Xinhua News Agency, Beijing, July 2 — Headline: The Asset Valuation Law is here—how can we safeguard the healthy development of the market economy?

Xinhua News Agency reporter Han Jie

The 21st Session of the Standing Committee of the 12th National People's Congress adopted the Asset Valuation Law on the 2nd, marking the long-awaited enactment of a comprehensive legal framework for the asset valuation industry—a sector often referred to as the “lubricant of the market economy.”

Reform of state-owned enterprises, IPOs of corporate stocks, cross-border mergers and acquisitions, compensation for housing demolition, appraisal and valuation of jewelry and precious ornaments... As asset valuation services increasingly permeate economic and social development, what positive impacts will the enactment of the Asset Valuation Law have on the industry’s development? And how can we better safeguard the healthy development of the market economy? Our reporter interviewed several authoritative experts.

     Lowering the entry barriers will inject "fresh water and clear springs" into the industry's development.

After the State Council abolished the administrative licensing requirement for the professional qualifications of appraisers, many provisions of the Asset Valuation Law reflect the spirit of reform in the administrative approval system. The law has lowered the entry barriers for appraisal professionals and allows individuals with appraisal expertise and practical experience—other than certified appraisers—to engage in appraisal services.

“Lowering the entry barriers for the industry will help better encourage mass entrepreneurship and innovation. As a result, people will find it easier to obtain appraisal services for everyday needs such as mortgage loans, housing demolition compensation, and compensation for the use of agricultural land. The increased convenience of these services will also help drive down appraisal fees,” said Zhang Guochun, Secretary-General of the China Association of Asset Appraisers.

Asset valuation is a professional activity that provides value benchmarks and value information for all parties involved in market transactions. It plays an irreplaceable role in safeguarding the security of state-owned assets and ensuring the efficient functioning of the securities and capital markets.

“Removing the准入 requirement for appraiser practice qualifications can bring in a broader pool of practitioners, allowing the market to allocate resources more flexibly and effectively and making mechanism-based selection possible, thus ushering in a wider ‘fresh flow of clean water’ into the appraisal industry,” said Wang Zilin, Chairman of Zhonglian Asset Appraisal Group.

Gong Fanrong, Director of the Legislative Affairs Office of the Finance and Economic Committee of the National People's Congress, said that the enactment of the Asset Valuation Law is a necessity for perfecting the market economic system and is an indispensable legal instrument for maintaining social order and promoting fair competition in the market. It is urgently necessary to establish, through legislation, as soon as possible a legal framework for asset valuation that is compatible with the modern market system, thereby perfecting the market economic system and fostering the healthy development of the market economy.

     Implement self-regulatory management to prevent industry associations from becoming a “second government.”

Walking a tightrope between “government” and “market,” industry associations—due to their intricate and often tangled relationships with the government—are frequently referred to as “red-top intermediaries.” How to standardize administrative approvals and strengthen oversight of industry associations has drawn considerable attention.

In Chapter 5, “Industry Associations,” the Asset Valuation Law consistently emphasizes the keyword “implementing self-regulatory management.” It stresses that industry associations must carry out self-regulatory management in accordance with laws, administrative regulations, and their articles of association, and clearly defines the responsibilities of industry associations.

“To do a good job in asset valuation, it’s crucial to strengthen the power of industry associations,” said Wu Xiaoling, a member of the Standing Committee of the National People’s Congress. Only by reinforcing legal red lines and enabling industry associations to truly achieve self-regulatory management can we change the previous image of industry associations as “a second government.”

Currently, the asset valuation services provided in China primarily cover six major specialized categories: comprehensive asset valuation, real estate appraisal, land valuation, mining rights valuation, appraisal and valuation of used motor vehicles, and individual asset appraisals for insurance purposes. These categories are managed by five different government departments: the Ministry of Finance, the Ministry of Housing and Urban-Rural Development, the Ministry of Natural Resources, the Ministry of Commerce, and the China Insurance Regulatory Commission.

Huang Wei, Deputy Director of the Administrative Law Office of the Legislative Affairs Commission of the Standing Committee of the National People's Congress, said that given that China’s six major assessment sectors each have their own industry associations and no single overarching association exists, Article 37 of the law calls for the establishment of a mechanism for communication, collaboration, and information sharing among these associations. The law encourages the associations to jointly develop codes of conduct in their day-to-day self-regulatory management, thereby promoting the healthy and orderly development of their respective industries.

     Strengthen punishment efforts to plug loopholes that lead to the loss of state-owned assets.

The assessed value of a five-story residential building is 150 yuan, while the asset valuation of a two-hundred-million-yuan enterprise has been inflated to 18 million yuan... A single piece of falsified appraisal can easily lead to the loss of tens of millions, even hundreds of millions, of state-owned assets.

“The Asset Valuation Law is a national statute designed to safeguard the value of resources, uphold market fairness, and regulate capital operations,” said Liu Gongqin, a member of the National Committee of the Chinese People's Political Consultative Conference and Chairman of Zhongtongcheng Asset Evaluation Co., Ltd. He added that, in the course of advancing supply-side structural reform, as asset transfers, restructuring, capital increases and share expansions, and equity transactions involving state-owned enterprises become increasingly frequent, it is essential to use legal frameworks to standardize asset valuation practices, thereby serving as a crucial safeguard against the loss of state-owned assets.

Zhang Guochun said that, for the entire industry, the most important significance of the Asset Valuation Law lies in clarifying the legal responsibilities of all parties involved in the valuation process. In the past, many administrative regulations lacked clear definitions of the responsibilities of appraisers and other relevant parties, leading to ambiguity in legal liability and undermining the independence, objectivity, and fairness of the valuation process. The promulgation of this industry-wide law provides a legal safeguard for protecting national and public interests.

Notably, the new law has intensified penalties for non-compliant appraisal agencies and appraisal professionals. For instance, if an illegal agency issues a false appraisal report or omits significant information, it will be ordered to suspend operations for a period ranging from six months to one year, have its illegal gains confiscated, and be fined an amount between one and five times the illegal gains. In cases of serious violations, its business license will be revoked; and if the violation constitutes a crime, criminal liability will be pursued in accordance with the law.

If an appraisal professional is found to have violated regulations by signing false appraisal reports, they shall be ordered to cease practicing for a period of more than two years but less than five years. Any illegally obtained gains shall be confiscated. In cases of serious violations, the professional shall be ordered to cease practicing for a period of more than five years but less than ten years. If the violation constitutes a crime, criminal liability shall be pursued in accordance with the law, and the individual shall be permanently barred from engaging in appraisal activities.

“After the Asset Valuation Law is enacted, practitioners will conduct their business in accordance with the law, government departments will strengthen regulation in compliance with the law, and industry associations will play an active role—thus curbing the current chaos in some asset valuation practices,” said Gong Fanrong.