CHINA 20/20 Legal & Regulatory Developments - August 2012

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China’s 12th Five Year Plan for Strategic Emerging Industries

On July 9, 2012, the State Council issued the 12th Five Year Plan for the Development of National Strategic Emerging Industries. The plan was formulated to implement the Decision of the State Council on Accelerating the Cultivation and Development of Strategic Emerging Industries issued in 2010. The plan sets out detailed development goals, significant actions to be undertaken and major policies to be established for the strategic emerging industries which are energy conservation and environmental protection, new information technology, biotechnology, high-end equipment manufacturing, new energy, new materials and clean energy vehicles. In particular, the plan lists 20 major projects as development priorities. China hopes the strategic emerging industries will account for 8% of the country’s GDP by 2015 and 15% by 2020. Foreign investment is welcomed in these industries and projects. All preferential policies supporting the development of strategic emerging industries will also apply to eligible foreign invested enterprises.

The full Chinese text of the plan is available here.

12th Five Year Plan for Foreign Capital Utilization and Overseas Investment

On July 17, 2012, the National Development and Reform Commission (“NDRC”) issued the 12th Five Year Plan for Foreign Capital Utilization and Overseas Investment. The plan indicates that from 2011 to 2015, China will make the use of foreign loans more efficient, improve the quality of foreign investment, enlarge the scale of overseas investment and promote the coordinated development of foreign investment and outbound investment. Under the plan, foreign investors are encouraged to invest in China’s strategic emerging industries and producer service sector. Multi-national corporations are encouraged to establish regional headquarters, research and development centers, procurement centers and financial management centers in China. In addition, China will further open the banking, securities, insurance, telecommunications, gas, logistics, education, sports, medical, culture, tourism and family services markets to foreign investors. In terms of overseas investment, the plan supports PRC enterprises’ investment in overseas energy and mineral resources development projects, high and new technology and advanced-manufacturing projects. The government will improve its management system and reduce the approval procedures for overseas investment to create a favorable environment for Chinese enterprises to “go abroad”.

The full Chinese text of the plan is available here

NDRC Issues Draft Measures for Approval of Foreign Invested Projects

On August 16, 2012, the NDRC issued a draft version of the Measures for Administration of Verification and Approval of Foreign Invested Projects. The public is allowed to submit comments on the draft until September 15, 2012. According to the draft measures, NDRC will examine and approve encouraged and permitted foreign invested projects with a total investment of USD300 million or more, and restricted foreign invested projects with a total investment of USD50 million or more. Foreign invested projects whose total investment is lower than this will be examined and approved by the local counterparts of the NDRC. As a new requirement, the NDRC requires applicants to provide an energy-saving plan and an energy-saving assessment document or energy-saving registration form when submitting an application. For projects that may have significant public interest, the NDRC will solicit public opinion in an appropriate way when proceeding with the verification. The draft measures also apply to projects invested by foreign investors in Renminbi.

The full Chinese text of the draft measures is available here

NDRC Issues Draft Measures for Approval of Overseas Investment Projects

On August 16, 2012, the NDRC issued a draft version of the Measures for Administration of Verification and Approval of Overseas Investment Projects. The public is allowed to submit comments on the draft until September 15, 2012. The draft measures divide overseas investment projects into two categories: resources development projects and non-resources development projects. The rules governing resources development projects will apply to the administration of overseas transportation infrastructure projects (such as ports, airport, railway, road, urban subway and light rail etc). The approval authority provisions and the registration, record-filing and information reporting requirements set out under the draft measures are unchanged. After the completion of an overseas investment project approved by the NDRC or State Council, the Chinese investor may transfer their equity or asset to the project without obtaining the NDRC’s further approval. However, the investor must report such transfer to the NDRC within 10 working days after the closing of the deal.

The full Chinese text of the draft measures is available here.

Notice on Investing Insurance Capital in Equities and Real Estate

On July 16, 2012, the China Insurance Regulatory Commission issued the Notice on Relevant Issues on Investing Insurance Capital in Equities and Real Estate. The notice lowers the qualification conditions for insurance companies wishing to invest in equities and real estate by (1) removing the requirement that the insurance company has been profitable during the last fiscal year; (2) adjusting the minimum net assets requirement for the insurance company in the preceding fiscal year to RMB 100 million; and (3) adjusting the minimum solvency adequacy ratio for the insurance company at the end of the preceding quarter to 120%. The notice also enlarges the equity investment scope of insurance capital to cover energy enterprises, resources enterprises and insurance related modern agriculture enterprises and new-type trading circulation enterprises e.g. e-commerce, logistics and distribution networks employing modern technology and management techniques. Insurance capital may be invested into growth funds, M&A funds, emerging strategic industry funds and related fund of funds, but a non-insurance financial institution or its subsidiary is prohibited from actually controlling or holding the general partnership interest in such equity investment funds.

The full Chinese text of the notice is available here

Draft Amendment to the PRC Patent Law

On August 9, 2012, the State Intellectual Property Office issued a draft amendment to the PRC Patent Law. The public is allowed to submit comments on the draft until September 10, 2012. The amendment proposes to strengthen the protection of patent rights and crack down on patent infringement activities. The draft amendment grants patent administration departments the power to investigate patent infringement activities suspected of “disturbing the market order”. Upon recognition of such conduct, the patent administration departments may order the infringer to stop the infringement, forfeit the illegal earnings, destroy the infringing products, or impose penalties on the infringer. According to the draft amendment, the plaintiff in a patent rights litigation case may request the people’s court to investigate and collect evidence of infringement in the control of the accused. In case the accused refuses to provide or transfer such proof or counterfeits or destroys such proof, the people’s court may take action against the defendant including compelling it to produce proof or imposing fines or detention for counterfeiting or destroying proof. In addition, the amount of compensation imposed on infringers who deliberately infringe patent rights has been increased.

The full Chinese text of the draft amendment is available here.

Draft Guidelines on Anti-monopoly Law Enforcement in the Intellectual Property Field

On August 14, 2012, the draft Guidelines on Anti-monopoly Law Enforcement in the Intellectual Property Field (version 5) prepared by the State Administration for Industry and Commerce were released at the International Seminar on Cutting-edge Issues in the Enforcement of Anti-monopoly Law. The guidelines prohibit the holder of an intellectual property right (IPR) from eliminating or restricting competition by including any of the following provisions in a licensing agreement: (1) requiring the licensee to grant back exclusive rights to improvements to the technology; (2) prohibiting the licensee from challenging the validity of the IPR; (3) restricting the licensee’s freedom to manufacture, use or sell competing products or adopt competing technology after the expiry of the licensing agreement; and (4) other unreasonable trading conditions. According to the draft guidelines, an agreement between competing companies containing any of the following terms will constitute a monopoly agreement in breach of the Anti-monopoly Law: (1) fixing the royalties or the sale price of commodities using IPR; (2) limiting the number of IP licenses or the quantities of products using the IPR produced or sold; (3) dividing the IP licensing market, sales markets for products using the IPR or raw materials procurement market; (4) restricting the purchase and development of new technology or new equipment or products using the IPR; and (5) jointly refusing to license IPR or sell commodities with IPR to a specific trading party. IPR holders who occupy a dominant position on a particular market are also prohibited from refusing to license IPR on a discriminatory basis or from imposing tied sales.

A summary of the draft Guidelines is available here.

Published In: Antitrust & Trade Regulation Updates, Business Organization Updates, Finance & Banking Updates, Intellectual Property Updates, International Trade Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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