instruments) Bill 2022" (referred to as the "Bill") on May 10, 2023, which came into effect on the 19th of this month. The tax relief applies to tax years starting on or after April 1st of last year. (Source: news. gov. hk)

Recommendation: The tax relief system provides profit tax relief for qualified family investment control tools managed by a single family office in Hong Kong, which helps to consolidate Hong Kong's position as the main hub of family offices and an international asset and wealth management center.

2. Hong Kong Securities Regulatory Commission: Revised Guidelines on Combating Money Laundering and Terrorist Financing

The Hong Kong Securities Regulatory Commission has revised its anti money laundering and terrorist fund raising guidelines applicable to licensed corporations and associated entities, which were gazetted on May 25, 2023 and took effect on June 1, 2023. (Source: apps. sfc. hk)

Recommendation: The revised guidelines of the Hong Kong Securities Regulatory Commission aim to incorporate the relevant provisions and guidelines of the Anti Money Laundering and Terrorist Financing (Amendment) Ordinance 2022 ("Amendment Ordinance"), which was issued on December 16, 2022 and will come into effect on June 1, 2023. Licensed corporations and associated entities should review their existing policies and procedures in accordance with the revised guidelines and take any necessary measures to ensure that they continue to comply with all applicable regulations.