China 20/20 Legal & Regulatory Developments - September 29, 2012

by Orrick, Herrington & Sutcliffe LLP

In This Issue

12th Five Year Plan for Financial Industry Development and Reform

12th Five Year Plan for the Development of Cloud Computing in China

MOFCOM Establishes Administrative Office for Commercial Franchises 

CSRC to Amend the Rules for Establishing Foreign Invested Securities Companies

SFDA to Carry out On-spot Inspection on Overseas Drug Manufacturers


12th Five Year Plan for Financial Industry Development and Reform

On September 17, 2012, the People’s Bank of China, China Banking Regulatory Commission, China Securities Regulatory Commission, China Insurance Regulatory Commission and the State Administration of Foreign Exchange jointly issued the 12th Five Year Plan for the Development and Reform of Financial Industry. According to the plan, China will be making efforts to improve the financial macro-control, deepen the financial reforms and expand the opening-up of financial market during the 12th Five Year period (namely 2011 to 2015). The reforms in financial market will be promoted along with a “marketization” direction and cover the following areas: (1) promoting the marketization of interest rates; (2) improving the formation mechanism of Renminbi exchange rate; (3) achieving the convertibility of Renminbi for capital account items; and (4) further improving the operation management of foreign exchange reserves. The opening-up of China’s financial industry involves further reforms of its currency market, capital market, foreign exchange market and gold market. In particular, the plan encourages domestic financial institutions to efficiently use foreign preferential loans and international commercial loans and deepen the financial cooperation with overseas institutions. As a general goal, China hopes that direct finance by non-financial enterprises will account for 15% or more of the total social finance by the end of 2015.

The full Chinese text of the plan is available here.

12th Five Year Plan for the Development of Cloud Computing in China

On September 3, 2012, the Ministry of Science and Technology issued the 12th Five Year Special Plan for the Development of Cloud Technology in China. The plan sets out detailed goals for the development of cloud computing in China, which includes: (1) establishing cloud computing technology and standard system and making breakthrough on key technologies; (2) improving the service capability of servers and building cloud servers capable of dealing with 100 million concurrent accesses; (3) establishing EB level cloud storage system supporting multiple data access methods, online expansion and auto-balance of node load; (4) building cloud operating systems and public service and management platforms supporting multiple users and application types; and (5) demonstrating the application of cloud computing services in key areas and industries and promoting cloud computing application and service models in various industries. To achieve the goals, China encourages domestic enterprises to strengthen cooperation with foreign governments, foreign enterprises, international organizations and science research institutions. China will formulate relevant provisions to create a better environment for the development of cloud computing.

The full Chinese text of the plan is available here.

MOFCOM Establishes Administrative Office for Commercial Franchises

On August 17, 2012, the Ministry of Commerce (“MOFCOM”) issued the Notice on Further Improving the Administration of Commercial Franchises. According to the notice, MOFCOM has established a Commercial Franchise Administrative Office comprised of the department of circulation industry development, department of treaty and law, department of finance, department of market supervision, department of trade in services and commercial services and department of electronic commerce and informatization. Under the notice, MOFCOM requires its local counterparts to strengthen the administration of franchisor filing system and publicize the filing information. It also requires commercial authorities at all levels to effectively handle the complaints received from the “12312 reporting and complaint service center” and gradually establish a credit record and evaluation system for franchising enterprises.

The full Chinese text of the notice is available here

CSRC to Amend the Rules for Establishing Foreign Invested Securities Companies 

On August 24, 2012, the China Securities Regulatory Commission (“CSRC”) issued the draft amendments to the Rules for the Establishment of Securities Companies with Foreign Equity Participation. The public was allowed to submit comments on the draft until September 22, 2012. Under the draft amendments, the cap of the aggregate (direct and indirect) shareholding ratio or ratio of rights and interests of foreign investors in a Sino-foreign equity securities company is increased from 33% to 49%. In addition, the amendments provide that, among all domestic shareholders of a Sino-foreign securities joint venture, there must be a domestic securities company which holds no less than 49% equity or rights and interests of the joint venture. In the case of a domestic securities company converted into a Sino-foreign securities joint venture, there must be a domestic shareholder which holds no less than 49% shares of the joint venture.

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

SFDA to Carry out On-spot Inspection on Overseas Drug Manufacturers

On August 20, 2012, the State Food and Drug Administration (“SFDA”) issued a draft version of the Measures for Administration of Inspection of Overseas Drug Manufacturing Enterprises (Trial). The public is allowed to submit comments on the draft until October 8, 2012. The draft measures apply to all overseas drug manufacturers that have obtained or are applying for a Registration Certificate for Imported Drugs or a Registration Certificate for Pharmaceutical Products issued by the SFDA. The SFDA will, according to the information obtained through registration review, day-to-day supervision, port inspection and public reporting, determine a list of overseas drug manufacturers and categories on which it needs to carry out an on-the-spot inspection. The inspection team will usually comprise of 2 to 5 members and they will examine the authenticity of application materials and the GMP (“Good Manufacturing Practice”) compliance of drug manufacture process when conducting the inspection. Manufacturers who fail the inspection will be ordered to suspend their drug imports to China and their drugs that have already been imported to China may also be ordered to be recalled. Overseas manufacturers who refuse to accept the inspection without a cause or do not coordinate for the inspection will be deemed to have failed the inspection.

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

Written by:

Orrick, Herrington & Sutcliffe LLP

Orrick, Herrington & Sutcliffe LLP on:

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