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China Regulatory Brief: Draft Foreign Investment Law, Tourist VAT Rebates

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China-Regulatory-BriefChina Releases Draft Foreign Investment Law

On January 19, the Chinese Ministry of Commerce (MOFCOM) released the draft of the proposed new Foreign Investment Law to solicit public comments by February 17, 2015. According to the draft, the State Council will publish a negative list of industries in which foreign investment is restricted or prohibited. It is stipulated that most foreign investment, including setting up a new company, will no longer need pre-approval from the State Council unless a foreign party intends to invest in one of the restricted industries on the negative list. In addition, the proposed new law will repeal the Sino-foreign Equity Joint Venture Law, the Wholly Foreign-owned Enterprise Law and the Sino-foreign Contractual Joint Venture Law

Related Link IconRELATED: China Releases Draft Foreign Investment Law

China Expands Tourist VAT Rebate Scheme Nationwide

On January 6, the Ministry of Finance (MOF) released the “Announcement on Implementing Tourist VAT Rebate on Departure Policy to Foreign Tourists (MOF Announcement [2015] No.3),” which took immediate effect. According to the Announcement, foreign tourists (defined foreigners who stay in China for less than 183 days) purchasing goods in certain areas are able to apply for value-added tax (VAT) refunds at the rate of 11 percent. The threshold for VAT refunds is set at RMB 500. In 2011, China launched this policy as a pilot scheme in Hainan. The country is currently looking to expand the tax rebates policy nationwide to boost its domestic tourism industry.  

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Further Signs of Liberalization for E-commerce in the Shanghai Free Trade Zone

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By Rainy Yao and Steven Elsinga E-commerce-legal-and-regulatory_300x230pix

SHANGHAI – Foreign investors looking to enter China’s lucrative e-commerce market are now allowed to set up wholly foreign-owned e-commerce companies on a pilot basis in the Shanghai Free Trade Zone (FTZ), according to an announcement released by the Ministry of Industry and Information Technology (MIIT) on January 13.

According to the announcement, foreign investors engaging in online data processing and transaction processing (for-profit e-commerce) businesses may control 100 percent of the shares, meaning that they are now allowed to set up a wholly foreign-owned enterprise to conduct such activities. Previously, foreign shareholding in online data and transaction processing businesses was limited to 55 percent in the Shanghai FTZ and 50 percent in other parts of China. Continue reading…

China’s Trade With Eastern Europe and the Caucausus

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CDE Op-Ed Commentary

As China and Russia begin to move closer together in terms of mutual trade  and economic support, a related issue is the development of trade between China and Russia’s neighbors along its western border. While some, such as Georgia and the Ukraine have developed relations with the European Union, others are members of the Commonwealth of Independent States, and some of these are part of the new Eurasian Economic Union.

Sitting within Russia’s sphere of influence and at the edge of Europe, these countries constitute a trade border with both. How has China been approaching trade with these hinterland nations, with faces both East and West?

Russia’s new economic problems introduce a sudden new dynamic to China’s relations with these countries. As problems continue in Ukraine, Russia faces sanctions from the E.U. and is beginning to turn its face towards the East. This includes further development emphasis upon its own trade blocs, as well as an interest in how China views the region, and considering developing infrastructure in an increasingly mutual China-Russia development axis. This means that Chinese influence in Russia’s neighboring states will start to have an impact upon future Russian trade, as well as how the region develops up against the borders of the expanding European Union. Continue reading…

China Releases Draft Foreign Investment Law, Signaling Major Overhaul for Foreign Investment

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By Dezan Shira & Associates 
Legal Editor: Steven Elsinga

The Chinese Ministry of Commerce released the draft of the proposed new Foreign Investment Law to solicit public opinions. The proposed law will significantly reduce barriers to foreign investment, whilst at the same time increase scrutiny of foreigners trying to evade the regulations on investing in restricted industries. The new law introduces five major changes.

1. Foreign-invested company laws repealed

When the law comes into effect, it will repeal the Sino-foreign Equity Joint Venture Law, the Wholly Foreign-owned Enterprise Law and the Sino-foreign Contractual Joint Venture Law. Foreign-invested companies will largely be subject to the same legal treatment as domestic companies. WFOEs, foreign-invested equity JVs and contractual JVs will no longer have separate legal regimes. Continue reading…

Zhuhai: An Emerging Force in South China

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Panorama of Guangzhou in daytime, Zhujiang New Town.By Rainy Yao

Located in the center of the Pearl River Delta (PRD), Zhuhai is one of China’s four original Special Economic Zones (SEZs) established in 1980. The city borders Macau to the south and is about one hour away from Guangzhou and Shenzhen by car. In the past three decades, Zhuhai has experienced strong economic growth due to its geographical proximity to Hong Kong and Macau, and is the only deep-water port on the western side of the Pearl River. In this article, we take a closer look at this emerging force in South China. Continue reading…

China Regulatory Brief: Shanghai FTZ Allows Foreign E-commerce Companies, Consumption Tax Raised on Fuel Oil

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China-Regulatory-BriefWholly Foreign-owned E-commerce Companies Allowed in the Shanghai Free Trade Zone

On January 13, China’s Ministry of Industry and Information Technology released an announcement allowing foreign investors to set up wholly foreign-owned e-commerce companies to conduct online data processing and transaction processing (for-profit e-commerce) businesses in the Shanghai FTZ. Previously, the shares a foreign party was permitted to own in such businesses was limited to 55 percent in the FTZ and 50 percent in other parts of China. Meanwhile, foreign investors may now provide call center, domestic multi-party communication, internet access and domestic VPN services as cooperative joint ventures with a Chinese partner, also within the Shanghai FTZ.

China Grants Tax Exemptions for Elderly Care, Traditional Medicine and Protecting Historical Relics

China’s Ministry of Finance and State Administration of Taxation recently released the “Circular on Business Tax Policies to Support the Export of Cultural Services and Other Services (Cai Shui [2015] No.118),” which took effect on January 1, 2015. The circular exempts companies and individuals from business tax if they restore or protect cultural and historical relics, provide traditional health care (included in the national directory of intangible cultural heritage) or elderly care in China.

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New Draft of Charity Law Submitted to China’s National Legislature

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By Chris Devonshire-Ellis

China has been drafting a new version of its Charity Law that will significantly impact upon the manner in which foreign charities and NGOs operate in the country. The new law, the drafting of which has been in the pipeline for several years now, is understood to now be in bill format and was introduced to the NPC last month. This new draft makes significant improvements and clarifications on previous attempts, reflecting a more pragmatic approach to the status of charitable organizations by the Chinese State.

The draft includes recommendations from the Chinese Ministry of Public Security, Ministry of Civil Affairs, and crucially, guidance from the State Administration of Taxation for charity certification and determination of tax status for charities. Previously, applications from charities for legal status in China were extremely difficult to obtain due to conflicts within the registration system, notably with systematic problems taxing not-for-profit entities.

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China’s Proposed New Silk Road Free Trade Area

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By Chris Devonshire-Ellis

Chinese President Xi Jinping has been busy in Central Asia, touring the region last year and including visits to Turkmenistan, Kazakhstan, Uzbekistan and Kyrgyzstan. He also proposed, in cooperation with leaders of the Shanghai Cooperation Organisation (SCO), the establishment of a new Silk Road that would encompass free trade throughout Central Asia.

The SCO is an official grouping that includes China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and Uzbekistan, with Afghanistan, India, Iran, Mongolia and Pakistan as observer states; Belarus, Sri Lanka and Turkey as dialogue partners; and ASEAN, the Commonwealth of Independent States (CIS) and Turkmenistan as guests.

Xi is looking for both new markets and to leverage some economic clout over the region’s vast oil and gas reserves, as well as hoping to minimize the potential for conflict that could spill over into China’s Xinjiang Autonomous Region by raising local incomes and wealth throughout the region. He has stated that the proposed region contains “close to 3 billion people and represents the biggest market in the world with unparalleled potential.” Continue reading…

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