On July 2, 2016, the 21st Session of the Standing Committee of the 12th National People's Congress adopted the “Asset Valuation Law of the People’s Republic of China” by vote. The law took effect on December 1, 2016. At the invitation of the Appraiser Information Editorial Team, the author would like to offer a brief analysis—from the perspective of an ordinary appraisal professional—on the impacts that the implementation of the “Asset Valuation Law” will have on the appraisal industry and appraisal practitioners, for everyone’s reference.

I. Changes in the Industry Management System

Article 6, Chapter 1 of the “Asset Valuation Law” stipulates that the valuation industry may establish industry associations in accordance with the law based on their respective professional fields, implement self-regulatory management, and accept supervision from the relevant administrative departments responsible for valuation as well as social oversight.
Article 7, Chapter 1 of the “Asset Valuation Law” stipulates that the administrative departments under the State Council responsible for valuation shall, in accordance with their respective duties and responsibilities, exercise supervision and management over the valuation industry.
The administrative departments responsible for assessment under the local people's governments at or above the prefectural-level shall, according to their respective division of responsibilities, exercise supervision and management over the assessment industry within their administrative jurisdictions.
Article 40, Chapter VI of the “Asset Valuation Law” stipulates that the administrative departments responsible for valuation under the people's governments at or above the prefectural-level city shall, in accordance with their respective duties, be responsible for the supervision and management of the valuation industry. They shall impose administrative penalties in accordance with the law on illegal acts committed by valuation agencies and valuation professionals, promptly notify the relevant valuation industry associations of such penalties, and publicly disclose the penalty information to the public in accordance with the law.

Although the law is titled the “Asset Valuation Law,” based on its content and the official interpretation provided at the press conference by journalists, the concept of asset valuation itself is broad in scope. It does not refer solely to the category of asset valuation overseen by the finance authorities; rather, it encompasses the six major valuation fields currently regulated separately by five different government departments—such as real estate, land, mining rights, and others. In other words, the scope of adjustment under this law includes the six specialized valuation categories each managed by one of the five departments.

The real estate appraisal, asset appraisal, and land appraisal sectors—each of which has reached a relatively mature stage of development—have already established industry associations in accordance with the law and are respectively under the guidance and supervision of the Ministry of Housing and Urban-Rural Development, the Ministry of Finance, and the Ministry of Natural Resources. Thus, it appears that after the implementation of the “Asset Appraisal Law,” the industry’s management system will remain unchanged from its current state. To put it more simply, “each sector will continue to operate independently and manage itself separately”—essentially representing legal recognition of the status quo.

The final legal text stipulates that “the relevant administrative departments shall, in accordance with their respective responsibilities, exercise supervision and management over the appraisal industry.” This provision objectively reflects the difficulty of changing the current situation. Of course, from a long-term perspective, the law also clearly indicates that the development of the appraisal industry should shift toward self-regulation by the industry itself, reducing unnecessary administrative functions and bureaucratic overtones, and completely decoupling industry associations from government administrative authorities—a direction that has been firmly established.

Relevant assessment administrative departments of local people's governments at or above the prefectural-level city level shall, in accordance with their respective division of responsibilities, exercise supervision and management over the assessment industry within their administrative regions. Some assessment practitioners believe that prefectural-level cities will also establish assessment industry associations, thereby increasing the burden on member units. This understanding is incorrect. The intent of this provision is to clearly define the supervisory and management responsibilities of government departments such as the finance bureau, housing and urban-rural development bureau, and land and resources bureau of prefectural-level cities over the assessment industry in their respective professional fields—rather than referring to industry associations themselves.

Therefore, the author believes that the industry’s regulatory framework has essentially remained unchanged and continues to be characterized by a “multi-headed governance” situation. Of course, it is imperative to revise the relevant management measures for appraisers as well as the associated appraisal practice guidelines and standards (or procedures). However, this will take time and involve a gradual process.

II. Lowered Entry Barriers, Yet Evaluators Face Great Responsibility

Article 12, Paragraph 4 of Chapter 2 of the “Asset Valuation Law” clearly stipulates: Valuation professionals have the right to sign valuation reports in accordance with the law. Article 8 provides that valuation professionals include appraisers and other valuation practitioners who possess specialized knowledge and practical experience in valuation.

Article 27 of Chapter IV of the “Asset Valuation Law” stipulates: “The valuation report shall be signed by at least two valuation professionals who have undertaken the relevant assignment and bear the official seal of the valuation agency.” Article 28 provides: “When a valuation agency undertakes statutory valuation assignments, it shall designate at least two appraisers belonging to the corresponding professional categories to carry out the assignment. The valuation report shall be signed by at least two appraisers who have undertaken the assignment and bear the official seal of the valuation agency.”

The above-mentioned legal provisions are designed to reflect the requirements of administrative system reform and to relax or lower the entry barriers for practitioners. Currently, whether it’s the Standards for Asset Valuation, the Guidelines for Real Estate Appraisal, or the Procedures for Land Valuation, all explicitly stipulate that asset valuation reports and real estate appraisal (valuation) reports must be signed by two or more appraisers belonging to the corresponding professional categories. Individuals who have not obtained appraiser qualifications—or who hold appraiser qualifications but have not been registered—do not have the right to sign appraisal reports. Therefore, the most significant difference from the current management system is that the law now clearly states that, in addition to licensed appraisers, other qualified appraisal professionals will also have the right to sign non-statutory appraisal reports and issue appraisal reports.

Based on this, some argue that in non-statutory appraisal services, “anyone can sign off on it—literally anyone?” and “anyone can produce a report?” Such views are clearly one-sided and mistaken, representing a misinterpretation of the legal provisions.

The law stipulates that non-appraisers who are qualified appraisal professionals have the right to sign non-statutory appraisal reports, but this right is subject to clear and specific prerequisites: First, the person signing the report must be affiliated with an appraisal agency, employed by that agency, and possess the requisite professional expertise; second, they must have relevant practical experience in the industry. Only non-appraisers who meet both of these fundamental prerequisites are authorized to sign non-statutory appraisal documents.

In other words, financial or human resources personnel within an appraisal agency, although employed by the agency, do not possess signing authority unless they also have specialized appraisal expertise. Similarly, students majoring in appraisal-related fields, while possessing certain appraisal expertise, do not have the right to sign appraisal reports because they are not yet affiliated with an appraisal agency. Of course, regulatory authorities and industry associations will need to issue specific rules and guidelines to clarify these matters further. However, the author believes it is highly likely that only those who have gained a certain number of years of experience in appraisal work at an appraisal agency and have successfully passed the corresponding practical assessment will be recognized under the law as qualified appraisal professionals authorized to sign appraisal reports.

Article 3, Chapter 1 of the “Asset Valuation Law” stipulates that for matters involving state-owned assets or public interests—where laws and administrative regulations require valuation (hereinafter referred to as “statutorily required valuations”)—such valuations shall be entrusted to valuation agencies in accordance with the law.

For statutory appraisal services, the requirements are essentially the same as the current regulatory requirements, both of which must be signed by two or more appraisers belonging to the relevant professional category.

So, which types of appraisal services fall under statutory appraisal requirements? This is a question frequently raised by many appraisal professionals.

The appraiser information public account previously published an article titled “Can Individuals Without Appraiser Qualifications Issue Asset Valuation Reports?” This article provides a relatively detailed explanation of the statutory business of asset valuation. Below is an excerpt:

The following information on the scope of statutory appraisal services is for reference only; the specific details shall be subject to the final interpretation by the relevant national authorities.

The emergence of statutory asset valuation services stems from the need for reform in state-owned asset management. To prevent the loss of state-owned assets during changes in property rights and to safeguard the interests of these assets, asset valuation was introduced. In 1991, the State Council issued the "Administrative Measures for the Valuation of State-Owned Assets" (State Council Order No. 91), stipulating that an asset valuation must be conducted whenever there is a change in the ownership or operating entity of state-owned assets. Subsequently, relevant laws such as the "Company Law," the "Securities Law," the "Partnership Enterprise Law," and the "Auction Law" have successively addressed matters related to asset valuation. Under the guidance of these laws and regulations, the statutory scope of asset valuation services has been clearly defined.

Furthermore, since the original text primarily focuses on the business category of financial qualification asset valuation, it does not take into account property valuation qualifications related to housing expropriation assessments.

According to the relevant provisions of the “Regulations on the Acquisition and Compensation of Houses on State-Owned Land” (Decree No. 590 of the State Council), the compensation for the value of the houses subject to acquisition shall not be lower than the market price of similar real estate on the date of the announcement of the house acquisition decision. The value of the houses subject to acquisition shall be assessed and determined by a real estate appraisal agency with appropriate qualifications in accordance with the house acquisition appraisal methods.

Therefore, property acquisition (demolition) appraisal also falls under the category of statutory appraisal services. In addition, most other appraisal services corresponding to economic activities are non-statutory appraisal services.

Also refer to “Document No. [2011]90 of Zhejiang Price and Service,” which contains the “Description of the Scope of Statutorily Mandated Asset Valuation Services.” This document provides the following description of statutorily mandated asset valuation services:

Statutory asset valuation services refer to the asset valuation services provided by asset valuation agencies, in accordance with relevant national laws and regulations—including the Company Law, the Securities Law, the Law on State-owned Assets of Enterprises, the Partnership Enterprise Law, the Auction Law, the Measures for the Administration of Asset Valuation of State-owned Assets (Decree No. 91 of the State Council), and the Provisions on Several Issues Concerning the Management of State-owned Assets (Order No. 14 of the Ministry of Finance)—to the commissioning party for the following economic activities:
(1) Investing in foreign entities with non-monetary assets;
(2) Applying for the public issuance of corporate bonds;
(3) The restructuring, merger, acquisition, division, sale, liquidation, joint operation, and shareholding management of wholly state-owned enterprises, wholly state-owned companies, and companies controlled by state capital; as well as the establishment of Sino-foreign joint ventures or Sino-foreign cooperative ventures with foreign companies, enterprises, other economic organizations, or individuals.
(4) Enterprises and public institutions that hold state-owned assets and engage in any of the following behaviors:
1. To restructure wholly or partially into a limited liability company or a joint-stock company;
2. Merger, division, and liquidation;
3. Changes in equity proportions of original shareholders, excluding those of listed companies;
4. Transfer of whole or partial ownership (equity) rights, excluding listed companies;
5. Asset transfer, exchange, and auction;
6. Leasing all or part of the assets to non-state-owned entities;
7. Acquiring non-state-owned assets;
8. Exchange assets with non-state-owned entities;
9. Accepting repayment of debts by non-state-owned entities using physical assets;
10. Determine the value of the assets involved in the litigation;
(5) Other matters that, according to laws, regulations, and relevant national provisions, require assessment.

While the law has relaxed entry requirements for practitioners, it has also strengthened the legal responsibilities of appraisal professionals, covering civil, administrative, and criminal aspects.

On the day the “Asset Valuation Law” was passed, a netizen posted the following remark:

@I’m also a pedestrian: “Article 12, Paragraph 2 grants evaluators considerable authority—but is it actually being exercised? And if it’s not being done or isn’t being done properly, what happens when problems arise? For example, the client provides a forged property certificate, and we fail to detect it or check with the registration authority.”
@PengNing: “After reading the Fa, all I found was that I’d already broken the law.”

To a certain extent, this reflects the stringent requirements and rigorous oversight imposed by law on appraisal institutions, especially appraisal professionals. The specific provisions regarding the legal responsibilities of appraisal professionals are as follows:

Article 13, Paragraph 4 of the “Asset Valuation Law” requires verification and validation of the authenticity, accuracy, and completeness of documents, certificates, and materials used in valuation activities.

As the netizens above have worried, for certain property ownership documents, appraisal professionals, under conventional technical methods, are actually unable to verify and confirm their authenticity and completeness.

The Guangdong Province Land Appraisers Association had previously recommended amending the relevant provision to read: “Conduct necessary reviews of the authenticity, accuracy, and completeness of documents, certificates, and materials used in practice, and assume responsibility for review within the scope of professional expertise.” It was precisely out of consideration that, under current conditions, appraisal professionals are essentially unable to verify the authenticity of certain appraisal materials through conventional technical means and inquiry channels. Regrettably, this recommendation was ultimately not adopted in the final legal document. This has thus created significant potential legal risks for practicing appraisal professionals.

Article 44, Chapter VII of the “Asset Valuation Law” stipulates that if an asset valuation professional violates the provisions of this Law and falls under any of the following circumstances, the relevant administrative department for asset valuation shall issue a warning and may order the professional to suspend practice for a period of more than six months but less than one year; any illegally obtained gains shall be confiscated. In cases of serious violations, the professional shall be ordered to suspend practice for a period of more than one year but less than five years. If the violation constitutes a crime, criminal liability shall be pursued in accordance with the law.
　　(1) Privately accepting commissions to engage in business activities and collecting fees;
　　(2) Engaging in business activities simultaneously at two or more appraisal institutions;
　　(3) Soliciting business through improper means such as deception, enticement, coercion, or disparaging or defaming other appraisal professionals;
　　(4) Allowing others to conduct business in one’s own name, or using another person’s name to conduct business;
　　(5) Signing an appraisal report for a business that I have not handled, or an appraisal report containing significant omissions;
　　(6) Soliciting, accepting, or indirectly soliciting or accepting remuneration or property beyond what is stipulated in the contract, or seeking other improper benefits.
　　Article 45: If an appraisal professional violates the provisions of this Law and signs a false appraisal report, the relevant administrative department for appraisals shall order him or her 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.
　　Article 46: Any entity that violates the provisions of this Law and engages in appraisal services under the guise of an appraisal agency without having undergone industrial and commercial registration shall be ordered by the administrative department for industry and commerce to cease its illegal activities. If there are any illegal gains, such gains shall be confiscated, and a fine ranging from one to five times the amount of the illegal gains shall also be imposed.
　　Article 50: If an appraisal professional violates the provisions of this Law and causes losses to the client or other relevant parties, the appraisal institution to which the professional belongs shall bear the liability for compensation in accordance with the law. After fulfilling its compensation obligation, the appraisal institution may seek reimbursement from the appraisal professional who acted with intent or gross negligence.

The above provisions clearly define and strengthen the legal responsibilities of appraisal professionals. Those interested may refer to the article titled “Appraisers: Dancers on the Edge of a Knife” published on the Appraiser Information WeChat official account. This article lists several typical cases of illegal and criminal activities committed by appraisal professionals in recent years. From the perspective of judicial practice, deficiencies in appraisal procedures—such as failure to conduct on-site inspections or failure to detect forged property ownership certificates—and significant deviations of appraisal values from market prices (e.g., grossly overvaluing the appraised object)—are often deemed by judicial authorities as constituting the crime of issuing false certificates. According to the current legal provisions, in addition to being held criminally liable under the law, such individuals will also be permanently barred from engaging in appraisal-related work.
Meanwhile, Article 50 also clarifies that appraisal institutions and appraisers who cause losses to the relevant parties shall jointly bear civil liability for compensation. One can only say that once they don the “high hat” of an appraiser, they truly become workers who “earn the money from selling cabbage yet take on the risks of selling powdered drugs.” The “Asset Appraisal Law” is nothing less than a Sword of Damocles hanging over the heads of appraisal professionals!

III. Adjusting assessment institutions has become imperative; cross-practice in the assessment industry may become the new norm.

The implementation of the “Asset Valuation Law” will pose significant challenges for valuation agencies, particularly impacting smaller and medium-sized real estate valuation firms with qualification credentials.

Article 15, Chapter VII of the “Asset Valuation Law” stipulates that valuation agencies shall, in accordance with the law, adopt either a partnership or corporate structure and employ qualified valuation professionals to carry out valuation services.
　　An appraisal agency structured as a partnership shall have more than two appraisers; moreover, more than two-thirds of its partners shall be appraisers with at least three years of professional experience who have not been subject to any suspension of practice penalties in the past three years.
　　An appraisal agency organized as a company shall have more than eight appraisers and more than two shareholders, among whom more than two-thirds of the shareholders must be appraisers with at least three years of professional experience and who have not been subject to any suspension of practice penalties in the past three years.
　　If the appraisal agency has two partners or shareholders, both partners or shareholders must be appraisers with more than three years of professional experience and who have not been subject to any suspension of practice penalties in the past three years.

The establishment requirements for appraisal agencies are largely based on the criteria for establishing asset appraisal agencies. Therefore, in terms of the entry barriers, agencies that have already obtained asset appraisal qualifications will be least affected—or perhaps not affected at all. However, for agencies holding real estate appraisal or land appraisal qualifications, most such agencies will find themselves operating under a corporate structure that no longer meets legal requirements.

As of now, with the exception of first-tier real estate appraisal firms and nationwide land appraisal firms that hold the requisite qualifications, most other real estate appraisal institutions do not meet the requirement that “a corporate-form appraisal firm must have at least eight appraisers.” These institutions will either need to restructure themselves into partnership-based entities or find ways to increase their number of appraisers in order to comply with the legal requirement for establishing a corporate structure.

The author believes that the establishment of appraisal institutions is one of the aspects of this appraisal legislation that lacks sufficient consideration. On the one hand, the law should reflect the spirit of administrative reform and lower the barriers to entry into the industry; yet on the other hand, it inadvertently raises the threshold for obtaining qualifications. Even more worrying is that, given the persistent failure to effectively address the phenomenon of “affiliation” within the industry, raising the threshold for establishing appraisal institutions and increasing the number of appraisers may well lead some appraisal firms, in order to maintain their corporate structure, to massively increase the number of “affiliated” appraisers—resulting in a situation where, on paper, appraisal firms appear to have plenty of qualified appraisers, but in reality, the majority of those actually engaged in appraisal work are so-called “appraisal professionals” who do not possess formal appraiser qualifications.

In addition, the following provisions related to legal and assessment institutions are worth noting.

Article 42, Chapter VI of the “Asset Valuation Law” stipulates that the administrative department in charge of valuation shall not, in violation of the provisions of this Law, impose restrictions on the lawful business activities conducted by valuation agencies.

Therefore, the author still has a question: After meeting the requirements for establishment as a corporate entity, will land appraisal agencies—just like asset appraisal agencies—no longer be subject to geographical restrictions on their practice? Personally, I believe this should indeed be the case; otherwise, wouldn't the specialized category of land appraisal effectively be tying its own hands? Of course, this remains to be further clarified by the regulatory authorities overseeing the land appraisal profession and the relevant industry associations.

Assessing the scope of business—or, in other words, defining the boundaries—is another important aspect that evaluators pay close attention to.

Article 5, Chapter 1 of the “Asset Valuation Law” stipulates that valuation professionals engaged in valuation activities must join a valuation agency and may only practice within a single valuation agency.
Article 28, Chapter IV of the “Asset Valuation Law” stipulates that when an appraisal agency undertakes statutory appraisal services, it shall assign at least two appraisers belonging to the corresponding professional category to handle the assignment. The appraisal report shall be signed by at least two appraisers who have undertaken the assignment and bear the official seal of the appraisal agency.

Article 1, Section 5 clearly stipulates that appraisal professionals may only engage in business activities at one appraisal agency. Therefore, appraisal professionals who hold multiple qualifications may either choose to practice exclusively at an appraisal agency with multiple qualifications or may choose to practice solely under one qualification at a single-qualification agency.

For example, suppose a person holds both the qualification of an asset appraiser and the qualification of a real estate appraiser, and is currently registered with an asset appraisal agency in one location and a real estate appraisal agency in another location. According to legal requirements, the person must either give up one of these qualifications or choose to practice exclusively at an appraisal agency that is simultaneously qualified to provide both asset appraisal and real estate appraisal services.

Although this law clearly stipulates that the state shall determine the professional categories of appraisers based on the needs of economic and social development, it does not—and indeed cannot—clearly define the specific appraisal objects and boundaries corresponding to each professional category of appraiser. It merely requires that appraisal institutions carrying out statutorily mandated appraisal services must designate at least two appraisers belonging to the appropriate professional categories to handle such assignments.

We all know that there are significant disputes—regarding both the assessment objects and the boundaries—between the asset appraisals conducted by the current financial authorities and the real estate appraisals carried out by the housing and urban-rural development and land resources departments. Whether asset appraisers can sign and issue individual real estate appraisal reports for statutory appraisal engagements is not explicitly addressed in the law. The law merely refers to “the corresponding professional category.” Whether asset appraisers fall within the scope of the “corresponding professional category” for real estate appraisal remains unclear. In the future, we can expect interpretations along the lines of “one law, multiple forms,” which will inevitably continue to give rise to controversy.

As for non-statutory appraisal services, naturally there’s no room for such disputes. It’s quite simple: since other appraisal professionals who don’t hold appraiser qualifications can still sign appraisal reports, it stands to reason that asset appraisers—once they meet the requirements of possessing both specialized knowledge and practical experience—can certainly engage in non-statutory real estate appraisal work as well. Conversely, real estate appraisers, under certain conditions, can also take on movable property or business valuation assignments. As some appraisers put it, “An asset appraiser is an appraiser; a real estate and land appraiser is a professional appraisal practitioner.” Of course, we could just as easily say the reverse: “A real estate and land appraiser is an appraiser; an asset appraiser is a professional appraisal practitioner.” Such interpretations are truly ingenious—and yet leave one utterly speechless.

Some scholars believe that after the implementation of the “Asset Valuation Law,” existing asset valuation firms will massively enter the real estate appraisal sector, leading to a highly competitive landscape in which they will vie fiercely with real estate and land appraisal firms. This understanding may well be based on precisely this point.

But regardless of the industry, from the perspective of an ordinary appraiser or appraisal professional, we shouldn't remain rigid and stuck in the traditional certification-based business model—simply endorsing various economic activities and taking responsibility on behalf of others. The days when we could rely solely on our qualifications and准入 requirements for survival are coming to an end. Only by truly leveraging our professional expertise and shifting toward consulting and advisory services can we secure a genuinely promising future. Even the toughest times present the best opportunities: eliminating excess capacity and eradicating malicious competition. The appraisal industry has a long and arduous road ahead.

The above content represents only the author’s personal understanding after thoroughly reading the full text of the “Asset Valuation Law.” Further clarification from the relevant regulatory authorities and industry associations is still needed. If there are any inaccuracies, please feel free to offer your criticism and corrections!