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CHINA (PRC FIRMS): An Introduction to Corporate/Commercial: Beijing

Qixiao Cai
Yang Shen
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China: Corporate/Commercial (PRC Firms)
Practice Area Overview in Chambers GCR 2022

Noteworthy legislations, events and cases in 2021

On 10 April 2021, the State Administration for Market Supervision imposed a fine of CNY18.228 billion on Alibaba; on 15 April, it imposed a fine of CNY764 million on Yangtze River Pharmaceutical Group, and later initiated an investigation against Meituan. In October 2021, the Standing Committee of the National People’s Congress promulgated the Anti-Monopoly Law of the People’s Republic of China (Draft Amendment), which greatly increased the penalties for anti-monopoly violations, and established a centralised review and suspension system for operators, highlighting the antitrust work in key areas such as the internet and finance.

On 1 September 2021, the Data Security Law of the People's Republic of China (hereinafter referred to as the "Data Security Law") officially came into effect, filling the gaps in data security protection legislation and indicating the development direction for the establishment of a sound data security governance system. The new law laid a solid foundation for the rule of law for the data security space.

On 3 September 2021, the Beijing Stock Exchange was established. It was the first corporate stock exchange in China approved by the State Council and it is subjected to the supervision and management of the China Securities Regulatory Commission. The Beijing Stock Exchange is to serve small and medium-sized enterprise in China, and trading commenced on 15 November 2021.

In October 2021, the Ministry of Commerce issued the Fourteenth Five-Year Plan for Utilization of Foreign Investment Development, proposing to lower entry requirements in key areas and promoting the opening up of telecommunications, internet, education, culture and healthcare. The plan also signals an opening up of its capital markets to the world, creating strategic investment opportunities for foreign investors.

On 1 November 2021, the Personal Information Protection Law was officially implemented, integrating the protection of private rights of personal information rights and the public law supervision of personal information processing, stating the obligations and responsibilities of private entities and public authorities. In addition, it has laid the legal foundation for China's plan regarding the digital economy.

The Central Economic Work Conference was held in Beijing on 8-10 December 2021. The meeting summarised the economic work in 2021, analysed the current economic situation and laid out the economic work priorities for 2022. The meeting clarified China's direction in terms of economic growth. While the country continued to adhere to the dual-cycle, dual-carbon policies and regulating the real estate sector as well as other structural adjustment policies, it also adjusted its structural policies in some areas to prevent placing too much pressure on meeting short-term economic growth goals.

Prospect for China’s M&A in 2022 

Antimonopoly guidelines tighten control over internet companies. Compared to previous years' data, the proportion of large-scale transactions, made by leading internet companies, valued over CNY1 billion has significantly decreased. With the tightening control and restrictions, national antimonopoly supervision will be noteworthy in the market. The supervision and control on domestic internet entities will become more stringent. Leading internet companies will have concerns over large-scale transactions, hence they often adopt a 'wait-and-see' approach. Instead they may opt for investment and small M&A transactions.

There is a strong demand for industrial integration. In order to improve competitiveness, more TMT companies will make up for their shortcomings in related businesses through small M&As. The medical and healthcare industries will continue to be popular, and entities in related spheres will remain active in transactions. Enterprises such as pharmaceutical and medical device companies will continue to look for digital and innovative, high-quality targets in order to boost their competitiveness. With the pursuit of high-quality development in the 14th Five-Year Plan, future M&As will be based on the fundamental goal of increasing capital growth. More high-quality industrial M&As will emerge. Through extensional development, enterprises will become larger, better and stronger.

The Personal Information Protection Law will promote the rational and effective use of information and data in accordance with the law, and provides legal protection for the development of the digital economy. The Personal Information Protection Law clarifies the ownership rights of personal information. In the future, internet platforms will need to obtain authorisation from users to use personal information, and will assume more responsibility for information protection during use and storage; this further improves China's legislative system in the data field.

The Data Security Law coordinates development and security, guarantees development with security, boosts the construction of 'Digital China', and increases China's competitiveness in the digital economy on the international stage. The Data Security Law facilitates the flow and integration of data in a more orderly way, realising the greater value of it.

The Central Economic Work Conference pointed out that the general direction for economic work in 2022 is to give priority to stability, appropriately rectify deviations, take the lead with stability and seek progress while maintaining stability. With regard to the capital markets, the focus is on the full implementation of the registration system for stock issuances. Since China announced the establishment of the Science and Technology Innovation Board and the pilot registration system in 2018, the current domestic stock markets have implemented the registration system for stock issuances, except for the Shanghai and Shenzhen Stock Exchanges' main boards. In 2019, the Sci-tech Innovation Board was set up on the Shanghai Stock Exchange, and the pilot registration system was officially launched. In 2020, the Shenzhen Stock Exchange's Growth Enterprise Market launched a pilot registration system. In September 2021, the Beijing Stock Exchange announced the establishment of a registration system. It is foreseeable that there will be a full implementation of the registration system for stock issuances.