REGULATORY OVERVIEW - HKEX :: HKEXnews

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                                 REGULATORY OVERVIEW

REGULATIONS RELATING TO THE INDUSTRY

Policies on Software Industry

      The Notice of the State Council on Issuing Several Policies on Further Encouraging the Development
of the Software and Integrated Circuit Industries (國務院關於印發進一步鼓勵軟件產業和集成電路產業發
展若干政策的通知), which was promulgated by the State Council of the People’s Republic of China
(the “State Council”) and came into effect on January 28, 2011, indicates that the software and integrated
circuit industries are strategic emerging industries of the PRC and form an important basis of the national
economy and social informatization. These policies provide strong support for the development of
software industry from the aspects of tax, investment and financing, research and development, import and
export, human resources, intellectual property protection, market management and etc.

      The Ministry of Industry and Information Technology of the People’s Republic of China promulgated
the Development Plan of Software and Information Technology Service Industry (2016 – 2020) (軟件和
信息技術服務業發展規劃(2016-2020年)) on December 18, 2016, under which the key tasks and major
projects include: (1) to comprehensively improve the capacities of innovation and development; (2) to
actively cultivate and expand emerging business forms: complying with the new trend of information
technology innovation and development, focusing on the research and development of key software
products and solutions in emerging fields such as cloud computing, big data, mobile Internet, and Internet
of Things, encouraging the development of platform-based enterprises and platform-based industries,
accelerating the cultivation of new business forms and new models, and forming a “platform, data,
application, service and security” coordinated development pattern; (3) to further promote application
innovation and integrated development: giving full play to the characteristics of deep integration,
penetration and coupling of software, accelerating the integration of software and various industries,
developing key application software, industry solutions and integrated application platforms,
strengthening application innovation and business model innovation, improving service-oriented
manufacturing, cultivating and expanding information consumption, and strengthening the supporting
services for Made in China 2025, “Internet +” action plan and etc.; (4) to further improve the capacity of
information security assurance: supporting the development and industrialization of key technology
products, developing specialized services such as security assessment and certification, counseling, early
warning response, and enhancing the capacity of information security assurance around the new situation
of information security development and the demands on security assurance; (5) to vigorously strengthen
the construction of industrial system; and (6) to accelerate the improvement of internationalization.

Policies and Regulations on Financial Information Technology

     According to the Guidelines for Commercial Banks on Information Technology Risk Management
(商業銀行信息科技風險管理指引), which was promulgated by the China Banking Regulatory Commission
and came into effect on March 3, 2009, a commercial bank shall strengthen its management of information
technology outsourcing to ensure the security of sensitive information such as client data.

      According to the Measures for the Administration of the Over-the-Counter Business for the National
Interbank Bond Market (全國銀行間債券市場櫃檯業務管理辦法), which was promulgated by the PBOC
and came into effect on February 14, 2016, over-the-counter business for the national interbank bond
market (hereinafter referred to as the “Over-the-Counter Business”) means that financial institutions
provide services for the opening of bond accounts of investors, distribution of bonds and trading in bonds,
as well as the corresponding bond custody, settlement, pledge registration, redemption agency, inquiry and
other services, through their service outlets or electronic channels, among others. According to the Notice
of Carrying out Over-the-Counter Business of Local Government Bonds on the National Interbank Bond
Market (關於在全國銀行間債券市場開展地方政府債券櫃檯業務的通知) issued by the PBOC, the MOF
and the China Banking and Insurance Regulatory Commission, which was promulgated and came into
effect on November 10, 2018, institutions carrying out the Over-the-Counter Business may carry out the
Over-the-Counter Business of issued local bonds recognized by issuers and newly issued local bonds
whose issuance objects include investors of the Over-the-Counter Business.

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                                    REGULATORY OVERVIEW

Policies and Regulations on Healthcare Big Data

      On February 6, 2020, the NHC issued the Notice of the General Office of the NHC to Strengthen
Diagnosis and Treatment Consulting Services through the Internet to Prevent and Control the Epidemic
Outbreak (國家衛生健康委辦公廳關於在疫情防控中做好互聯網診療諮詢服務工作的通知), requiring
health administrative departments at all levels to make full use of the Internet diagnosis and consulting
services in epidemic prevention and control, scientifically organize the Internet diagnosis and treatment
consulting service work, effectively carry out the Internet diagnosis and treatment consulting service
work, and effectively conduct the real-time supervision of the Internet diagnosis and treatment consulting
service.

       The Plan of Health China 2030 (“健康中國2030”規劃綱要), published by the Central Committee of
the Communist Party of China and the State Council in 2016, proposes to establish a health information
service system to improve the construction of population health information service system on one hand,
and to improve the application of healthcare big data on the other hand. It further proposes to establish
a health industry system with complete system and optimized structure, to form a group of large
enterprises with strong innovation ability and international competitiveness, and to become a pillar
industry of the national economy. According to the Guiding Opinions of the General Office of the State
Council on Promoting and Regulating the Application and Development of Healthcare Big Data (國務院
辦公廳關於促進和規範健康醫療大數據應用發展的指導意見), which was promulgated by the General Office
of the State Council and became effective on June 21, 2016, the healthcare big data is a significant fundamental
strategic resource in China. The application and development of healthcare big data is to bring profound changes
to the mode of healthcare services, which is helpful to trigger and deepen the motivation and vigor for the reform
of the medicine and health system, improve the efficiency and quality of healthcare services, and expand the
supply of resources so as to satisfy the multi-level and diversified demands of the masses on health, and is also
beneficial to fostering new business forms and economic growth points. According to the Notice of the NHC on
the Promulgation of the Administrative Measures on Standards, Security and Services of National Healthcare Big
Data (for Trial Implementation) (國家衛生健康委員會關於印發國家健康醫療大數據標準、安全和服務管理
辦法(試行)的通知), which was promulgated by the NHC, and became effective on July 12, 2018, when selecting
a service provider of healthcare big data, the entity shall ensure that the provider complies with national and
industrial regulations and rules, is competent in carrying out the relevant regulations, systems and standards, and
guaranteeing data security, and has established systems for data security management, personal privacy protection
and emergency response management.

      According to the Measures for the Administration of Medical Quality (醫療質量管理辦法), which
was promulgated by the NHFPC (currently known as the NHC) on September 25, 2016, and became
effective on November 1, 2016, medical institutions shall establish medical quality management and
control system covering the whole process of clinical diagnosis and treatment services in which all
members of the institution shall participate in. Medical institutions shall, in strict accordance with the
relevant requirements of the health and family planning administrative departments and the quality control
organizations on the management and control of medical quality, actively cooperate with the quality
control organization in conducting work and promote the continuous improvement of medical quality.
Medical institutions shall, in accordance with the relevant requirements, accurately submit the data
information related to the medical quality and safety to the health and family planning administrative
departments or the quality control organizations in a timely manner. Medical institutions shall skillfully
use medical quality management tools to conduct medical quality management and self-evaluation,
improve the relevant indicator system of medical quality management based on the quality control
indicators and standards issued by the health and family planning administrative departments or the quality
control organizations, collect the relevant information in a timely manner, and form the basic data of their
medical quality. The Guiding Opinions of the General Office of the State Council on Establishing a
Modern Hospital Management System (國務院辦公廳關於建立現代醫院管理制度的指導意見), which was
promulgated by the General Office of the State Council and came into effect on July 14, 2017, proposes

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                                   REGULATORY OVERVIEW

guiding opinions on improving the management system of hospital and establishing and improving the
governance system of hospital. The Notice of Issuing the Key Points of the Basic Standards and the Core
System of Medical Quality and Safety in Community Hospitals (for Trial Implementation) (關於印發社區
醫院基本標準和醫療質量安全核心制度要點(試行)的通知), which was promulgated by the NHC and came
into effect on May 31, 2019, proposes the basic requirements for the implementation of the core system
of medical quality and safety in community hospitals.

Regulations on Information Security and Privacy Protection

       According to the Decisions on Maintaining Internet Security (關於維護互聯網安全的決定), which
were promulgated by the Standing Committee of the National People’s Congress (“SCNPC”) and became
effective on August 27, 2009, violators may be subject to criminal punishment in China for any effort to:
(1) use the internet to market fake and substandard products or carry out false publicity for any commodity
or service; (2) use the internet for the purpose of damaging the commercial goodwill and product
reputation of others; (3) use the internet for the purpose of infringing on the intellectual property of others;
(4) use the internet for the purpose of fabricating and spreading false information that affects the trading
of securities and futures or otherwise jeopardizes the financial order; or (5) create any pornographic
website or webpage on the internet, provide links to pornographic websites or disseminate pornographic
books and magazines, movies, audiovisual products or images. If any network operator violates relevant
provisions, it may be ordered by competent authorities to suspend its operations or close its websites, and
its relevant permit or business license may be revoked.

      The Provisions on Protection of Personal Information of Telecommunication and Internet Users (電
信和互聯網用戶個人信息保護規定), which was promulgated by the Ministry of Industry and Information
Technology of the People’s Republic of China on July 16, 2013 and became effective on September 1,
2013, regulates the collection and use of users’ personal information in the provision of
telecommunications services and internet information services in China. Telecommunication business
operators and internet service providers are required to establish its own rules for collecting and use of
users’ information and cannot collect or use users’ information without users’ consent. Telecommunication
business operators and internet service providers are prohibited from divulging, tampering with,
damaging, selling or illegally providing others with personal information collected.

     According to the Cyber Security Law of the PRC (中華人民共和國網絡安全法), which was
promulgated by the SCNPC on November 7, 2016 and became effective on June 1, 2017, network
operators of key information infrastructure shall store within the territory of the PRC all the personal
information and important data collected and produced within the territory of PRC and their purchase of
network products and services that may affect national securities shall be subject to national cyber security
review. The Measures for the Security Review of Network Products and Services (Trial) (網絡產品和服
務安全審查辦法(試行)), which was promulgated by the Cyberspace Administration of China on May 2,
2017 and became effective on June 1, 2017, provides for more detailed requirements regarding the cyber
security review.

REGULATIONS RELATING TO FOREIGN INVESTMENT

Restriction on Foreign Investment

      According to the Provisions Guiding the Direction of Foreign Investment (指導外商投資方向規定),
which was promulgated by the State Council on February 11, 2002 and became effective on April 1, 2002,
industries in China are classified into four categories: “permitted foreign investment industries,”
“encouraged foreign investment industries,” “restricted foreign investment industries” and “prohibited
foreign investment industries.” “Restricted foreign investment industries” and “prohibited foreign
investment industries’ are stipulated in the Special Administrative Measures (Negative List) for the Access
of Foreign Investment (外商投資准入特別管理措施(負面清單)).

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                                   REGULATORY OVERVIEW

      The Special Administrative Measures (Negative List) for the Access of Foreign Investment
(“Negative List”), which was promulgated by the NDRC and the MOFCOM on June 30, 2019 and became
effective on July 30, 2019, contains the administrative measures for the access of foreign investors.
According to the Negative List, foreign investors who participate in the restricted items under the Negative
List shall comply with relevant restrictions.

      According to the Foreign Investment Law of the PRC (中華人民共和國外商投資法) (“Foreign
Investment Law”), which was promulgated by the National People’s Congress on March 15, 2019 and
became effective on January 1, 2020, the PRC implements the management scheme of pre-establishment
national treatment along with a negative list with respect to foreign investment. The pre-establishment
national treatment refers to granting to foreign investors and their investments, in the stage of investment
access, the treatment no less favorable than that granted to domestic investors and their investments. The
Negative List refers to special administrative measures for access of foreign investment in specific fields
as stipulated by the PRC. The PRC gives national treatment to foreign investments outside the Negative
List. The organization form, institutional framework and standard of conduct of a foreign-funded
enterprise shall be subject to the provisions of the Company Law of the PRC (中華人民共和國公司法) and
the Partnership Enterprise Law of the PRC (中華人民共和國合夥企業法). Foreign investors shall not
invest in any field prohibited by the Negative List for foreign investment access. For any field with
investment restricted by the Negative List for foreign investment access, foreign investors shall meet the
investment conditions stipulated under the Negative List. Any field that does not fall within the Negative
List shall be administered under the principle of consistency between domestic and foreign investment.
Upon the Foreign Investment Law coming into effect, the Law on Sino-Foreign Equity Joint Ventures of
the PRC (中華人民共和國中外合資經營企業法), the Law on Sino-Foreign Contractual Joint Ventures of
the PRC (中華人民共和國中外合作經營企業法) and the Law on Wholly Foreign-owned Enterprises of the
PRC (中華人民共和國外資企業法) was repealed simultaneously. Foreign-invested enterprises established
before the Foreign Investment Law coming into effect may retain their original form of organizations
within five years after the Foreign Investment Law comes into effect.

Incorporation and Change of Foreign-invested Enterprises

       According to the Measures for Reporting of Information on Foreign Investment (外商投資信息報告
辦法) promulgated by the MOFCOM and the SAIC on December 13, 2019 which became effective on
January 1, 2020, foreign investors or foreign-invested enterprises shall submit their investment
information to the competent commerce authorities through the enterprise registration system and the
National Enterprise Credit Information Publicity System. The market regulatory authorities shall promptly
notify the competent commerce departments of the investment information submitted by the above-
mentioned foreign investors and foreign-invested enterprises. The MOFCOM shall establish a foreign
investment information reporting system to receive and process investment information promoted by
market regulators and information shared between departments in a timely manner. When a foreign
investor applies for the registration of the establishment of a foreign-invested enterprise within the
territory of China, it shall submit an initial report through the enterprise registration system. In case of any
change in the initial report, including the registration (filing) of the change of the enterprise, the
foreign-invested enterprise shall submit the change report through the enterprise registration system when
applying for the change (filing). If the enterprise alteration registration (filing) is not involved, the
foreign-invested enterprise shall submit the alteration report through the enterprise registration system
within 20 working days after the alteration occurs.

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                                  REGULATORY OVERVIEW

REGULATIONS RELATING TO FOREIGN EXCHANGE

General Rules of Foreign Exchange

      Under the Foreign Exchange Administration Rules of the PRC (中華人民共和國外匯管理條例),
which was last amended by the State Council and became effective on August 5, 2008, Foreign institutions
and individuals who invest directly in China shall conduct registrations with foreign exchange authorities
upon approval by the relevant authorities. According to the Circular 13, the SAFE has cancelled (1)
confirmation of foreign exchange registration under domestic direct investment and confirmation of
foreign exchange registration under overseas direct investment; (2) registration for confirmation of the
non-cash capital contribution of foreign investors under domestic direct investment and the registration for
confirmation of the capital contribution made by foreign investors for acquisition of the equity interests
of the Chinese side; (3) foreign exchange filling of overseas re-investment; and (4) annual inspection on
foreign exchange of direct investment.

      According to the Circular of the State Administration of Foreign Exchange on Reforming and
Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts (國家外匯管理
局關於改革和規範資本項目結匯管理政策的通知) which was promulgated by the SAFE and became
effective on June 9, 2016, The term “discretionary settlement of foreign exchange receipts under the
capital account” means the settlement of foreign exchange receipts under the capital account (including
the foreign exchange capital, external debts and funds recovered from overseas listing, etc.) that are
subject to discretionary settlement as already specified by relevant policies may be handled at banks based
on the domestic institutions’ actual requirements for business operation. Domestic institutions may, when
conducting the discretionary settlement of foreign exchange receipts under the capital account, use their
foreign exchange receipts according to the system of foreign exchange settlement upon payment. The
foreign exchange receipts under the capital account and capital in RMB obtained through foreign exchange
settlement shall not be used for the following purposes: (1) directly or indirectly used for payments outside
the business scope or for payments prohibited under relevant laws and regulations; (2) directly or
indirectly used for investment in securities or for investment in financing products other than principle
guaranteed products provided by banks, unless otherwise provided by laws and regulations; (3) used for
granting loans to non-related enterprises, unless permitted by the scope of business; and (4) used for
constructing or purchasing of real estate that is not for self-use, unless such company is a real estate
company.

Dividend Distribution

      According to the Notice of the State Administration of Foreign Exchange on Issuing Service Trading
Foreign Exchange Administration Rules (國家外匯管理局關於印發服務貿易外匯管理法規的通知), which
was promulgated by the SAFE on July 18, 2013 and became effective on September 1, 2013, and the
Notice of the State Administration of Foreign Exchange on Repealing and Amending Relevant Regulatory
Documents Involving the Reform of the Registration System for Registered Capital (國家外匯管理局關於
廢止和修改涉及註冊資本登記制度改革相關規範性文件的通知), which was promulgated by the SAFE and
became effective on May 4, 2015, profits, dividends and bonuses shall fall into the scope of current foreign
exchange receipts and payments under trade in services, and shall subject to the regulations of foreign
exchange of trade in services. For payments of profits, dividends and bonuses to foreign investors in an
amount more than USD50,000, the payer shall submit resolutions of the board of directors on the
distribution of profits related to the remittance to the bank for review.

      According to the Notice of the State Administration of Foreign Exchange on Further Promoting
Trade and Investment Facilitation and Improving the Authenticity Review (國家外匯管理局關於進一步促
進貿易投資便利化完善真實性審核的通知), which was promulgated by the SAFE and became effective on
April 26, 2016, when handling outward remittance of profits exceeding equivalent USD50,000 (exclusive)
for a domestic institution, a bank shall, based on the real transaction principle, review the board resolution
on profit distribution in connection with the remittance, original of the tax registration form and financial
statements proving the profits.

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                                  REGULATORY OVERVIEW

Foreign Exchange Registration for Overseas Investments by Domestic Residents

      According to the Circular 37, “SPVs” is defined as offshore enterprises directly established or
indirectly controlled by domestic residents (including domestic institutions and individual residents) with
their legally owned assets or equity of domestic enterprises, or legally owned offshore assets or equity, for
the purpose of offshore investment and financing. A domestic residents shall go through the foreign
exchange registration procedures for overseas investments with the SAFE prior to contributing domestic
or overseas legal assets or equity interests to SPVs. Following the initial registration, any major changes
such as change in the overseas SPV’s domestic resident shareholders, names of the overseas SPVs and
terms of operation or any increase or reduction of the overseas SPVs, registered capital, share transfer or
swap, merger or division, or similar developments, shall be report to the SAFE for registering the foreign
exchange changes of overseas investments in time, and failing to comply with the registration procedures
as set out in Circular 37 may be punished by the SAFE.

REGULATIONS RELATING TO INTELLECTUAL PROPERTY

Computer Software Copyrights

     According to the Copyright Law of the PRC (中華人民共和國著作權法), which was last amended by
the SCNPC on February 26, 2010 and came into effect on April 1, 2010, the copyright protection is
expanded to cover Internet activities, products distributed via Internet and software products.

      According to the Regulations on the Protection of Computer Software (計算機軟件保護條例), which
was last amended by the State Council on January 30, 2013 and came into effect on March 1, 2013,
software created by Chinese citizens, legal entities or other organizations, whether published or not, shall
enjoy copyright protection. Copyrights shall include the right of publication, authorship, alteration,
reproduction, distribution, lease, translation, etc. Software copyrights shall be valid since the completion
date of its creation. The term of protection of a natural person’s software copyright shall be the lifetime
of the natural person and fifty years after his death, expiring on December 31 of the fiftieth year after his
death. The term of protection of software copyright which belongs to a legal entity or other organizations
shall be fifty years, expiring on December 31 of the fiftieth year after the first publication of such
software, provided that any such software that has not been published within fifty years after the
completion of its creation shall no longer be protected. Anyone who commits any infringement of
computer software copyrights shall bear liabilities for ceasing the infringing act, elimination the effects
of the act, making a public apology or paying compensation for damages.

     According to the Measures for the Registration of Computer Software Copyright (計算機軟件著作
權登記辦法), which was promulgated by the National Copyright Administration of the People’s Republic
of China (“NCA”) and became effective on February 20, 2002, the NCA shall be in charge of the
administration of the registration of software copyright of the whole country, and the China Copyright
Protection Center is the body for software registration. The applicant can apply for registration of software
copyright, and the registration of exclusive license contracts and transfer contracts of software copyright.

Domain Names

      Internet domain name registration and related matters are primarily regulated by the Administrative
Measures for Internet Domain Names (互聯網域名管理辦法), which was promulgated by the Ministry of
Industry and Information Technology of the People’s Republic of China on August 24, 2017 and came into
effect on November 1, 2017, the Detailed Implementation Rules of China Internet Network Information
Center on Domain Name Registration (中國互聯網絡信息中心域名註冊實施細則), which was
promulgated by China Internet Network Information Center (the “CNNIC”) and came into effect on May
29, 2012, and the Measures of China Internet Network Information Center for Resolving Disputes

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                                  REGULATORY OVERVIEW

Regarding Domain Names (中國互聯網絡信息中心域名爭議解決辦法), which was last amended and came
into effect on September 1, 2014. Domain name registrations shall be handled through domain name
service agencies established under the relevant regulations, and the applicants become domain name
holders upon successful registration.

Trademarks

      According to the Trademark Law of the PRC (中華人民共和國商標法), which was last amended by
the SCNPC on April 23, 2019 and came into effect on November 1, 2019, and the Detailed Rules for the
Implementation of Trademark Law of the PRC (中華人民共和國商標法實施條例), which was amended by
the State Council on April 29, 2014 and came into effect on May 1, 2014, registered trademarks include
commodity trademarks, service trademarks, collective trademarks and certificate trademarks. A registered
trademark is valid for ten years and is renewable every ten-years since the day after the expiration date
of the previous term of validity of the trademark where a registered trademark needs to be used after the
expiration of its validity term. A registration renewal application shall be filed within twelve months (with
an extension period of six-month) prior to the expiration of the term. As for trademarks, the Trademark
Law of the PRC has adopted a “first come, first file” principle with respect to trademark registration.
Where trademark for which a registration application has been made is identical or similar to another
trademark which has already been registered or been subject to a preliminary examination and approval
for use on the same kind of or similar commodities or services, the application for registration of such
trademark may be rejected. Any person applying for the registration of a trademark may not prejudice the
existing right first obtained by others, nor may any person register in advance a trademark that has already
been used by another party and has already gained a “sufficient degree of reputation” through such party’s
use.

REGULATIONS RELATING TO TAX

Enterprise Income Tax

      According to the Enterprise Income Tax Law of PRC(中華人民共和國企業所得稅法), which was last
amended by the National People’s Congress and came into effect on December 29, 2018, and the
Regulations for the Implementation of the Enterprise Income Tax Law of the PRC (中華人民共和國企業
所得稅法實施條例), which was amended by the State Council and came into effect on April 23, 2019, a
uniform corporate income tax rate of 25% is applicable. Taxpayers are classified into resident and
non-resident enterprises. If non-resident enterprises have not formed permanent establishments or
premises in China, or if they have formed permanent establishment institutions or premises in China but
there is no actual relationship between the relevant income derived in China and the established
institutions or premises set up by them, the enterprise income tax is, in that case, set at the rate of 10%
for their income sourced from inside China.

       According to the Circular of the State Taxation Administration on the Issues Concerning
Implementation of the Preferential Income Tax for High and New Technology Enterprises (國家稅務總局
關於實施高新技術企業所得稅優惠有關問題的通知), which was promulgated by the SAT on April 22,
2009 and became effective on January 1, 2008, the corporate income tax rate for a high and new
technology enterprise is 15%. Pursuant to the Circular of the State Taxation Administration on the Issues
Concerning Implementation of the Preferential Income Tax Policy for High and New Technology
Enterprises     (國家稅務總局關於實施高新技術企業所得稅優惠政策有關問題的公告),                                             which      was
promulgated by the SAT and became effective on June 19, 2017, for the year when the qualification of high
and new technology enterprise expires, its corporate income tax is temporarily paid at a rate of 15% before
its re-examination, provided the high and new technology enterprise has not obtained the qualification of
high and new technology enterprise before the end of the year, it shall supplement the tax balance for the
corresponding period as required. Pursuant to the Administrative Measures for the Recognition of High
and New Technology Enterprises (高新技術企業認定管理辦法), promulgated on January 29, 2016 and
effected on January 1, 2016, the certificate of a high and new technology enterprise is valid for three years
from the date of issuance.

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                                 REGULATORY OVERVIEW

Value-added Tax

      According to the Provisional Regulations of the PRC on Value-added Tax (中華人民共和國增值稅
暫行條例), which was last amended and came into effect on November 19, 2017, and the Detailed Rules
for the Implementation of the Provisional Regulations of the PRC on Value-added Tax (中華人民共和國
增值稅暫行條例實施細則), which was last amended on October 28, 2011 and came into effect on
November 1, 2011, all enterprises and individuals engaged in the sale of goods, the provision of
processing, repair and replacement services, and the importation of goods within the territory of China
shall be subject to value-added tax. According to the Circular of Full Implementation of Business Tax to
Value-added Tax Reform (關於全面推開營業稅改徵增值稅試點的通知), which was promulgated on
March 23, 2016 and became effective on May 1, 2016, the Notice on Pilot Policies of Levying Value-added
Tax in Lieu of Business Tax for Construction Services and Other Sectors (關於建築服務等營改增試點政
策的通知), which was promulgated on July 11, 2017 and became effective on July 1, 2017, and the
Announcement on Relevant Policies for Deepening the Value-Added Tax Reform (關於深化增值稅改革有
關政策的公告), which was promulgated on March 20, 2019 and became effective on April 1, 2019, the
pilot program of replacing business tax with VAT shall be promoted to cover sales of services, intangible
assets and real estates nationwide.

      According to the Notice of the Ministry of Finance and the State Taxation Administration on
Value-added Tax Policies for Software Products (財政部、國家稅務總局關於軟件產品增值稅政策的通
知), which was promulgated on October 13, 2011 and became effective on January 1, 2011, if general VAT
taxpayers sell self-developed and produced software products, after VAT has been collected at the statutory
tax rate of 17%, the refund-upon-collection policy shall be applied to the part of actual VAT burden in
excess of 3%. Pursuant to the Notice of the Ministry of Finance and the State Taxation Administration on
Adjusting Value-added Tax Rates (財政部、稅務總局關於調整增值稅稅率的通知), which was
promulgated on April 4, 2018 and became effective on May 1, 2018, tax rates of 17%/11% applicable to
any taxpayer’s VAT-taxable sale or import of goods shall be adjusted to 16%/10%, respectively.

City Maintenance and Construction Tax

      In accordance with the Provisional Regulations on Urban Maintenance and Construction Tax of the
PRC (中華人民共和國城市維護建設稅暫行條例), which was promulgated and became effective on
January 8, 2011, and the Circular of the State Taxation Administration on Issues Concerning the Collection
of the Urban Maintenance and Construction Tax (國家稅務總局關於城市維護建設稅徵收問題的通知),
which was promulgated and became effective on March 12, 1994, any entity or individual liable to
consumption tax, value-added tax and business tax shall also be required to pay urban maintenance and
construction tax. Payment of urban maintenance and construction tax shall be based on the consumption
tax, value added tax and business tax which a taxpayer actually pays and shall be made simultaneously
when the latter are paid. The rates of urban maintenance and construction tax shall be 7%, 5% and 1% for
a taxpayer in a city, in a county town or town and in a place other than a city, county town or town
respectively.

Educational Surcharges and Local Education Surcharges

      In accordance with the Provisional Provisions on the Collection of Educational Surcharges (徵收教
育費附加的暫行規定), which was last amended and came into effect on January 8, 2011, all entities and
individuals who pay consumption tax, value-added tax and business tax shall also be required to pay
educational surcharges. The educational surcharge rate is 3% of the amount of value-added tax, business
tax and consumption tax actually paid by each entity or individual, and the educational surcharges shall
be paid simultaneously with value-added tax, business tax and consumption tax.

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST
BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

                                  REGULATORY OVERVIEW

      According to the Notice from the Beijing Municipal People’s Government Regarding the Issuance
of the Administrative Measures on Local Education Surcharges (北京市人民政府關於印發北京市地方教
育附加徵收使用管理辦法的通知), which was promulgated on December 21, 2011 and became effective on
January 1, 2012, for all entities and individuals who pay value-added tax, consumption tax and business
tax in the administrative region of Beijing Municipality, in addition to paying education surcharges as
required by the PRC government, they shall also pay local education surcharges in accordance with the
provisions of these Measures. Local education surcharges shall be based on 2% of the consumption tax,
value added tax and business tax which a taxpayer actually pays and shall be made simultaneously when
the latter are paid.

REGULATIONS RELATING TO LABOR AND SOCIAL INSURANCE

Labor Contract Law

      The Labor Contract Law of the PRC (中華人民共和國勞動合同法) (“Labor Contract Law”), which
was amended on December 28, 2012 and came into effect on July 1, 2013, and the Implementation
Regulations on Labor Contract Law of the PRC (中華人民共和國勞動合同法實施條例) which were
promulgated and came into effect on September 18, 2008, mainly regulate the rights and obligations of
employees and employers, including matters relating to the execution, performance and termination of
labor contracts. Pursuant to the Labor Contract Law, where an enterprise or institution will or has
established an employment relationship with an employee, a labor contract must be made in writing.

Social insurance

      According to the Regulations on Occupational Injury Insurance (工傷保險條例), which was amended
on December 20, 2010 and became effective on January 1, 2011, the Trial Measures on Employee
Maternity Insurance of Enterprises (企業職工生育保險試行辦法), which was promulgated on December
14, 1994 and became effective on January 1, 1995, the Decisions of the State Council on the Establishment
of Unified System of Basic Retirement Insurance Fund for the Employees of Enterprises (國務院關於建
立統一的企業職工基本養老保險制度的決定), which was promulgated and became effective on July 16,
1997, the Decisions of the State Council on the Establishment of the Medical Insurance Program for Urban
Workers (國務院關於建立城鎮職工基本醫療保險制度的決定), which was promulgated and became
effective on December 14, 1998, the Unemployment Insurance Measures (失業保險條例), which was
promulgated and came into effect on January 22, 1999, the Interim Regulations Concerning the Collection
and Payment of Social Insurance Premiums (社會保險費徵繳暫行條例), which was amended and came
into effect on March 24, 2019, and the Social Insurance Law of the PRC (中華人民共和國社會保險法),
which was amended and came into effect on December 29, 2018, enterprises are obliged to provide their
employees in China with welfare schemes covering pension insurance, unemployment insurance,
maternity insurance, labor injury insurance and medical insurance. These payments are made to local
administrative authorities and any employer that fails to contribute may be fined and ordered to make up
within a prescribed time limit.

      For entities failing to conduct social insurance registration, the administrative department of social
insurance shall order them to make corrections within a prescribed time limit; if they fail to do so within
the time limit, a fine will be imposed on them. Where an entity fails to pay social insurance premiums in
full or on time, the social insurance premium collection agency shall order it to pay or make up the balance
within a prescribed time limit, and shall impose a late fee; if still failing to pay within the time limit
prescribed, a fine will be imposed on them. Where an entity fails to apply for housing fund deposit
registration, the housing fund administrative center will order the employer to pay the amount within a
prescribed time limit; if the entity still fails to pay the amount, an application will be made to the People’s
Court for compulsory enforcement.

                                                    – 81 –

THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST
BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

                                 REGULATORY OVERVIEW

      According to the Reform Plan of the State Tax and Local Tax Collection Administration System (國
稅地稅徵管體制改革方案), which was issued by the General Office of the Communist Party of China and
the General Office of the State Council on July 20, 2018, since January 1, 2019, the duties for collecting
and administrating the social insurance premiums were to transferred from the Ministry of Human
Resources and Social Security to the tax authorities. On September 18, 2018, the executive meeting of the
State Council announced that the social insurance policies will remain unchanged until the social
insurance authorities completed handover. Furthermore, the Urgent Notice on Implementing the Spirit of
the Executive Meeting of the State Council in Stabilizing the Collection of Social Security Contributions
(關於貫徹落實國務院常務會議精神切實做好穩定社保費徵收工作的緊急通知), which was issued by
Ministry of Human Resources and Social Security and came into effect on September 21, 2018, requires
that the policies on the social insurance contribution rate and baseline shall remain unchanged until the
reform on the transfer of social insurance authorities is completed. The Notice on Implementing Measures
to Further Support and Serve the Development of Private Economy (關於實施進一步支持和服務民營經濟
發展若干措施的通知), which was issued by the SAT and came into effect on November 16, 2018, provides
that the social insurance policy will remain stable, and the SAT will cooperate with relevant authorities
in their efforts to reduce the social insurance contribution rate and ensure to reduce the overall burden of
corporate social insurance contributions.

     According to the Notice on Effectively Conducting Social Insurance Management during the
Prevention and Control of Pneumonia of Novel Coronavirus Infection (關於切實做好新型冠狀病毒感染的
肺炎疫情防控期間社會保險經辦工作的通知) issued by the Ministry of Human Resources and Social
Security on January 30, 2020, and the Notice on Further Improving Municipal Human Resources and
Social Security during the Epidemic Prevention and Control (關於進一步做好疫情防控期間本市人力資源
和社會保障相關工作的通知) issued by Beijing Human Resources and Social Security Bureau on January
31, 2020, the collection period of social insurance premiums payable in January and February 2020 was
extended to the end of March 2020.

Housing Fund

       In accordance with the Regulations on the Management of Housing Fund (住房公積金管理條例),
which was last amended by the State Council and came into effect on March 24, 2019, employers shall
apply for housing fund deposit registration with the local housing fund administrative center, and shall
open an housing fund account at the relevant bank. Employers failing to complete such registration and
open such account may be ordered to make corrections within a prescribed time limit; if they fail to do
so within the time limit, a fine of RMB10,000 to RMB50,000 will be imposed on them. Where an employer
fails to pay the housing fund in full, the housing fund administrative center will order the employer to pay
the amount within a prescribed time limit; if the employer still fails to pay the amount, the housing fund
administrative center can apply to the People’s Court for compulsory enforcement of the outstanding
amount.

      According to the Notice on Cooperating with Epidemic Prevention and Control and Strengthening
the Housing Fund Service Guarantee of the Central State Organs (關於配合做好疫情防控工作加強中央國
家機關住房公積金服務保障的通知) issued by the Central State Organs Housing Fund Management Center
on February 3, 2020 and the Notice on the Handling of Housing Fund Business during the Epidemic
Prevention and Control (關於疫情防控期間住房公積金業務辦理相關事項的通告) issued by Beijing
Housing Fund Management Center on February 1, 2020, employers with difficulties are allowed to
postpone the deposit of housing fund during the epidemic outbreak. After the epidemic is over, the
payment shall be made in time, which shall be deemed as continuous deposits. For the individual housing
loan of the housing accumulation fund that has been postponed due to the epidemic prevention and control,
the handling department and the entrusted bank shall notify the borrower to adjust the loan date.
Individuals hospitalized for treatment or quarantine due to infection with COVID-19, quarantined
individuals for epidemic prevention and control purpose and individuals involved in epidemic prevention
and control, who fail to make normal repayment due to the epidemic, shall not be considered overdue.

                                                  – 82 –

THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST
BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

                                  REGULATORY OVERVIEW

REGULATIONS RELATING TO HOUSE LEASING

      According to the Administrative Measures for Commodity House Leasing (商品房屋租賃管理辦法),
which was promulgated by the Ministry of Housing and Urban-Rural Development of the People’s
Republic of China on December 1, 2010 and came into effect on February 1, 2011, within 30 days after
the conclusion of the house leasing contract, the parties involved in the house leasing shall carry out house
leasing registration with the construction (real estate) administrative department of the people’s
government of a municipality directly under the central government of the PRC, city or county where the
house leased is located. The relevant parties may entrust others to complete the house leasing registration
and filling. If the relevant parties fail to make registration, they may be ordered to make corrections within
a specified time limit by the construction (real estate) administrative department of the people’s
government of a municipality directly under the central government of the PRC, city or county. If any
individual fails to do so, a fine of RMB1,000 will be imposed, while if any entity fails to do so, a fine not
less than RMB1,000 and not more than RMB10,000 will be imposed.

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