China's Supreme Court has approved regulations and amendments that would permit millions of investors to file class-action lawsuits and serious action on capital market crimes.

It says it's in line with a "zero tolerance" policy on capital market crimes, following recent fraud scandals involving some big-name Chinese brands.

"It's a good thing for protecting investors' rights and avoiding scams and fraud," a investor concerning accounting fraud case told CGTN in Beijing. 

For investors, the important thing is that the system provides convenient and low-cost channels for small and medium investors and forms a strong deterrent to financial crimes. The system encourages investors to participate in litigation. 

According to data from China's Security Regulatory Committee, the country has 167 million investors, over 95 percent of which are small and medium investors. 

More about the provision

The full provision posted in the Chinese Supreme Court website, points out that class-action system is an important part of the basic system of the capital market and an important aspect of increasing the cost of illegal and criminal acts in accordance with the law.

It clarifies that "if the representative requests that the defendant who loses the lawsuit pay reasonable announcement fees, notice fees, attorney fees, etc., the people's court shall support it; in the special representative litigation, investors who have not declared to withdraw shall be deemed to have agreed to participate in the litigation; Special representative litigation cases do not pay the case acceptance fee in advance; when the investor protection agency acts as a representative to apply for property preservation in the litigation, the people's court may not require guarantees, etc."

The regulations point out that false statements, insider trading, market manipulation and other illegal and criminal activities are harmful to the capital market. In recent years, there have been many cases of financial fraud in listed companies, which have seriously damaged the legitimate rights and interests of investors, endangered the healthy and stable development of the capital market, and had extremely bad impacts.

Judicial interpretations have specified specific procedural rules for the people's courts at all levels to correctly implement the law, unify judgment standards, improve the quality and efficiency of securities class actions, and implement the securities class-actions system.

The full text of the "Regulations" consists of 42 articles, divided into four parts, including "accurately responded to the practical problems in the representative litigation, such as the initiation conditions of the representative litigation, the selection method of the representative, the scope of authority of the representative, the review of the draft mediation agreement, the review of major litigation matters, and the representative's abandonment of appeal handling, initiation of special representative litigation, etc."

'Legacy' of Luckin Coffee's scandal 

Many say the new regulation is a landmark decision in the wake of accounting fraud charges against Luckin Coffee, which led to the de-listing of the Chinese coffeehouse chain from the U.S. Nasdaq Stock Market. The Chinese State Administration for Market Regulation says it too would take action against two of Luckin's domestic entities and relevant third-party companies connected to the fraud charges. China's finance ministry is also set to impose administrative penalties on Luckin Coffee.

"What's been lost is the money of Chinese investors and stockholders. It would be very good if could win back some losses," a investor said.

This system is a milestone because it conforms to China's needs and conditions. It's different from foreign class-action systems. It plays a very important role in maintaining order in the capital market. In the future, it can be used for reference in realizing verdicts of similar cases and preventing judicial inconsistencies," said Xu Shenjian, Dean of School of Juris Maser at China University of Political Science and Law on Tuesday.

The China Securities Journal states that, as of April 19, at least four class-action lawsuits have been filed against Luckin Coffee and its executives in the U.S.