DCC Regulatory & Policy Update 3
- hans.au
- Apr 12
- 13 min read
Issue 3 | March 2026
Contents
Foreign Investment & Market Access
1.1 China Updates Catalogue of Encouraged Service Imports
1.2 Shanghai Launches Fully Online FIE Registration via Cross-Border Digital Identity
1.3 China Launches National Long-Term Care Insurance Scheme
Competition & Price Controls
2.1 Beijing Signals Crackdown on Food Delivery Price War
2.2 China Activates Emergency Fuel Price Controls for the First Time
Tax & Customs Policy
3.1 China Tax & Customs Update: March 2026
3.1.1 VAT Developments
3.1.2 Corporate Income Tax (CIT) Incentives
3.1.3 Customs and AEO Simplification
3.1.4 Local Incentives and Anti-Tax Avoidance Campaign
Trade & Export Controls
4.1 China’s Revised Foreign Trade Law Takes Effect
4.2 China–US Trade: Stabilization Talk, Escalation Actions
4.3 China Quietly Tightens Fertilizer Export Controls
FOREIGN INVESTMENT & MARKET ACCESS
1.1 China Updates Catalogue of Encouraged Service Imports
On 25 February 2026, China’s Ministry of Commerce (‘MOFCOM’) and six other government departments jointly released a revised “Catalogue of Encouraged Service Imports” ('2026 Catalogue', effective 25 February 2026), the first major update since 2019. The 2026 Catalogue is a policy signal, not a market-access guarantee: it identifies where Beijing most wants higher-quality imported services, with priorities around innovation, green development, and healthcare modernization.
What 'Encouraged' Status Means
Inclusion in the ‘Encouraged’ category means heightened policy support and potential tax or administrative advantages, including smoother engagement with government-affiliated procurement processes. It does not guarantee market access or override sector-specific licensing or data governance requirements.
The 2026 Catalogue encourages imports of R&D, design, testing, IP, and digital technology services. Key additions include:
digital technology development services (broader coverage of software engineering, AI, and platform technologies);
technical testing and analysis services (advanced quality assurance and compliance testing in manufacturing and life sciences); and
resource recycling and utilisation services (aligned with China's dual-carbon and circular-economy goals). Medical and health services have also been added, reflecting China's healthcare modernization agenda.
Services where domestic capacity is now considered sufficient have been removed; a reminder that the 2026 Catalogue is a dynamic and regularly updated instrument.
Why It Matters
The sectors highlighted,AI, R&D, environmental services, IP, healthcare, and supply chain management,map directly onto China's 15th Five-Year Plan priorities, making policy support in these areas likely to be durable. For eligible foreign firms, inclusion can smooth regulatory engagement, support “Free Trade Zone” (FTZ)-based pilots, and strengthen the case for preferential procurement treatment. Foreign firms operating in these domains should assess whether their services qualify and structure market entry accordingly.
What to Watch
As domestic capacity matures, the 2026 Catalogue will keep narrowing. Services encouraged today won't stay that way. Early positioning in the currently favoured sectors has real strategic value precisely because the window is closing. In practice, FTZ and Service Trade Innovation Demonstration Zones will be where the new encouraged categories actually get implemented, so watch those closely for operational signals.
1.2 Shanghai Launches Fully Online FIE Registration via Cross-Border Digital Identity
In early 2026, Shanghai launched China's first fully online foreign-invested enterprise (FIE) registration service using cross-border digital identity authentication.
Despite years of modernization efforts, the document side of FIE registration,notarized paper documents, international couriers, apostilles, in-person submissions, remained slow, expensive, and delay-prone. The new system replaces this with a digital trust infrastructure built on decentralized digital identity (DDI), verifiable credentials (VC), and blockchain technology.
Developed in collaboration between the Shanghai Data Bureau, the Shanghai Municipal Administration for Market Regulation, Singapore's Infocomm Media Development Authority (IMDA), and the Singapore Academy of Law, the platform enables complete online company registration without anyone needing to be physically in China (though bank account opening still typically requires in-person presence). Business licenses issued carry the same legal validity as those issued through traditional processes. The first company registered through the system completed the process in two days.
Currently available to Singapore-based investors only, with expansion to other jurisdictions planned.
Why It Matters
The structural barrier preventing FIEs from accessing the same online registration convenience as domestic companies has been broken. At least bilaterally with Singapore. For investors from eligible countries, the practical benefit is immediate: company registration that previously took weeks of bureaucratic back-and-forth can now be completed in days from a laptop. The elimination of notarization, couriers, and in-person visits meaningfully reduces both cost and complexity at the incorporation stage.
What to Watch
This follows China's standard regulatory playbook: start experimental, expand gradually. The system was explicitly designed as a national model. Whether and when it will be adopted by other Chinese cities or provinces will depend on policy decisions at the national level and the readiness of digital infrastructure in those jurisdictions. Preferred trading partners, compatible digital identity infrastructure, and geopolitical alignment could determine who gets access and when. Shanghai and Singapore also plan to extend the model to support Chinese enterprises registering in Singapore, and both sides aim to incorporate blockchain-based identity models across Belt and Road countries.
1.3 China Launches National Long-Term Care Insurance Scheme
On 25 March, the General Offices of the Party Central Committee and the State Council issued guidelines formally establishing a national long-term care (‘LTC’) insurance system — scaling a pilot that has run across 49 cities since 2016. The rollout aligns with the policy direction set at China’s annual “Two Sessions”, the meetings of the National People's Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC) that took place in March.
How the Scheme Works
The LTC system subsidizes daily care costs for individuals assessed as having lost functional capacity, covering both working-age disabled people and the elderly. Funding comes from individual contributions, employer payments, and government subsidies, with a unified premium rate of approximately 0.3% of income. Local governments may draw on public medical insurance funds to cover employer and employee contributions where fiscal conditions permit. Coverage rates: employed individuals and retirees receive 70% of assessed care costs; unemployed individuals receive 50%.
Why It Matters
China has an estimated 12 million severely functionally impaired individuals, a number that is growing, and faces persistent care service shortages. The national rollout addresses this directly, signalling that Beijing is prioritizing social stability and long-term demographic management over short-term fiscal caution.
For businesses, the mandatory employer contribution at 0.3% of income is a modest but real addition to payroll costs that will need to be factored into headcount planning as local implementation details are confirmed. From a market perspective, this is a policy-mandated demand signal for the care economy: professional care services, assistive technology, care facilities, and health management all stand to benefit over the medium to long term.
What to Watch
Local implementation rules will be critical; the 0.3% rate is a baseline and contribution structures, benefit administration, and fund management will vary across provinces and municipalities. Companies operating across multiple cities should monitor local rollout timelines. Any adjustments to contribution rates or benefit coverage will have direct employer implications. Finally, the care services supply gap is the sector's binding constraint: policy-mandated demand without a corresponding expansion of qualified professionals and facilities creates both bottlenecks and commercial opportunities, particularly for foreign companies with expertise in elderly care, rehabilitation, or care management technology.
COMPETITION & PRICE CONTROLS
2.1 Beijing Signals Crackdown on Food Delivery Price War
China's state-run Economic Daily published an article on 25 March titled 'It's Time to End the Food Delivery Price War', a pointed signal that official patience with the Alibaba–Meituan subsidy battle is running out. Since last summer, the two platforms have been locked in an escalating race to the bottom, pouring vast sums into discounts to capture delivery market share. China’s State Administration of Market Regulation (‘SAMR’) issued multiple warnings that went unheeded, and the matter eventually escalated to a State Council inter-ministerial antitrust committee. The Economic Daily piece frames the price war as a direct threat to China's consumption recovery goals, arguing the entire restaurant industry has been dragged into a cycle of loss-making, running counter to Beijing's push to boost domestic demand.
This sits within a broader pattern: Beijing is actively seeking to rein in involution-style (内卷) price wars across sectors, including the automotive sector.
Why It Matters
When state media publishes language this direct, a regulatory response is typically imminent rather than speculative. Platforms operating in China's food delivery or e-commerce should note that Beijing is increasingly willing to intervene when platform competition is seen as economically destabilizing,not just anticompetitive. The consumption recovery framing gives regulators a macro-policy rationale that goes well beyond standard antitrust grounds.
What to Watch
All eyes are on Alibaba, widely seen as the primary driver of the subsidy battle. If platforms do not wind down the discounting, a formal SAMR investigation looks increasingly likely, with Alibaba the probable first target. The pace at which the Economic Daily commentary is followed by formal regulatory action will indicate how quickly China is prepared to move against major platform players when strategic economic priorities are at stake.
2.2 China Activates Emergency Fuel Price Controls for the First Time
On 23 March 2026, the National Development and Reform Commission (‘NDRC’) announced temporary price controls on retail fuel, limiting gasoline and diesel price increases to roughly half the levels its standard pricing formula would otherwise dictate. Gasoline rose RMB 1,160 per metric ton (versus an expected RMB 2,205); diesel rose RMB 1,115 (versus an expected RMB 2,120). Consumers face a pump price increase of over 10%, but are shielded from what would otherwise have been a roughly 25% hike.
The move draws on the NDRC “Notice on the Pricing Mechanism for Refined Oil Products” (Fa Gai Jia Ge No. [2013] 624, effective 27 March 2013), which grants the NDRC discretionary authority to intervene even when crude prices remain below the USD 130 per barrel ceiling that normally triggers automatic controls. Notably, this is the first time the NDRC has used this power; including during the 2022 price spike following Russia's invasion of Ukraine.
Why It Matters
Activating a dormant 13-year-old emergency power sends a clear signal: Beijing is prioritizing consumer price stability and consumption support over its standard market-linked pricing mechanism. This is consistent with broader policy direction, but it sets a precedent that the NDRC is willing to override its own formula when political conditions call for it. Companies with fuel-sensitive supply chains or logistics cost structures should note that the regulatory floor has effectively moved.
What to Watch
The NDRC recalculates fuel price ceilings every ten working days. The key question is whether this intervention is a one-off or the beginning of a sustained period of administrative price management. If international crude prices remain elevated, pressure to intervene again, or formalize a new pricing framework, will intensify.
TAX & CUSTOMS POLICY
3.1 China Tax & Customs Update: March 2026
March 2026 was less about new legislation and more about local-level implementation and translation of the new VAT Law (the Value-Added Tax Law of the People's Republic of China, adopted 25 December 2024, effective 1 January 2026) and broader fiscal policy priorities into sector- and zone-specific action. The month also featured a notable national compliance push, signalling that informally negotiated local tax benefits are under scrutiny.
3.1.1 VAT Developments
The new VAT Law is the most operationally significant March development for businesses is Shanghai's sector-specific incentive package, which includes additional input VAT credits for advanced manufacturing and integrated circuit businesses, monthly excess input VAT refunds for qualifying manufacturing and technology service firms, and software-related VAT refund treatment for the portion of tax burden above 3%.
For cross-border operators, the VAT Law's formal codification of the consumption-place principle continues to bite: services provided by overseas entities and consumed in China trigger Chinese VAT withholding obligations on the domestic payer, regardless of whether the foreign provider enters China. Cross-border service contracts should be reviewed to ensure withholding responsibilities are clearly defined and operationally feasible.
3.1.2 Corporate Income Tax (CIT) Incentives
Shanghai's Municipal Tax Bureau published the "2366 Industry Tax Incentive Policy Guide” ('2366 Policy', issued 25 February 2026 by the State Taxation Administration Shanghai Municipal Tax Bureau), bringing 43 preferential measures spanning four industry tiers under one roof. The "2366" label maps directly to Shanghai's 15th Five-Year Plan architecture: two foundational industries, three pioneer industries, and six key and future sectors, making it the month's most significant corporate income tax ('CIT') development.
Key benefits include a 15% preferential CIT rate for qualifying high- and new-technology enterprises, 'two-year exemption plus three-year 50% reduction' (两免三减半) for certain newly established entities, 100%–120% R&D super-deductions, extended loss carry forward periods, and accelerated or immediate depreciation for qualifying equipment. Targeted sectors, advanced manufacturing, modern services, integrated circuits, AI, and biomedicine, map directly onto Shanghai's 15th Five-Year Plan priorities.
Equally important: a national campaign against irregular investment-attraction tax arrangements, with the State Taxation Administration (‘STA’) releasing enforcement outcomes on 2 March 2026. The message is clear: preferential treatment is available, but only where eligibility is genuinely met, well-documented, and free of informal local subsidy arrangements.
3.1.3 Customs and AEO Simplification
On 26 March 2026, the General Administration of Customs of China issued simplified re-examination procedures for high-credit Advanced Certified Enterprises (AEOs), effective 1 April 2026. Faster and less burdensome customs review reduces clearance friction and compliance overhead — but the benefit is tied directly to enterprise credit status, reinforcing the commercial value of maintaining strong customs compliance.
Beijing's 'Two Zones' Office also published its 2026 work plan for four comprehensive bonded zones (Tianzhu, Zhongguancun, Yizhuang, and Daxing Airport), setting 66 priority tasks across seven areas. Eligible businesses in these zones benefit from deferred duty and VAT on stored goods, simplified clearance, and full duty and VAT relief on imported inputs used in bonded R&D or repair activities.
3.1.4 Local Incentives and Anti-Tax Avoidance Campaign
Shanghai dominated the local tax policy news in March through the 2366 Policy framework. Beyond Shanghai, updated support measures for headquarters-economy activity in Qianhai and Beijing's bonded zones indicate that location strategy and HQ structuring are increasingly material to tax planning for multinationals.
Why It Matters
China's tax environment is becoming simultaneously more generous in targeted sectors and more demanding on compliance documentation. Businesses qualifying for incentives, particularly in AI, integrated circuits, advanced manufacturing, and biomedicine, may see meaningful tax savings, but only if eligibility is cleanly documented and incentive claims are structured to withstand scrutiny. The national anti-tax-attraction campaign is a direct warning that informally negotiated local benefits are under review. For cross-border businesses, the VAT consumption-place rule and tightened withholding obligations remain the most operationally sensitive area, requiring closer coordination across finance, tax, supply chain, and legal teams.
What to Watch
Tax planners should monitor how Shanghai and other local governments finalize the operational details behind the 2366 Policy incentive package, particularly eligibility tests, filing mechanics, and audit standards. Follow-up STA guidance on the anti-tax-attraction campaign will shape how safely companies can rely on locally negotiated benefits going forward. For trade teams: watch whether AEO customs simplification is expanded beyond 1 April 2026 or adopted by other cities. For cross-border service providers: ongoing STA guidance on VAT place-of-consumption determinations and withholding obligations will remain critical reading throughout 2026.
TRADE & EXPORT CONTROL
4.1 China's Revised Foreign Trade Law Takes Effect
China's “Foreign Trade Law” (‘2026 FTL’), adopted on 27 December 2025 by The Standing Committee of the National People's Congress (‘NPCSC’), effective 1 March 2026, underwent a comprehensive revision — the first systematic update since the WTO-aligned overhaul of 2004. Where the 2004 revision focused primarily on trade facilitation, the 2026 FTL embeds foreign trade within a national security and industrial policy context.
Key Changes
National Security & Countermeasures: Explicit provisions to safeguard national sovereignty and security, with authority for restrictive measures against foreign individuals or entities deemed to endanger China's interests. Analysts say this significantly strengthens the government's authority to manage key resources and strategic goods, underscoring Beijing's intent to leverage global supply chains as diplomatic and trade instruments.
IP Protection: A dedicated new chapter creates a mechanism analogous to the US International Trade Commission (USITC) Section 337 process. MOFCOM, rather than Customs (as in the EU) or the China National Intellectual Property Administration (CNIPA), is expected to be the primary enforcement body, to enhance Chinese trade operators' risk response capabilities.
Digital & Green Trade: New provisions institutionalize digital trade development (cross-border e-commerce, electronic documents) and green trade standards to promote low-carbon development.
International Rule Alignment: The revision focuses on aligning China's domestic regulations with high-standard international trade rules, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Core principles from prior versions are maintained:
China generally permits free import and export of goods and technologies except where restricted for national security, public interest, or environmental protection;
the State may restrict trade for domestic supply shortages or to protect human, animal, and plant life;
and commercial bribery, false advertising, and selling at unreasonably low prices remain prohibited.
Why It Matters
The revised 2026 FTL cuts both ways. The new IP chapter may improve protection for foreign IP holders, but cross-border licensing and technology transfer arrangements face heightened scrutiny, particularly where MOFCOM determines that licensing terms restrict validity challenges or involve bundled portfolios. Companies in strategic sectors face a more unpredictable environment as national security considerations are now formally embedded in the trade law. Digital trade operators must navigate overlapping compliance regimes across trade, data, and cybersecurity frameworks simultaneously.
What to Watch
How MOFCOM operationalizes the new IP enforcement chapter, and whether a formal USITC-style investigative mechanism emerges (we think this is likely), will be the key development to track. The countermeasure provisions also bear watching, given ongoing trade tensions: the revised 2026 FTL adds to China's existing toolkit under the Foreign Anti-Sanctions Law and export control regime. Implementing regulations on digital trade, green trade, and services market access are still to come.
4.2 China-US Trade: Stabilization Talk, Escalation Actions
On 26 March 2026, Commerce Minister Wang Wentao met US Trade Representative Jamieson Greer on the sidelines of the WTO's 14th Ministerial Conference in Yaoundé, Cameroon, the latest bilateral contact following the Paris trade talks of 15–16 March. Both sides struck a conciliatory tone, with Wang describing trade as the 'ballast and engine' of the relationship and Greer signalling US willingness to strengthen dialogue.
The cooperative framing sits awkwardly alongside parallel escalation. Wang raised serious concerns over Washington's Section 301 investigations into multiple trade partners, including China, over overcapacity and forced labour. Hours later, Beijing launched two trade probes of its own: one targeting US measures it says disrupt global supply chains, and another focused on restrictions on green trade.
Why It Matters
The pattern, dialogue at the table, probes in the background, reflects a bilateral relationship where both sides have strong incentives to avoid open confrontation while continuing to apply pressure through institutional mechanisms. For businesses, this means the operating environment remains structurally unstable even when the diplomatic temperature appears calm. The green trade probe is particularly notable given how many foreign companies have exposure to clean energy supply chains running through both China and the US.
What to Watch
Whether the probe-and-counter-probe dynamic stays contained as a managed irritant or escalates into broader trade measures is the key variable. Both governments currently appear to prefer ringfencing these disputes while maintaining higher-level stabilization, but that calculus can shift quickly. The next formal bilateral engagement and any MOFCOM follow-up announcements on the scope of the two new probes will be early indicators.
4.3 China Quietly Tightens Fertilizer Export Controls
Beijing has reportedly instructed companies to freeze exports of nitrogen-potassium fertilizer blends and reiterated existing limits on urea exports, communicated quietly through administrative guidance rather than formal announcements. The restrictions appear targeted at firms mixing urea and sulfate of potash (SOP) granules into blended products to circumvent existing individual commodity export limits while capturing soaring global prices driven by Strait of Hormuz disruptions.
One notable carve-out: ammonium sulfate (amsul), a byproduct of metallurgical coke production and nylon 6 manufacturing, is unlikely to be restricted; curbing amsul exports would overwhelm domestic inventories and disrupt major industrial chains, a line Beijing is unlikely to cross unless the situation deteriorates significantly.
Why It Matters
The move follows a predictable Beijing playbook when commodity markets are disrupted: prioritize domestic food security and farmer affordability first, maintain stability for domestic producers second, and consider trade partners only after those objectives are met. For foreign buyers and agricultural importers, supply availability is effectively a residual, not a guaranteed commercial outcome. The informal nature of the restrictions adds an additional layer of uncertainty: quiet administrative guidance is harder to anticipate, plan around, or formally challenge than published regulations.
What to Watch
How long the Iran conflict keeps pressure on the Hormuz Strait will largely determine the duration and scope of these controls. Beijing may seek to offset reputational damage with key trade partners through government-to-government supply arrangements, a mechanism it has used before. Any formal regulatory announcement codifying the current informal guidance would signal a more durable shift in export policy rather than a temporary crisis response.
© DCC Consulting | dcc.consulting
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