14 April 2020

China regulatory and legal round-up | April 14, 2020

General Corporate

Interim Provisions on Supervising the Enforcement of Market Regulation came into effect

On December 31, 2019, the State Administration for Market Regulation (“SAMR”) released the Interim Provisions on Supervising the Enforcement of Market Regulation (《市场监督管理执法监督暂行规定》), which took effect on April 1, 2020.  The provisions aim to strengthen enforcement supervision, ensure that the market regulatory authorities execute their functions and duties in accordance with the laws, and protect the rights and interests of all market participants, including foreign invested enterprises.

MIIT is seeking public comments on four draft national standards in the intelligent manufacturing area

On March 30, 2020, the Ministry of Industry and Information Technology (“MIIT”) released four intelligent manufacturing related draft national (recommended) standards, which are open to public comments: [Note to the editor: please add a hotlink here. https://www.cesa.cn/publiclist.aspx?id=84 ]

  • Intelligent manufacturing – online detection based on machine vision-general requirements (《20182048-T-339智能制造 机器视觉在线检测系统 通用要求》),
  • Intelligent manufacture – virtual plant information model (《20182047-T-339智能制造 虚拟工厂信息模型》),
  • Intelligent manufacturing – reference architecture for virtual factory design (《20182046-T-339智能制造 虚拟工厂参考架构》),
  • Intelligent manufacturing order management model – technical requirements (《20182043-T-339智能生产订单管理系统 技术要求》).

The standards set forth technical standards and requirements of intelligent manufacturing systems and aim to provide guidance on research, development, and application of intelligent manufacturing systems to universities, research institutions, and enterprises.  Comments may be submitted online at https://www.cesa.cn/publiclist.aspx?id=84 before April 30, 2020.

National Medical Products Administration issues two circulars regarding pharmaceutical registration and manufacturing

On March 30, 2020, the National Medical Products Administration (“NMPA”) issued the Circular on Relevant Matters regarding Implementation of the Administrative Measures on Pharmaceutical Registration (《关于实施《药品注册管理办法》有关事宜的公告》, (the “Pharmaceutical Registration Circular”) and the Circular on Certain Matters regarding Implementation of the Newly Amended Administrative Measures on Supervision of Pharmaceutical Manufacturing (《关于实施新修订《药品生产监督管理办法》有关事项的公告》). The NMPA circulars provide detailed guidance on the procedures and standards that authorities are using to review pharmaceutical registration applications and supervise pharmaceutical manufacturing during the transition period, with the goal of facilitating the implementation of

Companies that export pharmaceutical products to China or have Chinese subsidiaries engaging in pharmaceutical manufacturing in China should pay attention to these new laws and regulations.

Foreign Exchange & Customs

SAFE expands the scope of pilot programs that facilitate foreign debt of high-tech enterprises

On March 19, 2020, the State Administration of Foreign Exchange ("SAFE") issued the article Promoting Pilot Programs for Facilitation of Foreign Debts & Supporting Cross-border Financing of High-tech Enterprises (《扩展外债便利化试点 支持高新技术企业跨境融资》).

China, in general, adopts a “full-covered macro-prudence adjustment policy” in managing Chinese enterprises’ foreign debt levels, and limits the amount of foreign debt that a Chinese entity can borrow up to a quota equal to 2.5 times the entity’s net assets. In 2018, SAFE implemented a pilot program in the Beijing Zhongguancun National Innovation Zone that allowed medium and small-size high-tech companies to borrow foreign debt above this limit.  Under the pilot program, medium and small-size high-tech companies with insufficient foreign debt quotas could, after registering their foreign debts contracts with local branches of SAFE, borrow foreign debts more than 2.5 times their net assets. 

SAFE has now decided to extend this pilot programs to Shanghai (Pilot Free Trade Zone), Hubei (Pilot Free Trade Zone and Wuhan East Lake High-tech Development Zone), Guangdong and Shenzhen (Guangdong-Hong Kong-Macau Greater Bay Area), and Beijing Zhongguancun Science City’s Haidian Park.  High-tech enterprises will be able to raise funds via various international and domestic channels, and foreign entities will be able to invest more funds in the Chinese market in the form of foreign debt.

Read More: 新时期企业跨境外汇资金流动的 “痛”与“困” 

1.  China strengthens supervision of the export of epidemic prevention materials

On March 30, 2020, the Ministry of Commerce, the General Administration of Customs, and the National Medical Products Administration jointly issued the Announcement on Orderly Export of Medical Materials (《商务部 海关总署 国家药品监督管理局关于有序开展医疗物资出口的公告》).

Effective on April 1, 2020, enterprises that export COVID-19 detection reagents, medical masks, medical protective clothing, respirators, and infrared thermometers must:

  • provide written or electronic declarations to customs that state that the export products have obtained the medical device registration certificates in China and meet the quality standard requirements of the importing country or region, and
  • submit the medical device registration certificates to the customs.

Previously, customs officials did not verify the medical device registration certificates at the time of export.

Additionally, the supervision of the export of epidemic prevention materials was strengthened including: tightening control, inspecting export documents of all goods (compared with the previously adopted random inspection), verifying that the name and quantity of products match the customs declaration, and confirming that the products are not expired, do not have any obvious quality problems, and do not infringe any intellectual property rights.

On April 10, 2020, the General Administration of Customs issued Announcement [2020] No. 53 setting out a list of tariffs. Medical materials exported under these tariffs will be subject to 100% export inspection.

Data Protection

2.  01 Finance releases evaluation results of Financial Apps

On March 12 and 31, 2020, the Financial App Evaluation Center (the “Center”), operated by the financial intellectual institution 01 Finance(零壹财经), released evaluation results of three groups of financial Apps. In each group, the Center reviewed 50 financial Apps across 44 indicators including privacy policies, password security, and personal information security. The issues identified included failure to set up a PopupWindow reminding the user to review the privacy policies, failure to close the information push function, failure to provide info-security function when the users input information, repeated requests for user authorization after the user expressly denied an authorization request, failure to establish a complaint process for personal information security matters, failure to process users’ complaints within 15 working days, modifying passwords without first verifying a user’s identity, and a lack of anti-screen capture for user authentication.  In the past few years, several national regulatory agencies have issued specifications and guidelines for the protection of personal information on mobile devices and have launched multiple rounds of new law enforcement measures.  Enterprises that operate financial Apps (including mini-programs) in China should review the relevant legislation to ensure that they are in compliance with the laws protecting personal information.

SAMR and SCA publish the Implementation Opinion on Commercial Password Testing and Certification

On March 31, 2020, SAMR and the State Cryptography Administration (“SCA”) issued the Implementation Opinion on Commercial Password Testing and Certification (《市场监管总局 国家密码管理局关于开展商用密码检测认证工作的实施意见》)(“the Opinion”). The Opinion is in response to the requirements of Article 25 of the Cryptography Law, effective January 1, 2020, which states that “the State promotes the construction of commercial cryptographic testing and certification systems and formulates technical specifications for commercial cryptographic testing and certification.”  

According to Article 26 of the Cryptography Law, commercial cryptographic products that could have an influence on national security, people’s livelihood, or the public interest shall be classified and listed as critical network equipment and/or special network security products, and must be inspected and certified by a qualified network security certification institution before entering the market.  A commercial password service that uses critical network equipment and/or special network security products must be certified by the commercial password certification agency. Accordingly, enterprises that provide commercial cryptographic products or commercial cryptographic services using critical network equipment and/or network security products should assess whether they need to carry out commercial cryptographic testing and certification and, if required to, should choose commercial password certification agencies that satisfy the requirements of the Opinion in order to be certified.


Should you need any additional information, or if you would like to discuss how recent updates in Chinese law may affect your business, please feel free to contact us.

Disclaimer

This client alert is not intended to be legal advice. Readers should seek specific legal advice from KWM legal professionals before acting on the information contained in this alert.

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