Overview of Collective Redress/Class Action in China

Narrowly construed, “collective redress” or “class action” refers primarily to the class action regime in the United States or comparable systems. In mainland China (excluding Hong Kong, Macau, and Taiwan), the closest analogue is the “special representative action” in securities misrepresentation litigation. Broadly construed, collective redress/class action encompasses all forms of litigation involving the rights and interests of multiple parties, including various forms of joint action.

Developmental Trajectory

Joint action mechanism

The Civil Procedure Law of the PRC (for Trial Implementation, 1982) first introduced joint action, allowing consolidation for trial where one or both parties to a lawsuit comprise multiple persons and the subject matter is identical or of the same type.

Ordinary representative action mechanism

As large-scale class disputes emerged, the Civil Procedure Law of the PRC (1991) and the Opinions on Several Issues Concerning the Application of the Civil Procedure Law (1992) established the ordinary representative action mechanism. In 2003, the Supreme People’s Court (SPC) refined the ordinary representative action mechanism in the Several Provisions on Trying Cases of Civil Compensation Arising from Misrepresentation in the Securities Market (“Misrepresentation Judicial Interpretation”). In 2019, the SPC’s Minutes of the National Civil and Commercial Trial Work Conference advocated eligible local courts to apply the representative actions mechanism. In March 2020, when the revised Securities Law of the PRC (the “Securities Law”) took effect, Article 95(1) and (2) of the Security Law formally codified the ordinary representative securities action mechanism. That same month, the Hangzhou Intermediate People’s Court applied the representative actions mechanism in the Wuyang Bond case, involving an uncertain number of parties, marking its full activation in securities disputes.

Model judgment mechanism

In financial and securities disputes, the courts also developed the model judgment mechanism. In May 2016, the SPC and the China Securities Regulatory Commission (CSRC) promulgated the Notice on Conducting a Pilot Programme of Diversified Dispute Resolution Mechanisms in Securities and Futures in Certain Regions (“Pilot Programme of Diversified Dispute Resolution Mechanisms”). In November 2018, the SPC and CSRC promulgated the Opinions on Comprehensively Advancing Diversified Dispute Resolution Mechanisms in Securities and Futures (“Diversified Dispute Resolution Mechanisms”). The two documents established the model judgment mechanism.

This mechanism allows courts to first adjudicate a representative case in mass disputes involving an uncertain number of parties. Subsequent parallel cases may adopt the established common factual findings and legal standards. In 2019, the Shanghai Financial Court applied it very effectively in the Founder Technology case. It has since become a mainstream mechanism to resolve securities and financial disputes.

Special representative action mechanism

With the deepening reform of the securities market, the regulatory authorities intensified enforcement against violations and strengthened civil liability. Thus, in March 2020, the Securities Law first introduced the special representative action, a mechanism with similarities to the US class action. Currently, this applies exclusively in securities collective actions pursuant to the Securities Law.

The aforementioned mechanisms in the PRC were designed by drawing on international experience – particularly from the US, the EU and Japan – while adapting it to China’s legal tradition, social system, and practical demand.

Joint Action Mechanism

The joint action mechanism, currently provided in Article 55 of the Civil Procedure Law, traces its origin to Article 75 of the Draft Civil Procedure Code of the Qing Dynasty. It is generally accepted that Soviet civil procedure exerted a certain influence on China’s early joint action mechanism, including the distinction between “necessary joint action” and “ordinary joint action”. Meanwhile, German and Japanese civil procedure law and legal theory also affected current Chinese law, particularly in the course of action, the classification of class action, and specific provisions.

Model Judgment Mechanism

Model litigation is not an independent category of action under the Civil Procedure Law, but rather a judicial practice developed for mass disputes. It has been widely applied in securities, real estate sales, and property management and other mass disputes.

The mechanism draws mainly on the German model case mechanism, while also referencing collective action procedures in the UK and USA. In 2005, Germany’s Capital Investors’ Model Proceedings Act explicitly codified its rules of application. In China, the Chaoyang District People’s Court of Beijing first applied the mechanism in 2006 in a real estate contract dispute. Nonetheless, the Chinese mechanism exhibits distinctive features, such as initiation ex officio by the court and the method of selecting model cases.

Ordinary Representative Action Mechanism

China’s ordinary representative action mechanism embodies a hybrid influence from the “appointed party” system of Japan, the representative action of the United Kingdom, and the class action of the United States. It adopts the principle of “express opt-in”, requiring parties to expressly choose to participate, to elect a certain number of representatives, and to accept that the judgment will have a binding effect on all the represented parties. Meanwhile, the Chinese mechanism confers more ex officio judicial authority – for example, empowering the court to designate representatives if the parties fail to elect them.

Special Representative Action Mechanism

The special representative action mechanism in China draws mainly on the class action of the United States, especially the “opt-out” mechanism. Moreover, the representative must be an investor protection institution (a professional organisation mandated to protect investors), emphasising judicial scrutiny and oversight, akin to mechanisms in Germany and Taiwan. At present, it applies exclusively to securities cases preconditioned on, and transferred from, an ordinary representative action with an uncertain number of plaintiffs. Selection for special representative actions also takes into account factors such as the materiality of the misrepresentation and its social impact, reflecting the unique orientation of Chinese judicial practice.

The EU collective redress regime does not apply in China.

Joint Action Mechanism

The joint action mechanism, currently provided in Article 55 of the Civil Procedure Law of the PRC (2023, Civil Procedure Law) and Articles 73–76 of the Interpretation of the Supreme People’s Court on the Application of the Civil Procedure Law of the PRC (“Civil Procedure Judicial Interpretation”).

Model Judgment Mechanism

In May 2016, the SPC and the CSRC issued the Pilot Programme of Diversified Dispute Resolution Mechanisms. In November 2018, they issued Diversified Dispute Resolution Mechanisms. In May 2024, the CSRC further promulgated the Work Plan on Improving Diversified Dispute Resolution Mechanisms for Securities and Futures and Deepening Litigation Source Governance. In addition, courts in Beijing, Shanghai, Guangdong, Zhejiang, Jiangsu and other regions have gradually issued local judicial guidelines and opinions on applying the model judgment mechanism in securities disputes.

Ordinary Representative Action Mechanism

Article 56 of the Civil Procedure Law provides for representative actions with a certain number of plaintiffs, while Article 57 addresses those with an uncertain number of plaintiffs. Articles 75–80 of the Civil Procedure Judicial Interpretation establish the basic framework.

Article 95 of the Securities Law, Article 33 of the Misrepresentation Judicial Interpretation, and Articles 5–31 of the Provisions by the Supreme People’s Court on Several Issues Concerning Representative Actions for Securities Disputes (“Representative Actions Provisions”) set out specific rules for applying the ordinary representative action mechanism in security disputes.

Special Representative Action Mechanism

Articles 32–41 of the Representative Actions Provisions provide special representative actions in securities disputes. Shanghai, Nanjing, Xiamen, and Fuzhou courts have issued local judicial documents and guidelines to implement the mechanism.

In addition, the China Securities Investor Services Centre (ISC), designated as the authorised body to initiate special representative actions, has promulgated the Special Representative Actions Rules (Trial Implementation) and the Administrative Measures for Assessing Securities Litigation Cases (Trial Implementation), which serve as important regulatory references.

Joint Action Mechanism

The joint action mechanism, as a general mechanism established under the Civil Procedure Law, is applicable to all categories of civil disputes.

Model Judgment Mechanism

In contemporary judicial practice, the model judgment mechanism is applied primarily in collective redress arising from securities, financial products (such as funds, asset management products and trusts) and consumer protection.

Ordinary Representative Action Mechanism

The ordinary representative action mechanism, as a general mechanism established under the Civil Procedure Law, is applicable to all categories of civil disputes. In practice, it has been applied in the following areas:

• collective redress arising from misrepresentation, insider trading and market manipulation in the securities market;
• collective redress arising from environmental pollution;
• collective redress arising from product liability;
• contract disputes affecting multiple parties, including rural land contracts, property management contracts, prepaid consumption contracts, and lease agreements;
• construction payment disputes;
• collective labour disputes involving large numbers of employees; and
• disputes arising from false advertising.

Special Representative Action Mechanism

Currently, the special representative action mechanism is only applicable to securities collective redress cases arising from misrepresentation, insider trading and market manipulation. As of September 2025, only four cases have been filed: the Kangmei Pharmaceutical case (before the Guangzhou Intermediate People’s Court), the Essence Information Technology case (before the Shanghai Financial Court), the Jin Tong Ling Technology case (before the Nanjing Intermediate People’s Court), and the Misho Ecology & Landscape case (before the Shenzhen Intermediate People’s Court).

The mechanisms of representative action and model judgment discussed in this report epitomise judicial practice and academic research, and are not necessarily prescribed with official or exclusive definitions in statutes or judicial interpretations. Refer to 1.1 History and Policy Drivers of the Legislative Regime and 2.1 Collective Redress and Class Action Legislation for the definition and applicable rules.

Joint Action Mechanism

The joint action mechanism, as a general mechanism established under the Civil Procedure Law, is applicable to all categories of civil dispute. The jurisdiction of the joint action is determined pursuant to the Civil Procedure Law. Issues in “necessary joint action”, such as consolidation, are determined ex officio by the court, not subject to the parties’ choice. Conversely, “ordinary joint actions” may be consolidated if the court deems this appropriate and the parties agree.

Model Judgment Mechanism

The competent court may, at its discretion, apply the model judgment mechanism and designate a model case. Jurisdiction is usually determined in accordance with the Civil Procedure Law and the nature of the dispute, unless special rules apply (such as in securities misrepresentation disputes).

Ordinary Representative Action Mechanism

Representative actions are divided into those with a certain number of litigants and those with an uncertain number of litigants. Jurisdiction is determined in principle under the Civil Procedure Law, unless special rules apply.

Representative actions with an uncertain number of plaintiffs have special characteristics. The competent court may, at its discretion, apply the mechanism. The court may issue an announcement of registration of rights stating the facts of the case and the claims of the existing litigants, and notify right-holders who have not yet participated in the litigation to register with the court within a certain period. Right-holders may elect representatives, but if they fail to do so, the court may appoint representatives after consultation with the right-holders, or designate directly where consultation fails. Non-registered plaintiffs may initiate a separate lawsuit, but in principle, representative actions take precedence, and parallel cases are suspended. Common factual findings and legal interpretations established in the representative judgment are directly binding on parallel cases.

Special Representative Action Mechanism

A special representative action must be preconditioned on and transferred from an ordinary representative action with an uncertain number of plaintiffs. Specifically, after the court announces the eligible right-holders, an investor protection institution which may accept special authorisation from more than 50 plaintiffs, may apply to convert the case into a special representative action.

Special representative actions apply exclusively in securities litigation. Jurisdiction is strictly limited to the intermediate people’s courts, specialised financial courts, courts where securities exchanges or other national stock exchanges approved by the State Council are located. Except where the Supreme People’s Court assigns otherwise, such actions are in practice confined to the Shenzhen Intermediate People’s Court, the Shanghai Financial Court, and the Beijing Financial Court.

Joint Action Mechanism

As a general mechanism under the Civil Procedure Law, a joint action follows the procedures applicable to ordinary civil actions.

Model Judgment Mechanism

The model judgment mechanism imposes no special requirements on the filing of claims or trial procedures. Courts adjudicate model cases following the procedures of ordinary civil actions. Once the model judgment becomes final, subsequent cases will first be resolved through settlement. If parties fail to reach settlement, the common factual findings and legal interpretations established in the model case may be directly applied to parallel cases.

Ordinary Representative Action Mechanism

In ordinary representative actions with a certain number of litigants, such litigants may elect representatives and file an ordinary representative action with the court.

In ordinary representative actions with an uncertain number of litigants, the main procedure includes:

• the plaintiffs file ordinary representative actions;
• the court determines the scope of eligible right-holders and issues a public registration announcement;
• right-holders with identical or similar claims register within the prescribed period, after which the court reviews the list of registered right-holders and confirms the scope of eligible plaintiffs;
• representatives are elected by the parties, or appointed by the court if the parties fail to elect them (parties may withdraw their registration upon discovering the representatives and initiate a separate lawsuit instead);
• cases involving representatives will be heard first; and
• investors within the determined scope who did not register may bring separate suits, but the court may apply the factual findings and legal interpretations of the effective representative action judgment to parallel cases.

Special Representative Action Mechanism

Although a special representative action is transferred from an ordinary representative action with an uncertain number of litigants, the two differ in their initiation requirements, as additional procedures must be satisfied before the court may proceed with a special representative action:

• during the registration period, if an investor protection institution deems it necessary to act as a representative, it may publicly solicit and obtain special authorisation from at least 50 eligible right-holders to initiate the special representative action;
• once the scope of the right-holders is confirmed, the court will issue the Announcement of Registration of Rights for a Special Representative Action; and
• during this announcement period, investors may declare to opt out; otherwise, they are deemed to have consented to participate in the action.

Joint Action Mechanism

No special restrictions are imposed on the nature or identity of the litigants.

Model Judgment Mechanism

No special restrictions are imposed on the nature or identity of the litigants.

Ordinary Representative Action Mechanism

In ordinary representative actions with a certain number of litigants, there are no restrictions on the nature or identity of the litigants, but numerical and representational requirements apply.

Numerical requirements

• There must be at least ten plaintiffs.
• Two to five proposed representatives must be designated in the complaint.

Representational requirements

• Representatives must hold a substantial proportion of the interest at stake in the claims.
• Representatives or their attorneys must have a certain degree of litigation capacity and professional expertise.
• Representatives must be able to faithfully and diligently safeguard the interests of all plaintiffs.

In actions with an uncertain number of plaintiffs, special rules govern the scope of eligible claimants, as discussed in 3.1 Mechanisms for Bringing Collective Redress/Class Actions and 3.2 Overview of Procedure.

Further, where an investor protection institution participates as a plaintiff, or accepts authorisation from the investors, the investor protection institution may assign staff or engage attorneys to participate in the proceedings. The court may designate the institution itself as a representative, or appoint representatives from among the parties it represents.

Special Representative Action Mechanism

In special representative actions, only investor protection institutions may serve as representatives. These professional organisations, mandated to protect investors, currently refer mainly to the ISC or the China Securities Investor Protection Fund Corporation Limited (SIPF).

Joint Action Mechanism

The plaintiffs or defendants must consist of at least two persons.

In necessary joint actions, the court will, ex officio, add additional parties.

In ordinary joint actions, consolidation requires that the plaintiffs’ claims involve identical or similar subject matter and that the plaintiffs apply for consolidation. In addition, all parties must consent to the consolidation. Only when these conditions are satisfied may the court grant approval for the cases to be consolidated.

Model Judgment Mechanism

The model judgment mechanism imposes no restrictions on the type, number or scale of plaintiffs.

Ordinary Representative Action Mechanism

This mechanism does not impose express restrictions on the nature or type of plaintiffs. However, it requires there to be at least ten plaintiffs, with no upper limit. In representative actions with an uncertain number of plaintiffs, once the court issues a registration announcement, eligible right-holders may register to join within the prescribed period and, upon judicial confirmation, will become members of the class.

Special Representative Action Mechanism

In a case where a special representative action procedure is applicable, there should be more than 50 investors. Investors follow the principle of “opt-out”.

As for the nature and type of the investors, although statutory law and judicial interpretations remain silent on this issue, a special representative case in 2024 held that professional institutional investors, due to their distinctive characteristics, should not be recognised as eligible right-holders for special representative actions. Such investors should initiate separate lawsuits instead.

See 3.4 Class Members, Size and Mechanism – Opting In or Out for joinder in joint actions.

In the model judgment mechanism and the ordinary representative action mechanism, eligible plaintiffs must voluntarily initiate proceedings or register after the court issues an announcement. The court cannot add plaintiffs on its own initiative.

In special representative actions, investors falling within the court-defined scope of right-holders are automatically included in the class, unless they expressly opt out.

The court’s procedural management authority (excluding its discretion over substantive matters), includes the following:

• determining, ex officio, the adjudicatory mechanism to be applied;
• selecting model cases ex officio under the model judgment mechanism;
• deciding, ex officio, whether to suspend separately filed cases in ordinary representative actions with an uncertain number of plaintiffs;
• defining the scope of right-holders in its announcement of the registration of rights based on factual findings, in ordinary representative actions with an uncertain number of plaintiffs and in special representative actions;
• adding parties necessary to the joint actions ex officio in necessary joint actions;
• consolidating cases for trial ex officio;
• designating representatives in ordinary representative actions with an uncertain number of plaintiffs where the parties fail to elect their own representatives;
• in exceptional circumstances, under exclusive or centralised jurisdiction rules, the SPC may confer jurisdiction to another court;
• reviewing settlement or mediation agreements reached between representatives and defendants, and deciding whether to issue a judicial confirmation in representative actions; and
• reviewing a representative’s decision to amend or waive claims, admit the opposing party’s claims, or withdraw the action in its entirety, and determining whether to grant approval in representative actions.

Pursuant to the Civil Procedure Law and relevant provisions, the time limit for first-instance proceedings is generally six months, which may be extended for six to nine months upon approval in special circumstances. The time limit for appeals is generally three months, which may be extended for three months upon approval in special circumstances. In all kinds of collective actions under PRC law – regardless of whether conducted through joint action, model judgment, or representative action – the large number of participants and the complexity of substantive issues often result in proceedings exceeding statutory limits. Actual average duration varies significantly due to case type, scale and the complexity of the substantive issues, and it is not possible to identify an average timeframe uniformly applicable to all cases.

As noted in 3.7 Length and Timetable for Proceedings, no uniformly applicable average timeframe exists for collective actions in China. Pursuant to the Civil Procedure Law and judicial practice, proceedings may be delayed due to the following reasons:

• jurisdiction challenges raised by the parties;
• judicial review of the scope of right-holders in representative actions;
• the period for right-holders’ registration announcement;
• court-appointed third-party appraisal, assessment or valuation;
• judicial investigation and evidence collection;
• settlement negotiations; and
• suspension of proceedings pending the resolution of another case that remains undecided.

Allocation of Litigation Costs

• General collective action: Pursuant to the Measures on the Payment of Litigation Costs, case acceptance fees, property preservation fees, and public announcement fees are prepaid by the plaintiffs when filing the action or applying for property preservation, but are ultimately borne by the losing parties.
• Ordinary representative action with an uncertain number of plaintiffs: no case acceptance fees need to be prepaid. Such costs are ultimately borne by the losing parties.
• Special representative actions: no case acceptance fees need to be prepaid and these are ultimately borne by the losing parties. If the plaintiffs lose in whole or in part, they may apply for a reduction or deferment of such fees. The court will decide whether to approve the application based on the financial situation and the circumstances of the case. If an investor protection institution, acting as a representative, applies for property preservation, the court may waive the requirement to provide a guarantee.

Litigation Funding

Third-party litigation funding is, in principle, not permitted in the PRC. In practice, however, some plaintiffs’ attorneys may advance litigation costs for their clients and require no prepayment of attorneys’ fees. The principal resolutions to alleviate cost burdens for plaintiffs include special representative actions initiated by investor protection institutions, support actions initiated by the procuratorate, legal aid, and judicial cost arrangements allowing reduction, deferment or exemption of court fees.

Disclosure

There are no “discovery or disclosure” procedures in China, as this concept is generally known in common law jurisdictions. Instead, the Civil Procedure Law bears the burden of proof. The parties may decide what evidence to submit in support of their claims or defences, and bear the consequences if such evidence is insufficient. Courts may, ex officio, investigate and collect the evidence necessary to ascertain the facts. If the parties are objectively unable to obtain evidence themselves, they may apply to the court to investigate and collect evidence.

Privilege

PRC litigation rules do not recognise “privilege”, as this concept is generally known in common law jurisdictions, but analogous protections exist:

• State secrets – evidence involving state secrets will not be presented in public hearings.
• Trade secrets – per a party’s request, the court may conduct non-public hearings in cases involving trade secrets.
• Personal privacy – evidence involving personal privacy must be kept confidential and, if introduced, will not be presented in public hearings.
• Attorney-client confidentiality obligation – attorneys will be bound by the statutory obligation of confidentiality. However, the scope, evidentiary effect and degree of protection afforded thereunder are more limited than under attorney-client privilege in common law jurisdictions.

PRC laws and regulations on collective actions are primarily procedural rather than substantive. Substantive remedies available in collective actions are the same as those available through individual actions, including:

• damages;
• injunctive relief;
• removal of obstructions;
• elimination of danger;
• restitution;
• apology; and
• punitive damages.

The PRC has established a diverse range of dispute resolution mechanisms. Those applied in collective actions include:

• Model judgment plus settlement/mediation in parallel cases – once the court renders a model judgment in a representative case and such judgment becomes final, subsequent parallel cases may be resolved through settlement or mediation by reference to the result in the model judgment.
• Court mediation – the trial court may mediate and issue a settlement agreement with binding enforceability. For example, the Essence Information Technology case was the first special representative action in China resolved by mediation.
• Out-of-court settlement – parties may reach an agreement out of court, with the plaintiff withdrawing the action.
• Advance compensation – a special mechanism in securities collective actions, under which issuers, controlling shareholders, de facto controllers, and relevant intermediaries may agree to set up a compensation fund and compensate investors in advance. They may later seek reimbursement from other liable parties. Four cases in China have successfully applied this mechanism:
1. the Wanfu Biotechnology case (2013);
2. the Hailianxun case (2013);
3. the Xintai Electric case (2015); and
4. the Amethystum Storage case (2023).
• Arbitration – in cases where parties have agreed to arbitral jurisdiction, collective disputes may also be resolved through arbitration.

Judgments

Joint action

The judgment is binding on all parties to the action.

Model judgment mechanism

A final judgment in the model case binds only the parties to that case, but its common factual findings and legal interpretations serve as important references in parallel cases.

Ordinary representative action

In actions with a certain number of plaintiffs, the final judgment binds all right-holders. In actions with an uncertain number of plaintiffs, the judgment binds all registered right-holders; non-registered right-holders who later bring separate actions within the statutory limitation period may directly apply the effective judgment.

Special representative action

The final judgment binds all right-holders within the defined scope who have not opted out.

Enforcement of Judgments

In all of the above mechanisms, entitled parties of the judgment may apply for compulsory enforcement against non-performing parties after the expiry of the performing period prescribed by the court. In representative actions, some courts permit representatives to apply for enforcement directly on behalf of all plaintiffs.

Enhanced Co-Ordination of Civil, Administrative Regulatory and Criminal Proceedings in Securities Collective Actions

On 15 May 2025, the SPC and the CSRC jointly issued the Notice of the Guiding Opinions on Strict and Impartial Law Enforcement and Administration of Justice to Serve and Guarantee the High-Quality Development of the Capital Market. This document underscores the comprehensive integration of criminal prosecution, civil litigation, and administrative regulatory enforcement in securities enforcement, thereby strengthening the three-dimensional accountability regime across administrative, civil and criminal domains.

Diversified Dispute Resolution Development

The implementation and refinement of diversified dispute resolution (DDR) mechanisms, particularly through non-litigation mechanisms, was reaffirmed as a policy trend by the government in 2025. In financial consumer disputes in particular, including mass claims arising out of funds, trusts, asset management, and wealth management products, courts across China are actively exploring specialised mediation, settlement and preliminary judgments to enhance judicial efficiency and reduce litigation costs for investors.

Institutionalising Representative Actions in Securities Collective Litigation

The document jointly issued by the SPC and the CSRC on 15 May 2025 also reaffirmed the policy objective of institutionalising representative actions under Article 95 of the Securities Law. To date, four cases have applied the special representative action mechanism, while dozens of cases have been conducted under the ordinary representative action mechanism.

Prospective Issuance of Judicial Interpretation of Insider Trading and Market Manipulation

On 4 April 2024, the State Council issued Several Opinions on Strengthening Regulation, Preventing Risks and Promoting the High-Quality Development of the Capital Market (“Opinions on High-Quality Development of the Capital Market”), urging the promulgation of judicial interpretations addressing civil compensation for insider trading and market manipulation. This initiative was reiterated in the Notice of the Guiding Opinions on Strict and Impartial Law Enforcement and Administration of Justice to Serve and Guarantee the High-Quality Development of the Capital Market, jointly issued by the SPC and the CSRC on 15 May 2025. The judicial interpretation has now been formally included in the legislative agenda, and its drafting and application are expected to trigger extensive discussion in the market.

Prospective Issuance of Financial Trial Work Conference Minutes

In 2023, the SPC prepared a draft Minutes of Financial Trial Work Conference and circulated it for public comment. However, no final version has been formally promulgated as yet. This document may be issued in the future. The securities and financial trial issues contained therein are expected to exert a profound influence on the collective action framework.

The Impact of Institutionalising Representative Actions in Securities Disputes

Following the issuance of the Opinions on High-Quality Development of the Capital Market, it is foreseeable that ordinary representative actions with an uncertain number of plaintiffs will be applied more broadly, while cases adopting the special representative action mechanism in the securities sector will also increase. This demonstrates the commitment of Chinese courts and administrative regulators to curbing violations in the securities market. At the same time, it will inevitably increase litigation risks and defence costs for market participants, underscoring the need for thorough insight into the practice and rules of Chinese securities collective actions.

Expansion of the Defendant Pool in Securities Collective Actions

Pursuant to the Misrepresentation Judicial Interpretation, the scope of entities that may be named as defendants in securities collective actions has been expanded to include counterparties, suppliers, customers, and financial intermediaries providing services to the issuers. For instance, in a case before the Nanjing Intermediate People’s Court, a supplier alleged to have assisted the issuer in financial fraud was sued and may bear potential liability. Thus, the risk of collective actions is expected to diffuse beyond issuers, permeating a broader array of market participants.

Expansion of the Scope of Matters Subject to Collective Actions

In securities litigation, early disputes were confined to the traditional public offering market and stocks traded through exchange quotation systems. However, as recent judicial practice has evolved, securities collective actions have been extended to a broader array of bond markets and securities products. For example, in the Meijite Lamp case, liability arising from securities disclosure violations was extended to asset-backed securities (ABS). In the Wuyang Bond case, the court applied the representative action mechanism to bond investors. In the Yeah Info Technology case, the National Equities Exchange and Quotations (NEEQ) market was expressly recognised as subject to the general rules governing securities disputes. The inherent differences among these securities or instruments – such as the nature of the issuers, methods of trading, investor composition, price efficiency, market liquidity, and regulatory requirements – are likely to further complicate collective actions in the securities sector.

Beyond securities disputes, collective actions in other fields are also emerging. For instance, the Pudong New Area People’s Court in Shanghai applied the ordinary representative action mechanism with an uncertain number of plaintiffs in a commercial real estate lease dispute, in which 342 parties ultimately registered to join the action. These developments collectively demonstrate the trend towards expanding the scope of matters subject to collective action mechanisms.