January 2008

Key Developments in the China Government Affairs and Regulatory Sectors

Holland & Knight Newsletter
Hongjun Zhang Ph.D.

Senior members of the Chinese government are discussing proposed changes to government structure and leadership that will be confirmed during Chinese congressional meetings in March 2008. Among the significant changes under discussion are replacements to key leaders, such as Vice Premier Wu Yi, who are scheduled to retire.

Structural changes to the Chinese government of particular interest reflect key Chinese policy concerns of late. These include the re-establishment of a Ministry of Energy, to consolidate policy and law-making efforts within one regulatory body, and the elevation of the State Environmental Protection Administration to a full Ministry with cabinet status.
In the policymaking and enforcement realms, key focus areas will include renewed enforcement focus on multinational corporations in China, economic or financial initiatives aimed at improving environmental, corporate social responsibility and other company governance efforts, product and food quality, labor contract and related compliance assurance, and energy security and conservation.
A review of the Chinese and other recent media reports highlights this observation. For instance, the Chinese government’s focus on multinational corporation compliance with Chinese laws, particularly environmental and other regulatory programs, continues. As one national government regulator in China recently put it to us “we expect sophisticated multinational investors to serve as models for compliance in China. So, when they do not comply with our laws, we take this very seriously.” (See, e.g., “Multinationals Urged to Clean Up Their Acts,” China Daily, 1/10/2008).1

Further, in “Corporate Ecology Urged in China,” China Daily, 12/31/2007,2 it was announced that China’s State Environmental Protection Administration is proposing to force publicly listed companies to regularly disclose environmental information through new rules that could be finalized in the next six months.. Publicly listed, in this context, refers to companies listed on China’s Shenzhen or Shanghai Stock Exchanges. The article “China’s First Environmental Protection Index Formally Released,” China CSR, 1/3/2008, recounts China’s first corporate responsibility index focused on the environment, called the Taida Environmental Index. The index was formally released at the point of 3856.80. The Taida Environmental Index was compiled to reflect 40 companies listed on the Chinese stock exchanges from 10 environment-related industries. The index’s code is 399358, the norm date is December 31, 2002 and the norm point is 1000. At present, the index lags behind the overall market, which shows that listed environment companies have not received enough attention from the market.

In the area of product and food quality, the media stories also reflect increasing activity. Developments include expanded controls on exports/exporters (see, e.g., “More Chinese Toys Need Export Licenses After Scares,” Agence France-Presse, 1/9/2008),3 and the development of an expanded array of product quality standards (see, e.g., “More Legislation to Help Combat Shoddy Products,” China Daily, 1/6/2008, noting that the government will continue its battle against shoddy products this year by speeding up legislation and framing 10,000 national quality standards).4

A wide variety of new legal measures in the labor area in China may dramatically change employee-employer relationships, as well as pose new challenges for enforcement authorities. (See, e.g., “New Labor Contract Law Changes Employment Landscape,” Xinhuanet, 1/1/2008).5
As for energy security and conservation, developments will include implementation of the new amendment to China’s Energy Conservation Law (enacted in October 28, 2007 and effective April 1, 2008), and finalization of China’s new Energy Law. News accounts abound in this area, and underscore China’s energy concerns and priorities. (See, e.g., “China Seeks Fusion Power as Shortcut to Solve Energy Crisis,” Asian News International (South Asia), 1/7/2008,6 and “China Poised to be World Leader in Renewable Energy, Expert Predicts,” Agence France-Presse, 1/10/2008).7

1 View (last visited Jan. 10, 2008).2 Article 15.
2 View (last visited Jan. 10, 2008).4 Article 3.

View (last visited Jan. 10, 2008).

View (last visited Jan. 10, 2008).

5 Link no longer available.

6 Link no longer available.

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