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6 White Paper on the Business Environment in China
firms remain barred from offering telecommunications services requiring financial institutions to clearly state who bears the
to consumers, effectively limiting foreign participation to sell- risks in shadow banking business contracts. The new Circular
ing handsets and accessories to the Chinese market.68 further requires the separation of wealth management funds for
clients from the banks’ own funds and forbids the use of clients’
Notable Policy Activity money to buy the banks’ own loans.72
The 12th Five-Year Plan and Ongoing Attempts to Accelerate Reforms in Retail
the Development of the Service Sector In April 2014, China embarked on a major overhaul of its
Notes released by the State Council on March 11, 2011 cov- consumer protection law. According to China Briefing by De-
er several measurements for the Central Government’s ongoing zan Shira & Associates, “the new law introduces a number of
campaign to bolster the nation’s service economy: by 2011, the important reforms to the Chinese retail environment: In allega-
ratio of value added by the service sector to the GDP should tions of counterfeiting, the onus of proof is now on the retailer
have grown by four percent over 2010’s value69 and the total to prove their innocence for the first 6 months after the sale,
amount of imports and exports in services should have reached rather than the consumer to prove wrongdoing all the time, as
$600 billion.70 previously; Penalties for fraud and false advertising have been
increased; Class-action lawsuits against retailer malfeasance
In November 2015, The State Council announced plans to have been made easier to file (though limited to state Consum-
promote the development of the retail, health, travel and sports er Associations and their local branches); Retailers are now
sectors in a bid to boost domestic consumption. In a statement required to accept goods for return within 7 days of purchase
on its website, the State Council said it will encourage financial unless agreed otherwise; For online and other types of delivery
institutions to accept a broader range of collateral for extending purchases, consumers are not required to provide a reason for
loans to “lifestyle-related businesses”, in addition to services re- returns; and Greater restrictions now apply to retailers’ collec-
lated to families and the elderly, culture, law, accommodation tion and use of consumer data.” 73
and catering as well as education and training. The Cabinet
said the government also plans to expand consumer credit,
improve the system of Internet payments and study the man-
agement of credit card fees to “further reduce overall expenses”
related to their use. Finally, the government will crack down
on price-gouging as well as the sale of counterfeit goods, and
prosecute monopolies and businesses engaged in unfair compe-
tition. This announcement comes in line with the “new normal”
of slower growth in China with a new emphasis on sustainable,
consumption-led development. 74
New Shadow Banking Regulations
In December 2013, the State Council issued “Circular 107”,
laying out new intended regulations for shadow banking, out-
lining changes for corporates dealing with non-bank lenders
and new regulatory responsibilities by relevant government
authorities. The new regulation gained special relevance when
in January 2014, China Credit Trust (CCT), a wealth manage-
ment fund which sold investments via the Industrial and Com-
mercial Bank of China (ICBC) had to be bailed out. The new
Circular specifically outlined national shadow banking regula-
tory responsibilities among four same-level government bodies
– the People’s Bank of China (PBOC), China Banking Reg-
ulatory Commission (CBRC), China Securities Regulatory
Commission (CSRC) and Insurance Regulatory Commission
(IRC). Besides regulation at the national level, the Circular also
stated that local governments are responsible for regulating “rel-
evant shadow banking.” The new Circular also pinpoints ambi-
guity of responsibility arising from unclearly written contracts,
236
firms remain barred from offering telecommunications services requiring financial institutions to clearly state who bears the
to consumers, effectively limiting foreign participation to sell- risks in shadow banking business contracts. The new Circular
ing handsets and accessories to the Chinese market.68 further requires the separation of wealth management funds for
clients from the banks’ own funds and forbids the use of clients’
Notable Policy Activity money to buy the banks’ own loans.72
The 12th Five-Year Plan and Ongoing Attempts to Accelerate Reforms in Retail
the Development of the Service Sector In April 2014, China embarked on a major overhaul of its
Notes released by the State Council on March 11, 2011 cov- consumer protection law. According to China Briefing by De-
er several measurements for the Central Government’s ongoing zan Shira & Associates, “the new law introduces a number of
campaign to bolster the nation’s service economy: by 2011, the important reforms to the Chinese retail environment: In allega-
ratio of value added by the service sector to the GDP should tions of counterfeiting, the onus of proof is now on the retailer
have grown by four percent over 2010’s value69 and the total to prove their innocence for the first 6 months after the sale,
amount of imports and exports in services should have reached rather than the consumer to prove wrongdoing all the time, as
$600 billion.70 previously; Penalties for fraud and false advertising have been
increased; Class-action lawsuits against retailer malfeasance
In November 2015, The State Council announced plans to have been made easier to file (though limited to state Consum-
promote the development of the retail, health, travel and sports er Associations and their local branches); Retailers are now
sectors in a bid to boost domestic consumption. In a statement required to accept goods for return within 7 days of purchase
on its website, the State Council said it will encourage financial unless agreed otherwise; For online and other types of delivery
institutions to accept a broader range of collateral for extending purchases, consumers are not required to provide a reason for
loans to “lifestyle-related businesses”, in addition to services re- returns; and Greater restrictions now apply to retailers’ collec-
lated to families and the elderly, culture, law, accommodation tion and use of consumer data.” 73
and catering as well as education and training. The Cabinet
said the government also plans to expand consumer credit,
improve the system of Internet payments and study the man-
agement of credit card fees to “further reduce overall expenses”
related to their use. Finally, the government will crack down
on price-gouging as well as the sale of counterfeit goods, and
prosecute monopolies and businesses engaged in unfair compe-
tition. This announcement comes in line with the “new normal”
of slower growth in China with a new emphasis on sustainable,
consumption-led development. 74
New Shadow Banking Regulations
In December 2013, the State Council issued “Circular 107”,
laying out new intended regulations for shadow banking, out-
lining changes for corporates dealing with non-bank lenders
and new regulatory responsibilities by relevant government
authorities. The new regulation gained special relevance when
in January 2014, China Credit Trust (CCT), a wealth manage-
ment fund which sold investments via the Industrial and Com-
mercial Bank of China (ICBC) had to be bailed out. The new
Circular specifically outlined national shadow banking regula-
tory responsibilities among four same-level government bodies
– the People’s Bank of China (PBOC), China Banking Reg-
ulatory Commission (CBRC), China Securities Regulatory
Commission (CSRC) and Insurance Regulatory Commission
(IRC). Besides regulation at the national level, the Circular also
stated that local governments are responsible for regulating “rel-
evant shadow banking.” The new Circular also pinpoints ambi-
guity of responsibility arising from unclearly written contracts,
236
