Author Archives: China Briefing

The Strategic Reasons Behind Recent China MNC Closures

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A number of high-profile foreign investors have announced office and factory closures in China, while at the same time “unfriendly” barriers to certain Western hi-tech industries, and most notably software and IT have been announced. While the media often portrays this as symptomatic of problems in China, due to a “slowing economy” and “unfriendly business practices”, my view is that these are normal occurrences in the typical life of a multinational company. I do not believe, with one or two obvious exceptions, that they represent a trend of a “bad China” or a country where foreign investors are generally and increasingly having a tough time, one or two specific sectors excluded.

In actual fact, China realized the second highest volume of Foreign Direct Investment in the world last year, according to the World Investment Report 2014, produced by the Geneva-based UN Conference on Trade and Development (UNCTAD), which stated that FDI was a rising trend that would continue. So the bigger picture doesn’t support China as being FDI unfriendly. This means that the reasons for high-profile China retractions and closures must instead be related to very specific cases or strategic decisions due to changing commercial circumstances. Let us review this by taking a look at some of these cases: Continue reading…

Update: Latest Guidance Catalogue for Foreign Investment Industries Released

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China

By Rainy Yao

SHANGHAI—On March 10, the much anticipated “Catalogue for the Guidance of Foreign Investment Industries (2015)” was jointly released by the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM). The Catalogue will enter into force on April 10, 2015.

The Guidance Catalogue is comprised of encouraged, restricted and prohibited lists. Foreign companies that are engaged in the encouraged industries may enjoy preferential policies such as tariff exemptions for imported equipment, or tax incentives. For industries that are listed as restricted, investors often need to get pre-approval from the government. Some of these sectors may also have a limit on the number of shares of a foreign entity may own. For industries not included in the catalogue, foreign investors only need to complete filing procedures with the local government.

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China & Asian Human Resources – Sharing Talent Across Borders

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CDE Op-Ed Commentary

The human resource map in Asia is changing. An aging China is consequently facing a decrease in its numbers of available workers, while countries such as India are increasing theirs – a result both of China’s One Child policy now affecting the labor pool and of India’s absence of any strategic family planning. Yet these two massively populous countries are not the only sources of labor in Asia.

As foreign investors begin to look more closely at emerging Asia as a China manufacturing alternative – yet keeping their China HR experience in hand, we can examine where future labor pools are likely to come from and examine how workforce experience and talent can be shared across Asia’s own emerging markets.  Continue reading…

Manufacturing in Asia to Sell to China’s New Growth: Legal Structures

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CDE Op-Ed Commentary

As wages increase in China, the demands of keeping a China manufacturing facility profitable are growing. Yet that is one side of the coin. China is also developing as a massive consumer market, and one that promises far more in terms of RMB product sales and profits than mere manufacturing facility profits could ever previously provide. A new, dynamic age for non-RMB averse foreign investors in China is arriving. Yet at the same time, foreign investors who have been based in China face challenges – the business environment is changing. This is not a bad thing; it is a consequence of various demographic trends moving the national economy in a particular direction. Continue reading…

China and Asia’s Free Trade Corridors and Beneficial Tax Agreements

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CDE Op-Ed Commentary

Both China and most other Asian nations have been highly assertive in their use of Double Tax and Free Trade agreements over the past five years, as the reality of rising prices in China coupled with an emerging consumer class dictate that intra-Asian trade flows are growing as an astounding rate. While China’s President Xi Jinping indicates that China’s GDP this year may drop to 7 percent, the alternative story is the growth in China’s trade corridors. In this snapshot below we can see the growth trajectory between China trade and ASEAN as a whole, break that down into the ASEAN five main manufacturing nations, and with India. All figures are 2014 estimates.  

China Trade Corridors

Of these, the three to watch are ASEAN overall, where bilateral trade is expected to reach US$1 trillion by 2020, India, where bilateral trade is expected to rocket to US$ 250 billion in the same period, and Vietnam, whose AEC compliance at the end of this year can be expected to see trade rise to some US$ 150 billion during this time frame. In fact, all the ASEAN economies, and those beyond, are expected to see bilateral trade increase by amounts faster than China’s own domestic GDP during the next five years.  Continue reading…

China Regulatory Brief: 2015 Guidance Catalogue for Foreign Investment Industries Released

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China-Regulatory-Brief
Updated Guidance Catalogue for Foreign Investment Industries (2015) Released

On March 10, the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM) jointly released the “ Catalogue for the Guidance of Foreign Investment Industries (2015),” which will take effect on April 10. The Catalogue lifts restrictions on foreign investments in various industries, including logistics, e-commerce and finance. The Catalogue also encourages foreign investment into modern agriculture, high technology and environmental protection. Specifically, the limit of shares of a foreign entity may own in a telecommunications company providing value-added telecommunication services has been raised to 50 percent (exclude e-commerce services). Foreign investors may own 49 percent of shares in securities investment funds management companies.

The Catalogue follows a draft version released in November 2014.

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Outlook on Light Manufacturing in China: March 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.

China

Asia_Light_Manufacturing_Outlook_Cascade_AsiaEarly March will see the largest wave of workers returning from Chinese New Year (CNY) celebrations, however, most factories in coastal areas will struggle to sustain their workforce. A recent survey shows the majority of factories would be willing to increase wages by 5% to 10% to retain their workers and to recruit new ones to replace those not returning. Some may also face higher labor costs with the distribution of promised annual bonuses and the reimbursements of workers’ return transportation costs.

Factories will pay less for their employees’ unemployment insurance under the central government’s recent decision to reduce the combined contribution of employers and employees from 3% of an employee’s monthly wage to 2%. The actual percentage from each party will be determined at the provincial level. Continue reading…

Investing in China’s Entertainment Industry

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By Dezan Shira & Associates
Editors: Zhou Qian and Matthew Zito

One problem in discussing the entertainment industry in China is the misalignment between what is typically referred to as “show business” in the West versus the administrative definition of the “entertainment industry” (娱乐业) in China. The former typically encompasses a wide range of creative performances and media products including animation, dance, film, music, radio, television, theater; whereas in China, these sub-sectors are split between at least two major industry classifications administered by the National Bureau of Statistics (NBS). According to the NBS’s Industrial Classification for National Economic Activities (GB/T 4754-2011), the “entertainment industry” is divided as appearing in the top-left. Continue reading…

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