DCC Regulatory & Policy Update 07/26
July 2026
Contents
1.1. New Exit and Entry Provisions - Certain Export Control Conduct Could Restrict Travel
2.1. Record Cross-Border Data Transfer Penalty
2.2. Rules Regarding Human-like AI, AI Agents and Ethics-Safety
3.1. Offshore Trusts Brought Into the Individual Income Tax Net
3.2. Consumption Tax Resumption on Certain Batteries
5.1. Export Control Enforcement Turns Out- and Inward At Once
1. Immigration & Mobility
1.1. New Exit and Entry Provisions – Certain Export Control Conduct Could Restrict Travel
Background
The State Council published the Provisions on Exit and Entry Administration (出境入境管理规定), State Council Decree No. 841, on 31 July 2026, taking effect on 15 September 2026 (the “Provisions”).
Until now, restrictions on leaving China rested on a patchwork of higher-level and rather general statutes — the Exit and Entry Administration Law, the Passport Law, the Supervision Law, the Counter-Espionage Law and the Tax Collection and Administration Law. Operative detail was left to practice rather than to published administrative rules. The Provisions, though only 19 articles long, are the most significant administrative regulation in this field since the Exit and Entry Administration Law took effect in 2013.
Key provisions
Article 4 sets out three categories of circumstance in which Chinese citizens may be prevented from leaving. All three can go beyond the personal level and matter commercially, and they are frequently collapsed into one in English-language summaries. The first covers citizens penalised for fraudulently obtaining travel documents or illegally crossing borders, who may be barred from leaving for six months to three years after their punishment is completed.
The second covers citizens who engage in unlawful or criminal activity abroad that harms “national security and national interests” (国家安全和利益). Our reading is that unlawful activity refers to conduct that is unlawful under Chinese law, and not necessarily unlawful in the country where it is carried out. In the joint press briefing (答记者问) of 31 July 2026 by the Ministry of Justice, the Ministry of Public Security and the National Immigration Administration (“NIA”), specific mention was made of cross-border gambling — likely a reference to gambling operations in the Philippines, Cambodia, Myanmar and Laos, where licensed gambling is lawful locally but unlawful for Chinese citizens under Chinese law.
The prohibition runs six months to three years from the date of return to China and may be decided either by the competent State Council departments or — following verification through Chinese diplomatic missions abroad — by the provincial government where the person is domiciled in China. The threshold here seems often overstated by commentaries: the text requires unlawful or criminal conduct, not merely conduct a regulator considers unwelcome, and it requires harm to “national security” and “national interests”. Employment abroad, political speech, or contact with foreign institutions do not meet that standard on the face of the Provision. What the Provision does establish is a verification role for diplomatic missions, which gives the mechanism a route to information generated outside China.
The third is the category connecting to China’s recently beefed up export control regime, and it’s connections point is different from the other two. Where a Chinese citizen breaches export control or technology import and export administration requirements in a way that may endanger national industrial or technological security (可能危害国家产业安全、技术安全), the Ministry of Commerce (“MOFCOM”) and other competent State Council departments may prohibit that person's departure. No maximum duration is specified, in contrast to the six-month-to-three-year ceilings applied to the first two. Note that the standard is prospective risk – “may endanger” - rather than established harm.
The third ground reaches further than one might think. Chinese technology export rules treat the provision of services and the taking up of employment as channels of technology transfer, and the rare earth measures announced by MOFCOM on 9 October 2025 expressly prohibit Chinese nationals from providing substantive assistance to foreign projects in that field without a licence. The trigger is the individual's conduct and its technology nexus, not any corporate connection to China. A Chinese national employed by a European company that has no Chinese subsidiary, no Chinese customers and no China operations can therefore fall within this ground — a point that employers in magnet materials, separation technology, semiconductor equipment and adjacent fields should raise with affected staff before those staff next travel to China.
Article 5 tightens the entry side for foreign nationals. Consequences are sharpened for false information in visa or entry applications, for prior border-related violations, and for individuals appearing on a Chinese sanctions or countermeasure list, unreliable entity list or malicious entity list — with entry bans of one to five years available.
Notification. The Provisions introduce procedures for notifying an affected person of an exit restriction, including the facts, the reasons, the legal basis and the available avenues of redress. Notification may be withheld where national security or an active criminal investigation is involved.
Service providers. A registration system will apply to immigration and visa service agencies.
Why this matters
The significance is not that exit restrictions are new. It is that the export control regime and the personal mobility regime have been formally connected for the first time, in a published State Council instrument.
Through 2025 and the first half of 2026, China's export control architecture expanded rapidly — the unified dual-use list, the rare earth measures, and the Decree 834 and 835 frameworks covered in our April and May issues. Enforcement, however, was visible mainly through customs actions and corporate penalties. What was not clear was how consequences would attach to the individuals who make export decisions. Article 4 answers that question directly, and it does so without a stated time limit.
There is already a documented instance of the underlying practice. In March 2026, the two co-founders of the AI startup Manus were summoned to the National Development and Reform Commission (“NDRC”) and afterwards told they could not leave China — free to travel domestically — while regulators reviewed Meta's acquisition of the company. The NDRC prohibited the transaction in April and ordered it unwound (see our report on the Manus case). The restriction attached to individuals before any finding of wrongdoing, and it reached executives of a company that had already relocated to Singapore: the stated concern was the enterprise's connection to Chinese technology and talent, not its place of incorporation.
This reframes several prior risk assessments. A compliance investigation into a China entity's export classification practice is no longer purely a corporate matter; it is potentially a matter affecting the personal circumstances of the local general manager, or other manager who signed off on a classification. Companies that have relied on Chinese national employees to manage sensitive export licensing, particularly in semiconductors, rare earths, batteries, optics and advanced materials, should assume that those individuals now carry a personal exposure that their employment contracts may not address.
On foreigners: the Provisions themselves do not create restrictions on the departure of foreign nationals. That authority sits elsewhere — and it expanded in April 2026. Article 16 of the Provisions on Industrial and Supply Chain Security (Decree No. 834) and Article 17 of the Regulations on Countering Improper Extraterritorial Jurisdiction by Foreign States (Decree No. 835), both covered in our April and May updates, provide for exit restrictions reaching foreign nationals, including in connection with conduct said to harm Chinese supply chains or with the implementation of foreign sanctions. Read together with the somewhat tightening of the entry to China for foreigners — including the express reference to countermeasure lists — individuals connected to entities designated under the Unreliable Entity List, the Anti-Foreign Sanctions Law framework or the Malicious Entity List could find that designation follows them personally at the border, on entry and on exit alike.
The notification provisions are a genuine improvement in transparency, and international commentary has been too quick to dismiss them. The carve-out for national security and criminal investigations is broad, but a written statement of reasons and legal basis, where it is given, is a materially better position than the status quo, in which affected individuals have often learned of a restriction only at the airport.
What to watch
Implementing rules or departmental guidance from the NIA on how the Article 4 export control category will be triggered in practice — in particular, whether an administrative penalty is required or whether an open investigation suffices.
Whether MOFCOM and the NIA establish a referral mechanism, which would indicate that the category is intended for routine rather than exceptional use.
Implementing rules or departmental guidance from the NIA on how the Article 4 export control category will be triggered in practice — in particular, whether an administrative
penalty is required or whether an open investigation suffices.
Whether MOFCOM and the NIA establish a referral mechanism, which would indicate that the category is intended for routine rather than exceptional use.
The registration list for immigration and visa service agencies: those agencies established after commencement of the Provisions must file within 15 days; those already operating have 90 days to file commencing from 15 September 2026.
Reports since early August 2026 indicate that border checkpoints have begun applying elements of the new regime ahead of commencement, with additional questioning keyed to occupation, destination and database records, and particular attention to technology-sector employees. These reports rest on anonymous sources, so we treat the details as unconfirmed. They concern the exit of Chinese nationals rather than the entry of foreign visitors. No Western government has adjusted its travel advice in response.
Any early published cases in the first quarter after commencement. The absence of published cases will not indicate that the Provision is dormant — and there are unverified suggestions that authorities intend to publicise enforcement examples before 15 September.
Check whether corporate directors and officers policies, secondment agreements and expatriate assignment agreements are updated to address any of the above restriction scenarios — most current documents do not.
2.1. Record Cross-Border Data Transfer Penalty
(Carried from June. The Shanghai Cyberspace Administration disclosed this matter on 13 June 2026; it did not appear in our June issue and we are covering it now.)
Background
On 13 June 2026, the Shanghai Cyberspace Administration (上海市互联网信息办公室, “Shanghai CAC”) published, through its 网信上海 channel (as reproduced by the news platform 21财经), a batch of network data security enforcement cases handled under the guidance of the national Cyberspace Administration of China (“CAC”). The batch was framed around four recurring failings: inadequate discharge of primary responsibility for network data security, absent security management and protection measures, insufficient back-end data compliance capability, and lax auditing of data export compliance.
Within that batch, Shanghai Ctrip Commerce Co., Ltd. (上海携程商务有限公司) — a variable interest entity within the structure of Trip.com Group Limited, which is incorporated in the Cayman Islands and operationally headquartered in Shanghai — was fined RMB 10 million (approximately US$1.4 million) under the Personal Information Protection Law (“PIPL”) for failing to implement data export security assessment requirements and for unlawfully exporting personal information. It was ordered to rectify within a specified period. The notice recorded that the company cooperated after the penalty and fully implemented the required corrections.
This is the highest publicly disclosed fine for a cross-border data transfer violation since the PIPL took effect in 2021. Shanghai had previously published two cross-border cases, in the hotel management and property management sectors, in its January 2026 release of typical 2025 enforcement matters — but without disclosing penalty amounts.
Key provisions
The announcement did not specify the mechanics of the violation, which is the central interpretive difficulty. What can be established is the framework it sits within.
Security assessment thresholds. A CAC security assessment is required where, cumulatively since 1 January of the current year, a processor has exported the personal information of one million or more individuals (excluding sensitive personal information), or the sensitive personal information of ten thousand or more individuals.
Three lawful routes. PIPL Article 38 permits a CAC security assessment, standard contractual clauses with a provincial filing, or third-party certification. The certification route became fully operational when the Measures for Certification of Cross-Border Personal Information Transfer (个人信息出境认证办法) took effect on 1 January 2026.
The contract necessity exemption. Under the Regulations on Promoting and Regulating the Cross-Border Flow of Data, released on 22 March 2024 , transfers genuinely necessary to conclude or perform a contract with the individual are exempt. The listed examples include cross-border shopping, delivery, remittance, payment, account opening, and — directly relevant here — flight and hotel booking.
Why this matters
Two inferences are available from the facts, and they point in the same direction.
First, on the size of the fine. The PIPL does not open with a monetary penalty. The ordinary sequence is a warning, an order to correct and confiscation of unlawful gains, with a fine of up to RMB 1 million only where a company refuses to comply; fines of up to RMB 50 million or 5% of prior-year turnover are reserved for serious circumstances. RMB 10 million sits an order of magnitude above the RMB 1 million ceiling — and the recorded cooperation and full rectification are mitigating factors, so that is the figure after credit.
A case involving fashion company Dior sharpens the contrast. In September 2025 the National Cybersecurity Notification Centre (国家网络安全通报中心) disclosed that Dior (Shanghai) had sent user data to its French headquarters without completing any of the three lawful routes, without separate consent, and without encryption or de-identification. Three failings, and the outcome was rectification alone — no confiscation, no fine. Note also that the action came from the cyber units of the Shanghai Public Security Bureau, i.e. the police, rather than from CAC: data enforcement in China runs through several authorities in parallel.
Second, and more useful operationally, on the contract necessity exemption. Hotel and flight booking are the textbook illustrations of the exemption in the March 2024 rules, yet a hotel-booking platform has been fined for unlawful personal information export. The two facts reconcile only if the transfers went beyond what the bookings actually required.
Another Shanghai precedent supports that reading. Among the typical cases published for 2025 was a hotel management company that had filed for a security assessment. The national cyberspace authority's result notice identified specific data fields as lacking sufficient export necessity; the company continued transmitting them and was fined and ordered to rectify. Clearing the filing does not settle the question of scope.
Chinese-language commentary suggests Ctrip may likewise have held an assessment but transferred outside its approved scope. The announcement does not say so, and we do not assert it. But the hotel case shows regulators already pursue that fact pattern — supervision extends past ex ante approval into verifying what is actually sent against what was assessed, a materially harder standard than filing correctly once. Check now that your live data flows match your approved scope; the reconciliation is worth doing whichever reading proves right.
Finally, a point about who is being targeted: the Shanghai notice identifies consumer-facing internet companies in livelihood sectors (民生领域) as the current priority, without listing specific industries. We read that as indicating that the widespread assumption that Chinese data enforcement is aimed principally at multinationals sending data to overseas headquarters is too narrow.
Readers should note that this is the second enforcement action against a Ctrip entity covered in this July update; the SAMR decision below under 4.1 is entirely separate, involves a different regulator and a different legal theory, and the two should not be read as connected.
What to watch
Whether the Shanghai CAC publishes the full penalty decision. Only the summary has been released, and the reasoning on scope is what practitioners need.
The January 2027 typical-case release. Shanghai has established a pattern of publishing annual enforcement summaries; whether quantified cross-border penalties recur will show if RMB 10 million was a signal or an outlier.
Whether other provincial cyberspace administrations under CAC begin disclosing penalty amounts. Most cross-border cases to date have concluded with unquantified warnings and rectification orders, which has muted their deterrent effect.
Shanghai is liberalising in parallel. On 24 April 2026 Shanghai CAC and the Shanghai Data Bureau (上海市数据局) extended a data export negative list beyond the Shanghai free trade zone to the whole city: data not on the list needs no security assessment, standard contract filing or certification. The four covered fields — reinsurance, international shipping, commerce, meteorology — do not include travel, so the relief does not touch the conduct penalised here. Watch which sectors are added next.
Uptake of the certification route now that it is operational. Mid-scale exporters below the assessment thresholds have had a third option since 1 January and comparatively few have used it.
Internally: whether the data fields your China entity actually transmits match the data fields in your assessment, filing or certification, and whether any contract-necessity reliance is documented per transaction type rather than asserted at the customer level.
2.2. Rules Regarding Human-like AI, AI Agents and Ethics-Safety
Background
Two distinct instruments took effect on 15 July 2026, and they are being persistently conflated in English-language coverage. They are not the same rule and they do not do the same thing.
On 10 April 2026 CAC, the NDRC, the Ministry of Industry and Information Technology (“MIIT”), the Ministry of Public Security (“MPS”) and SAMR issued the Interim Measures for the Administration of AI Anthropomorphic Interaction Services (人工智能拟人化互动服务管理暂行办法), effective on 15 July 2026 (“Human-Like AI Measures”). These are binding departmental rules. On 8 May 2026 CAC, NDRC and MIIT issued the Implementation Opinions on the Standardized Application and Innovative Development of Intelligent Agents (智能体规范应用与创新发展实施意见), also operative from 15 July 2026 (“AI Agent Opinions”). These are a policy framework rather than a finished rule.
Separately, the National Cybersecurity Standardization Technical Committee (全国网络安全标准化技术委员会, “NCSTC”) issued the Ethics-Safety Guidelines for Artificial Intelligence Applications 1.0 (人工智能应用伦理安全指引1.0) (TC260-005), effective 1 July 2026 (”E-S Guidelines”), setting out nine core ethics principles. The E-S Guidelines are a non-binding Chinese national technical standard.
Key provisions
The Human-Like AI Measures target a defined category: services mimicking the personality, thought patterns and communication style of a human in order to provide sustained emotional interaction. Providers are obliged to:
conduct security assessments;
are prohibited from designs that induce user addiction or dependency;
are prohibited from providing virtual intimate relationships to minors;
must sign service agreements collecting age and guardian information;
must intervene where users show signs of distress; and are prohibited from training models on private user conversations.
In short, this is a first attempt to prohibit AI programs from creating excessive user dependency by substantially replacing real human social interaction. Workplace assistants, customer service bots and research tools fall outside the category, provided they avoid sustained emotional engagement.
The AI Agent Opinions define an AI agent as a system with autonomous perception, memory, decision-making, interaction and execution capability, and pull agents out of the generative AI category. Article 6 requires that an agent's decision authority be tiered before deployment into three classes: decisions reserved to a human, decisions requiring prior user authorisation, and decisions the agent may take independently. Agents deployed in sensitive sectors — healthcare, transportation, media, public safety — face filing, compliance testing and product recall provisions.
Why this matters
In the first days of July 2026, ByteDance's Doubao and Alibaba's Qwen announced they would discontinue user-created agent and companion features. Qwen disabled humanlike interactive agents on 10 July and its broader agent functions on 15 July; Doubao switched its agent features off on 15 July itself, giving users read-only access to configurations and chat histories until 15 October, after which the data is no longer recoverable in the app. Tencent had already retired a comparable Yuanbao feature on 30 June, and NetEase completed the shutdown of its companion application Miaoshi on 14 July. Doubao alone reports roughly 345 million monthly active users.
So, four platforms, including China's most capable AI companies, concluded – this is our reading – that withdrawing a popular product feature would be cheaper than rebuilding it to comply with regulations.
However, a substantial body of English-language commentary has reported that the AI Agent Opinions became enforceable on 15 July and that the Doubao and Qwen shutdowns were a response to the AI Agent Opinions. We think the shutdowns were a response to the Human-Like AI Measures. Why? The AI Agent Opinions are an implementation framework that directs regulators to develop standards, filing mechanics and recall procedures for AI agents — most of which does not exist yet. Whereas, in our opinion, the need to go back to product development comes from architectural and design requirements and not from procedural ones. To require an AI product to be anti-addictive and to include distress-intervention, as required by the Human-Like AI Measures, cannot be satisfied by something like a disclosure banner or through persistent-memory companion architectures.
For foreign companies, the practical scope question is whether an AI product provides sustained emotional interaction. The distinction between a companion-like AI and a permitted work assistant is clear at the extremes of each type, but unclear in the middle, where a predominantly work-oriented assistant may carry some companion-like elements and vice versa. Wellness applications, elder care technology, education products with persistent character-based tutors, and customer-facing agents designed for warmth and continuity all sit near that boundary. The Human-Like AI Measures do not resolve where a friendly, memory-retaining service assistant becomes an anthropomorphic (human-like) interaction service.
What to watch
The first enforcement action or filing rejection under the Human-Like AI Measures. The scope boundary will be likely defined by application, not by regulatory text. There are reports, which we have not been able to confirm against a primary source, that Shanghai CAC removed more than 14,000 non-compliant AI agents in a sweep before the deadline, targeting impersonation, gambling and image-generation misuse. If accurate, enforcement began before commencement rather than after it.
CAC-issued standards and filing mechanics under the AI Agent Opinions. Until these appear, the tiered decision authority requirement in Article 6 of the AI Agent Opinions has no compliance procedure attached.
Whether ByteDance's Maoxiang, a separately operated paid companion application, is treated as within scope. If a compliant companion product proves viable, the withdrawal decisions look like commercial choices rather than compliance impossibilities.
Whether the tiering requirement in Article 6 of the AI Agent Opinions develops an audit or logging expectation. A tiering obligation without a proof mechanism is unenforceable, and regulators generally resolve that by requiring records.
Whether sectoral regulators — the National Financial Regulatory Administration and the National Medical Products Administration in particular — issue agent-specific guidance for their industries.
The NCSTC draft national standard on security classification and grading methods for AI applications (网络安全技术 人工智能应用安全分类分级方法), a separate instrument from the E-S Guidelines, released for public comment on 15 July 2026. Comments are due to the NCSTC secretariat by 13 September 2026 — note that at least one widely syndicated English-language source reports this deadline as September 2027, which is wrong and would cause a client to miss the window. The draft supplies a common methodology for sorting AI applications by risk tier, and NCSTC opened calls on 7 July for participants to draft sector-specific AI application security documents for finance, healthcare and broadcasting. Read together, the direction is that tier assignment will determine which sectoral obligations attach. With a comprehensive AI law off the legislative agenda, standards of this kind are carrying weight that statute would carry in other jurisdictions, and the consultation is one of the few points at which a company can influence rather than absorb the outcome. Companies with material AI deployments in China should assess where their applications would fall under the draft tiers before the window closes.
3. Tax & Customs
3.1. Offshore Trusts Brought Into the Individual Income Tax Net
Background
On 24 July 2026, the Ministry of Finance (“MOF”) and the State Taxation Administration (“STA”) jointly issued the “Announcement Concerning Issues Related to Individual Income Tax on Offshore Trusts” (关于离岸信托个人所得税事项的公告（2026年第21号公告)） (“Announcement 21 ”), while the STA separately issued the “Announcement on Tax Administration Matters Relating to Individual Income Tax on Offshore Trusts” (关于离岸信托个人所得税管理事项的国家税务总局公告（2026年第15号公告）) ("Announcement No. 15"). Both announcements became effective immediately on the date of issue.
Offshore trust structures have long occupied an ambiguous position in Chinese tax practice. The Individual Income Tax Law provides no dedicated trust regime, and in the absence of look-through rules, tax planning has relied substantially on structural opacity. These announcements close that position.
Key provisions
Both announcements provide a framework applying an individual income tax rate of 20% across the offshore trust’s entire life cycle, from establishment through the holding period and distributions until termination. Both resident-funded and non-resident-funded trusts are addressed.
Funding a trust is treated as a deemed disposition: the 20% applies to the gain, measured as market value at contribution less original cost and reasonable expenses, with the basis then stepping up to that market value.
Going forward, undistributed income earned by the trust and by the offshore entities it holds or controls must be reported and taxed annually. The tax-triggering event is no longer the distribution of gains from the trust, which is the single most consequential structural change.
Article 10 permits a credit for foreign taxes of an individual-income-tax nature paid in respect of the trust, subject to a country-by-country ceiling.
Obligations extend beyond the individual taxpayer. Offshore trustees face accounting and cooperation requirements and, in defined circumstances, direct filing obligations.
Article 17 of Announcement No. 21 establishes a 90-day filing and payment period for specified historical liabilities. For resident contributors, this covers unpaid tax on property contributed between 1 January 2023 and 31 December 2025. For non-resident contributors, it covers unpaid China tax on property contributed between 1 January 2023 and 24 July 2026. Pre-2026 income of resident-funded trusts is covered regardless of whether it was distributed, and is reported as interest, dividend and bonus income without distinction among income categories.
Timely payment within the window avoids late-payment surcharges. The provision is not framed as an amnesty, and it does not waive penalties generally.
Why this matters
This is the most operationally immediate item in this Update, and the deadline is already running. The 90-day period from 24 July 2026 expires on 22 October 2026.
Three points deserve emphasis.
First, the reach into non-residents is unusual and easily missed. The historical window for non-resident contributors runs to the date of the announcement itself, which means a non-resident who funded a trust with China-situs property at any point in the last three and a half years is within scope. Advisers focused on resident settlors fall risk of under-scoping the review.
Second, the trustee obligations create a conflict-of-laws problem that has no clean answer. Offshore trustees typically sit in Singapore, Hong Kong, Jersey or the Cayman Islands, and in Europe principally in Switzerland, where FINMA-licensed trustees administer trusts governed by Jersey, Guernsey or Cayman law, and in Liechtenstein. They are subject to fiduciary duties and, in several jurisdictions, to statutory confidentiality obligations that conflict with a Chinese cooperation and filing requirement. Article 271 of the Swiss Criminal Code, for example, prohibits acting on Swiss territory for a foreign state without authorisation, which is arguably what direct compliance with a Chinese cooperation or filing obligation would amount to. A trustee that discloses may face beneficiary claims and potential criminal liability at home; a trustee that does not may face Chinese consequences that, following item 1.1 above, are no longer purely financial where individuals connected to the structure travel to China. Trustees with any China-connected settlor or beneficiary should be taking advice on both sides now, not sequentially.
Third, the characterisation rule is more consequential than it appears. Reporting pre-2026 trust income as interest, dividend and bonus income without distinguishing among income categories removes the ability to argue for more favourable treatment of capital gains or non-income receipts within the historical window. That is a deliberate simplification with a real cost attached, and it is the provision most likely to be tested.
What to watch
STA local bureau practice in the first filing cycle, particularly whether the 90-day window is applied strictly or with administrative flexibility. Early indications from Shanghai and Beijing Tax Bureaus will set the tone.
Whether the STA issues supplementary guidance on valuation of contributed property, which Announcement No. 21 does not fully address.
The unresolved look-back question: resident recipients of distributions from non-resident-funded trusts must file within the 90-day window, but no look-back start date is specified. Practitioners are proceeding without an answer, and the STA has not clarified.
The interaction with Common Reporting Standard data. The framework is considerably more enforceable than its predecessors because the information already exists in the exchange of information channel.
Whether trustee-side jurisdictions issue any guidance or safe harbour for trustees caught between disclosure regimes. None has done so to date.
3.2. Consumption Tax Resumption on Certain Batteries
On 17 July, MOF, the General Administration of Customs and the STA issued Announcement No. 20 of 2026, resuming consumption tax on mature battery products — mercury-free primary, nickel-metal hydride, lithium primary, lithium-ion and all-vanadium redox flow — at 2% from 1 September 2026, rising to 4% from 1 September 2027. This ends an eleven-year exemption for lithium-ion cells.
Photovoltaic cells become taxable at 2% from 1 April 2027 and 4% from 1 April 2028.
Sodium-ion, solid-state and fuel cell batteries, together with perovskite, tandem and gallium arsenide photovoltaic cells, are exempt from 1 September 2026 through 31 December 2028.
To claim an exemption for the first time, a taxpayer must produce a test report from an accredited institution confirming the product meets the applicable national standard — a documentation step worth scheduling now rather than at first declaration. The tax applies at the manufacturing or import stage on domestic sales, so exporters are comparatively less exposed. Companies deciding where to site new battery or photovoltaic lines should read the exemption list as a statement of industrial policy direction, not merely a tax rate.
4. Competition & Market Regulation
4.1. SAMR’s Multi-Billion-RMB Decision Against Ctrip
Background
On 25 July 2026, the State Administration for Market Regulation (“SAMR”) issued its decision against Ctrip, China's largest online travel agency, operating under Trip.com Group Limited. SAMR had opened the case in January 2026 following a complaint.
The sanctions total approximately RMB 5.179 billion: confiscation of RMB 1.658 billion in unlawful gains plus a fine of RMB 3.521 billion, the latter set at 7.5% of Ctrip's 2025 domestic sales of RMB 46.958 billion. SAMR additionally ordered the refund of RMB 122 million in hotel order security deposits and a comprehensive rectification plan.
This is SAMR's first antitrust decision in the online travel sector, the third-largest antitrust penalty imposed in China to date, and the first case in which SAMR has confiscated the unlawful gains of a platform company. That last element is easily overlooked and is the more portable precedent: confiscation is calculated on conduct-derived revenue, which makes the eventual figure far less predictable than a turnover-based fine.
The decision also had consequences at board level: following the investigation, Min Fan resigned as president and director and Qi Ji resigned as director — a further illustration of the theme running through this issue, that regulatory exposure in China increasingly attaches to individuals and not only to the entity.
This is separate from the Shanghai CAC’s data export penalty against a different Ctrip entity at item 2.1 above. The two actions involve different regulators, different legal frameworks and different conduct, and neither bears on the other.
Key provisions
SAMR found abuse of a dominant position in the market for online hotel booking platforms in China, where Ctrip held over 50% share across 2020 to 2025, on two theories:
Exclusive dealing. Ctrip tiered hotels as "Featured", "Gold" and "Unbranded", with traffic allocated in that order. "Featured" status was conditioned on selling exclusively through Ctrip, enforced through traffic throttling and delisting.
Most favoured nation (“MFN”) pricing. "Gold" and "Unbranded" hotels were required to offer their lowest online price on Ctrip — "Gold" hotels by a margin of at least RMB 20 or 5% below competitors, "Unbranded" hotels by not pricing above rivals. Ctrip enforced this through a "Price Adjustment Assistant" tool that reset prices automatically or manually, in some cases without the hotel's consent, backed by traffic restrictions.
Why this matters
The exclusive dealing finding is conventional. The MFN finding is not, and it is the reason this decision matters well beyond the travel sector.
This is the first Chinese platform case to turn on a lowest-price-across-the-internet obligation. Price parity clauses are extremely common in Chinese commercial practice — in marketplace agreements, distribution arrangements, franchise terms, and channel agreements across e-commerce, food delivery, ticketing, and increasingly in business-to-business platforms. Many of these clauses were drafted on the assumption that, absent an exclusivity element, they were commercially aggressive but not legally exposed. That assumption no longer holds where the imposing party is dominant.
Two features of the decision extend its reach. The first is the enforcement mechanism: SAMR gave weight to the automated repricing tool and to instances where prices were reset without merchant consent. Where a platform holds the technical capability to change a merchant's price unilaterally, that capability is itself evidence going to the coerciveness of the arrangement, not merely to its efficiency. Companies operating platforms with dynamic pricing or automated price-matching functionality should review what those systems can do without merchant action, and what they log.
The second is the tiered structure. The decision treats a traffic-allocation hierarchy conditioned on commercial concessions as an enforcement mechanism rather than as a neutral merchandising choice. Loyalty tiers, preferred partner programmes and algorithmic ranking benefits tied to pricing behaviour all sit within that reasoning.
It is also worth noting what the decision does not do. SAMR did not find the MFN clause unlawful in itself. The finding is grounded in dominance. Non-dominant platforms retain more room, though the revised Anti-Unfair Competition Law provides SAMR with alternative routes against similar conduct where a dominance finding is unavailable — a point that has been underplayed in commentary focused solely on the fine.
What to watch
Implementation rather than appeal. Trip.com Group publicly accepted the decision on the day it was issued and undertook to carry out the rectification measures, which makes a challenge to the market definition — online hotel booking platforms as a distinct market — unlikely to be tested. That definition therefore stands unexamined as a precedent for the next case.
How the rectification plan and the RMB 122 million deposit refund are executed, and whether SAMR publishes a compliance report.
Follow-on private damages claims from hotels. China's private antitrust enforcement remains thin, but a published dominance finding materially lowers the evidentiary burden.
SAMR's food delivery platform investigation, previously announced and still open. If it produces a similar MFN theory, price parity becomes a settled enforcement priority rather than a single case.
The finalisation of SAMR's platform economy regulations, in development through 2025 and 2026, and the revised Regulations Prohibiting Monopolistic Agreements. Whether either codifies a treatment of price parity is the question to track.
Whether provincial Administrations for Market Regulation begin bringing parity-clause cases, which would signal that the theory has moved from headline enforcement to routine practice.
5. Trade & Export Control
5.1. Export Control Enforcement Turns Out- and Inward At Once
Background
Two MOFCOM actions in July mark a change in the character of China's export control regime — from a licensing system with occasional enforcement to an enforcement system with structural incentives.
On the MOFCOM Announcement No. 26, effective 1 July 2026, which establishes a whistleblower system for policing strategic-mineral export-control violations through Chinese exporters and their service providers, we already reported in our June Update.
On 24 July 2026 MOFCOM’s Department of Industry Security and Import-Export Control (产业安全与进出口管制局) announced the addition of 14 EU-based entities to the Export Control List, effective on the same day (“Announcement No. 30”) under a mechanism which is based on the Export Control Law and the Dual-Use Export Control Regulations. Exports and transfer of dual-use items to these 14 EU entities is now prohibited, not merely restricted, subject, however, to a case-by-case exception on application. The entities span Italy, Germany, France, Poland, the Netherlands, the Czech Republic, Bulgaria and Lithuania, across defence, chemicals, photonics, materials and heavy machinery, and include Rheinmetall AG, Lafert S.p.A., III-V Lab and Vigo Photonics S.A.
This followed comparable action against other jurisdictions in June, reported in our June Update. On 22 June MOFCOM added ten US entities to the Export Control List, including MP Materials and USA Rare Earth. In the same period twenty Japanese companies were added to the Export Control List and a further twenty to the Watch List — two distinct instruments with different consequences.
These actions sit alongside a marked intensification of enforcement against individuals, which is the more consequential development for foreign companies.
On 25 June the Guangzhou Intermediate People’s Court convicted Anhui Guangzhi Technology, a subsidiary of the listed Guangzhi Technology (stock code: 300489.SZ), and individuals of the company for smuggling goods prohibited from export, imposing a fine of RMB 8 million on the company, a ten-year prison sentence on the Legal Representative, an eight-year prison sentence on the Head of Sales and a three-year prison sentence on the employee that filed the customs declaration for smuggling germanium and gallium in the value of RMB 56.76 million.
Days earlier, the Shenzhen-listed optics manufacturer Wavelength Opto-Electronic (波长光电, stock code: 301421.SZ) disclosed that the Shanghai Customs Anti-Smuggling Bureau had placed its chairman under “release on bail with conditions” ( 取保候审) over the alleged declaration of germanium-bearing infrared lenses as ordinary optical glass, without a dual-use export licence. The case originated in an April 2025 customs audit covering three years of exports. It also carries an interpretive question: some Chinese practitioners have questioned whether germanium-bearing finished lenses are controlled at all, since Announcement No. 36 of 2023 lists metallic germanium and substrates rather than finished components that may include germanium, and export control follows a list principle. The misdeclaration is not disputed; the export control characterisation is. Manufacturers of optics, sensors and instruments should not assume a finished product sits outside the list merely because the list does not name it.
Foreign nationals fall within the same enforcement. The Japanese Consulate in Shenyang confirmed on 24 June that two of its nationals had been detained by Dalian Customs on 18 and 25 May, and arrested in June, over motors containing rare earth magnets allegedly declared as ordinary goods and built so the magnets could be removed after arrival. China’s foreign ministry has confirmed only that the two were detained for violating Chinese law.
Key provisions
Announcement No. 26 is the structurally significant instrument. A public reporting channel changes the detection economics of export control compliance: violations are no longer found principally through customs inspection and audit, but through disclosure by parties with knowledge and a motive — which in practice means employees, former employees, competitors, and disappointed counter parties. Because reporting is open regardless of nationality or location, that includes parties outside China.
We note that Announcement No. 26 contains no definition of "strategic minerals” (战略矿产). Its scope has to be inferred from the individual export control announcements, which means the perimeter of the reporting regime is established elsewhere and can move without the reporting instrument being amended.
Announcement No. 30 extends the entity-listing approach to the European Union, following its earlier application to US and Japanese companies.
Why this matters
Our April and May issues flagged the Decree 834 and 835 frameworks and asked what enforcement infrastructure would follow. Announcement No. 26 is a substantial part of the answer, and it is a more consequential development than the higher-profile entity designations.
A public reporting mechanism does three things to a compliance function. It can shorten the effective statute of limitations, because historical conduct becomes discoverable through disclosure long after it would have escaped audit due to time lapse. It can also convert employment disputes into regulatory risk, since a departing employee in a trade compliance or logistics role now has a channel to increase pressure. And it raises the cost of informal practice — the workaround classification, the accommodating declaration, the shipment released ahead of licence — because those practices are known to the people who execute them.
The individual enforcement cases matter for the same reason. Read together with the exit and entry Provisions at item 1.1, the direction is unambiguous: export control exposure in China is becoming personal, and it is becoming personal for operational staff rather than only for senior management.
On the EU designations, the immediate commercial effect is concentrated in rare earth-dependent manufacturing, and the price data show why. The US Geological Survey puts the 2025 average FOB China price for yttrium oxide at USD 9 per kilogram, itself 42% above the USD 6 recorded for 2024. Outside China the same material trades in a different world: S&P Global Platts assessed terbium oxide CIF North America at USD 4,900 and dysprosium oxide at USD 1,200 per kilogram at the end of March 2026, while Argus Media assessments reported by Reuters put yttrium oxide outside China close to USD 1,100 per kilogram by May 2026, against single digits before the April 2025 controls. Ex-China assessments diverge widely because so little material actually changes hands, so any single quotation should be read as indicative rather than as a market clearing price. The direction, however, is not in doubt, and it is a licensing artefact rather than underlying scarcity: Chinese customs data reported by Reuters show shipments of yttrium, dysprosium and terbium remain down by around half against the twelve months before April 2025.
The strategic reading is that China is applying the entity-listing tool to the United States, the European Union and Japan in close succession, which removes any expectation that European companies occupy a middle position.
What to watch
Case counts or enforcement data under Announcement No. 26. MOFCOM may not publish these, in which case the absence of data is itself informative and companies should assume the channel is active.
Whether the reporting mechanism is extended beyond strategic minerals to the full dual-use list.
The status of the suspended October 2025 measures. MOFCOM’s and General Administration of Customs’ joint Announcement No. 70 of 2025 suspended Announcements Nos. 55–58, 61 and 62 until 10 November 2026, and Announcement No. 72 suspended Article 2 of Announcement No. 46 of 2024 — the US-specific gallium, germanium, antimony and super-hard materials restrictions — until 27 November 2026. Critically, the April 2025 controls under Announcement No. 18, covering samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium and their magnets, were never suspended and remain in force. Both suspension dates fall in the fourth quarter and neither should be assumed to roll forward.
Further additions to the control list and the watch list — the two lists are distinct instruments with different consequences, and commentary routinely conflates them — and whether designations begin to reach the subsidiaries or affiliates of listed parties.
The customs-side controls that took effect on 30 June under GACC Announcements No. 77 and No. 78, covering certain machine tools and drone components across all trade channels including express parcels and cross-border e-commerce, with simplified declaration modes expressly barred. Companies shipping through consolidators should confirm which declaration mode their forwarder actually uses.
Whether internal reporting channels at China entities are functioning. Where an employee has no credible internal route, the external reward channel is the alternative — this is now a concrete rather than theoretical reason to invest in internal escalation.
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