Author Archives: China Briefing

China Investment Roadmap: The Medical Device Industry – New Issue of China Briefing Magazine

Posted on by

CB 2014 11_cover_250x350The newest issue of China Briefing Magazine, titled “China Investment Roadmap: The Medical Device Industry,” is out now and available as a complimentary download in the Asia Briefing Bookstore through the month of November.

Contents:

  • Market Overview: Medical Devices in China
  • Investing in China’s Medical Device Industry
  • Case Study: Choosing a Distribution Model for the Chinese Market

Today’s opportunities for foreign investment in the medical device industry in China are the product of a near perfect storm of factors in the country: social, technological, economic and regulatory.

In the social realm, China’s greying and increasingly wealthy population has created an unprecedented demand for medical products, services and institutions. Here, the capital, technology and expertise of foreign firms hold an indispensable value. Meanwhile, the long-standing pattern of China as a low-tech manufacturer and high-tech importer of medical devices is slowly giving way to more China-side manufacturing of mid-to-high tech devices by foreign-invested enterprises.

Economically, the currently fractured and immature market in low-tech devices will likely see consolidation over the coming years, as trade barriers are lowered and more sophisticated supply chains put in place. And on the regulatory front, China’s new Trademark Law (effective May 1, 2014), in conjunction with alternative dispute resolution (ADR) initiatives such as the Shanghai International Arbitration Centre (“SHIAC”), mean that foreign investors can feel safer than ever bringing their core technologies to China.

In this issue of China Briefing, we present a roadmap for investing in China’s medical device industry, from initial market research, to establishing a manufacturing or trading company in China, to obtaining the licenses needed to make or distribute your products. With our specialized knowledge and experience in the medical industry, Dezan Shira & Associates can help you to newly establish or grow your operations in China and beyond.


About
Us

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email china@dezshira.com or visit www.dezshira.com.

Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.

 ‍

Related Reading

Industry Specific Licenses and Certifications in China
In this issue of China Briefing, we provide an overview of the licensing schemes for industrial products; food production, distribution and catering services; and advertising. We also introduce two important types of certification in China: the CCC and the China Energy Label (CEL). This issue will provide you with an understanding of the requirements for selling your products or services in China.

 

Adapting Your China WFOE to Service China’s Consumers
In this issue of China Briefing Magazine, we look at the challenges posed to manufacturers amidst China’s rising labor costs and stricter environmental regulations. Manufacturing WFOEs in China should adapt by expanding their business scope to include distribution and determine suitable supply chain solutions. In this regard, we will take a look at the opportunities in China’s domestic consumer market and forecast the sectors that are set to boom in the coming years.

Revisiting the Shanghai Free Trade Zone: A Year of Reforms
In this issue of China Briefing, we revisit the Shanghai FTZ and its preferential environment for foreign investment. In the first three articles, we highlight the many changes that have been introduced in the Zone’s first year of operations, including the 2014 Revised Negative List, as well as new measures relating to alternative dispute resolution, cash pooling, and logistics. Lastly, we include a case study of a foreign company successfully utilizing the Shanghai FTZ to access the Outbound Tourism Industry.

China Regulatory Brief: FTAs with South Korea and Australia, FDI Accounting Firms in Pingtan and Coal Export Tariffs

Posted on by

China-Regulatory-Brief

China and South Korea Reach Substantial Conclusion on FTA

On November 10, Chinese President Xi Jinping and Korean President Park Geun-hye reached a substantial conclusion on a free trade agreement (FTA) during a meeting in Beijing, after more than two year’s of previous negotiations. The proposed FTA, covering 17 industrial areas including e-commerce, environmental prorection and government purchasing, is supposed to be signed by the end of December, 2014. Further, the two sides agreed to cancel more than 90 percent of commodity tariffs over the next 20 years. China is South Korea’s largest trade partner; in 2013, bilateral trade reached US$230 billion.

China and Australia Set to Sign FTA

China and Australia are set to sign a milestone free trade agreement (FTA) in Canberra this week in a move to boost the two countries’ bilateral trade. The FTA is expected to cover trade in goods and services, including the exemption of export tariffs on a majority of Australian goods such as mineral and energy exports. Meanwhile, China will further open its domestic market to Australian legal services, design and financial firms. In return, Australia may relax its strict restrictions on Chinese investment in the securities market. China is Australia’s largest trade partner and biggest export market. According to Chinese Customs, bilateral trade reached US$150 billion in 2013. Continue reading…

Shanghai-Hong Kong Stock Connect to Launch Nov. 17 – Interview with Prof. Terrill Frantz

Posted on by

FICE

By Steven Elsinga

On Monday, the Shanghai-Hong Kong Stock Connect is set to officially launch, after months of anticipation. The scheme aims to link up the stock exchanges of Hong Kong (HKSE) and Shanghai (SSE), allowing investors in either exchange to trade on both stock markets.

On the Southbound link, institutional investors and individuals with over RMB 500,000 in their brokerage accounts may trade Hong Kong shares through a broker on the Shanghai stock market; while heading Northbound, Hong Kong investors and international investors with Hong Kong brokerage accounts may trade shares listed on the SSE. Note: there are no limitations on the type of investor or net worth on the Northbound link.

RMB liberalization

Both channels will use the RMB for transactions. Northbound investors will use offshore RMB deposits to trade on the Shanghai exchange; Southbound investors will trade on the Hong Kong Stock Exchange using Hong Kong dollars, like all other participants, but clearing will take place in RMB. Southbound investors trading on the Hong Kong exchange will have to convert their RMB into Hong Kong dollars when entering the market, and convert them back into RMB when exiting a position.

Not all shares will be eligible to be traded under the scheme. On the Shanghai Stock Exchange, Northbound investors are limited to purchasing A-shares listed on the SSE 180 and SSE 380 Indices. On the Hong Kong Stock Exchange, Mainland investors may trade shares listed in the Hang Seng Large Cap and Mid Cap Indices.

Investors on both sides may also trade shares of companies that are listed on both the SSE and HKSE, as A-shares and H-shares respectively. A-shares refer to RMB-denominated shares on Mainland stock exchanges and H-shares to RMB-denominated shares in Chinese companies traded on the HKSE.

Related Link IconRELATED: RMB Internationalization and the Shanghai FTZ

This has led to an interesting situation where shares in the same company now trade at different prices in Hong Kong and Shanghai, a phenomenon tracked by the Hang Seng China AH Premium Index. With these shares now available to both SSE and HKSE participants, this difference should erode. There is, however, a ban on all types of short selling in the Northbound link (HKSE participants trading on the SSE), so consolidation would likely see a rise in H-shares, rather than a tumble in Shanghai A-shares.

Trade quotas

Apart from the types of shares, the pilot scheme comes with limitations on the total RMB value of shares that can be traded through the exchanges. For the Northbound link, there is an aggregate cap of  RMB 300 bn and RMB 13 bn daily. Southbound trading, meanwhile, will be limited to RMB  250 bn aggregate and RMB  10.5 bn daily.

RECHRF-00012398-001To gain a better understanding of these new developments, China Briefing spoke with Terrill Frantz PhD., a professor at Peking University HSBC Business School. While much has been made of the possibility of A-share/H-share arbitrage following the launch of the pilot Connect, Prof. Frantz believes this opportunity may be short-lived.

In his mind, a much more interesting dynamic will come from the daily caps on the RMB value of trading. Prof. Frantz foresees real time tracking of the daily trade volume by regulators, but noted uncertainty of what will happen when the volume reaches its daily limit – e.g., will trading be halted ? This could mean the price of a particular popular stock soaring in a short amount of time as trading approaches the quota.

Related Link IconRELATED: CSRC Announces Employee Stock Ownership Plan

Prof. Frantz likened it to trading a German company while in New York, where the company files an earnings report at the end of the day. New York traders can take full advantage of the new information, whereas German investors must wait for the market to open the next day. Based on the daily quotas in the Shanghai-Hong Kong Connect scheme, this could happen during the day, on a daily basis.

Impact on QFII program

Previously, the only way for foreign investors to trade A-shares was through the Qualified Foreign Institutional Investors (QFII) program. This was one of the first efforts to internationalize the RMB. Under the program, a small number of foreign financial institutions are allowed to invest in the RMB-denominated securities market in China, including A-shares on the Shanghai and Shenzhen stock exchanges, but also bonds and futures.

Shanghai Stock ExchangeThese financial institutions can then sell financial products based on their investments in China. Investments through this channel are still subject to capital controls, with quotas allocated to individual entities. Over the past several years, these quota allocations have played a role in Chinese diplomacy, such as a RMB 80 billion quota granted to French investors during Chinese President Xi Jinping’s European tour earlier this year.

In Prof. Frantz’s view, the impact of the Shanghai-Hong Kong Connect will be to annul the QFII program’s current monopoly on A-shares. He believes the biggest beneficiaries of this development will be individual investors – who in the Northbound link are now allowed to invest directly in the SSE – as well as Mainland investors who will now be legally able to trade on the Hong Kong markets.

Related Link IconRELATED: Frankfurt Beats London to Become First RMB Clearing Hub Outside Asia

But overall, he does not expect the new liberalization to have too great an effect on the market: “The hedge funds and individuals who are able to invest large enough amounts to matter already have access to these shares. The major players have long found ways around the limitations, regardless of whether they were allowed to.”

RMB exchange limits lifted for Hong Kong residents

In preparation for the launch of the Connect, the Hong Kong Monetary Authority (HKMA) announced the abolition of all previous restrictions on Hong Kong residents exchanging RMB to and from other currencies, also effective 17 November. Previously, Hong Kongers could only exchange up to RMB  20,000 a day. Had the restrictions not been lifted, Hong Kong investors would have hardly been able to participate in the new trading channel.

Because Hong Kong banks draw their RMB from the offshore pool in Hong Kong – also referred to as CNH – the move will not affect the flow of RMB from China into Hong Kong. This is also why the daily limit of RMB  80,000 on remittances to China shall remain in place. The new move therefore widens the range of options for offshore RMB, but otherwise does not loosen access to the China-side currency.

Related Link IconRELATED: China Agrees to FATCA Compliance

Remaining uncertainty

Overall, a great deal of uncertainty still surrounds the Connect program, despite its pending launch. It is unclear, for example, whether China will charge a capital gains tax (CGT) on the sale of shares, which Hong Kong does levy. Furthermore, under the QFII program, the Chinese authorities have not always collected CGT in the past, which adds to the confusion.

Neither does the Hong Kong-China Double Taxation Agreement touch upon the issue. Levying CGT on Northbound traders would require Hong Kong brokerages to withhold tax on their clients, something they have no experience with – the China Securities Regulatory Commission, for its part, has not given a definitive answer on the question.


About
Us

Terrill L. Frantz is a Professor of Management at Peking University HSBC Business School, in Shenzhen, China. His research is focused on cross-border mergers and acquisitions, particularly post-merger integration dynamics. He can be contacted at terrill@phbs.pku.edu.cn.

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email china@dezshira.com or visit www.dezshira.com.

Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.

 ‍

Related Reading Double Taxation Avoidance in China: A Business Intelligence Primer
In our twenty-two years of experience in facilitating foreign investment into Asia, Dezan Shira & Associates has witnessed first-hand the development of China’s double taxation avoidance mechanism and established an extensive library of resources for helping foreign investors obtain DTA benefits. In this issue of China Briefing Magazine, we are proud to present the distillation of this knowledge in the form of a business intelligence primer to DTAs in China.

Revisiting the Shanghai Free Trade Zone: A Year of Reforms
In this issue of China Briefing, we revisit the Shanghai FTZ and its preferential environment for foreign investment. In the first three articles, we highlight the many changes that have been introduced in the Zone’s first year of operations, including the 2014 Revised Negative List, as well as new measures relating to alternative dispute resolution, cash pooling, and logistics. Lastly, we include a case study of a foreign company successfully utilizing the Shanghai FTZ to access the Outbound Tourism Industry.

Strategies for Repatriating Profits from China
In this issue of China Briefing, we guide you through the different channels for repatriating profits, including via intercompany expenses (i.e., charging service fees and royalties to the Chinese subsidiary) and loans. We also cover the requirements and procedures for repatriating dividends, as well as how to take advantage of lowered tax rates under double tax avoidance treaties.

Republican Congress Could Shape Obama’s Legacy on U.S. Investment in China

Posted on by

Op-Ed Commentary: Andrew Salzman, Dezan Shira & Associates, North American Desk

With the Republican Party reclaiming a majority in the U.S. Senate, it is fair to ponder what this will mean for American businesses with an international presence, such as in China. With their Senate takeover, Republicans now have a majority in both houses of U.S. Congress. This could lead President Obama to place a greater emphasis on foreign policy during his last two years in office.

The U.S.’s well-publicized ‘pivot to Asia’ could receive a new shot in the arm as the President looks to define his legacy achievements.  For example, the passage of the Trans Pacific Partnership (TPP) – a large free trade agreement that covers both sides of the Pacific, but notably excludes China – may receive an added impetus with the GOP in Congress.

Notably, the TPP fits in with traditional Republican goals of reducing tariffs and regulatory barriers. If passed, the pact could help to deepen ties between the U.S. and ASEAN and increase American investment in that region. Continue reading…

APEC Gives Thumbs Up to Future Tariff Reductions Between China & WTO on IT Products

Posted on by

CDE Op-Ed Commentary

Updated information technology agreement will have a broad impact, from video games & computer software to medical equipment & semi-conductors

While the media has concentrated on trite items such as the significance of handshakes, smiles and smirks, much has been accomplished outside the spotlight at this year’s APEC meeting in Beijing. China’s FTAAP study – which many have dismissed as a sop to give Beijing “something to announce” – merely competes with the U.S. engineered TPP agreement. There is also the U.S.-China agreement on carbon emissions, which while also headline making may not last beyond this “agreement stage”, with both countries having a history of not meeting previous obligations. It seems the biggest deal, however, and the only one that will affect consumers worldwide, has been left until last.

Arguably the biggest chunk of tangible business to come out of APEC this year has been an agreement between China and the United States – and potentially extending to the entire global structure of the WTO – to eliminate tariffs on Information Technology (IT) products, from video game consoles and computer software to medical equipment and semiconductors.

This agreement the U.S. has said, will open the door to expanding the current WTO agreement on these products, assuming that other countries will accept the same terms as those tentatively agreed upon with China. And with China in agreement, the U.S. anticipates a fast resolution on the issue.

This makes sense: China is a major producer of the component parts that go into IT products, and global consumers want the cost of processing these to remain low – not just the iphones, video games and hi-tech monitors of today, but also future generations of product development. The implications are that China will develop as an R&D hub for IT, while the global market will be guaranteed access to high-quality technology at prices affordable for the everyman.

The United States trade representative, Michael Froman, stated “We’re going to take what’s been achieved here in Beijing back to Geneva to work with our W.T.O. partners. While we don’t take anything for granted, we’re hopeful that we’ll be able to work quickly”. This, if successful, will take place through an expanded version of the existing Information Technology Agreement.  

Related Link IconRELATED: Electronics Industry Set for Investment as Part of “Make in India” Campaign

On Tuesday, U.S. President Obama credited APEC with the initiative to reduce tariffs, saying, “The United States and China have reached an understanding that we hope will contribute to a rapid conclusion of the broader negotiations in Geneva.” Talks with China over expanding the 1997 accord on IT collapsed last year over the scope of products to be covered by the agreement. However, intensive negotiations prior to President Obama’s visit led to yesterday’s agreement to eliminate more than 200 additional tariffs.

While the United States still exports many high-tech goods, China is the world’s dominant exporter of electronics and has much to gain from an elimination of tariffs. For their part, Taiwan, South Korea and Japan have increasingly found themselves supplying China’s huge electronics industry.

The US Department of Trade has estimated that expanding the Information Technology Agreement could create up to 60,000 jobs in the United States by eliminating tariffs on goods that currently generate US$1 trillion sales per annum. About ten percent, or US$100 billion of those products are American-made.

Related Link IconRELATED: IT Parks in Vietnam: Present and Future

If the same commitments are passed by the WTO, China will continue to act as an investment magnet for international businesses involved in manufacturing IT products, and likely triggering a second investment wave of such companies. While some industry applications may be considered either too sensitive or complicated for China, existing factories elsewhere in Japan, South Korea and Taiwan can also be expected to take up part of this slack, with software development continuing to remain based largely in the United States and Europe.

This agreement therefore is an excellent example of how decisions and consensus reached at a regional level – such as APEC – can potentially gravitate upstream to later affect the entire global supply chain and consumer patterns.   


Chris Devonshire-Ellis
 is the Founding Partner of Dezan Shira & Associates – a specialist foreign direct investment practice providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam, in addition to alliances in Indonesia, Malaysia, Philippines and Thailand, as well as liaison offices in Italy, Germany and the United States. For further information, please email china@dezshira.com or visit www.dezshira.com.

Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.

 

Related Reading

E-Commerce in China
In this issue of China Briefing Magazine, we cover the current laws pertinent to the e-commerce industry in China, as well as introduce the steps involved in setting up an online shop in the country in order to help provide foreign investors with an overview of the e-commerce landscape in China.

 

E-Commerce Across Asia: Trends and Developments 2014
In this issue of Asia Briefing Magazine, we provide a comprehensive overview of e-commerce trends across the Asia-Pacific region with a focus on developing markets in Southeast Asia. In addition to analyzing macro-level economic and development indicators that signal the potential for region-wide growth, we explore several rapidly growing markets in-depth while highlighting opportunities for investment in each. 

Revisiting the Shanghai Free Trade Zone: A Year of Reforms
In this issue of China Briefing, we revisit the Shanghai FTZ and its preferential environment for foreign investment. In the first three articles, we highlight the many changes that have been introduced in the Zone’s first year of operations, including the 2014 Revised Negative List, as well as new measures relating to alternative dispute resolution, cash pooling, and logistics. Lastly, we include a case study of a foreign company successfully utilizing the Shanghai FTZ to access the Outbound Tourism Industry.

Expecting in China: Employee Maternity Leave and Allowances

Posted on by

By Rainy Yao and Steven Elsinga

In 2012, the State Council released and implemented the “Provisions on Female Labor Protection under Special Circumstances (State Council Decree No. 619),” which extended maternity leave for female employees in China to 14 weeks (98 days) from the previous 90 days-just meeting the minimum maternity leave stipulated by the International Labor Organization (ILO).

However, maternity leave in China can vary widely by location, especially in terms of ‘late maternity leave’ as determined by the local government. Also, it can be quite complex for an employer to calculate how much maternity leave and allowance that female employees are entitled to. In this article, we explain maternity and paternity leave in China and detail the payment of maternity allowances.  

Continue reading…

Beijing-Promoted FTAAP Will Delay TPP, Driving US Companies to ASEAN for FTA Benefits

Posted on by

CDE Op-Ed Commentary

The main outcome of the Asia-Pacific Economic Cooperation (APEC) annual meeting in Beijing has been an agreement to  launch a “strategic study” of a trade pact known as the Free Trade Area of the Asia-Pacific (FTAAP). Scheduled to take two years to complete, APEC officials have been keen to stress that the study is not an opening of negotiations. Notably, it is backed by China.

Through APEC’s agreeing to the study however, the alternatives – the long-promoted Trans-Pacific Partnership (TPP) and Regional Comprehensive Economic Partnership (RCEP) agreements – will, in my opinion, probably fall by the wayside. The TPP is led by Washington and excludes China, while the RCEP is promoted by China and excludes the United States. Negotiations for each will continue – officials from the countries concerned will want to keep up political and trade pressure on any future FTAAP agreement through using the TPP and RCEP negotiations to push their own agendas.

Continue reading…

China Regulatory Brief: Revised Foreign Investment Catalogue, SH-HK Connect

Posted on by

China-Regulatory-Brief

Revised Foreign Investment Catalogue Released for Public Commentary

On November 4, China’s National Development and Reform Commission (NDRC) released an ‘opinion-seeking draft’ of the “Catalogue for the Guidance of Foreign Investment Industries,” which substantially reduced restrictions on foreign investment in areas including general manufacturing and the finance industry. Overall, more than 40 previously restricted items have been removed from the Catalogue. Wholly foreign-owned enterprises (WFOEs) will be newly approved in industries such as oil exploitation, mining and component manufacturing for vessels. Further, foreign investors will benefit from relaxed restrictions on the percentage of shareholder equity that must be controlled by the Chinese partners to joint ventures across a number of industries.

Shanghai-Hong Kong Stock Connect to be Launched on November 17

On November 10, Hong Kong’s Securities and Futures Commission (SFC) and the China Securities Regulatory Commission (CSRC) jointly announced that the Shanghai-Hong Kong Stock Connect will be officially launched on November 17, provided that all relevant regulations and supporting policies are approved by both sides. Launched by the CSRC and the SFC in April this year, the RMB 550 billion initiative will permit Hong Kong investors to invest in select stocks (A shares) listed on the Shanghai Stock Exchange. Meanwhile, eligible mainland investors meeting the minimum asset requirements will also be able to invest in Hong Kong stocks. Continue reading…

Asia Briefing Bookstore Catalogue 2013
Scroll to top