Spring blossoms yield autumn fruits; when melons ripen, their stems naturally fall. After ten years of refinement, this document—approved by the Standing Committee of the National People's Congress and signed by President Xi Jinping—has been adopted. 46 The “Asset Valuation Law of the People’s Republic of China” (hereinafter referred to as the Asset Valuation Law), which was promulgated by Presidential Order, came into effect on... 2016 Year 12 Moon 1 It will take effect from the date of promulgation. This represents an important achievement in the construction of China’s legal framework for the socialist market economy and marks a significant milestone in the development of the asset valuation industry, signaling that China’s asset valuation sector has entered a new era of governance based on law. The asset valuation industry should seize the opportunity presented by the implementation of the Asset Valuation Law to place asset valuation squarely within the broader context of building the market economy, enhancing national governance capacity, and reforming the fiscal and tax system. Guided by the Asset Valuation Law, we must deeply recognize its crucial role in steering the development of the valuation industry, grasp its core principles, carry out all tasks meticulously, and usher in a new era of rule-of-law governance for the asset valuation sector.

One,   Deeply recognize the significant importance of the Asset Valuation Law for the development of the valuation industry.

Over the past three decades, China’s asset valuation industry has actively supported the country’s reform and opening-up efforts and the development of a market economy, forging a professional path for valuation services that is tailored to the characteristics of the socialist market economy with Chinese features. This industry has made significant contributions to safeguarding the rights and interests of state-owned capital, standardizing the operation of capital markets, preventing financial systemic risks, protecting public interests, and ensuring national economic security. The implementation of the Asset Valuation Law will be of great significance for the standardized and healthy development of the valuation industry. The implementation of the Asset Valuation Law, It has established the statutory status of asset valuation in China’s economic and social development. The Asset Valuation Law, in the form of a law, fundamentally defines the rights, obligations, and responsibilities of all asset valuation entities. The implementation of the Asset Valuation Law, A comprehensive, systematic, and complete legal framework for asset valuation has been established, led by the Asset Valuation Law and comprising asset valuation-related laws, administrative regulations, departmental rules, and industry self-regulatory management systems. The implementation of the Asset Valuation Law, It adapts to the urgent need to maintain the order of the socialist market economy. The implementation of the Asset Valuation Law, It provides crucial professional support for major reforms, particularly in deepening the reform of state-owned enterprises, improving and perfecting the capital market, promoting supply-side reform, and fostering the development of a mixed-ownership economy. The implementation of the Asset Valuation Law, This will help fully leverage the important role of asset valuation as a safeguard against the loss of state-owned assets.

II. Focus on Grasping the Core Essence of the Asset Valuation Law

The Asset Valuation Law fully implements the spirit of the 18th National Congress of the Communist Party of China and the Third, Fourth, and Fifth Plenary Sessions of the 18th Central Committee. It reflects the overarching requirements set forth by the Party Central Committee and the State Council to comprehensively deepen reform and promote the rule of law in all respects. The law integrates the experiences and achievements gained in recent years from national reforms, developments in the valuation industry, and reforms in management approaches. At the same time, it has achieved innovative breakthroughs in concepts, systems, and management practices across multiple dimensions. Grasping the core essence of the Asset Valuation Law is crucial for its effective implementation. The core essence of the Asset Valuation Law is primarily reflected in key areas such as “individuals,” “institutions,” “industry associations,” “clients,” and “legal responsibilities.”

First, the regulatory requirements for “persons” under the Asset Valuation Law. Citizens with a college diploma or higher are eligible to take the nationally unified examination for appraiser qualifications. In addition to appraisers, professionals in the field of asset valuation also include those who possess both specialized knowledge and practical experience in appraisal. These legal provisions have accordingly lowered the threshold for entry into the appraisal profession, reflecting the spirit of national reform and helping to attract more qualified professionals to the industry, thereby strengthening the industry’s talent pool.

Second, the management requirements for “institutions” under the Asset Valuation Law. The Asset Valuation Law has abolished the approval requirement for establishing asset valuation agencies, replacing it with a post-establishment filing system and strengthening subsequent supervision. At the same time, the establishment criteria have been relaxed. For partnership-based valuation agencies, one-third of the partners no longer need to be certified appraisers. As for corporate-style valuation agencies, while the requirement that more than two-thirds of shareholders must be certified appraisers remains in place, the law now allows a greater number of practitioners to become shareholders. The removal of restrictions on registered capital meets the diverse professional talent needs of valuation agencies and can effectively promote the balanced development of large, medium-sized, and small valuation agencies.

Third, the management requirements for “industry associations” under the Asset Valuation Law. The Asset Valuation Law specifies the positioning, organizational structure, management approach, and membership composition of valuation industry associations, granting these associations greater autonomy in self-regulation. It requires valuation institutions and professional valuers to join the relevant industry associations, enjoy the rights stipulated in the associations’ articles of association on an equal basis, and fulfill their corresponding obligations. These provisions and requirements will help industry associations effectively carry out their duties of self-regulatory oversight and enhance the quality of services provided.

Fourth, the regulatory requirements for “clients” under the Asset Valuation Law. The Asset Valuation Law clearly defines the obligations and rights related to “clients,” emphasizing the responsibilities that valuation clients are expected to fulfill. These innovative provisions clarify, from a legal perspective, the relationship between valuation agencies and their clients, hold parties accountable for illegal acts, safeguard the legitimate rights and interests of valuation agencies and appraisers, and play a positive role in fostering a sound environment for valuation practice.  

Fifth, the requirements of the Asset Valuation Law regarding “legal liability.” The Asset Valuation Law lays out in detail the penalties that valuation professionals and valuation institutions must face for violating the law. It underscores the evidentiary nature of statutorily mandated valuation services, whose regulatory requirements are significantly higher than those for non-statutory valuation services. At the same time, it clearly defines the legal responsibilities of clients and users of valuation reports, strengthens the supervisory and administrative functions of government authorities, clarifies the duties of industry associations, and specifies the penalties for violations—all of which will promote the standardized development of the asset valuation industry.

Three,   Fully implement the Asset Valuation Law and steer the valuation industry toward standardized development.

At the recently concluded 5th National Congress of Members of the China Association of Asset Appraisers, Xiao Jie, Party Secretary and Minister of the Ministry of Finance, pointed out: “Asset valuation is a modern, high-end service industry—a vital professional force in economic and social development—and an essential foundational task in fiscal management.” Currently, China is at a new starting point—adapting to the new normal of economic development, shifting its economic growth model, and comprehensively deepening reform to inject new momentum into economic and social development. Both the market’s decisive role in resource allocation and the need to better leverage the government’s role call for professional support from the industry. The full implementation of the Asset Valuation Law will have a profound impact on the asset valuation industry. Therefore, the asset valuation industry must earnestly implement the Asset Valuation Law and focus on promoting the standardized development of the valuation sector.

First, thoroughly study and publicize the Asset Valuation Law. We must continuously and comprehensively guide the entire industry to earnestly study and deeply understand the Asset Valuation Law, unify thinking, enhance awareness, strengthen the industry’s legal consciousness, and promote law-based and standardized practice. We should organize training on the Asset Valuation Law in a targeted, phased, and orderly manner, ensuring that all valuation agencies, asset appraisers, practitioners, and association administrators accurately grasp the spirit and relevant provisions of the law and conscientiously comply with and implement them in their work. We should actively disseminate and popularize knowledge of the Asset Valuation Law to the public through various channels and in diverse formats, especially ensuring that all relevant stakeholders—such as commissioning parties and users of valuation reports—are fully informed about and familiar with the law, thereby guaranteeing its smooth implementation.

Second, improve the management system for the appraisal industry. In accordance with the requirements of the Asset Valuation Law and the spirit of reform, we shall work closely with the State Council and relevant departments to revise and improve the regulatory frameworks governing asset valuation. We will also collaborate with the Ministry of Finance to formulate fundamental management systems such as the Measures for the Supervision and Administration of the Valuation Industry and the Basic Standards for Asset Valuation. Based on the self-regulatory functions conferred upon industry associations under the Asset Valuation Law, we will revise and refine various self-regulatory management systems for the valuation industry, including the Measures for Members’ Self-Discipline, the Management Measures for Members’ Credit Files, the Complaint and Reporting System for Members, and the Procedures for Quality Inspections of Professional Practice. In light of the regulatory requirements for the valuation industry and the needs of the valuation market, we will promptly issue the newly revised Professional Practice Standards for Asset Valuation and Codes of Ethics, continuously strengthening the development of valuation standards and enhancing their professionalism, timeliness, and authority.

Third, cooperate with the relevant authorities to carry out evaluation and enforcement work. Actively assist the relevant government departments in performing their supervisory and administrative duties in the appraisal industry, ensuring that all administrative regulatory measures are effectively implemented and fostering a positive synergy between government administrative oversight and industry self-regulation. Cooperate with the judicial authorities in carrying out law enforcement activities related to asset valuation, provide support for judicial trials, safeguard the legitimate rights and interests of all parties involved in appraisals, and promote the enhancement of judicial fairness.

Fourth, guide assessment agencies to strengthen their internal management in accordance with the law. Guide assessment agencies to establish and improve systems related to business management, and to undertake and handle assessment services in accordance with the law. Establish and refine quality control systems, strengthen quality awareness and quality management. Develop and enhance internal management systems, and intensify supervision and management of the practice of assessment professionals. Establish and improve mechanisms for preventing professional risks, setting up professional risk funds or voluntarily obtaining professional liability insurance as needed by the business. Strengthen training for assessment professionals on business skills, professional ethics, and legal education, thereby enhancing their professional competence and ethical standards, and ensuring orderly competition and healthy development of the assessment market.

( This article is from the China Finance & Economy Daily. 12 Moon 1 First Edition of the Day )