September 2024 China Update

Our latest China update is out, providing a snapshot of some of the more major business and regulatory news arising over the last month. Let me know if you have any questions, or require assistance with your China projects.

Business News

China rolls out Stimulus

Given a slowing economy, backed up by recent economic data negatives, this week, the Chinese government has rolled out new stimulus measures. Among the measures, China's central bank will cut banks’ reserve requirement ratio (RRR) by 50 basis points in the near future, freeing up about 1 trillion yuan (US$142.21 billion) for new lending – additional rate cuts are on the cards for later this year.  Further, China's central bank will cut the seven-day reverse repo rate by 0.2 percentage points to 1.5%. Mortgage rates will be reduced by 0.5 percentage point on average, in order to provide some relief to households, whilst downpayment minimums will be reduced to 15% from 25%. China’s Securities and Regulatory Commission has also stated it is motivated to revive China’s stock markets, by supporting China's state fund Central Huijin Investment in stock purchases and expanding investment scope, and optimising the registration of equity-focused fund products and promote the innovation of broad-based exchange-traded funds (ETFs) and other index products. 

September Economic Data Snapshot

China’s Retail Sales rose 2.1% YoY in August from 2.7% in July, worse than the 2.5% expected. The nation’s Industrial Production increased 4.5% YoY in the same period versus 4.8% anticipated and 5.1% recorded previously. Meanwhile, the Fixed Asset Investment rose 3.4% YTD YoY in August versus the 3.5% expected and 3.6% seen in July.  Outbound shipments from the world's second-largest economy grew 8.7% year-on-year in value last month, the quickest since March 2023.

Sam’s Club, Lululemon Among Brands Seeing Strong Growth in China

In a report from Bloomberg this month, it was noted that some foreign brands are still seeing double-digit sales growth in China – “While top luxury brands and discount retailers alike are struggling with sluggish demand, a select few consumer companies have managed to deliver astronomical gains reminiscent of times when China’s economy was booming.”  These brands include Sam’s Club and Lululemon, who have adopted strong promotion techniques, cleverly tailored for local markets. According to the report, those brands doing well, are consistently touting that consumers are more discerning in their buying these days, seeking out “value for money” when making more expensive purchases. Further, perhaps showing off the “bling” has lost some of its attraction.

Calvin Klein and Tommy Getting Heat in China

On 25 September 2024, China’s Ministry of Commerce said it that it was investigating PVH, the owner of Calvin Klein and Tommy Hilfiger, with a view to placing it on placed on China’s “unreliable entities list” over allegations that it boycotted cotton products from the Xinjiang region. Being blacklisted would prohibit the company from selling to and buying from China.

 IBM Moves R&D Unit from China

According to a report from Caixin, IBM Corp. has begun shutting down two major research and development (R&D) units in China, amid declining business.  IBM has joined a number of U.S. tech firms in scaling back their presence in China.The units affected by the pullback are apparently IBM’s China Development Lab (CDL) and China Systems Lab (CSL), both established in 1999. CDL has been focused on application software development, while CSL has been focused on system development such as mainframe database.

China’s Dairy Industry Loses Some Steam

In a recent report from Reuters, it was claimed that “falling birth rates and cost-conscious consumers” have cut demand even as dairy farms expanded in recent years, forcing smaller farmers out of business and squeezing shipments. China’s diary industry has seen boom times over the last 25 years, with imported and locally produced dairy products seeing constant growth.  Overcapacity and a drop in consumption have combined to give the industry a reality check. Given the importance of the industry, it is only a matter of time before stimulus measures are looked at for the dairy industry.

China to Lift Ban on Japanese and Australian Seafood Imports

Earlier this month, it was reported by the SCMP and others, that China had agreed to gradually allow Japanese seafood to be imported in to China once again. The decision was made after “rounds of talks” between Beijing and Tokyo over the impact of discharging nuclear waste water into the Pacific Ocean, China’s Ministry of Foreign Affairs said - “Following the implementation of monitoring activities, including participation in long-term international monitoring within the framework of the International Atomic Energy Agency and independent sampling by participating countries, we will begin to adjust relevant measures based on scientific evidence and gradually resume imports of Japanese seafood that meet the standards, Japan has made it clear that it will continue to conduct ongoing marine environment and marine ecological impact assessments in order to substantially fulfill its obligations under international law and to use its utmost efforts to avoid adverse impacts on human health and the environment …”. Meanwhile, Australia is still hopeful of seeing a ban imposed on Australian lobsters lifted by Christmas - China has lifted almost all trade restrictions imposed on Australia after Canberra called for an inquiry into the origins of COVID-19, due to a thawing in relations between the two countries, but barriers on lobster imports remain.

China Lifts Quarantine Requirements for Frozen Fruit Imports

The Bureau of Import and Export Food Safety of China’s General Administration of Customs has stated that quarantine access management will no longer be required for frozen fruit products.

According to leading fruit industry magazine, Produce Report, “… frozen fruits from any country can now enter the Chinese market without the need for the usual quarantine entry procedures.

China’s General Administration of Customs defines frozen fruits as fruits that have had their inedible peels and seeds removed, been flash frozen at minus 18 degrees Celsius or below for at least 30 minutes, and maintained temperatures below minus 18 degrees Celsius throughout storage and transportation, in compliance with the “Code of Practice for the Processing and Handling of Quick Frozen Foods” (CAC/RCP 8-1976).”

China Lifts Retirement Age

China’s legislature has approved a proposal to raise the country's retirement age, according to Xinhua News Agency. According to reports, the retirement age will be raised for males to 63 years old from 60, while for women in white collar work it will be raised to 58 years from 55. For women in blue collar work it will be increased to 55 from 50. The changes are set to come into force on 1 January 2025 and will be implemented over a 15 year transition period.

China Ceases Most International Adoptions

International adoptions from China have been declining in recent years and were largely on hold since the pandemic.  Foreign Ministry spokeswoman Mao Ning told a regular press briefing this month that under China’s new policy, international adoptions would be limited to foreigners adopting children or stepchildren of relatives – she also acknowledged the important role that international adoptions has played in the lives of many, offering appreciation. According to a recent report from the Wall Street Journal, the leading destination was the US, which adopted more than 82,000 Chinese children between 1999 and 2023, according to State Department statistics. Most of them were girls.

China to Strengthen Ties with African Countries

As representatives from fifty African nations gathered in Beijing for the three-yearly “Forum on China-Africa Cooperation Summit”, Xi Jinping committed 360 billion yuan (US$50.70 billion) in financial assistance over three years, with “210 billion being disbursed through credit lines and at least 70 billion in fresh investment by Chinese companies.”  According to Reuters, at the 2021 China-Africa summit in Dakar, China promised at least US$10 billion in investment and the same again in credit lines. This time, the financial assistance would be in yuan, in an apparent push to further internationalise the Chinese yuan.

Regulatory News 

Intellectual Property

China and Italy Sign MOUs on GIs

On 28 July 2024, during the visit of Italian Prime Minister Giorgia Meloni to China, the Italian Ambassador to China, Massimo Ambrosetti, signed two MOUs on GI protection - “Memorandum of Understanding between China National Intellectual Property Administration and the Ministry of Agriculture, Food Sovereignty and Forestry of the Italian Republic” with Shen Changyu, Director of China National Intellectual Property Administration (“CNIPA”), and “Memorandum of Understanding on Cooperation and Protection of Geographical Indications between the People’s Republic of China and the Italian Republic, Action Plan on Cooperation in Food Safety Supervision (2024-2026)” with Luo Wen, Director of the State Administration for Market Regulation of the People’s Republic of China (“SAMR”), respectively, at the Great Hall of the People in Beijing. Both of them involve cooperation arrangements between the two countries in relation to geographical indications.

According to the memorandum signed with CNIPA, China and Italy agreed to cooperate in exchanging geographical indication laws and policies, product promotion, and event organization to promote economic and trade exchanges between the two countries. According to the memorandum signed with the SAMR, China and Italy will establish a bilateral communication and cooperation mechanism to carry out information sharing and technical cooperation to strengthen the protection of geographical indications, and improve the effectiveness of combating infringement and counterfeiting of geographical indications.

Currently, China implements three sets of geographical indication protection systems. The first set of systems is governed by Agricultural Law of the People’s Republic of China, Agricultural Product Quality and Safety Law of the People’s Republic of China and Measures for the Administration of Geographical Indications of Agricultural Products. According to this system, the Ministry of Agriculture of the People’s Republic of China is responsible for approving the registration of geographical indications of agricultural products. The second set of systems is based on the laws and regulations such as Trademark Law of the People’s Republic of China, Regulation on the Implementation of the Trademark Law of the People’s Republic of China and Administrative Measures Concerning the Registration of Collective Marks and Certification Marks. According to this system, the SAMR approves geographical indications registered as collective and certification trademarks. The third set of systems is governed by Product Quality Law of the People’s Republic of China, Standardization Law of the People’s Republic of China, Law of the People’s Republic of China on Import and Export Commodity Inspection and Provisions on the Protection of Geographical Indication Products. According to this system, the General Administration of Quality Supervision, Inspection, and Quarantine of the People’s Republic of China is responsible for approving geographical indication products for protection.

According to IP Statistics published by the CNIPA on 13 August 2024, as of July 2024, China has approved a total of 2,523 geographical indication products, approved a total of 7,384 registrations of geographical indications as collective marks and certification marks, and approved 30,551 entities to use geographical indication special marks.

Please our website for an article providing a detailed analysis.

China Seeks Opinions for Administrative Trademark Enforcement Action Evidence Matters

On August 19, 2024, the State Administration for Market Regulation (SAMR) issued a draft of the Evidence Regulations on Trademark Administrative Enforcement (Draft) for public opinion.

The Draft contains 24 articles. The Draft is applied to the evidence collection, examination, and recognition during the investigating trademark violation cases by the trademark administrative enforcements; and the types of evidence above include 1) documentary evidence, 2) physical evidence, 3) audio-visual materials, 4) electronic data, 5) witness testimony, 6) statements of the parties, 7) appraisal opinions, and 8) on-site transcripts. Please our website for an article providing a detailed analysis.

Data Protection

China Releases Cybersecurity Standards Practice Guidelines for Identifying Sensitive Personal Information

On September 18, 2024, the Secretariat of the National Cybersecurity Standardization Technical Committee released the “Cybersecurity Standards Practice Guidelines — Guidelines for Identifying Sensitive Personal Information”. This document aims to enhance organizations’ capabilities in identifying and protecting sensitive personal information, ensuring compliance with relevant laws and regulations in their daily operations. These Guidelines apply to all organizations that handle personal information, regardless of their size. Whether government agencies, businesses, educational institutions, or non-profit organizations, all can utilize these Guidelines to improve their processing capabilities and risk management related to sensitive personal information. Please our website for an article providing a detailed analysis.

AI

China Issues National Standards on AI-Generated Synthetic Content for Comment

On 14 September 2024, the Cyberspace Administration of China released the draft Measures for Identifying AI-Generated Synthetic Content, inviting public comments until 14 October 2024. Concurrently, a supporting draft mandatory national standard titled Cybersecurity Technology: Methods for Identifying AI-Generated Synthetic Content was also made available, with the deadline for feedback set for 13 November 2024. The purpose of these draft measures and standards is to address the challenges posed by the rapid development of AI-generated content, such as text, images, audio, and video. AI technologies, with their ability to produce realistic synthetic content, raise concerns about misinformation, fraud, and national security risks. China aims to establish mechanisms to clearly identify such content, ensuring transparency and maintaining cybersecurity while protecting public interests. Please our website for an article providing a detailed analysis.

China Releases AI Safety Governance Framework

On 9 September 2024, the National Technical Committee 260 on Cybersecurity of Standardization Administration of China released the first version of the AI Safety Governance Framework. It is China’s second step following its release of the Global AI Governance Initiative on 18 October 2023. The Initiative systematically expounds China’s thinking for global AI governance around AI development, security and governance. On the one hand, the Framework provides development and management guidance for the domestic AI field in China. On the other hand, it proposes the first version of the Chinese draft to promote the early formation of the global AI governance framework and standard specifications. According to the Framework, AI safety governance involves identifying AI safety risks, technical response measures, comprehensive governance measures, and safe development and application guidelines. Please our website for an article providing a detailed analysis.

Antitrust

China’s Supreme Court Issues Typical Cases on Anti-Monopoly and Anti-Unfair Competition

On September 11, 2024, the Supreme People’s Court released eight “typical cases” on anti-monopoly and anti-unfair competition. These cases involve multiple industries and different types of improper competition and monopoly behaviours, demonstrating how fair and competitive market order can be maintained through judicial means. Please our website for an article providing a detailed analysis.

China Releases Draft Discretion Benchmarks for Administrative Punishments for Antitrust Concentration Cases

On 16 August 2024, the State Administration for Market Regulation published a draft Discretion Benchmarks of Administrative Punishments for Illegal Implementation of Concentration in Violation of the Anti-monopoly Law of the People’s Republic of China (“Draft Discretion Benchmarks”), and solicited public opinions until 14 September 2024. The Draft Discretion Benchmarks, consisting of 19 articles, clarify the purpose, basis, procedures, and factors for determining the amounts of preliminary and final fines for cases of illegal implementation of the concentration in violation of the Anti-Monopoly Law.

The Anti-Monopoly Law revised on 24 June 2022 has significantly increased the fines for illegal implementation of concentration. In order to improve the quality of law enforcement of administrative penalties, as well as to standardize and supervise the setting and implementation of administrative fines, the Draft Discretion Benchmarks is formulated in accordance with related laws and regulations, including the Anti-Monopoly Law, Law of The People’s Republic Of China on Administrative Penalty, Provisions of the State Council on Notification Thresholds for Concentrations Between Undertakings, Provisions on the Examination of Concentrations of Undertakings, Opinions of the General Office of the State Council for Further Regulating the Development and Administration of Administrative Discretion Benchmarks, Guiding Opinions of the State Council on Further Regulating and Supervising the Creation and Imposition of Fines, and Notice by the State Administration for Market Regulation of Issuing the Guiding Opinions on Regulating the Discretion in Administrative Punishments in Market Regulation.

Please our website for an article providing a detailed analysis.

Health

China Releases Draft of First Medical Device Administration Law

On 28 August 2024, the National Medical Products Administration of China released a draft Medical Device Administration Law of China to solicit opinions from the public until 28 September 2024. China’s medical device market has developed rapidly in recent years, and the export scale has especially grown. The Regulation on the Supervision and Administration of Medical Devices currently implemented in the medical device field can no longer fully and effectively meet the needs of such a rapidly developing market. The promulgation of the Draft Law has not only improved the status of relevant provisions in the Regulation but also added more new provisions to promote the high-quality development and more international exchanges and cooperation of China’s medical devices. Please our website for an article providing a detailed analysis.

China Proposes to Allow Wholly Foreign Owned Hospitals

On September 7, 2024, the Ministry of Commerce co-issued a Notice with the National Health Commission (the NHC), and the National Medical Products Administration, in which it permits foreign invested enterprises to engage in the technology development and application of the human stem cell, gene diagnosis, and treatment for the purpose of product registration, listing, and production within the free trade zones in Beijing, Shanghai, and Guangdong, as well as the free trade port of Hainan. Further, the Notice also proposes to permit the establishment of hospitals (except for the Chinese medicine and excluding the mergers and acquisitions of public hospitals) wholly owned by foreign enterprises in the cities of Beijing, Tianjin, Shanghai, Nanjing, Suzhou, Fuzhou, Guangzhou, and Shenzhen, as well as Hainan province. Please our website for an article providing a detailed analysis.

China Seeks Suggestions for Health Functions of Dietary Supplements

On August 6, 2024, the State Administration for Market Regulation (SAMR) published an announcement to solicit suggestions for health functions of dietary supplements, in order to “provide policy and technical consulting services, support research on new functions of health food products, and foster new quality productivity in the field of health food products.” The said solicited health functions of dietary supplements are to be included in a catalogue, which is defined as a list of health care function information with clear evaluation methods and judgment criteria developed in accordance with the Measures for the Administration of the Catalogue of Raw Materials of Dietary Supplements and the Catalogue of Health Functions (the Measures) effective on October 1, 2019. Please our website for an article providing a detailed analysis.

China’s Supreme People’s Court’s Interpretation on Several Issues Concerning the Application of Law in the Adjudication of Punitive Damages in Food and Drug Cases

On August 21, 2024, the Supreme People’s Court held a press conference to announce the Interpretation on Several Issues Concerning the Application of Law in the Adjudication of Punitive Damages in Food and Drug Dispute Cases (hereinafter referred to as the “Interpretation”) and four typical cases involving punitive damages for food safety . The “Interpretation” came into effect on August 22, 2024. The “Interpretation” comprises 19 articles that provide provisions on protecting the rights of ordinary consumers, refunding and returning food and drugs, the liability of purchasing agents, the liability of small workshops, the identification of flaws in labels and instructions, the concurrence of punitive damage liability, the responsibility for producing and selling counterfeit and substandard drugs, the determination of the punitive damages base, the regulation of repeated purchasing for claims, and the punishment of illegal claims. Please our website for an article providing a detailed analysis.

China Issues New Draft Guidelines for Nutritional Information Representations on Pre-packaged Food

In early August 2024, the National Health Commission’s Standardization Working Group on Food Nutrition and Health Management released the Guideline for Graphical Representation of Nutritional Information on Pre-packaged Food (Draft for Public Comment). The deadline for submitting comments is October 4, 2024. The draft outlines in detail the relevant terms and definitions, basic principles to be followed, specific classifications, and corresponding requirements for front-of-pack nutrition labelling on pre-packaged food. Please our website for an article providing a detailed analysis.

International Trade

China Solicits Opinions for Various Customs Regulations

On September 9, 2024, the General Administration of Customs of the People’s Republic of China (GACC) issued a Notice to solicit opinions on the amendments to 33 Customs regulations, and the solicitation will expire on September 30, 2024. According to a statement from the GACC regarding the amendments, it includes amendments in three aspects: 1) It consolidates the experiences related to customs clearance facilitation reform and proposes to amend the “accept declaration” to the “complete declaration,” etc. For instance, it proposes to amend the “on the date of acceptance of the list declaration” in Article 16 of the Measures of the Customs of the People's Republic of China for the Administration of the Centralized Declaration of Imported and Exported Goods to “on the date of completion of the list declaration”; 2) It keeps the descriptions in the relevant regulations in consistency with those in the upcoming Tariff Law, as the Regulations of the People's Republic of China on Import and Export Duties currently cited by many proposed amended regulations will be expired upon the effect of the Tariff Law. Thus, the descriptions used in the Tariff Law (e.g., taxable price [计税价格], taxpayer [纳税人] shall replace the ones used in the current regulations (e.g., tax-paid price [完税价格], person liable to pay taxes [纳税义务人]). For instance, it proposes to amend the “tax-paid price” in Article 9 of the Measures of the Customs of the People's Republic of China for the Collection of Fees for Delayed Declaration on Imported Goods to “taxable price; 3) It also regulates the description of the taxpayer of imported articles from “owner” to “carrier or addressee”, as well as the expression of the taxation enforcement measures, updates the format of the relevant forms, and improves provisions related to tax disputes and legal liability for some violations, etc., in accordance with the Tariff Law. Please our website for an article providing a detailed analysis.