August 2024 China Update

Our latest China update is out, providing a snapshot of some of the more major business and regulatory news arising over the last month. Let me know if you have any questions, or require assistance with your China projects.

Business News

WeRide Files for US IPO

According to an article published by CNBC, WeRide, one of China’s autonomous vehicle companies, has filed for an IPO in the US. This would make it China’s largest US IPOs since Didi filed in 2021, and will certainly test the market’s appetite for China IPOs. WeRide develops self-driving technology for driverless taxis, minibuses as well as freight sanitation vehicles, and was last valued at around US$5.11 billion. According to Bloomberg, the IPO has been postponed as of this week, due to various technical issues, just as Beijing’s regulatory approval for the US IPO was due to lapse.

China’s Industrial Profits Rise

According to data released by China’s National Bureau of Statistics in late July 2024, China’s industrial profits improved in June 2024, with the showing of a 3.6% year-on-year rise in profits followed a 0.7% gain in May, while first-half earnings were up 3.5%, accelerating from a 3.4% increase in the January-May period. This must be contrasted with other economic data, such as luxury brands (including Marriott and L’Oreal), alcohol beverage companies (including Moutai and Budweiser) and large MNC’s such as GE Health, talking of reduced sales outlooks for China. And an update - data released on 27 August 2024 (today) showed industrial profits continuing to rise for the month of July.

NDRC Promotes Foreign Debt Borrowings

China’s National Development and Reform Commission (NDRC) has released its “Circular on Supporting Borrowings of Medium and Long-term Foreign Debt by High-quality Enterprises to Promote High-quality Development of the Real Economy”, effective from July 29, 2024 to July 29, 2029. The Circular is aimed as simplifying foreign debt access and reporting procedures - the Circular specifies that: high-quality enterprises may submit a planned consolidated foreign debt quota applications for both parent and subsidiary companies, realizing one-time application and phased use; applications for international commercial loans or overseas issuance of bonds that lack some materials may be processed under the provisional acceptance policy; and for enterprises meeting certain conditions, formal legal opinion requirements may be relaxed.

Marriages in China Slow

According to a recent article from Reuters, the number of Chinese couples who got married in the first half of this year fell to its lowest level since 2013, as more young people deferred nuptials amid a slowing economy and a rise in living costs. The number of marriages in China is closely tied to the number of births, so it is significant given China’s aging population. A total of 3.43 million couples tied the knot in the first six months of the year, a drop of 498,000 from the same year-ago period.

Shanghai and Shenzhen Property Sales are Up

Although China’s general property market is slow at best, with the government bringing in new measures regularly to try to get things moving, luxury apartment sales in centres such as Shenzhen and Shanghai remain strong, with new developments selling out incredibly quickly. According to the South China Morning Post, all 33 units of Blossoms China, a luxury residential project in Shanghai co-developed by Sunac China Holdings and Xinhu Zhongbao, were “snapped up” by homebuyers, pulling in 1.8 billion yuan (US$252.8 million). Back in June, Bloomerg reported that homes in Shanghai that were on the market for US$3.8m, were five times oversubscribed.

Mercedes Benz gets Approval for Autonomous Driving Testing in Beijing

According to a Mercedes, Beijing has granted approval to Mercedes to start trials of its “Level 4 self-driving capabilities” on Beijing’s expressways and urban streets. On its website, Mercedes-Benz states that “Mercedes Benz announces to have become the first international car maker to obtain approval for Level 4 automated driving testing for designated urban roads and highways in Beijing. As part of Mercedes Benz China's technology research projects, this Level 4 testing aims to explore cutting-edge technology in developing automated driving system software and hardware. Previously, at the end of 2023, Mercedes Benz became one of the first automakers to obtain Level 3 testing in Beijing.”

Olympics in Lifts French Wine and Speedo Sales in China

According to Vino Joy, the popularity of the Paris Olympics have led to increased interest in French produce, in particular French wine. The German supermarket brand, Metro who has been in China since 1996, and one of China’s top supermarkets by numbers, has disclosed that the sale of four imported French wines—Champagne Mallol-Gantois Reserve Grand Cru, Rothberg Bordeaux White, M. Chapoutier Cotes du Rhone, and Chateau De Costis Bordeaux— increased by over 120% month-on-month. It seems that the Olympics have also led to a jump in China demand for sportswear and sports products, with Australian brand Speedo seeing sales in China jump via Tmall, along with strong sales evidence being seen for Adidas and Decathlon.

EVs, hybrids make up half of July Auto Sales in China

Sales data from China Passenger Car Association (CPCA) has shown that half of all vehicles sold in China in July were either new pure electric vehicles or plug-in hybrids. It is thought that this is the first time that new energy vehicles have hit this mark. With most consumer level driving trips in China being local in nature, and access to charging stations being excellent in most large cities, sales are predicted to continue to increase.

Hong Kong’s IPO Market Still Quiet

According to recent aticles from the South China Morning Post, weak market sentiment and general economic uncertainty continues to breed caution in Hong Kong’s capital market, causing potential issuers to delay IPO plans. The larger accounting firms have been making more positive noises regarding Hong Kong IPO’s since May of this year, but this has not led to significant increases in activity for now. KPMG recently stated that it expected to see the market become more active in the second half of 2024 – “In the first half of 2024, global IPO markets raised a total of USD 51.6 billion across 513 deals. This marked a decline of approximately 20% in both funds and deal volume, compared to the first half of 2023. Despite the overall downturn, the US IPO markets showed promising signs. However, these were counterbalanced by a slowdown in the Asia Pacific region. The New York Stock Exchange and NASDAQ ascended to the top two positions among global IPOs in terms of total funds raised, while the Shanghai Stock Exchange and Shenzhen Stock Exchange slipped to fourth and fifth place respectively. The three largest IPOs were hosted by European stock exchanges, each raising between USD 2.4 billion to USD 2.8 billion.”

China’s Express Courier Services Boom

China’s State Post Bureau's August report on its express delivery industry for July shows a notable growth in the sector, with the industry development index achieving an 11.8 percent year-on-year growth. Grabbing headlines, it was announced earlier this month that China’s express delivery sector had handled 100 billion parcels so far this year, reaching the same milestone 71 days ahead of last year's pace. It is thought that the continued popularity of online shopping and more reliable courier services, have led to increases in the use of courier services.

Amer Sports (owner of the Wilson brand) Sales in China Boom

China has become the second-biggest market for Amer Sports, the maker of Wilson branded sports products. Revenue from the Chinese market rose 52 percent to US$599 million in the six months ended June 30 from a year ago, accounting for nearly 28 percent of Amer’s total income in the period, according to Amer Sports’ financial statements released last week. The US remains its number one market, with sales at US$777 million.

China and Vietnam Sign Deals

According to Reuters, during Vietnam’s new leader’s, To Lam, visit to Beijing this month, fourteen agreements dealing with cross-border railways to crocodile exports were signed. This follows Xi Jinping’s Hanoi visit in December 2023, where numerous MOUs were signed, setting the stage for the finalisation of binding agreements. Lam's visit to Beijing, was his first overseas trip since he was appointed party chief early this month. Although details are still awaited, the December MOUs included agreement on jointly building a new bridge across the Red River to connect Vietnam's Lao Cai province and China's Yunnan province, a commitment in the joint statement to the two countries working on the construction of interoperable railways connecting China to the Vietnamese northern port of Haiphong, joint naval patrols in the Gulf of Tonkin, and the establishing a hotline between Vietnam's agriculture ministry and China's coastguard for handling unexpected incidents arising from Vietnam's fisheries activities in the South China Sea (in addition to an earlier pledge to enhance an existing hotline between defence ministries).

China Continues to Set Up Plant Variety Rights Test Centres

On 21 August, the Science and Technology Development Center of China’s State Forestry Administration announced that the newly created Kunming Test Station was getting close to being ready to handle testing of plant varieties of the genera Vaccinium (blueberries), Dianthus, (flowers) and Viburnum (flowers). They also provided guidance and suggestions, urging the continued collection of known varieties, improvement of the known varieties database, enhancement of technical training for testing personnel, and the diligent fulfillment of the Kunming Test Station’s duties and obligations as a regional test station for new varieties of forestry and grassland plants. Over the last 20 years, the securing of plant variety rights in China has become very popular, leading to specialized test centres being developed for different types of plants. These test centres are not usually mandatory.

Sinopec Upbeat on Natural Gas and Chemicals

This week, Sinopec reported a rise in its first-half net profit but lower revenue due to a decline in demand for diesel - Net profit for the first six months ended June rose 1.7% to 35.70 billion yuan, equivalent to $5.01 billion, while revenue fell 1.1% from a year earlier to 1.576 trillion yuan. According to Marketwatch, Sinopec has said that it expects China “domestic demand for natural gas and chemical products to continue growing in the second half of the year while the refined oil demand may remain stable.” Two other major Chinese oil producers, Cnooc and PetroChina, will report their results later this week.

Monkey Magic Sees Increases in Computer and Gaming Sales

According to the China Daily, personal computers, Sony Play-Station 5 consoles and other derivative products are “flying off the shelves” in China, due to the overwhelming popularity of the newly launched Chinese-made video game Black Myth: Wukong (many Westerners will remember the Monkey Magic television series from the 1980s). The sales of PS5 surged over 100 percent year-on-year between Aug 13 and Aug 19, according to Alibaba's e-commerce platform Tmall. During the same week, the sales of other electronic products such as laptops, keyboards and headphones for esports embraced robust year-on-year growth of over 80 percent, Tmall data showed.

Manufacturers of electronic products such as Sony, Ipason, Razer and Logitech saw their sales increase rapidly after the game was launched, the platform said. The West has seen a Taylor Swift bump for economies, and China is currently seeing a major Monkey Magic bump. As to actual game sales, the game’s X account posted last Friday that it had sold 10 million copies “across all platforms” as of Friday at 9:00 pm Beijing time.

Legal News

China Releases Draft Anti-Monopoly Guide for Pharmaceutical Field

On 9 August 2024, China’s State Administration for Market Regulation published a draft Anti-Monopoly Guide for Pharmaceuticals, drafted based on China’s Anti-Monopoly Law to solicit public comments until 23 August 2024. The Draft Guide are industry specific anti-monopoly guidelines applicable to all drug varieties, including traditional Chinese medicine, chemical drugs, and biological products. It will replace the Guide of the Anti-Monopoly Committee of the State Council to Anti-monopoly in the Active Pharmaceutical Ingredients Field issued on 15 November 2021. Given the characteristics of the pharmaceutical field, the Draft Guide mainly refines the analysis ideas and identification factors of monopolistic behaviours, such as monopolistic agreements, abuse of market dominance, and concentration, in this field. Please see our website for more details.

China Releases Draft Guideline for Closure of Internet Platforms

On 7 August 2024, the secretariat of China’s National Technical Committee on Cybersecurity of Standardization Administration released a draft data processing guideline for shutting down internet platforms for public comments until 22 August 2024. It is stipulated according to Cybersecurity Law of the People’s Republic of China, Data Security Law of the People’s Republic of China, and China’s Personal Information Protection Law, and provides general requirements for the processing of data, and specific processing requirements for personal information and key data when shutting down internet platforms. Please see our website for more details.

CNIPA Releases IP Statistics for the First Half of 2024

The China National Intellectual Property Administration (“CNIPA”) has released intellectual property statistics for the first half of 2024. According to the statistics, compared with the same period last year, the grant numbers of China’s invention patents and trademarks increased significantly, but those of the utility models, designs, and integrated circuit layout designs slid dramatically.

In terms of patents, according to the CNIPA’s patent statistics from January to June 2024, the number of invention patent grants increased by 27.97% over the same period last year, from 432,632 last year to 553,649. This is attributed to the significant increase of 30.26% in domestic invention grants. The number of utility model grants fell to 966,514, accounting for only 87.53% of the same period last year. Among them, the numbers of both domestic and foreign grants declined, especially the number of domestic utility model grants dropped from 1,101,424 in the same period last year to 963,975. The number of design grants also fell by 11.35%, from 344,000 last year to 304,954. Although the designs granted by foreign countries increased significantly from 4,806 to 10,580, the designs granted by the CNIPA decreased by 44,820. From the perspective of the type of patent applicants, most of them are service inventions, with corporate inventions accounting for the most, accounting for 74%. Compared with the same period last year, the grant number for patents from colleges and universities declined significantly, with inventions falling from 90,411 last year to 87,287, utility models falling from 32,473 last year to 29,160, and designs falling from 9,106 last year to 6,696. As of 30 June 2024, the numbers of valid Chinese invention, utility model, and design patents have risen to 5,343,829, 11,472,420, and 3,018,678 respectively.

Regarding trademarks, as of 30 June 2024, China has 48,043,693 valid registered trademarks. In the first half of this year, the number of trademark applications exceeded 3.51 million, and the number of valid trademark registrations also exceeded 2.46 million, an increase of 444,681 over the same period last year. Meanwhile, the trademark applications approved for registration in both China and out of China highly increased, with domestic registrations increasing by 427,533, and foreign registrations increasing by 17,148. From January to June this year, the number of opposition filings increased from 53,581 last year to 61,789. In addition, the number of appeal cases also increased by 13.91%, from 188,764 last year to 215,014. Among them, the largest proportion is the appeals for objection and invalidation declaration cases, which are 168,354 and 35,421 respectively.

China Issues Guiding Opinions on Comprehensively Enhancing the Efficiency of Public Services in Intellectual Property

On 30 July 2024, the CNIPA released its Guiding Opinions on Comprehensively Enhancing the Efficiency of Public Services in Intellectual Property. On August 1, a detailed interpretation of the Guiding Opinions was published, further clarifying the goals and implementation strategies. These documents aim to bolster high-level technological self-reliance and strengthen the role of IP public services in supporting economic development and innovation. The Guiding Opinions are designed to integrate IP public services into the national innovation system, emphasizing service to both national and regional economic development. The focus is on creating a robust IP service framework that supports high-quality development through effective and efficient public service delivery.

China’s Supreme People's Court and MOJ Hold First Arbitration and Judicial Review Training

In early July 2024 , the first joint training course for arbitrators and arbitration judicial review judges jointly organized by the Supreme People's Court and the Ministry of Justice took place at the National Judges College. This illustrates China’s commitment to arbitration and its growing importance for dispute resolution in the region.

The progress of arbitration in China was discussed, including successed achieved in dealing with the complicated application of local and foreign law in arbitration cases. The panelists spoke of the importance of conducting joint training for arbitrators and arbitration judicial review judges. For more details, please see our website.

China Issues Draft Implementation Rules on Company Registration Administration

On 26 July 2024, China’s State Administration for Market Regulation (“SAMR”) published a draft Implementation Measures on Company Registration Administration for public comment until 26 August 2024. To implement the requirements on the formulation of specific measures for company registration by the Company Law of the People’s Republic of China and the Provisions of the State Council on Implementing the Registration Management System for Registered Capital under the Company Law of the People’s Republic of China, the Draft Measures formulate specific implementation rules for the registration and management appliable to all Chinese market entities, including foreign-invested enterprises. It has five chapters and 27 articles, mainly including requirements for company registration matters and standardized management of company registration to cultivate a high-quality national unified market. For more details, please contact us or visit our website.

China’s Supreme Court Issues Commentary on New Company Law

The “Company Law of the People’s Republic of China” (hereinafter referred to as the “New Company Law”) came into effect on July 1, 2024. To address the issue of transitioning between the old and new laws following the implementation of the New Company Law, the Supreme People’s Court issued the “Provisions of the Supreme People’s Court on the Temporal Effect of the Company Law of the People’s Republic of China” (Fa Shi [2024] No. 7,) on June 29, 2024, which came into effect simultaneously with the New Company Law. The Provisions consist of 8 articles, including general provisions on temporal effect and favorable retrospective rules, favorable retrospective rules for the validity of civil legal acts, favorable retrospective rules for contract performance, blank retrospective rules for new provisions, retrospective application rules for refined provisions, legal application of liquidation responsibilities, the precedence of res judicata over retroactivity, and effective time. For more details, please contact us or visit our website.

Draft for Comment - Data Security Technology - Methods for Monitoring Security Risks of Data Interfaces

On August 2, 2024, the National Information Security Standardization Technical Committee of China released its draft for comments on Data Security Technology - Methods for Monitoring Security Risks of Data Interfaces. This document aims to standardize and guide organizations in monitoring security risks associated with data interfaces. The public consultation period will end on October 1, 2024. For more details, please contact us or visit our website.

China’s Implementing Regulations of the Law on Guarding State Secrets

The newly revised Law of the People’s Republic of China on Guarding State Secrets (hereinafter referred to as the Secrets Law) came into effect on May 1, 2024. The Implementing Regulations of the Law of the People’s Republic of China on Guarding State Secrets (hereinafter referred to as the Implementing Regulations), following closely, were revised and announced to take effect on September 1, 2024. The revised Secrets Law and Implementing Regulations expand and refine the scope of state secrets, strengthen the management of confidential information, standardize the procedures for declassifying secrets, increase penalties for leakage, and improve supervision and inspection mechanisms, thereby laying a solid foundation for effective implementation of secrecy work. For more details, please contact us or visit our website.