By Dezan Shira & Associates
Editors: Jake Liddle and Tongyu Zhang
Over the last few years, there have been a number of changes to the wholly foreign owned enterprise (WFOE) establishment process in China. Primarily, the latest update to the Catalogue for the Guidance of Foreign Investment Industries, which lifts regulatory thresholds for certain industries such as the energy and finance sectors, affects the record filing process with MOFCOM. In addition, obtaining a business license has become easier with the introduction of the new five-in-one license: previously, five different certificates had to be acquired from different authorities. These new considerations for investors looking to set up a WFOE in China are advantageous, widening the scope of investment and speeding up the application process.
By Jake Liddle
Authorities recently announced tax incentives for venture capital enterprises (VCEs) and individual angel investors (AIs) making investments into tech startups. The incentives for VCEs and AIs are detailed in a joint circular detailing pilot tax policies produced by China’s Ministry of Finance (MOF) and the State Administration of Taxation (SAT).
Most notably, the circular provides similar tax incentives to both corporate and individual investors, irrespective of if individuals make investments as a partner of a limited partner VCE or as an AI. The preferential tax policies aim to promote and nurture venture capital investment.
While a part of China’s broader initiative to promote the development of small and medium sized enterprises (SMEs), the pilot program is a component of the US$55.2 billion in tax cuts approved by the government in April.
By Chet Scheltema
Negotiated settlement is often required to sever the employment of a senior manager with minimal disruption and expense. This is nowhere more true than in China, where private dispute resolution is strongly favored.
However, in China, the labor dispute system encourages compromise and payment of severance. In some cases, this can encourage employees to negotiate aggressively to force employers into uncomfortable concessions.
For foreigner managers accustomed to dispute resolution processes in the West, where establishing fault and faultless behavior is seen as paramount, especially where fraud or bad faith exists, a greater emphasis in China on making concessions and paying severance to an opportunistic employee may be a bitter pill to swallow. Yet, it may be the most practical recourse.
By Femke van Rijt
When entering the Chinese market, some foreign companies attempt to use the same business and marketing tactics that have worked for them elsewhere. Many underestimate the need for market research, which helps localize marketing tactics, prior to entry.
Investors who fail to understand the nuances of the Chinese market will struggle to survive. In this article, we will explore the different ways in which some multinational companies have failed or succeeded in acclimating to the Chinese market.
Alibaba to launch Tmall World, entering Southeast Asian markets
China’s e-commerce giant Alibaba will launch a new brand, Tmall World, which will provide a platform for China-based exporters to direct their products to markets in Hong Kong, Taiwan, Singapore, and Malaysia, among others.
Export-based manufacturers have been calling for new channels through which to sell their products, as traditional trade has slowed.
Chinese products that meet certain standards and certification will be able to use the platform to gain access to overseas markets.
Alibaba already has its Tmall Global brand, which allows foreign merchants to sell directly to the Chinese market, while domestic exporters do not have the same means to export to other Asian markets. They do this through either Aliexpress, or Lazada, both owned by Alibaba.
Our weekly round up of other news affecting foreign investors throughout Asia:
Import and Export Procedures in Malaysia – Best Practices
Malaysia continues to liberalize its import and export regulations; but, complex goods-specific rules still exist. In this article, we explain best practices for importing into and exporting out of Malaysia.
India’s ‘Beef Ban’: Repercussions for Meat, Leather, and Dairy Industries
The Indian federal government’s new ‘beef ban’ is producing anxiety in three large industries: meat, leather, and dairy. In this article, we explain the new Livestock Market Rules, 2017 and its repercussions for the industries that rely on buffalo.
By Alexander Chipman Koty
China’s sweeping new Cybersecurity Law (“the Law”) came into effect on June 1 amid widespread anxiety from the foreign business community. Many in the private sector were concerned by the Law’s stringent requirements, ambiguous language, and unclear implementation plan.
To allay these concerns, the Cyberspace Administration of China (CAC) modified the language of certain parts of the Law, and delayed implementation of cross-border data localization provisions until the end of 2018. While the last minute changes add a degree of clarity to the Law, and give additional time for companies to organize compliance, many of the fundamental issues that concerned foreign companies remained unchanged.
As a result, companies with operations or customers in mainland China should review the Law. Professional advisors can help determine whether your business needs to make changes to its business structure to comply with the new Law.
By Zolzaya Erdenebileg
While 2017 promises to be a better year than 2016 for the luxury market in China, the fierce competition for sales has not let up.
To increase outreach to their customers, many brands are investing heavily into e-commerce channels. About 92 percent of top luxury brands in China now have an account on the messaging app WeChat, compared to only about half that in 2014. This puts WeChat on par with Weibo, a popular Chinese microblogging site, on which about 94 percent of luxury brands have an account.
WeChat and the WeChat Store allow brands to stage creative and engaging marketing campaigns to reach customers in China. Setting up shops and multimedia marketing on the app has become simpler, as Tencent – WeChat’s developer – courts luxury brands in its competition with Chinese e-commerce giant Alibaba. For the most part, the move has been successful with more luxury brands experimenting with the app.