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What the China GDP Figure Isn’t Telling You

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China’s economic growth slowed to 7.4 percent last year, causing the country to miss its full-year economic target for the first time since 1998. However, China also became the world’s top destination for foreign direct investment (FDI) in 2014, surpassing the United States. China maintained an average growth rate of more than 10 percent until 2010; its GDP growth rate reached a peak in 2007 at 14.2 percent. By comparison, the last time the U.S. economy (the only one bigger than China’s) grew by more than 10 percent was in 1950.

China’s lower growth has recently become a top concern for foreign investors. However, the national growth figure in a way distorts the true picture of the Middle Kingdom’s economic conditions. China is a vast and diverse country, with the economy in transition to wean off its decade-long reliance on heavy industry.

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China’s Fapiao System: Fapiao and Value-Added Tax

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201504-illustrationBy Steven Elsinga and Jim Qiao

This article is additional unpublished content from our latest issue of China Briefing Magazine, titled “Managing Your Accounting and Bookkeeping in China.” The second part of this series goes into printing fapiao.

For those new to China, the fapiao system can be an especially confusing part of domestic bookkeeping. In China, all business transactions are required by law to be recorded on an official receipt (or ‘fapiao’ in Chinese).

Fapiao differ from regular receipts in that they are printed on special paper that must be purchased from the tax authorities. If a transaction is not printed on an official fapiao, the authorities will not recognize it, and the enterprise will be unable to use the expense for tax deductions or refunds. This also means that employees must submit official fapiao to declare expenses for reimbursement from their employer. Continue reading…

China Regulatory Brief: Loosened FDI Regulations, Private Economy Demonstration Zone in Wenzhou

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SAFE Releases New Rules for Foreign Exchange Capital Funds Settlement

On April 8, the State Administration of Foreign Exchange (SAFE) released new regulations for settlement of foreign exchange capital funds. Under the new rules, foreign-invested enterprises (FIEs) registered in China will be allowed to make foreign exchange capital account settlement at their own discretion, starting June 1. This means that FIEs in China will be allowed to buy and sell RMB  from designated banks in unlimited amounts. SAFE also allows enterprises to freely choose the timing for foreign exchange settlement. The same rules were first implemented in the Shanghai Free Trade Zone (FTZ) in 2013 and further expanded to 16 Chinese main financial reform cities last year. The rules are expected to enable FIEs to better manage and avoid foreign exchange risks.

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China Costs Compared With Cambodia, Laos and Indonesia

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CDE Op-Ed Commentary

Asean-map_550x400pixOur sister website, ASEAN Briefing is running a ten-part, detailed series of articles about the costs of business in ASEAN and comparing these with China. First up are two of the smaller members of ASEAN, the China friendly, yet little explored nations of Cambodia and Laos, as well as the economic giant of Indonesia. 

The articles examine bilateral trade volumes, as well as other major trading partners and the most commonly traded products. In addition wage comparisons, infrastructure and other demographic data and intelligence concerning bilateral trade and opportunities are also discussed. These articles can be as follows for Cambodia here, Laos here and Indonesia here, and are of use to anyone interested in exploring alternative production facilities to China. The series continues during this week with Malaysia, Myanmar and the Philippines to follow. Continue reading…

When not Paying Wages Constitutes a Crime in China

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2014 10 CB mag illustrationMost foreign investors may not be aware of it, but as of 2011, employers in China may face prison sentences for not paying their staff. While some conditions need to be met before an employer is held criminally liable, understanding this law is important to keep in mind in case a company runs into financial troubles, or leaves China without paying its employees.

Definition of the Crime

When a company evades paying a “relatively large amount” of labor remunerations, either by transferring property or concealment, or by refusing to pay while being able to, the government will order it to rectify the situation. If the company fails to pay after being so ordered, the entity will be fined and the person(s) in charge of the company and those directly responsible for the crime will be fined and imprisoned for three years. This can be extended to seven years for serious cases.

Below, we discuss how the different elements of the penal clause are interpreted. Continue reading…

Outlook on Light Manufacturing in China: April 2015

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The below is a sample of Cascade Asia Advisor’s monthly report on light manufacturing across emerging Asia, available for purchase through the Asia Briefing bookstore. The report is a 4-5 page executive-ready assessment and outlook designed to help companies anticipate labor risks and dynamics across key manufacturing countries in Asia. Countries of coverage include Cambodia, China, Indonesia and Vietnam.


Asia_Light_Manufacturing_Outlook_Cascade_AsiaRoughly 90% of migrant workers have returned to their work posts since the Chinese New Year, leaving some 20% of manufacturing enterprises in coastal provinces clamoring to recruit for vacant positions. Smaller suppliers are among the worst affected due to a serious mismatch between jobs offered and expectations of young job seekers, particularly as they give increasing consideration to workplace environment and personal development. Meanwhile, workers’ disputes over wages, benefits and social security will gradually return to the pre-holiday cadence.

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Setting Up a Dental Clinic in China

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120717-N-GI544-083By Zhou Qian

In this article, we discuss the legal requirements for setting up a dental clinic in China. Earlier, we wrote about the opportunities for foreign companies in the dental health industry.

WFOE or Joint Venture

In accordance with “Regulations for the Administration of Medical Institutions,” dental clinics belong to the category of “medical institutions”. As such, dental clinics may not be wholly foreign-owned, but need to take the form of either an equity joint venture or cooperative joint venture with a Chinese partner. Continue reading…

China’s AIIB – The Facts To Know

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By Steven Elsinga

March 31 2015 was the deadline for countries to join the Asia Infrastructure Investment Bank. This cut-off date was met with a rush of last minute applications from countries around the world.

The Asian Infrastructure Investment Bank (AIIB) was first proposed when Xi Jinping and Li Keqiang visited Southeast Asian countries in October 2013. The AIIB will finance infrastructure projects throughout Asia, such as roads, railways and ports. Continue reading…

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