Apr 10, 2019 10:33 AM

CX Daily: A Bankruptcy Law Revamp Must Put Local Governments in Their Place

Residential buildings in Chang'an town, Dongguan city, Guangdong province, May 16, 2018. Photo: VCG
Residential buildings in Chang'an town, Dongguan city, Guangdong province, May 16, 2018. Photo: VCG

New tax option drives up existing home sales in southern city

In March, 2,521 existing homes were sold in Dongguan, South China’s Guangdong province — an increase of 217.51% from the previous month, according to data from the research department of the Shenzhen-based real estate agency, Leyoujia Holding Group Ltd.

The surge in sales came after Dongguan’s government changed the rules for existing home sales on March 11, effectively lowering the tax on home sales. Homeowners had a new option to pay a 2% tax on the total transaction price of their home. The existing option was to pay a 20% tax on the increase in the value of their property since their purchase. The new tax option is better for sellers whose homes have appreciated more than 11.1% in value, according to our calculations.

Dongguan is one of several localities in China that have loosened restrictions on the property market as the country’s economic growth has slowed. At a key meeting in December, policymakers indicated they would take a different approach to managing the property market, allowing local governments more freedom to adjust restrictions based on conditions in their own local markets.



CEFC China has been in a debt crisis since its founder Ye Jianming was placed under investigation by Chinese authorities. Photo: VCG

Asset sales /

Citic advances deal to buy Czech assets of CEFC

China’s state-run conglomerate Citic Group signed a contract to pay 147 million euros ($165 million) to take over the Czech assets of embattled CEFC China Energy, ending nearly 10 months of disputes with CEFC China’s creditors over the price, though several creditors said they plan to contest the deal.

Rainbow Wisdom Investments Ltd., a unit of Citic, last week signed the deal with PricewaterhouseCoopers, the liquidator appointed by a court to handle the Czech asset sales, we learned. The final price was nearly triple the amount Citic proposed late last year.

Editorial /

An effective amendment to the bankruptcy law will put local governments back in their place

In our view, long-sought amendments to China's bankruptcy law will touch on many different areas, ranging from its scope, conditions and procedures to perhaps even an individual bankruptcy system. The rework will be extremely complicated, to be sure, but the most important thing it must accomplish is to put local governments back in their place.

The most serious problem in bankruptcy practice is local governments intentionally or unintentionally destroying bankruptcy proceedings by intervening in cases at will, even violating basic legal requirements. It is undeniable that bankruptcy — especially when it comes to state-owned enterprises — has a major impact on the local area and inevitably involves various interests. The participation of local governments is indispensable, but such participation must be premised on respect for markets and the rule of law.

Check out our editorial.



Nio faces shareholder suits in U.S. alleging misleading disclosures on Shanghai factory and on impact of shrinking EV subsidies. Photo: VCG

Legal woes /

China’s Nio faces class action lawsuits in U.S.

Chinese electric vehicle maker Nio Inc. and its executives face multiple class action lawsuits in the U.S. The shareholder suits allege the company misled investors about a planned new manufacturing facility during its 2018 IPO and failed to disclose the impact of reductions in government subsidies for electric cars.

Nio’s executives and its IPO underwriters led investors to believe the company planned to build its own manufacturing factory in Shanghai but instead continued to rely on a “little-known” auto manufacturer to produce its electric vehicles, according to the lawsuits. Nio said the lawsuits are “meritless” and the company will defend itself vigorously.

Property market /

Analysts say too soon to tell how looser 'hukou' rules will affect real estate

China may be relaxing rules on where migrant workers can obtain a “hukou,” or household registration, but its short-term impact will not replace finance and policy in shaping the real-estate industry, analysts say.

Rather, it's the labor supply that will first feel the impact.

Still, without key details on the qualifications for new hukou applicants, such as the minimum number of years someone has to have paid social security fees, even cities eager to absorb talent, like Alibaba hometown Hangzhou, are left in the dark, others say.

Vaccines /

China’s rising vaccine star halts production, signaling tightening industry controls

Chongqing Zhifei Biological has halted the production of its own meningitis vaccine AC-Hib after the company failed to obtain a new license to replace its existing one, which expired April 1.

It is not clear whether the renewal application was postponed or rejected. Industry watchers say Zhifei’s case signals the increasingly tight supervision of vaccine production after scandals caused nationwide concern.

Jiangsu explosion /

Deadly explosion’s impact continues to be felt on capital market

In the aftermath of the deadly explosion last month that resulted in 78 deaths, the city of Yangcheng announced Thursday that it will “completely” shut down the Xiangshui Chemical Industrial Park, or ground zero. Analysts told us they believe closings like this may be more frequent going forward, as inspection procedures become stricter and officials are more cautious about approving new projects because of safety concerns.

If true, prices of certain chemical products could surge, potentially affecting overall market supply, analysts said. The scenario could be similar to that of the cement industry, where a crackdown on pollution caused the sector’s prices to surge.

State assets /

Gree Electric management may buy 15% stake from Zhuhai government

Zhuhai city government-backed Zhuhai Gree Group Co. Ltd., which holds 18.22% of Gree Electric Appliances Inc., will put 15% of the company up for sale in a deal that could lead to an ownership shakeup in the Chinese appliance giant.

The stake could be worth at least 41 billion yuan ($6.1 billion), based on the company’s market value. The deal will require approval from the state assets regulator. A person close to Gree Electric told us that company Chairwoman Dong Mingzhu and her management team have a “strong intention” to buy the stake. Dong holds 0.74% of Gree Electric as the 10th-largest shareholder.

Quick hits /

Platform for livestreaming games becomes latest mega-fundraiser

Genome giant denies falsifying revenue data

Plastic surgery app wants to show its face on the Nasdaq

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