Author Archives: China Briefing

An Overview of China’s Retail Industry

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By Eunice Ku, Dezan Shira & Associates

The following is an excerpt from the April 2014 edition of China Briefing Magazine, titled “China Retail Industry Report 2014.”

Changing Consumer Market

Moving towards a consumption – and service – focused economic model

Underpinned by the steady rise of household income, China’s retail market has become one of the most lucrative and rapidly growing in the world. China is currently the world’s second largest retail market, and Asia’s largest. It is expected to surpass the U.S. to become the world’s largest retail market by 2016. After years of accelerated growth and annual expansion rates of 10 percent or more, China’s growth in 2013 slowed down to 7.7 percent – level with the figure for 2012. This slowdown in growth is consistent with China’s effort to carry out a major overhaul aimed at weaning its economy off its decades-long reliance on heavy industry, export-oriented manufacturing, state-driven investment, as well as investment in infrastructure. Meanwhile, to rebalance the nation’s economy, policymakers are attempting to shift towards a more consumption- and service-driven model, hoping to foster and sustain more productive growth over the next decade and beyond. Continue reading…

China Announces Preferential Policies for Three Development Zones

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GUANGZHOU – On March 27, the Ministry of Finance and State Administration of Taxation jointly released a “Circular on Preferential Corporate Income Tax (CIT) Policies and Preferential Catalog for Hengqin New Area, Pingtan Comprehensive Pilot Zone (PCPZ) in Fujian Province and Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone (Caishui [2014] No.26 hereinafter referred to as the ‘Circular’)”. The Circular is effective from January 1, 2014 to December 31, 2020.

Based on the Circular, eligible enterprises in Hengqin, Pingtan and Qianhai will be taxed at a reduced 15 percent CIT rate. Continue reading…

Key Aspects of Business Establishment for FIEs in China

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In this China Briefing exclusive interview, Jenny Liao of Dezan Shira & Associates discusses the key aspects of business establishment in China for foreign invested enterprises, including capital requirements, the importance of internal controls and dividend repatriation strategies.

What are the key considerations for company establishment in China?

A key factor for companies just getting established in China is the ability to accurately evaluate their capital requirements. As a rule of thumb, the capital for a wholly foreign-owned enterprise (WFOE) should cover its pre-operation expenses for one year, until the WFOE is able to generate sufficient profit to run its own operations.

If a foreign-invested enterprise (FIE) injects an insufficient amount of capital to cover its initial operations, the company may encounter problems retrieving additional capital, on account of China’s stringent foreign exchange regulations on capital transfers. For FIEs to inject money beyond the capital amount, it is necessary to communicate with various governmental departments and undergo tedious procedures, such as obtaining a capital verification report. Needless to say, delays in obtaining additional capital would negatively impact company operations. Continue reading…

China Regulatory Brief: Business License Reform & Shanghai FTZ Customs Clearance

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China Implements New Version of the Business License

The State Administration of Industry and Commerce (SAIC) implemented a new version of the business license on March 1 in accordance with the new capital subscription system, furthering its goal to enhance the transparency of enterprise information and public supervision. The new business license includes a QR code, enabling the public to view all relevant details pertaining to the enterprise with one scan using a mobile device, including its registration number and business scope. All new versions of the business license will have a unified vertical format – the license will be A4 sized while its copy will be A3 in size. The old business licenses will remain effective, but enterprises are required to convert to the new version before February 28, 2015. If a company applies to make any changes to its business license before this date, a new business license will be issued.

Continue reading…

China Announces Preferential Income Tax Policies for Small Businesses

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BEIJING – On April 8, the Ministry of Finance (MOF) and the State Administration of Taxation (SAT) issued an “Announcement on Preferential Income Tax Policies for Small and Low-Profit Enterprises” (CaiShui [2014] No.34, hereinafter referred to as the “Announcement”).

Based on the Announcement, small and low-profit enterprises with a taxable income not exceeding RMB100,000 (US$16,130) should pay corporate income tax at the rate of 20 percent on only 50 percent of their taxable income. The preferential policy is effective from January 1, 2014 to December 31, 2016. Continue reading…

China’s Rare Earth Exchange Begins Trading Following WTO Ruling

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SHANGHAI – China’s first rare earth exchange, Baotou Rare Earth Products Exchange, announced in a statement last month the commencement of trading in three rare earth metals – europium oxide, praseodymium-neodymium oxide and cerium oxide.

Following an adverse ruling by the World Trade Organization (WTO) regarding China’s export regulations on rare earth metals, China’s Baotou Exchange is expected to regulate the country’s rare earth market while improving price formation and promoting industry development. Continue reading…

Anatomy of a Corporate Hijacking: How Your Chinese Company Can Be Hijacked and How to Prevent It

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By Chet Scheltema, Director, Dezan Shira & Associates

BEIJING – The American executive was bewildered and somewhat panicked. Calling late in the evening from the U.S. Midwest, he was trying to understand where his Chinese company’s corporate financials were being held and why he couldn’t access them. Local management had become uncooperative and refused to answer questions or provide information. The executive wondered why he couldn’t immediately terminate and replace the local managers and retake control of his company. Continue reading…

Leveraging India to Sell More China Manufactured Products

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Op-Ed Commentary: Chris Devonshire-Ellis

The dynamics between China and India have long been one of Asia’s more fascinating relationships. Both are vast countries with similar population sizes. Both are ancient cultures, and have long had significant impact upon the development and shape of the modern world over their centuries of existence. Yet they can also appear mysterious, impenetrably exotic and inscrutable for the foreign investor. Much also has been written about the rise of China and India, and their very different paths over the last twenty years. China is often projected as superior, dynamic and modern, and India as dirty, poor and archaic.

Yet in fact, India has been following China’s development progress at a steady clip for much of the past 15 years. Growth rates have reached 8 and 9 percent and, although “languishing” at the 5-6 percent mark for the past two years, the fact remains that India has not been at all slovenly in its development. Much needed infrastructure has been and continues to be put in place. The Delhi and Mumbai international airports are first rate, the Delhi Metro system is arguably better than Beijing’s, and ring roads and express highways continue to spring up in all major cities, and crucially, between them. Continue reading…