Recently, Chengchen GAN, Senior Partner of JT&N, was invited by Chambers & Partners, an international authoritative legal rating agency, to write an exclusive commentary for the Chambers Global Legal Guide 2023-Corporate/Commercial: Shanghai.
Attorney GAN’s practice focuses on private placements and venture capital investments, M&A and reorganizations, intellectual property, litigation, and arbitration, and he has extensive experience in foreign-related services. Attorney GAN has been successively appointed as a master tutor by Fudan University, East China University of Political Science and Law, Tongji University and Shanghai University of Political Science and Law, and has received awards such as the “Rising Star of the Year” by the IFLR1000 China, “Specially Recommended Lawyer in Private Equity” by The Legal 500, “Up and Coming” in Corporate/Commercial: Shanghai by Chambers & Partners, and “Deals of the Year 2022” by the China Business Law Journal.
The Article:
2023 is a year of great significance for the city of Shanghai to gradually recover from the influence of the COVID Epidemic. The resurgence is first and foremost demonstrated by the huge influx of people during the Spring Festival and May Day (Labour Day) Holidays indicating the prosperity of the tourism industry, followed by the rapid recovery of catering and retail industries. The phenomena above shall be partly attributed to “retaliatory consumption” arising from the end of epidemic control measures over an extensive period of time, and partly attributed to the growth of public confidence in the market. Therefore, from the perspective of ephemeral phenomenon, 2023 is bringing a more dynamic, bright and confident market in comparison to 2022.
However, from a more macroscopic perspective, the epidemic control measures put in place over the past three years have inevitably led to the closure and bankruptcy of a large number of small and medium-sized enterprises, causing a domino effect. On the one hand, the overall unemployment rate of society has leapt, causing a decline in residents’ overall consumption capacity, which is hard to be covered up by the appearance of short-term recovery. The retail market (especially for those that target at high-and-mid-end consumers) will continue to face challenges. On the other hand, institutional investors are seen to act in a more conservative manner by adopting strategies including contraction of investments or holding, resulting in difficulties for investment institutions to raise capital. Free market financing will still be trapped in an inextricable predicament for the short run. Moreover, Shanghai is also facing the pressure created from the "retreat" of foreign invested enterprises and the gradual shift of "Made in China" related industries to Southeast Asia. The effect in connection with industrial transformation and upgrading is becoming particularly distinct after the "anesthesia" effect of the epidemic fades.
Upon a comprehensive consideration on the increasing complexity of the international trends and the impact of de-globalization, we believe that in 2023, more attention should be paid to structural opportunities in business, especially in the fields of synthetic biology, green energy, high-tech materials, artificial intelligence, etc. Out of which in terms of industry safety, we have a particularly focus on agricultural-related technological innovation projects. On 2 January 2023, the CPC Central Committee and the State Council of PRC issued “Opinions on Furthering the Comprehensive Advancement of Key Tasks for Rural Revitalization in 2023”, which is a further implementation of the “Rural Revitalization Strategy” put forward by President Xi. We also note that the PRC government has been continuously launching policies in support of industries including bio-breeding, gene editing, bio-pesticides and other aspects to encourage the development and innovation of related technologies and their application.
It is further noted that in the field of green energy, state-owned enterprises and institutions are vigorously promoting innovation in new energy technologies, especially the projects related to sodium-ion batteries and hydrogen energy batteries, which can effectively compensate for China's dependence on lithium ore imports. The promotion and support in these areas also provides the capability to building a solid foundation for strategic safety procedures, and unsurprisingly investment opportunities for the forgoing projects have become viral and is representing a hot trend. When focusing on the field of high-tech materials, local governments with the Shanghai government in the lead holds the aim to improve the semiconductor-related industry chain by integrating the existing industrial advantages, along with the development of underlying tools such as material innovation to further contribute to industries such as military and aerospace. In the field of artificial intelligence (AI), ChatGPT has undoubtedly caused a mind blowing impact on the traditional Internet industry. The rapid development of AI is believed to have a long-term impact in the traditional working methods of the Internet industry and to force an entire revolution.
In terms of judicial litigation, we expect that in 2023, disputes related to the purchase and sale of goods, leasing, and Valuation Adjustment Mechanism (VAM) arising from the epidemic will decrease, and the judicial system will be more cautious in the application of relating legal provisions such as force majeure and change of circumstances. However, disputes concerning investment, virtual assets, misrepresentations for listed companies, and information disclosure disputes will be on a gradual rise. The changes in the economic sector will ultimately be reflected in the dispute resolution process at the end and also in structural institutions related to litigation.
Overall, 2023 is a year of both opportunities and challenges. From a business perspective, one of the most important indicator shall be a prudent judgment of structural opportunities and domestic policies during special periods. In terms of the legal service market alone, we need to be prepared for the constantly changing or even fading trend of traditional businesses, as well as the challenges proposed to the traditional service industry by emerging technologies such as artificial intelligence. The legal industry needs to “resonate” with the tide of the times with an inclusive mindset, and return to the "essence" of service to "adapt" to changes.