By Weining Hu
On April 8, 2016, Chinese authorities released an updated “positive list” for goods imported through cross border e-commerce (CBEC). Pet food, specifically dog food and cat food, are included on the list for the first time. This new regulatory update presents a substantial e-commerce opportunity for foreign pet food companies, as pet food can now be imported more easily via one of China’s 13 free trade zones or sold directly on business-to-consumer (B2C) or consumer-to-consumer (C2C) e-commerce platforms such as Tmall and JD.com. However, uncertainties and risks accompany these new opportunities, as new integrated tax policies for CBEC and the pre-existing “negative list” exert impacts on foreign investment.
China looks to increase green energy consumption by 2020
China is aiming to build a clean, low carbon, safe, and modern energy system by 2020. Attention will be paid to the quality of the energy sector’s development by dealing with the country’s overcapacity problems and promoting green energy development. Efforts will also be made to increase market competition among energy and related sectors. This will mean a 15 percent reduction of energy use per unit of GDP by the year 2020, and that non-fossil fuel share will increase to more than 15 percent, with natural gas occupying 10 percent. Persistent air pollution has foregrounded this target, with 62 percent of 338 cities suffering bad air quality last week, according to the Ministry of Environmental Protection. In 2015, 64 percent of energy consumption in China derived from coal, the main source of breathable particulate matter (PM 2.5) which causes smog.
By Zolzaya Erdenebileg
With the signing of the China-Mongolia-Russia corridor in June 2016, Sino-Mongolian relations entered a new era of economic cooperation that will be vital to Mongolia’s economic recovery and long term stability. Mongolia has long aspired to become a logistics and financial center, using its location in North Asia and proximity to Chinese and Russian markets to its advantage. However, a recent visit by the Dalai Lama to Mongolia, and the resulting Chinese backlash, has once again revealed that economic partnership and recovery for Mongolia will be more difficult than the government expects.
By Jake Liddle
In recent years, China has increased its focus and efforts towards combating the high levels of environmental pollution in the country, the result of its accelerated economic growth. In 2012, China declared war on pollution, and put aside RMB 3.7 trillion for the battle, with over half of the funds reserved for water pollution. The 13th Five Year Plan targets this issue, and in 2015, the government published the Water Pollution Prevention and Control Action Plan, aiming to halt heavily polluting sectors from contaminating water sources.
However, China’s most recent environmental report remains negative, suggesting that 61.5 percent of groundwater and 28.8 percent of key rivers were classed as ‘not suitable for human contact’. The contamination is largely caused by industrial and agricultural industries, and the resulting pollution has permeated the earth down to the water table. The report found that usable and safe water is scarce, and over half of China’s cities suffer from water shortages, especially in the arid northern regions. While China has 20 percent of the world’s population, it only possesses seven percent of the world’s water resources. What’s more, these water resources are not reliable and are distributed unevenly among provinces and administrative regions.
For China to reverse the state of its severe water pollution, high-grade wastewater treatment technologies are in great demand.
By Dezan Shira & Associates
Editor: Tongyu Zhang
On December 3, 2016, China’s Ministry of Finance (MOF) issued regulations on accounting treatment of Value-added tax (VAT), which immediately came into force from the date of issuance. The latest regulations are presented as guidelines for companies to handle accounting adjustments in advance of the annual reporting deadline. The regulations modify the sub-items under the “tax payable” category, clarify the presentation method of these items in financial statements, and standardize the accounting handling methods for VAT-related businesses. Note that transactions concluded during the period from May 1, 2016 to the effective date of the regulations, whose assets and liabilities are affected, shall be adjusted according to the new regulations. The regulations will prevail if inconsistent with the national unified accounting system.
Directory of relevant regulatory departments of foreign NGOs in China published
China’s Ministry of Public Security has published a list of activity fields and a project catalogue for foreign NGOs operating in China, and a directory of their respective regulatory departments for 2017. Such departments listed will serve as intermediaries between the Ministry of Public Security and foreign NGOs. The Listdivides different fields and matches them with the relevant governmental departments. For example, the General Administration of Sports would be responsible for administering sport NGOs. However, some of the fields will be jointly regulated by multiple government departments, such as NGOs engaging in environmental protection. Before applying for registration of a representative office with the relevant provincial-level People’s Government, a foreign NGO must first obtain approval from the listed intermediary government departments.
By Dezan Shira & Associates
Editor: Alexander Chipman Koty
Hailed as China’s most significant tax reform in over two decades, the value-added tax (VAT) was comprehensively implemented as the country’s only indirect tax in 2016, effectively replacing the business tax (BT) that previously applied to a number of industries. The reform is part of Beijing’s efforts to restructure the Chinese economy from one driven by labor-intensive manufacturing to one that is service-oriented by easing the tax burden on service industries, which have historically paid a disproportionate share.
In 2015, services made up more than half of China’s GDP for the first time, and are growing at a faster rate than any other sector of the economy. The Chinese government envisions the VAT reform to further propel growth in services and consumption as the country pivots away from the low value-added industries. The broader introduction of the VAT is also designed to encourage low-end manufacturers to upgrade their technology and capabilities, and to invest in research and development in order to move up the value chain.
By Daniel Schaefer
Drones are a young and multifaceted industry that have only recently begun to show their true potential. Particularly in China, drones are now being used to change the business landscape and alter how companies conduct their operations in a wide variety of commercial sectors, from agriculture to mining to cinematography.
China is leading the rise of the drone industry, with five out of the world’s top 11 venture capital-funded drone companies residing in the country. Foreign companies are already beginning to participate in the Middle Kingdom’s drone market – in August 2015, Intel invested US$60 million in Chinese drone manufacturer Yuneec. Although the regulatory environment is still developing and can be restrictive for certain usages, growth in the industry shows no signs of abating.