Cecca Newsletter December 2017

Issue Six: End-of-Year Issue December 2017
CECCA NEWSLETTER cecca.org.uk 1
CONTENTS
End-of-year Note 2017: CECCA and You……..2
1.Special Observer
The Rise and Rise of China……………………………………….....4
2. Company Law
2.1 Legal Updates: Provisions of the Supreme People's Court
on Several Issues Concerning the Application of the
Company Law of the People's Republic of China (IV)…… 7
2.2 To be or not to be?
-- An Empirical Study on Dual-class Share Structure of US
Listed Chinese Companies (I) ……………………………….……10
3. Academic Frontier
Research Project Investigates Seafarer’s Welfare in Chinese
Ports …………………………………………………………………………15
4. News in Brief
4.1 China Was Elected to Be Category(A) Member of IMO
Assembly Council for The 2018-2019 Biennium with The
Highest Amount of Votes. ………………………….……………..16
4.2 Shenzhen Court of International Arbitration (SCIA) Sets
up China’s First Overseas Hearing Center in The U.S...…16
5. Events: Call for Papers -- Insolvency Law
The 2nd
Cross-border Corporate Insolvency and Commercial
Law Research Group Conference & Symposium..….……….17
CECCA
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CECCA NEWSLETTER
Publisher: CECCA Editorial Department Publishing Directors: Shengnan Jia, Dr. Lijun Zhao
Executive Editors: Haiyang Yu, Xiangyi Zhang

End-of-Year Note 2017: CECCA and You
To CECCA’s consultants, members and friends,
As the holiday season is coming, on behalf of CECCA’s colleagues, we would like to express our sincere
thanks to all of you for making 2017 a truly wonderful and meaningful year for CECCA. We wish you a
pleasant and amazing holiday in the upcoming days.
CECCA has been working to build an efficient communication platform for our professional and
supportive community, which is composed of every one of you. With efforts and help from our
consultants, members and friends, in June 2017 we were able to hold an amazing annual conference
‘Issues of Maritime Governance’ in London, together with our expert speakers from CECCA, City,
University of London, Middlesex University, Southampton Solent University, World Maritime
University, and the Chinese Shipping Association of London (CSAL).
*Issues of Maritime Governance: 2017 Annual Conference
CECCA has also been enthusiastically participating and contributing to other events, most of which
are held by our colleagues and friends, based on our consultants’ and members’ backgrounds.
This year, delegates attended the London
Summit on Commercial Dispute
Resolution, which was hosted by Beijing
Arbitration Commission, and the
Institute of Advanced Legal Studies,
Queen Mary, University of London. We
were very pleased to meet up with our
excellent colleagues in London again, who
were all experienced and celebrated
Chinese lawyers and arbitrators who
disposed of international commercial
cases in the different sectors. We were
very honored to have a conversation with
Sir William Blair again, and he was pleased to promise that he would try to do a closing remark at
CECCA’s annual conference next year.
On 12th
September CECCA was invited to attend the forum ‘Chinese Shipping in London’, which
focused on changing economic demands in China and the resulting impact across ocean freight markets,
held by CSAL during London International Shipping Week (LISW17) at the Baltic Exchange. CECCA’s
consultants and directors attended the event and contributed to the discussion with insights.

To provide ‘Professional Consultancy on Legal,
Trade, Finance and Policy Matters’, CECCA started
to publish our own ‘CECCA Newsletter’, not only by
emails, our website and LinkedIn page, but also on
all kinds of social media, including Facebook,
Twitter, Blog and the Chinese one ‘WeChat’.
With our expert members’ and friends’ efforts, we
were able to share all those brilliant and professional
insights and knowledge, not only in our monthly-
published ‘CECCA Newsletter’ in English, but also
through twice-a-week updates on WeChat page in
Chinese. Thanks to our enthusiastic friends’
wonderful ideas and suggestions, we have been
making changes and improving the quality of our
newsletters, and we have become more confident in
the future of our association than ever. Sincere
thanks to all of you. We could not make any of these happen without your efforts and support.
To build an efficient communication platform for our community, to provide ‘Professional Consultancy
on Legal, Trade, Finance and Policy Matters’, and to promote Commercial Collaboration between
China and Europe, we invite you to join our journey in 2018.
Thanks for your efforts and help again and we wish you an awesome holiday!
CECCA Editorial Department
On Behalf of
China-Europe Commercial Collaboration Association
(CECCA)
December 2017

1. Special Observer
The Rise and Rise of China
Authored by Professor Yash Tandon1
The beginning of a third revolutionary epoch?
As I write this blog, the Western media is awash with the news of the week-long 19th Congress of the
Chinese Communist Party that started on 18 October. The CNN – Hong Kong (October 17) wrote:
“At the congress, Xi may cement his standing by revising the party charter to include ‘Xi Jinping
Thought’ as one of the party’s guiding theories, elevating his stature to that of Chairman Mao
Zedong”. A number of articles (among them the British Guardian)have talked about Congress
ushering in a “third epoch” in Chinese recent history. The first epoch was Mao Tse-tung, the “Lenin”
of China; followed by Deng Xiaoping, who brought an era of “Socialism with Chinese characteristics”,
which (in my view) is really “capitalism with Chinese characteristics.” Now we are witnessing the
beginning of “the Xi Jinping era”. The Economist dubbed the Congress as a “coronation” of Xi Jinping.
Before we get deeper into this, we need to put the 19th Congress in a proper historical and geopolitical
context, in order, especially, to understand the implications of the rise of China for Africa and for the
peoples of the global South.
China – a reluctant giant
For five centuries the West has ruled the world. It is now broadly recognised that the Euro-American
Empire is collapsing, and the power that is gradually but surely neutralising the Empire is China. China’s
rise is palpable.
This worries the West, especially the United States
which is a Pacific Ocean nation as well as
Atlantic. With its US “hub-and-spoke” strategy
for Asia, the USA has been assuring its strategic
partners across the Pacific that it is the only country
(and, Japan, its ally in the Pacific) that can provide
them security against China. But this is only
partly true; most of the Asiatic countries know of
the waning power of the United States and Japan,
and are hedging their bets between the US and
China.
Strange as it may sound, China is not really keen to
take over from the United States. It is not ready to
provide global political leadership. President Xi
says China still needs another two decades to “catch
up” with the West, and to address the serious
problems of poverty and inequality that still plague
its countryside. At the Communist Party’s 95th
anniversary, July 2016, Xi had pledged to return to
Marxist roots. “I’m afraid the propertied classes have taken over,” he said,” the poverty gap is generating
class tensions”.
So China’s first priority is to address class contradictions within the country. But the problem is that
the Euro-American- Japanese Empire is collapsing faster than China had expected. At the World
1
Professor Yash Tandon, Senior Consultant，CECCA. This article is also available at http://yashtandon.com/the-
rise-and-rise-of-china/,welcom to visit professor’s blog.
Picture taken from http://en.ofweek.com/news/China-can-quadruple-solar-output-by-2030-21682
Editor’s Note:
In previous issues, the 19th
National Congress of CPC were followed up by CECCA. In this issue, our senior
consultant Prof. Yash Tandon, as an expert in international political relations, analyzed the rise of China and the
trend of China’s future development, from a perspective of World Macro History and Development.

Economic Forum’s 2017 Davos Conference President Xi more or less said that the USA is no longer
able to stabilise the world, and so China has to take over the leadership, even when it has its own internal
challenges to address.2
Chinese alternative to the present Western order
In our times, competing ideas about contemporary “order” and its moral basis articulated by political
thinkers and policy strategists from Cuba, Iran, China, Russia and Africa are in many ways
fundamentally different from those of the “mainstream” Euro-American thinking. And even if they
share some common values – human rights, for example, or good governance – their application in
concrete situations raise serious questions for debate. That is why the West continuously talks about
bringing countries like Cuba, Iran and Zimbabwe “back to order”. China, too, has a different conception
of “order” and morality, and it challenges the mainstream conceptions on issues such as human rights
and governance. But because of its size and power China can withstand Western sanctions better than
Cuba, Iran or Zimbabwe.
At the 7th Strategic and Economic Dialogue between the United States and China in Beijing in June
2015, among other matters, the two countries discussed climate change, cyber security code of conduct,
protection of oceans, and combatting wild life trafficking. But more importantly, China said that the
international order needs “new norms” based on cooperation, not confrontation. China calls
“responsible” cooperation between the two as “equal partners” to build a new international order. The
US gave lip-service to the idea of “co-operation”, but in reality it is following policy of “containment” –
much like it did in respect of the Soviet Union during the “cold war” era. The US has heavy military
presence in the China Sea, and strong ties with Japan and South Korea. In South Korea alone, there are
28,500 American soldiers, sailors, airmen and Marines.
China is setting “new norms” of international relations – which it calls in typically dialectical note – the
“new normal norms”. Whilst challenging the “old norms”, it has gone about it subtly, setting up new
structures of global governance to the IMF, the World Bank and the World Trade Organisation
(WTO). It would be interesting to study how China challenges the WTO at its eleventh Ministerial
Conference in Buenos Aires in December 2017.
An African perspective on the rise of China
Between 2001 and 2011, total trade (exports + imports) between Africa and BRIC (Brazil, Russia, India,
China) grew from US$ 22.9 billion to US$ 267.9 billion. Although for Africa, traditional trade partners
such as Europe and the US remain important, Brazil, India and China together bought a quarter of
Africa’s exports in 2013. China is Africa’s top business partner, with trade exceeding US$ 198.5 billion
– compared with US-Africa trade amounting to US$ 99.8 billion in 2013. This, by any accounts, is an
interesting development.
This has provoked some heated discussion in the West, where the China-bashers portray China as a
rogue dragon. Last year I was interviewed by a freelance journalist sympathetic to Africa, Hans Wetzels,
who expressed the concerns that some Africans and Europeans have about the Chinese presence in
Africa. He asked me several questions, among them:
§ What is your opinion on the growing presence of China in Africa? Is this the way South-South
cooperation should be set up, or is China yet another empire ready to exploit Africa?
§ While travelling around Angola, I saw empty Chinese-built buildings, Dos Santos and his
companions making a load of money off selling oil to China while the slum-dwellers in Luanda
are still drained of any perspective of development. That “oil for infrastructure” model does not
seem like a model leading to sustainable development. Do you agree?
§ One of the main differences people point out between China and Western powers in Africa is
that China never meddles in domestic affairs while the West brings an entire agenda (an agenda
you have called imperialist and others have dubbed paternalistic). Is this correct? And do you
foresee China becoming more political in the future as the country gains in power and will that
change the relationship with Africa?
I will not answer these questions here, except to say that whilst some Africans have genuine concerns,
Western anxiety about Chinese presence in Africa tells more about the failure of their model of
development than about China. Yuzhou Sun, a D. Phil student at Oxford, argues that students on
2
See: https://america.cgtn.com/2017/01/17/full-text-of-xi-jinping-keynote-at-the-world-economic-forum

Africa-China relations are caught up in an epistemological challenge – a problematic tendency towards
oversimplified “dragon in the bush”, a “monolithic Chinese dragon in an un-variegated African bush
stripped of historical and political content.”3
Of course, there are people in the West who see the Chinese presence in a positive light. In The
Dragon’s Gift: The Real Story of China in Africa, Deborah Brautigam, argues that Africa and China are in
a “win-win” relationship. The book is based on years of research travelling around Africa, visiting
Chinese-funded projects cutting across agriculture, industry, natural resources, and governance. She
ends with a sound advice to Africans and the West.
Ultimately, it is up to African governments to shape this encounter in ways that will benefit their
people. … The West can help by gaining a more realistic picture of China’s engagement, avoiding
sensationalism and paranoia, admitting our own shortcomings, and perhaps exploring the notion that
China’s model of consistent non-intervention may be preferable to a China that regularly intervenes in
other countries’ domestic affairs, or uses military force to foster political change.4
As an African, I share some of the concerns about China in Africa, and I’ve challenged African
governments to tune up their negotiating skills with China (as also with Europe, the US or India). There
is no reason, for example, why China should bring its workers for China funded construction projects
in Africa, nor why the Chinese should set up small shops – a sector best developed by Africans
themselves. Brautigam is correct to argue that “Ultimately, it is up to African governments to shape
this encounter in ways that will benefit their people”. This said, I would add that for Africa and for
countries such as Cuba, Venezuela and Iran, the Chinese model is better than the Western.
Taking a step further at a global geopolitical level, I would argue that Africa should take advantage of
the BRIC grouping – especially China – to balance the power of the American-European- Japanese
Empire that presently dominates Africa. Turkey in this respect provides a good perspective; President
Erdogan is adroitly turning away from the West. He may, for example, join the Shanghai Cooperation
led by China and Russia. Africa should take a leaf from Erdogan’s book.
Conclusion
In concluding this essay, I cannot resist the temptation of quoting from Amitav Ghosh’s novel, Sea of
Poppies, where the British agent, Burnham, who is in the business of growing opium in India and
exporting it to China, says: “I see no reason why an Englishman should abet the Manchu tyrant in
depriving the people of China of opium”; and, in a wishful thinking that the demise of China is for good,
he says: “Johnny Chinaman thinks he can return to good old days … no longer, he has tasted opium”.5
Things have changed. China is fast emerging as the leading nation. This is a reality even the West cannot
ignore, let alone Africa.
3
http://www.history.ox.ac.uk/people/yuzhou-sun
4
Brautigam, Deborah, (2009, 2011) The Dragon’s Gift: the Real Story of China in Africa, Oxford University Press
5
Amitav Ghosh, Sea of Poppies,2009, pp. 121, 117

2. Company Law
2.1 Legal Updates
Provisions of the Supreme People's Court on Several Issues
Concerning the Application of the Company Law of the People's
Republic of China(IV) came into force on 1st
September (hereinafter the ‘the SPC
Provisions (IV)’).6
Authored by Dr. Chi Zhang7
CECCA’s newsletter in October has released this legal update. In this article, the following topic will
be discussed - the SPC Provision (IV) aims to implement major reforms which are introduced by the
recent foreign investment approval system, and to make the Chinese company law more attractive to
foreign investors. Based on the existing case law regarding shareholders’ rights, the SPC Provisions (IV)
has enhanced the role of courts in filling the loopholes of the existing legislation. This article ventures
to examine the potential impact of the SPC Provisions (IV) on the legal practice, and to focus on the
significant changes in the protection of shareholders and relevant judicial practice.
1.1 Guiding judicial decisions on the validity of company resolutions
The SPC Provisions (IV) provides clear standards for approving shareholders’ or directors’ resolution.
It permits a company’s shareholders, directors or supervisors to apply to the court to strike down the
shareholders’ or directors’ resolution of a company as having not been passed, on the grounds that:
a) No meeting of the company has been convened to adopt the resolution, unless, under paragraph 2 of
Article 37 of the Company Law or the company's bylaws, a decision may be directly made without
shareholders' meeting being convened and all shareholders have affixed their signatures and/or seals to
the decision document.
b) the matter stated in the resolution had not been voted by the meeting; or
c) the minimum quorum of attendees or shareholder voting rights fail to comply with the provisions
of the Company Law or the company’s bylaws; or
d) the voting result fails to reach the ratio for passing the resolution as specified by the Company Law
or the company’s bylaws; or
e) any other circumstances under which the resolution could be deemed not to have been passed.8
6
Up to now, the SPC has released four judicial provisions on practical issues concerning the application of the
company law of the P.R.C. The first three SPC provisions on the company law of the P.R.C were released in 2006,
2008, 2010, respectively and the fourth one was promulgated in late 2016.
7
Dr. Chi Zhang is a director of the financial report at the CECCA Editorial Department and a lecturer of law at
China University of Mining and Technology (Beijing)
8
The SPC Provisions (IV), Article 5.
Editor’s Note:
In recent years, Chinese government has been promoted reforms from different perspectives in order to build a
better business environment with international standards. More and more Chinese companies have evolved to
cater to the demand of the international business.
To provide a better insight and understanding of changes in this field, we have organized the following: ‘Company
Law’, with papers from our expert consultants and members.

1.2 To strengthen shareholders’ right to information
In accordance with the existing Company Law of the P.R.C, shareholders are entitled to inspect or
copy the articles of the association meeting minutes of shareholders, resolutions of directors and
supervisors, financial reports and accounts of a limited liability company. The SPC Provision (IV) has
strengthened shareholders’ rights to information by providing them the remedy of specific
performance. This enables them to compel the company to provide the requested information within
a specific period of time and at a specific location. Furthermore, the shareholders are entitled to claim
damages against the directors or senior managers who fail to prepare the relevant documents or to well
store the documents leading to the losses to the shareholders.
Moreover, the SPC Provisions (IV) also clarifies the company’s right under the P.R.C Company Law
to refuse to grant a shareholder access to its books of account requested for an ‘improper purpose’. The
relevant provisions deem a shareholder conducting business that substantively competes with the
company’s primary business, or seeks to provide any information contained in the company’s books of
account to a third party, which may damage the legitimate interest of the company, as an ‘improper
purpose’. This provision makes it much clearer than before to practically judge the validity of
shareholders’ conducts in accessing business information of the company.
1.3 Statutory preemptive rights of shareholders
Under the Article 71 of the P.R.C Company Law, the preemptive rights of shareholders have been
provided. Exactly speaking, the preemptive rights, being the statutory right have been protected by
operation of law. In order to achieve this right, the company law is provided that a shareholder as a
‘transferor’ who seeks to transfer the shares to a ‘transferee’ who is not an incumbent shareholder (or
so-called a ‘third party transferee’) must seek the consent of more than a half of the other shareholders.
If the non-transferring shareholders neither give consent nor purchase the shares of the transferring
shareholder they are deemed to have consented to the transfer. If the non-transferring shareholders
consent or are deemed to have consented, the non-transferring shareholders (subject to any contrary
provision in the articles of association) have a preemptive right to purchase the shares under the same
conditions.9
However, during the performance of this provision, some questions arise. For example, what is the
meaning of “the same condition”? What remedies can be employed if the preemptive rights of the non-
transferring shareholders are prejudiced? The SPC Provision (IV) ventures to address all these
questions.
Firstly, The SPC Provision (IV) clarifies that factors of the same conditions include the percentage of
the transferred shares, the price, the manner of payment and other obligations of a buyer10
. In this
regard, it should be noted that the same conditions may have different connotations in practice.
Therefore, whether the condition in which the shares are transferred is ‘equivalent’ or not, should be
judged on a case-by-case basis. For instance, in many cases, transactions can be paid either in cash or
equity replacement, hence the same condition should be measured not only on the value of cash but
also the potential value of the replaced equity and other factors. In addition, it is quite common that
the price of equity transfer between the incumbent shareholder and his/her relatives may be cheaper
than market price. In such a situation, if the court inclines to invalidate such transaction, the justice or
some transaction customs may be threatened. This stipulation of the SPC Provisions (IV) actually leaves
a leeway and provides a feasible method for judges to flexibly decide the validity of share transfer in
judicial practice.
Secondly, in terms of the remedy of the non-transferring shareholders, the interpretation states that
the non-transferring shareholders are entitled to claim the preemptive rights on the ground that the
9
The Company Law of the P.R. China (2013 Revision), Article 71.
10
The SPC Provisions (IV), Article 18.

transferring shareholders transfer its equity interest to the third party without consulting the non-
transferring shareholders or the preemptive rights are prejudiced by way of fraud or malicious collusion.
1.4 Detailed practical rules of shareholders’ derivative lawsuits
In accordance with the PRC Company Law (2013 Revision), the shareholder of a limited liability
company or joint stock company is entitled to petition the company’s directors or supervisors to initiate
legal proceedings against supervisors or directors, whose conducts have caused loss to the company by
their breach of laws, regulations or legal obligations, or against any other third party damaging the
legitimate interests of the company.11
This is the so-called ‘shareholders’ derivative lawsuits’ under the
Chinese company law.
The SPC Provision (IV) aims to make the above stipulation more practically workable through guidance
to courts on how the proper claimants should be identified and when the company, co-shareholders
and other third parties should be joined as participants in the litigation. From financial perspective of
such litigation, the SPC Provisions (IV) provides that in the following circumstances the petitioners
successfully contest the litigation12
:
a) the benefits accrue to the company, and in no event shall the court order to the defendant to directly
assume liability to shareholders; and
b) the company must reimburse the shareholders’ reasonable expenses.
1.5 CECCA’s Comments
The general objective of the SPC Provisions (IV) is to clarify judicial rules in deciding the disputes in
relation to shareholders’ rights and obligation under the existing Chinese company law as well as to
enhance shareholders’ rights in P.R.C companies. It covers a broad range of issues including corporate
governance, right to information preemptive rights and derivative lawsuits. Especially, with the
development of high-tech companies in the Chinese market, corporate governance failure has been
increasing in the recent years. The SPC Provisions (IV) timely provides series of detailed and practical
rules for enhancing the protection for minority shareholders, which is significant and helpful for the
development of market’s development economy development in China. Whether the SPC Provisions
(IV) will make it more attractive for investors, however, remains uncertain.
Meanwhile, it should be noted that this interpretation remains some ambiguous issues to Chinese
judges. As mentioned above, the judge’s discretion determines the meaning of “the same condition”. In
addition, the interpretation grants the shareholders right to claim damages. For example, the senior
managers do not store the relevant documents causing the losses to the shareholders. But it is difficult
for the minority shareholders to demonstrate their losses. This issue is still waiting for the further
clarification in the judicial practice.
11
The P.R.C Company Law (2013 Revision), Article 151.
12
The SPC Provisions (IV), Articles 25 and 26.

2. Company Law
2.2 To be or not to be?
— An Empirical Study on Dual-class Share Structure of US Listed Chinese Companies (I)
Authored by Judge Fa Chen* and Dr.Lijun Zhao**13
Abstract:
Dual-class share structure is widely used as a hostile takeover defense. However, it is extremely
controversial. There is neither theoretical consensus nor practical trend relating to its application.
Currently, Mainland China employs the one share, one vote principle and is witnessing hostile takeover
boom. Nevertheless, little research has discussed the feasibility of adopting dual-class share structure
as a solution.
This paper aims to fill in the research gap through analyzing the feasibility of adopting dual-class share
structure in China mainly by way of analyzing the necessity and devising a framework of limited
application from an empirical perspective.
Introduction
China (Mainland China) has experienced over three decades economic flourish, and has become the
second largest economy. During the period of development, China transplanted and localized the
experience of leading economic forces worldwide. As two significant economies, the British (hereinafter
“the UK”) and the American (hereinafter “the US”) commercial practices are similar and converging in
many senses, which are both mirrored greatly by China. However, with regard to takeover regulation,
in particular, the application of takeover defenses, the US and the UK diverge from each other
drastically, which empowers the employment of post-bid anti-takeover tactics to directors and
shareholders respectively; towards pre-bid takeover defenses, especially, the adoption of dual-class share
structure (DCSS), the US and the UK also hold diametrical attitudes. At the crossroad, China chose
the British framework of takeover regulation as its mould, banning the application of DCSS with the
one share, one vote (OSOV) principle clearly written in both its company laws and listing rules14
. This
choice may be partly attributed to the fact that when devising the framework of takeover regulation,
China referred the Hong Kong mode greatly, and thus indirectly reflected the British mode of takeover
regulation. More importantly, hostile takeovers were rare in China, and it did not take hostile takeovers
into consideration when making the laws.
The 2008 global financial crisis brought about financial ravage and detrimental domino effect
worldwide. In order to revive the slowing economy through injecting liquidity, in response, China
adopted a number of financial policies, which released abundant capital, and a great proportion of which
flowed into the field of takeover eventually. Consequently, there are emerging trends that hostile
13
* Fa Chen, formerly served as Judge – sitting in the Tribunal of Commercial Dispute and Intellectual Property
Infringement – in Chaoyang District Court of Beijing, now as Senior Legal Consultant of a leading law firm.
Specialty: Commercial Dispute Settlement and IP Litigation. Fa Chen conducted research in the UK as a
Chevening Scholar. Currently, Fa is Director of Consultancy Services and Events, CECCA,
http://cecca.org.uk/consultancy-1. Email: FaChen@outlook.com.
** Dr Lijun Zhao, Founding Director of the CECCA, Lecturer in law at Middlesex University London, Fellow of
the Society of Legal Scholars and the Higher Education Academy. Specialty: Commercial Law, Maritime and
Transport Law, Comparative and Chinese Law. Email: L.Zhao@mdx.ac.uk
This paper has been published in Journal of International Business and Law, 16(2017), pp.215-248, available via
http://scholarlycommons.law.hofstra.edu/jibl/vol16/iss2/6/
14
Company Law of People’s Republic of China 2014 (CLOC 2014), Article 103: Shareholders attend the general
meeting of shareholders; one share carries one vote; see also China Securities Regulatory Commission (CSRC),
Guide to the Articles of Association of Listed Companies 2014, Article 78: Shareholders conduct their voting
rights according to their shareholding on the one share, one vote basis.

takeovers are booming while
corresponding regulations are
incompetent 15
. Rather than
the lagging regulatory
reaction, commercial entities
reacted quickly to seek safe
harbor. Those American stock
exchanges became attractive
to Chinese companies due to
their tolerance of takeover
defenses, in particular, DCSS.
To seek the soft regulation
with the issuance of multiple
voting shares, dozens of
Chinese companies chose the
American stock exchanges as
their initial public offering
(IPO) venues. Until June 30
2016, there are 150 Mainland
Chinese (Chinese) companies listed on the US stock markets, of which approximately three-tenths
employ DCSS. It seems that there is a great desire for DCSS among Chinese listed companies.
In this paper, the authors aim to discuss the feasibility of adopting DCSS in China in an empirical
perspective. The remainder of this paper is constructed as follows: in Part One, the authors will search
out the financial and regulatory factors, which lead to the emerging hostile takeover boom in China.
Part Two will be an overview of the US listed Chinese companies with DCSS and other takeover
defenses. In Part Three, the authors will analyze the functionality and corporate performance of the
US listed Chinese companies with DCSS. Part Four will analyze the limitations and restrictions on the
application of DCSS on the US stock exchanges and corresponding implications on the Chinese
framework of takeover regulation. Concluding remarks are the subject of Part Five. As to the range of
data to be covered, only those companies listed after 2011 will be sampled in this paper due to the
consideration that some of the data of the Chinese companies on NYSE or NASDAQ listed prior to
2011, were not available or were inaccurate; counting them leads to misleading results. Furthermore, the
data is dated for such a changing area of law. In order to reflect the up-to-date status accurately, this
paper focuses its empirical study on data dating back to 2011.
15
This status is clearly reflected by the usage of leverage capital and the ineffectiveness of the tactic of poison pills
in the ongoing takeover battle between Baoneng and Vanke, which may be the most spotlight-catching Chinese
takeover event. In this takeover battle, the target company named Vanke is a Chinese company listing on the
Shenzhen Stock Exchange which is ranked 1st in the field of real estate worldwide with a net profit of about USD
$ 5 billion in 2015. Before the takeover battle, a state-owned company named Huarun Group was the largest
shareholder of Vanke with 14.89% of outstanding shares, while the founder Shi Wang held less than 1% of
shareholding. From July 2015, Baoneng began to purchase dispersed shares on the stock exchange and achieved
the shareholding of 5% and 10% on 11 July 2015 and 25 July 2015 respectively. Baoneng succeeded Huarun to
become the largest shareholder on 26 August 2015 with a shareholding of 15.04%, and subsequently improved this
figure to 24.26% on 11 December. From 18 December 2015, Vanke suspended its shares on board of the stock
exchanges. After this suspension was withdrawn on 4 July 2016, Baoneng continued to buy Vanke’s shares and
increased its shareholding to about 25.4%. These transactions jointly cost Baoneng over RMB ¥ 46 billion.
However, it is estimated that Baoneng paid just RMB ¥ 10 billion himself, while the other ¥ 36 billion was either
raised through pledging the purchased Vanke’s shares to banks or was leveraged from fund companies. On 17 June
2016, the board of Vanke declared that due to a board decision which was approved by two-thirds of the directors,
Vanke would issue new shares (poison pills) exclusively to Shenzhen Metro Group (as a white knight) for buying
its assets. Such a resolution was opposed by both Huarun and Baoneng, whose shareholding will be diluted to
12.10% and 19.27% if the cooperation between Vanke and Shenzhen Metro Group is carried out, while Shenzhen
Metro Group will become the largest shareholder with 20.65% of shareholding. To date, there is no final outcome
of this takeover battle. Source: the data of the shareholding of Vanke is from its Annual Report 2015 and Semi-
annual Report 2015; other information is from public reports.

1. The Emerging Trend of Hostile Takeover Boom in China
The Emerging hostile takeover boom in China may be a combined outcome of diverse causes, and it is
extremely difficult to figure out all the financial, regulatory and corporate factors which may lead to a
hostile takeover on a case-by-case basis. However, the recent amendments of some financial policies
and legislation in China have been facilitating hostile takeovers in the general sense. On the one hand,
they enable a bidder to raise leverage capital more easily to launch a hostile takeover; on the other, they
make takeover regulation increasingly difficult.
1.1 Raising Takeover Capital is Becoming Easier
Hostile takeovers are commonly launched by a bidder who purchases a great number of dispersed shares
on the stock market at a higher price, and leveraged capital always provides plenty of funds for such
transactions. A number of recently revised financial policies and legislation in China have released
abundant funds, which have been serving as leverage capital to facilitate hostile takeovers.
Primarily, commercial banks are permitted to use more funds as loans. In order to revive the slowing
economy through injecting liquidity, People’s Bank of China (PBOC) has cut the benchmark interest
rate of loan and deposit reserve ratio16
five times since 2015, reducing the former from 5.6% to 4.35%17
and the latter from 20% to 17%.18
It is estimated that each 0.5% of deposit reserve equals approximately
RMB ¥ 685 billion19
, thus 3% represents over RMB ¥ 4,000 billion. Not only do lower interest rates
lessen the loan burden of raising capital, but also the released funds enable commercial banks to provide
more takeover loans.
Moreover, PBOC removed the ceiling for deposit interest rates on 23 October 2015 and permitted
commercial banks as well as rural cooperative financial institutions to set this rate freely20
. This means
that the above-mentioned institutions could price their financial products to raise deposits; as a result,
more raised deposits will flow into the field of takeover loans eventually.
Furthermore, the detailed implementation of financial policies promoted the hostile takeover boom as
well. In 2015, the China Banking Regulatory Commission (CBRC) revised the percentage restriction on
loans that commercial banks could provide for takeovers, increasing the cap from 50% in 2008 to 60%
in 2015; in the meantime, the maximum term of takeover loans were prolonged from 5 years to 7 years21
.
Moreover, the scope that such loans could cover was extended to include all the costs of a takeover. It
is broader than the 2008 stipulation which merely comprised transaction fees22
. In addition, more
commercial banks are permitted to conduct their business in the area of takeover loans due to the
16
Deposit reserve ratio is a central bank regulation employed by most of the world’s central banks, which sets the
minimum percentage of customer deposits that each commercial bank must hold as reserve rather than lend out,
see The Economic Times, ‘Definition of “Reserve Ratio”’
<http://economictimes.indiatimes.com/definition/reserve-ratio> accessed 15 May 2017.
17
These figures are the benchmark interest rate of one-year’s loan. Source: Blackmerger,
<http://www.blackmerger.com/#!peoples-bank-of-china/c1e91> accessed 15 May 2017.
18
These figures are the deposit reserve ratio for large financial organisations. Source: Mingtiandi, ‘Will China’s
latest rate cuts rekindle real estate investment?’ 24 October 2015 <http://www.mingtiandi.com/real-estate/china-
real-estate-research-policy/will-chinas-latest-rate-cuts-rekindle-the-real-estate-industry/> accessed 15 May 2017.
19
See Bloomberg, ‘China cuts banks’ reserve requirement ratio’ 29 February 2016
<http://www.bloomberg.com/news/articles/2016-02-29/china-cuts-reserve-ratio-in-latest-step-to-
support-growth> accessed 19 September 2016.
20
See People’s Republic of China, The State Council, English.gov.cn, ‘Economists: interest reforms let market
decide’ 26 October 2015 <http://english.gov.cn/policies/policy_watch/2015/10/26/
content_281475220321273.htm> accessed 15 May 2017.
21
Guideline 2008, Article 18: Takeover loan should not provide more than 50% of the total takeover capital;
Article 19: The term of takeover loan should be no longer than 5 years in general. Such stipulations expired and
were substituted by Guideline 2015, Article 21: Takeover loan should not provide more than 60% of the total
takeover capital; Article 22: The term of takeover loan should be no longer than 7 years in general.
22
Guideline 2008, Article 4: Takeover loan means the loan that commercial bank provides to a bidder or his
subsidiary for paying the cost of takeover transaction. Guideline 2015, Article 4: Takeover loan means the loan
that commercial bank provides to a bidder or his subsidiary for paying the cost of takeover transaction and other
fees generated during the takeover.

lowered threshold23
. This means that when looking for takeover capital, a bidder has more options than
ever before.
Even though the above-discussed financial policies and legislation were revised with the purpose of
encouraging investments rather than facilitating hostile takeovers, the higher percentage of loans, less
interest burden, longer loan term and more choices jointly result in a financial scheme that makes it
easier for a bidder to raise leverage capital. Correspondingly, the threshold of launching a hostile
takeover is lowering in China.
1.2 Takeover Regulation is Becoming More Difficult
The incompetence of Chinese takeover regulation, in particular, the poor identification of persons
acting in concert contributes to the boom of hostile takeover as well. The recently established financial
policy, i.e. the Pilot Program of an Interconnection Mechanism for Transactions on the Shanghai and
Hong Kong Stock Markets, made this weakness even worse24
.
Under the takeover regulatory framework in China, where a bidder individually or collectively holds 5%
or above of the total outstanding shares of a target company, they should, within three days of this
occurrence, submit a written report to both CSRC and the stock exchange on which the target company
is listed, notify the target company and make a public announcement about their shareholding. Within
this three day term, the bidder and persons acting in concert with him are prohibited from buying or
selling shares of the target company25
. Moreover, after obtaining 5% or more of shareholding, the bidder
and persons acting in concert shall obey an obligation of disclosure each time when their shareholding
of the target company increases or declines 5%26
. Such stipulations are promulgated on the grounds that
takeovers should be conducted under supervision and regulation. Furthermore, compulsory disclosure
could attract other investors to purchase the shares of the target company, and thus it could enhance
share price to increase takeover cost27
. Moreover, such requirements enable a target company to realize
the shareholding of a bidder in a timely manner and to decide whether and how to take defenses.
It is relatively easy for CSRC to monitor and regulate a takeover launched by a single bidder. However,
where a takeover is initiated by persons acting in concert, in particular, a hostile takeover of which the
bidders do not wish to disclose their takeover collusion, it is sometimes complicated to identify these
persons acting in concert. To solve this problem, CSRC lists 11 specific circumstances and an open-
ended provision with regard to the presumption of persons acting in concert, which mainly concentrate
on relative relationship, cross-shareholding and cross-employment28
. Nonetheless, such stipulations are
23
Guideline 2015 cancelled two requirements that existed in Guideline 2008 on the commercial banks which are
permitted to provide takeover loan, as follow: 10% or above of Capital Adequacy Ratio and 1% or above of Reserve
Balance.
24
Moreover, the replica of this Pilot Program, i.e. the Shenzhen – Hong Kong stock connect program has been
approved by the State Council, and is proposed to carry out on 5 December 2016.
25
Securities Law of People’s Republic of China 2014, Article 86 (1). The same statement is also stipulated in CSRC,
Measures for Regulating Takeover of Listed Companies 2014 (Measures 2014), Article 13 (1).
26
ibid Article 13 (2).
27
Wei Cai, ‘Hostile takeover and takeover defences in China’ (2012) 42 (3) Hong Kong Law Journal 901, 933.
28
Measures 2014, Article 83 (2): Where there is no proof to the contrary, investors who take over a listed company
will be presumed as persons acting in concert when any of the following circumstances is achieved: (a) one or more
investors have controlling interests over the other investors; (b) the investors are controlled by the same person;
(c) the chief members of directors, supervisors and executives of one investor serve as the directors, supervisors
and executives of another investor simultaneously; (d) one investor holds shares of another investor, and could
influence his major decisions; (e) any legal person, institution or natural person provides financing arrangement
for the investors with regard to a takeover; (f) partnership, cooperation, joint venture or any other economic
relationship exists among the investors; (g) an investor and a natural person who owns 30% or more shares of this
investor hold shares of the same listed company; (h) an investor and his directors, supervisors or executives hold
shares of the same listed company; (i) a natural person who owns 30% or more shares of one investor and any of
the persons (comprising but not limiting to directors, supervisors, executives and their parents, spouses, offspring
as well as their offspring’s spouses, parents and siblings of their offspring’s spouses, etc.) collectively with this
investor hold shares of the same listed company; (j) directors, supervisors, executives of a listed company and those
relatives stated in (i) hold shares of their company simultaneously or indirectly hold shares of their company
simultaneously through undertakings controlled by them or their relatives; (k) directors, supervisors, executives

far from enough, since it is sometimes hard to verify persons acting in concert when they do not disclose
their relationship actively.
The Pilot Program of an Interconnection Mechanism for Transactions on the Shanghai and Hong Kong
Stock Markets, which was enacted on 17 October 2014, may aggravate the difficulty of takeover
regulation even further. In the light of this Program, investors in China could purchase shares of some
specific listed companies on the Hong Kong Stock Exchange via the Shanghai Stock Exchange, and vice
versa29
. It means that where a person wishes to launch a hostile takeover and to veil the obligation of
disclosure, not only could he seek potential persons acting in concert in China, but also he could look
for alliances in Hong Kong so that his confederates could purchase shares of the target company via the
Hong Kong Stock Exchange to conceal this takeover collusion. Although CSRC and the Hong Kong
Securities Regulation Commission endorsed a memorandum and declared that they would conduct
effective takeover regulation together, no framework of the identification of persons acting in concert
has been established yet. As a result, it will be more difficult for CSRC to conduct takeover regulation,
as well as for a target company to adopt post-bid defenses properly since they do not know the actual
shareholding of a bidder.
Hostile takeovers are flourishing while official regulation does not keep the pace. On these grounds,
permitting companies to adopt more takeover defenses autonomously is a feasible solution to this
dilemma. Under the present circumstance of DCSS being banned in China, many Chinese companies
went public in the US to issue multiple voting shares.
and staff hold shares of their company with legal persons or other institutions they control or entrust; (l) other
connections exist among the investors.
29
See Reuters News, ‘Update China to allow cross-border investment between Hong Kong, Shanghai stock
markets’ 10 April 2014 <http://www.reuters.com/article/china-crossborder-
idUSL3N0N21MY20140410> accessed 19 September 2016.

3. Academic Frontier
News on the SWiC project, 22 November 2017
Research Project Investigates Seafarers’ Welfare in Chinese Ports
How are welfare services in Chinese ports, offered to seafarers from countries around the world
(including those from China), organised and operated? What are the most valued services that seafarer
organisations and other players can provide in these ports?
To answer these and others questions, on the basis of a detailed survey and analysis, a research project,
‘Seafarers Welfare in China (SWiC)’ has begun at the China Centre Maritime (CCM) at Warsash
School of Maritime Science and Engineering (WSMSE), Southampton Solent University. Funding is
being provided by the ITF Seafarers Trust, and the project is endorsed by Nautilus International, the
UK Merchant Navy Welfare Board and the International Seafarers Welfare and Assistance Network.
The project is intended to go well beyond assessing what welfare services are currently provided for
seafarers employed on ships calling at Chinese sea ports. Another aim is to help develop best practice
in port-based welfare provision, informed by ideas derived from the research on seafarers’ needs.
A key research element is to look closely at various stakeholders current policies. The policies of the
Chinese Government, trades unions, shipping and ship management companies, crewing agencies and
other key stakeholders relating to seafarers’ welfare and how it is provided will be analysed.
At the China Centre Maritime, the project is being led by maritime sociologist Professor Minghua
Zhao30 with Dr Gaochao He, a professor from Zhongshan University specialised in the study of
Chinese workers and Dr/Captain Pengfei Zhang31, a senior lecturer at WSMSE and specialist on
seafarers rights and MLC2006. The research, which has already begun, is expected to produce
important findings to inform maritime policy makers and practitioners and to benefit the 1.3 million
seafarers who carry the huge amounts of international trade across the globe to all parts of the world.
For more information, please see the project website https://www.solent.ac.uk/research/current-
projects/swic-project
30
Minghua Zhao, the director of China Centre (Maritime), professor at Southampton Solent University, senior
consultant of the CECCA.
31
Pengfei Zhang, senior lecturer in law at Southampton Solent University, senior member of the CECCA.

4. News in Brief
4.1 China Was Elected to Be Category(A) Member of IMO Assembly
Council for The 2018-2019 Biennium with The Highest Amount of
Votes.
On 1st
December 2017, the Assembly of the International Maritime Organization elected its 40-
member council for the 2018-2019 biennium in London. With the highest amount of votes, China was
elected to be a Category (a) member, as a member within the ‘10 States with the largest interest in providing
international shipping services’.
According to the Ministry of Transport of the P. R. China, this was the 15th
reelection for China to be
Category(a) member of the Council.32
The other 9 states were as follows: Greece, Italy, Japan, Norway,
Panama, Republic of Korea, Russian Federation, United Kingdom, United States.
4.2 Shenzhen Court of International Arbitration (SCIA) Sets up
China’s First Overseas Hearing Center in The U.S.
Shenzhen Court of International Arbitration (also known as “South China International Economic and
Trade Arbitration Commission” or “SCIA”) sets up the first overseas hearing center of China’s
international arbitration institutions in the U.S. – SCIA Hearing Centre-North America – which is
located in Los Angeles. Its purpose is to facilitate the overseas hearing of SCIA cases, which means
international commercial arbitration cases in North America can be heard in this Hearing Center. This
Hearing Centre will also help enterprises to better understand ‘China’s rules’ and the business
environment of China under rule of law.33
32
Ministry of Transport of the P.R.China, ‘China is re-elected as a category (a) member of council for IMO with the highest
number of votes’, 1.12.2017 <http://www.mot.gov.cn/jiaotongyaowen/201712/t20171201_2944794.html>accessed on
10.12.2017
33
SCIA, ‘SCIA sets up China's first overseas hearing centre in the U.S.’ 23.11.2017 <
http://www.sccietac.org/web/news/detail/1714.html> accessed on 10.12.2017

5. Events: Call for Papers -- Insolvency Law
The Cross-Border Corporate Insolvency and Commercial Law Research Group [CI&CL], at City
University of London is pleased to announce:
THE 2nd
CROSS-BORDER CORPORATE INSOLVENCY AND COMMERCIAL LAW
RESEARCH GROUP CONFERENCE & SYMPOSIUM
at City, University of London on Friday 27 April 2018
* * *
Building on the tremendous success of our first Annual Conference in 2017, we are delighted to invite
all scholars, researchers and postgraduate students to participate in our Second Annual Conference to
be held on 27 April 2018 in London.
The Insolvency Conference welcomes submissions in all areas of Insolvency Law. Presenters should
expect to have up to 30 minutes for their presentation even if the precise duration will be confirmed
nearer the time. Time for discussion and Q&A will be allocated.
Intending contributors and speakers should prepare an abstract (250 words) and send it to Mr. Eugenio
Vaccari at eugenio.vaccari@city.ac.uk. All submissions must include your institution, a contact address,
an email address and a contact phone number. The deadline for submission is 25th
February 2018.
Conference Fees: £29 City students, £39 Speakers, £49 Non-Speakers.
The conference fee is to cover the cost of materials, equipment, venue, lunch, and refreshments. We
have deliberately kept it low to encourage wide participation. To register your interest or to book a
place at the Insolvency Conference, an online payment facility is available at
https://www.city.ac.uk/events/2018/april/2nd-corporate-insolvency-commercial-law-conference.
* * *
Follow us on Facebook.
Join us on LinkedIn.
* * *
They said of our 2017 event: 
«Very enjoyable day with a variety of interesting and thought provoking papers» [C. U., Aston Un.];
«A very entertaining and informative event» [E. S., QUT (Brisbane)]; 
«A distinguished, academic environment» [K. K., Attorneys-at-Law, Izmir (Turkey)]; 
«A great experience and a very well organised event» [M. S., KCL]; 
«A great line up of presentations» [Y. J., Glasgow University].
Information and commentaries in CECCA Newsletter do not amount to legal advice to any person on any specific
matter. Please contact CECCA in case you would like to reproduce any information or commentaries contained.

Cecca Newsletter December 2017

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