In the news: The PBOC and SAFE tighten transaction reporting, the NDRC fines GM $29 million, the CAC publishes a cybersecurity strategy and Qualcomm and Meizu settle a global patent dispute

Shanghai NDRC fines GM

The National Development and Reform Commission (NDRC)'s Shanghai bureau has imposed a Rmb201 million ($29 million) fine on General Motors Co., the second-largest foreign carmaker in China, for antitrust violations involving minimum prices set on certain models in its SAIC General Motors joint venture. This is the first time China has fined GM. Daimler AG's Mercedes-Benz unit was penalized $56 million for monopolistic pricing in 2015, and Volkswagen AG and Fiat Chrysler Automobiles NV were fined for similar practices in 2014. The NDRC continues to put pressure on car makers, even releasing industry-specific draft antitrust guidelines in 2016 that listed specific anti-competitive behavior and required manufacturers, dealers, suppliers, distributors and after-sales service providers to revisit their sales policies, contracts and business arrangements. MOFCOM published rules for comment on automobile sales in 2016 as well, and the two regulations—which may be issued this year—together demonstrate the government's intention to continue targeting enforcement in the sector.

China outlines cybersecurity strategy

The Cyberspace Administration of China (CAC) on December 27 released a “National Cyberspace Security Strategy” (Strategy), a document outlining the challenges and opportunities of cyberspace security and development, as well as goals, principles and strategic tasks. It talks of upholding the values of innovation through network and internet development while safeguarding against harmful content and crimes and attacks against infrastructure, cybersecurity and citizens' rights. The strategy lists objectives such as peace and cooperation, transparency and order, as well as the need to respect “cyberspace sovereignty”, strengthen network culture and improve network management systems. The Strategy also pledges to enhance network security dialogue with other countries and support the United Nations in promoting international cyberspace rules. The CAC document details the importance of preserving critical information infrastructure (CII), network operators of which the PRC Cybersecurity Law heavily pertains to. It actually puts forward an expanded definition of CII, including areas such as “education”, “scientific research”, “industrial manufacturing” and “important internet applications” that are missing from the Cybersecurity Law, which was criticized for its potential broad government discretion. While it doesn't go as far as offering complete clarity on scope, the Strategy sheds a bit more light on the state-prioritized industries with respect to cybersecurity.

Qualcomm and Meizu settle patent dispute

Qualcomm Inc. said Meizu Technology Co. has agreed to pay patent licensing fees to settle multi-jurisdictional legal battles, demonstrating that the U.S. chip maker can defend its intellectual property in the world's largest smartphone market. Meizu will pay Qualcomm fees similar to those accepted by other Chinese phone manufacturers, the two companies said. The deal ends patent conflicts in Meizu's home market as well as in Germany, France and the U.S., where the Chinese phone maker sought to do business. Qualcomm paid $975 million in February 2015 to settle an abuse of dominance case brought by the NDRC, and the resolution set the terms for charging licensing fees that many Chinese firms hadn't been paying at that time. Qualcomm said in October that more than 100 Chinese companies are respectful of patent rights and entered into agreements that comply with its deal with the NDRC. This dispute marked the first time Qualcomm had asked the Chinese authorities to enforce the settlement terms.

PBOC steps up cross-border transaction reporting standards

The People's Bank of China (PBOC) released amended rules on December 30 requiring financial institutions to flag large-volume (defined as Rmb50,000 or above in renminbi and $10,000 or above in foreign currency) or suspicious transactions, in an effort to identify money laundering and crack down on corruption and tax evasion. Transactions subject to scrutiny involve cash deposits and withdrawals, cash settlements or sales of foreign exchange, exchange of notes, cash remittances and payments made through a cash instrument. The new rule will take effect on July 1. The threshold for “large” renminbi transactions has been substantially lowered—it was Rmb200,000 according to a previous 2007 regulation. Daily transfers of at least Rmb2 million or $200,000 in foreign currency between institutional bank accounts, as well as daily domestic transfers of at least Rmb500,000 or $100,000 in foreign currency involving a personal account must also be reported. On December 31, the State Administration of Foreign Exchange (SAFE) released a Q&A for the New Year outlining restrictions for renminbi-to-dollar conversion. Individuals must fill out a detailed form on how they plan to use the money overseas and formally pledge not to spend the money to buy overseas assets such as property or insurance investments. The Q&A also states that violators will be put on a watch list and denied an FX quota for three years. The irony is that the tighter the grip China places on capital outflows, the more people scramble to get their money out in anticipation of further controls.

Shanghai NDRC fines GM

The National Development and Reform Commission (NDRC)'s Shanghai bureau has imposed a Rmb201 million ($29 million) fine on General Motors Co., the second-largest foreign carmaker in China, for antitrust violations involving minimum prices set on certain models in its SAIC General Motors joint venture. This is the first time China has fined GM. Daimler AG's Mercedes-Benz unit was penalized $56 million for monopolistic pricing in 2015, and Volkswagen AG and Fiat Chrysler Automobiles NV were fined for similar practices in 2014. The NDRC continues to put pressure on car makers, even releasing industry-specific draft antitrust guidelines in 2016 that listed specific anti-competitive behavior and required manufacturers, dealers, suppliers, distributors and after-sales service providers to revisit their sales policies, contracts and business arrangements. MOFCOM published rules for comment on automobile sales in 2016 as well, and the two regulations—which may be issued this year—together demonstrate the government's intention to continue targeting enforcement in the sector.

China outlines cybersecurity strategy

The Cyberspace Administration of China (CAC) on December 27 released a “National Cyberspace Security Strategy” (Strategy), a document outlining the challenges and opportunities of cyberspace security and development, as well as goals, principles and strategic tasks. It talks of upholding the values of innovation through network and internet development while safeguarding against harmful content and crimes and attacks against infrastructure, cybersecurity and citizens' rights. The strategy lists objectives such as peace and cooperation, transparency and order, as well as the need to respect “cyberspace sovereignty”, strengthen network culture and improve network management systems. The Strategy also pledges to enhance network security dialogue with other countries and support the United Nations in promoting international cyberspace rules. The CAC document details the importance of preserving critical information infrastructure (CII), network operators of which the PRC Cybersecurity Law heavily pertains to. It actually puts forward an expanded definition of CII, including areas such as “education”, “scientific research”, “industrial manufacturing” and “important internet applications” that are missing from the Cybersecurity Law, which was criticized for its potential broad government discretion. While it doesn't go as far as offering complete clarity on scope, the Strategy sheds a bit more light on the state-prioritized industries with respect to cybersecurity.

Qualcomm and Meizu settle patent dispute

Qualcomm Inc. said Meizu Technology Co. has agreed to pay patent licensing fees to settle multi-jurisdictional legal battles, demonstrating that the U.S. chip maker can defend its intellectual property in the world's largest smartphone market. Meizu will pay Qualcomm fees similar to those accepted by other Chinese phone manufacturers, the two companies said. The deal ends patent conflicts in Meizu's home market as well as in Germany, France and the U.S., where the Chinese phone maker sought to do business. Qualcomm paid $975 million in February 2015 to settle an abuse of dominance case brought by the NDRC, and the resolution set the terms for charging licensing fees that many Chinese firms hadn't been paying at that time. Qualcomm said in October that more than 100 Chinese companies are respectful of patent rights and entered into agreements that comply with its deal with the NDRC. This dispute marked the first time Qualcomm had asked the Chinese authorities to enforce the settlement terms.

In the news: The PBOC and SAFE tighten transaction reporting, the NDRC fines GM $29 million, the CAC publishes a cybersecurity strategy and Qualcomm and Meizu settle a global patent dispute

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