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China

Making Chinese IPOs a bit more private

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Alibaba Group co-founder and executive chairman Jack Ma attends the World Artificial Intelligence Conference (WAIC) in Shanghai, China, 17 September 2018 (Photo: Reuters/Aly Song).

Author: Juan Du, University of Sydney

The responses of Chinese regulators to initial public offerings (IPOs) by the country’s homegrown tech companies have made headlines beyond financial markets. With memories of the paused IPO and anti-trust investigations into Jack Ma’s Ant Group still fresh, regulators launched a series of investigations into Didi Global, China’s biggest ride-hailing company, within days of its IPO in New York on 30 June 2021.

Some media reports about the regulatory actions are skewed towards speculation about the Chinese Communist Party’s tightened grip over the tech giants. But based on public information, the accumulation of user data is a common theme in the investigations into Ant Group and Didi Global.

Like oil giants last century, big tech companies are facing growing challenges from states over their monopoly on user data. Super platforms act as basic infrastructure for the digital economy, enabling everything from the production to the distribution and consumption of digital services. Empowered by data, these platforms offer innovative solutions to digitalising traditional sectors. But they also enjoy higher pricing and bargaining power, hampering market competition, innovation and consumer interests.

In April 2021, Alibaba took a hefty penalty from Chinese regulators in the wake of anti-trust investigations. According to regulators, the company controlled over half of China’s online retail between 2015 and 2019. Since 2015, Alibaba has required merchants to choose between its platform and competitors’, using data and algorithms to implement this ‘pick one from two’ strategy — a violation of Chinese anti-trust law.

Alibaba was also accused of other data-related monopolistic behaviour. Its data-driven solutions, such as tailored search results for customers, make it difficult for merchants to switch platforms without losing their customer base, transaction records and review histories.

National security is also a concern when examining firm behaviour in cross-border exchanges of data. The probe into Didi Global was grounded in China’s National Security and Cybersecurity Laws, under which IPO-related cross-border activities require critical infrastructure operators to first seek evaluation from ad hoc Chinese regulators to pre-empt national security risks.

Two more companies came under scrutiny on the same grounds. Both control the personal data of millions of Chinese users and were recently listed in the US stock market. One of the companies, like Didi, manages large amounts of data on user identification and contact information, flow of vehicles and people and China’s transportation infrastructure.

Chinese regulators made revisions to the Cybersecurity Review Measures days after investigations into Didi. These made it compulsory for operators handling the data of over one million users to register with the cyberspace regulator for safety-related reviews before listing overseas. The cyber security examination will be undertaken by 14 Chinese regulators, and the securities regulator is the latest addition to this mechanism. The revisions referred to the Data Security Law, which will come into effect in September 2021.

The revisions are a typical case of policymaking lagging behind developments in industry. But when it comes to national security, countries often decide that it is better safe than sorry, as evidenced by the escalating screening of foreign investment in critical infrastructure by the United States, Japan, Australia and the European Union.

Didi’s treatment sent a ripple through the tech industry. Some tech companies like Meicai chose to delay their planned overseas IPOs to adjust to the new compliance requirements. Venture capitalists may have second thoughts over regulatory risks when investing in Chinese tech start-ups and see it as a hurdle for cashing in on their initial investments through IPOs. Chinese tech companies may be less favoured after foreign investors were spooked by the consecutive drops of Didi’s share price. Some firms may choose to instead list on the Hong Kong stock exchange.

Despite the chaos, there are some positives. The regulations restrain tech companies from illegal collection and use of data. Since 1 May 2021, companies have been prohibited from collecting data without consent beyond defined basic personal information. Big firms are more careful about monopolistic practices. The rival Chinese super platforms, WeChat and Alipay, are reported to be considering opening their ecosystems to each other and ending some…

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The New Company Law brings substantial changes with implications for new and existing foreign invested enterprises and stakeholders. Foreign investors must assess if adjustments to existing structures

Despite recent economic challenges, many organizations’ China operations provide unparalleled access to one of the world’s largest and most competitive global supply chains. Over the past 30 years, a significant number of foreign invested enterprises (FIEs) have been established in China. As of the end of 2022, the number of FIEs operating in China had exceeded 1.12 million.

Compared to their domestic counterparts, FIEs demonstrate greater caution regarding legal revisions and are diligent in making swift adjustments. This stems not only from the closer scrutiny FIEs face from regulatory authorities but also from their commitment to compliance and maintaining a competitive edge.

Clearly, there has been a shift in China’s corporate regulations—from merely encouraging an increase in the number of companies to focusing on attracting mature enterprises and higher-quality investments. While the transition from a broad approach to a more refined one may cause short-term challenges, it ultimately benefits the company’s long-term development. By returning to the original intent of setting registered capital, it not only protects the interests of creditors but also shields shareholders from the operational risks of the company.

In China’s foreign investment landscape, while most FIEs exercise commercial prudence in determining registered capital—factoring in capital expenditures, operational costs, and setting aside surplus funds—some opt for higher registered capital levels to avoid future capital increase procedures. This typically involves lengthy document signing and registration changes, lasting 1-2 months.

Joint ventures (JVs) often impose stricter payment deadlines for registered capital in their articles of association to ensure both parties’ simultaneous contributions align with operational needs. Conversely, wholly foreign-owned enterprises (WFOEs) tend to favor flexibility in payment deadlines, often allowing full payment before the company’s operational period expires.

Given these circumstances, despite the generally stronger capital adequacy among foreign companies compared to domestic entities, many FIEs could be affected by the new capital contribution rules.

This article is republished from China Briefing. Read the rest of the original article.

China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.

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Foreign Tourist Groups on Cruise Ships Fully Permitted Visa-Free Entry in China

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China will allow visa-free entry for foreign tourist groups arriving by cruise ship at 13 ports along the coast, starting May 15, 2024. Visitors must stay with the same ship and in permitted areas for up to 15 days. This policy aims to boost tourism and facilitate high-quality development in the cruise industry.


China’s immigration agency announced that it will grant a visa-free policy for foreign tourist groups to enter China by cruise at all cruise ports along the coast of China, starting May 15, 2024. The tourist group must remain with the same cruise ship until its next port of call and stay within permitted areas for no more than 15 days.

Effective May 15, 2024, the National Immigration Administration (NIA) has officially implemented a visa-free policy for foreign tourist groups entering China via cruise ships. This progressive move aims to enhance personnel exchanges and foster cooperation between China and other nations, furthering the country’s commitment to high-level openness.

Under this policy, foreign tourist groups, comprising two or more individuals, who travel by cruise ship and are organized by Chinese domestic travel agencies, can now enjoy visa-free entry as a cohesive group at cruise ports in 13 cities along the Chinese coast.

The tourist group must remain with the same cruise ship until its next port of call and stay within China for no more than 15 days. The eligible areas for this policy are coastal provinces (autonomous regions and municipalities) and Beijing.

Furthermore, to support cruise tourism development, seven additional cruise ports—Dalian, Lianyungang, Wenzhou, Zhoushan, Guangzhou, Shenzhen, and Beihai—have been included as applicable ports for visa-free transit.

The recent implementation of the visa-free policy for foreign tourist groups entering China via cruise ships is poised to have several significant effects. The policy will provide crucial support for the cruise economy and the overall cruise industry. By facilitating smoother travel for foreign tourist groups, it acts as a catalyst for high-quality development in this sector.

Additionally, under this policy, international cruise companies can strategically plan their global routes by designating Chinese port cities, such as Shanghai, Xiamen, and Shenzhen, as docking destinations. This move is expected to attract more cruise ships to Chinese ports, ultimately bringing in a larger number of international visitors to the Chinese market.

This article is republished from China Briefing. Read the rest of the original article.

China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.

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China’s New Tariff Law: Streamlining and Standardizing Current Tariff Regulations

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China’s new Tariff Law consolidates import and export duties, clarifies rules for imposing counter-tariffs, and sets a December 1, 2024 effective date. It codifies existing practices on cross-border e-commerce and rules on the origin of goods into law, impacting trade relations.


China’s new Tariff Law consolidates rules on import and export duties that were previously implemented via several legal documents and makes important clarifications and additions to prior regulations. Among other changes, it stipulates provisions for the Chinese government to impose counter-tariffs on imported goods, codifying these powers into law for the first time. We outline all the notable updates to the China Tariff Law and discuss the implications for the country’ current trade relations. 

On April 26, 2024, the National People’s Congress (NPC), China’s legislature, adopted the Tariff Law of the People’s Republic of China (the “Tariff Law”) after several rounds of revisions.

The new Tariff Law will replace the Import and Export Tariff Regulations of the People’s Republic of China, which fall under the purview of the State Council, and adopts many of its provisions.

Previously, Chinese law had not stipulated legislative powers to implement countervailing tariffs, although China was nonetheless able to impose counter-tariffs on trade partners through other means.

China’s new Tariff Law comes into effect on December 1, 2024.

China’s Tariff Law elevates several existing provisions and practices to the level of law. For instance, Article 3 of the Tariff Law clarifies the obligations of cross-border e-commerce platforms for tariff withholding and implementing consolidated taxation.

The Tariff Law also solidifies the rules and regulations on the origin of goods, stipulating that the application of tariff rates shall comply with the corresponding rules of origin. Although this has been previously implemented in practice, it is the first time this has been codified into law.

This article is republished from China Briefing. Read the rest of the original article.

China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.

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