March 2010

The absence of specific rules on national security investigation on foreign investment in China has been labeled as one of the imperfections of the Anti-Monopoly Law of PRC (“AML”). Article 31 of AML only makes a passing reference to the necessity of conducting national security review when foreign capitals engage in acquisitions or other forms of concentrations that implicate China’s national security. Critics point to the general provision as inoperable in curtailing the massive inflow of foreign acquisitions into strategically important industries in China. To the author’s knowledge, no such investigation has been performed in China, since AML became effective on August 1, 2008.

It may be changed soon. Media reports say that a so called “National Security Investigation Mechanism” (国家安全审查机制) is probably going to be unveiled at the end of this year. At that time, an inter-agency committee charged with the investigation will be established. According to the reports, the committee shall have members from a galaxy of government bodies that represent broad and varied state interest, i.e., National Development and Reform Commission, Ministry of Industry and Information Technology, Ministry of Science and Technology, Ministry of Commerce, Commission of Science, Technology and Industry of National Defense, Ministry of Agriculture, State-owned Assets Supervision and Administration Commission of the State Council, China Banking Regulatory Commission, State Administration for Industry & Commerce, State Administration of Taxation and several trade associations in key sectors of economy. It is reported that the draft bill on the national security policy was submitted to the State Council in March. The prelude to the unveiling came when Premier Wen Jiabao made the work report to the 3rd Session of the 11th National People’s Congress on March 5, when he is quoted to say that “in encouraging foreign capitals to participate in the restructuring and M&A of domestic enterprises, China shall accelerate the establishment of national security investigation regime. Continue Reading China’s National Security Check on Foreign Investment About To Be Unveiled

In February, CIRC released the Regulation on the Basic Service of the Personal Insurance Business (“the Regulation”).

Background

The insurance industry, especially personal insurance business is experiencing a rapid and healthy development in the recent years. However, the phenomenon that the insurance companies give much weigh on the underwriting rather than the indemnity, has become more and more severe. This phenomenon has impeded the further development of the industry. In order to solve such problem, some local bureau of CIRC drafted related regulations, which have received positive effects, but the differences among the regions also incur problems for insurance companies to establish uniform internal regulations. The promulgation of the Regulation is CIRC’s response to such problems.Continue Reading Regulation on the Basic Service of the Personal Insurance Business Published

Procedures for Stock Market Investment by Insurance Funds

For the qualified insurance companies and insurance asset management companies proposing to undertake equity investment in the public market, the following 2 steps shall be carried out initially: (1) entrusting the insurance funds in custody of a bank; (2) obtaining seats in the exchange market. Continue Reading Investment in Stock Market by Insurance Funds (2)

Recently, CIRC revised the old Administrative Measures for Insurance Clauses and Premium of Property Insurance Company 2005 and published a new one (“New Administrative Measures”). The new one will be effected since 1st April of this year.

The New Administrative Measures were revised to be in line with the new Insurance Law which was published and effected last year and were mainly revised from three aspects: (1) completing filing system of insurance clauses and premium; (2) enhancing the management of compliance chief officer and actuary chief officer; (3) strengthening supervision of insurance companies in line with new Insurance Law. Specifically speaking, the New Administrative Measures put focus on the following points.Continue Reading CIRC Published Revised Administrative Measures for Insurance Clauses and Premium of Property Insurance Company

In early March, 2010Diageo, the world’s leading spirits maker signed a deal whereby it acquires majority shares of SiChuan Quanxing Group, a holding company that owns Shui Jing Fang(水井坊), reputedly China’s oldest white wine. What is remarkable about the transaction is that it is the first case in which foreign capital takes over Chinese white wine. To further make the deal unique is how surreally the white whine came into being. In 1998, Quanxing Group discovered a relic site when its workers were in the process of renovating factories. Archeological excavation showed that the site was originally a wine making workshop that dates back to Yuan Dynasty, over 600 years ago. With state-of-art bio technology, several active microbes were obtained from the workshop and used to produce the white whine, branded Shui Jing Fang(水井坊). The relic site was also listed by Guinness World Records as the world’s oldest wine making workshop.

On a rough look, the Diageo/Shui Jing Fang deal is remarkably similar to the Coca-Cola bid for Hui Yuan . For example, both involve world famous brands buying Chinese famous local brands, in effort to tap into the ever increasing beverage market in China. Given the doomed Coca Cola/Hui Yuan transaction on antitrust account, one is tempted to ask whether history will not repeat itself this time. Meanwhile, media report says Diageo is preparing regulatory filing with MOFCOM, which is the authority charged with policing merger market to prevent anticompetitive consequences. There are also market speculations on the fate of the deal in the hand of MOFCOM.Continue Reading Can Foreign Capital “Drink” China’s Oldest White Wine?

Where the law stipulates or conditions that the parties to a contract agree on are met, an insurance contract may be rescinded if the parties to the contract reach a consensus through consultation or either a party to the contract executes the termination right to cancel the insurance contract. Usually, without consent of insurance companies, the insured may cancel the insurance policy unilaterally at any time. That because the insureds buy an insurance product is to protect them from unknown risks, so they have right to choose how and when to protect themselves. The Insurance Law (2009) stipulates that otherwise stipulated by other laws and regulations, or agreed by both parties in insurance contract, after the formation of insurance contract, the insurance contract may be rescinded by the insured. On the contrary, to protect the interest of insureds, the Insurance law (2009) generally prohibits the insurer to terminate the contract casually. Only under some special circumstances, the insurer may be allowed to cancel the insurance contract. Here we simply give a brief summary of those circumstances.Continue Reading Brief Summary of Circumstances of Terminating an Insurance Contract by Insurance Companies

According to the Administration of Stock Investments by Insurance Institutional Investors Tentative Procedure (hereinafter referred to as “Tentative Procedure”),as the “insurance institutional investors”, qualified insurance companies and insurance asset management companies are entitled to invest in stocks. Insurance companies include the insurance group companies and the insurance holding company. The difference of qualification requirements for insurance companies and insurance asset management companies [1] is, if the insurance asset management companies satisfy article 5 of the Tentative Procedure, they can invest in stocks directly without CIRC’s approval and if the insurance companies satisfy article 7 of the Tentative Procedure and get approval from CIRC, they can invest in stocks directly as well. Continue Reading Investment in Stock Market by Insurance Funds (1)