Our Latest Round-Up of Business News Affecting China-Based Businesses Investing in Asia
In this edition of China Outbound, we compare the operational costs in Vietnam and China’s Pearl River Delta, one of China’s key engines of growth and a magnet for foreign direct investment (FDI). Vietnam’s lower operational costs and abundant supply of labor make it a top location for manufacturers shifting production capacity. We discuss Thailand and ASEAN countries’ new investment promotion policies and how these will impact foreign businesses looking to relocate from China. Lastly, we take a look at China’s growing ties with ASEAN and Vietnam’s Free Trade Agreement, as well as the the potential benefits of these trade deals for foreign businesses.
Russia, India & South-East Asia To Be Winners As the EU and USA Market Importance Wanes
Amongst all the hyperbole concerning the current concerns of the Chinese economy, it is salient to note that China’s political instability in the mid-late 1980s, an event that culminated in the Tiananmen incident, was far worse. Deng Xiaoping’s discovery that China’s oil reserves were at an all-time low with just two weeks of operating stock left was a huge wake up call for reform, and arguably spearheaded the entire movement of pushing China into becoming a global power it is today. China then was on the point of collapse and at a very real risk of yet another revolution. It is a lesson well learned by the Communist Party. They view their hold on power as being intrinsically linked to securing energy supplies. Hand in hand with that, but to a marginally lesser degree is their ability to keep Chinese consumers content, and gradually building affluence.
By Dezan Shira & Associates
Editor: Elizabeth Leclaire
Spanning a total length of over 12 thousand kilometers, China’s high-speed railway network is the longest in the world, dwarfing the world’s second longest network of high speed trains, located in Spain, by almost four fold. In 2013, traffic on Chinese high-speed railways surpassed 214 billion passengers per kilometer, more congested than that of the rest of the world’s high speed networks combined.
With the nation’s accelerated urbanization and intensifying environmental crisis, China has sought to increase its dependence on public transportation. Within the first three years of the implementation of China’s 12th Five Year Plan (2011-2013), which pledged to develop the country’s railway network, the industry secured US$310 billion in investment. This reflects an investment increase of over 200 percent from the first three years of China’s 11th Five Year Plan. In addition to receiving greater government support, China’s railway industry has also significantly deregulated to provide substantial market entrance opportunities for foreign investors.
China has the world’s largest digital marketplace, and is predicted to grow three times faster than overall retail. For investors trying to sell to Chinese consumers, having a local website registered in China is critical to the success of their international business. Like in any other country, investors need to buy a domain name and get web hosting. Specific to China however, is the requirement to file the website with the Chinese Ministry of Industry and Information (MIIT). In this article, we take a look at the operational costs and the procedures for website registration in China. Meanwhile, we also include the pros and cons of using a foreign website to sell directly to the Chinese market.
ASEAN & Indian Stock Markets & Foreign Investment Rise as China Falters
As our practice, Dezan Shira & Associates, reaches into its 24th year of operations, media commentary about the state of the China market has long gone hand in hand with some wild and unpredictable commentary. 25 years ago, the United States sent the USS Nimitz down the Taiwan Strait, in a move unthinkable today. The China RMB plunged. A few years later, amongst the heat of the Asian Financial Crisis when all regional currencies were devaluing and economies crashing, the Chinese held steady and kept the RMB deliberately high to prevent further chaos. Since then the global financial crisis has come and hung around a little, but China has remained relatively stable.
By Dezan Shira & Associates
Editor: Elizabeth Leclaire
For foreign enterprises, registering a domicile is one of the first and most important steps in the process of establishing long term operations in China. The registration procedure is regulated on a state level by the China Administration for Industry of Commerce (AIC) and is required of both foreign and national businesses hoping to open a headquarters within the country. Under the AIC, all enterprise domiciles must have a distinct non-residential address that may not be shared with other enterprises. Furthermore, companies are confined to operations within the domicile unless branch offices are established. A lack of a legally registered domicile prohibits any formation of a company based in China.
It is important to note that provincial and municipal governments retain the power to deregulate domicile registration procedures on a local level. Within the past year, Shanghai, Guangzhou, and Chongqing have significantly simplified domicile registration procedures in order to stimulate economic and entrepreneurial development. Foreign investors should thoroughly examine the individual advantages and challenges faced when registering a domicile across different regions of China. In this article, we take a look at the lifted restrictions on domicile restrictions in China’s three major cities and give readers a general idea on how to register a domicile in China.
SMEs to Enjoy New Preferential Tax Policies in China
On August 19, Chinese Premier Li Keqiang announced a new round of preferential tax policies for small and medium-sized enterprises (SMEs) during an executive meeting of the State Council. Small and medium-sized enterprises with a taxable income not exceeding RMB 300,000 are allowed to pay corporate income tax at the rate of 20 percent on only 50 percent of their taxable income. Further, SMEs with a monthly sales volume of RMB 20,000 to RMB 30,000 shall be exempt from value-added tax (VAT) and business tax. The policy will take effect on October 1 and last until December, 2017. In the past eight years, China has taken a series of measures to aid in the development of SMEs such as establishing special support funds, reducing corporate income tax (CIT) and value-added tax (VAT) rates, and clearing some administrative fees.
The latest issue of China Briefing Magazine, titled “China Investment Roadmap: the Commercial Real Estate Sector” is out now and available to subscribers as a complimentary download in the Asia Briefing Bookstore through the month of June.
- Powering China’s Urbanization: A Market Overview of the Real Estate Sector
- Building for the Future: Selling Construction Materials in China
- Opportunities for a Foreign Architect or Firm in China