China Market Watch: Business Jet Sector and IIT System Reform

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China Television Manufacture Demand Slump

A majority of China’s television manufacturers have released last year’s performance reports, which show a drop in sales. Internet electronics companies such as LeEco and Xiaomi have contributed to the decline in market demand for televisions produced by specialist manufacturers. Electronics manufacturer Konka’s 2015 financial report shows a 14.33 percent fall in its television sector, while TCL Corp, another home appliance manufacturer, did not achieve its 18 percent revenue growth goal last year. Analysts say that the industry might suffer consolidation sooner than expected.

China’s television equipment manufacturing industry generated over US$100 billion in 2015, up 9.3 percent on the previous year, compared to an annual 13.7 percent growth rate over the last five years.  The industry relies heavily on exports, and due to the changing export product structure and global recession, the industry has suffered volatile export growth.

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Emerging Trends for Venture Capital Activities in China’s Privatized Education

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k-12 schoolsBy Emerging Strategy

China has slowly started to encourage private investment in its education systems and services. Despite the presence of some larger scale, established educational service providers, on the whole (and especially in emerging sectoral hotspots such as Learning Management Systems) the industry remains somewhat fractured, with numerous competing start-ups and young enterprises battling for market share.

In such a business environment offering enormous upside financial benefits for first movers, 2015 saw a marked increase in venture capital (VC) investments in education service providers and ed-tech companies. While a pickup in capital flows to the industry is a trend that has been noticeable for the past several years, 2015 saw significant investment in Chinese K-12 education and ed-tech related services as watershed trends. The influx of VC funds into these areas, especially in emerging ed-tech niches such as gamification and mobile learning, represent significant opportunities that should be noted for the future.

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China Removes Parcel Tax for Cross Border e-Commerce Retail Imports

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By Dezan Shira & Associates
Editor: Jake Liddle

The China General Administration of Customs (CGAC) has recently decided to make adjustments to the classification table and tax tariff list of imported goods issued in 2012. Taking effect from April 8, 2016, the policy will cancel parcel tax for cross border e-commerce and has been implemented with an aim to level competition between online platforms and traditional brick and mortar import stores.

An adjusted parcel tax scheme now only applies to goods brought back into the country for personal-use by Chinese residents with a value exceeding RMB 5,000, and for non-residents’ personal-use goods with value exceeding RMB 2,000. Goods amounting to less than these amounts are tax exempt. The tax brackets have been reduced from four levels (10 percent, 20 percent, 30 percent, and 50 percent) to three. Below is a table detailing the new scheme:

parcel tax new

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China Outbound – 2016 Manufacturing Alternatives in ASEAN

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Our Latest Round-Up of Business News Affecting China-Based Businesses Investing in Asia

In this edition of China Outbound, we examine the opportunities in each of the ASEAN nations for developing part, or all of, a manufacturing and operational strategy outside of China. As increasing numbers of foreign investors find production in China becoming expensive with reduced margins and falling profits, and China’s own current foreign investment targets increasingly focusing on services rather than production, we look at ASEAN’s manufacturing options in country by country detail.

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The Changing Landscape of China’s Manufacturing Sector

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manufacturing sector in ChinaBy Alexander Chipman Koty

The relentless momentum of investors turning their sights towards China has softened of late, as slowing growth and stock market volatility have caused alarm among observers. In 2015, FDI into China’s manufacturing sector came in at US$39.54 billion, a slight drop from 2014 (US$39.94 billion) and accounting for 31.4 percent of the total. While some of these fears are grounded in reality, others are overblown. This is particularly true in relation to the manufacturing sector – China’s principal driver of growth during its boom years – which made the country known as “the factory of the world”.

After decades of rapid growth and development, China’s manufacturing sector is inevitably changing. Shifts in demographics, hiring practices, technology, and markets are increasingly giving Chinese manufacturing a different look than during its years of unabated growth. These transformations are not unconditionally negative for the country’s competitiveness, however. China’s evolving manufacturing sector will invariably change the way investors operate their factories and presents new opportunities for growth in the country’s increasingly multifaceted economy.

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China’s Largest Foreign Law & Tax Practices by Geographic Scope

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Op/ed by Chris Devonshire-Ellis & Nicolas Hentrich

There are many ways to measure the size of professional services suppliers in China: numbers of partners, staff, clients, and turnover. Another important way to choose a practice truly committed to China is to look at firms with multiple offices – these are the practices that really understand the country and have seriously invested in it. This is becoming increasingly important as China becomes internally more competitive.  Foreign investors now need practices familiar with the cities and provinces beyond the main core of Beijing, Shanghai, and Guangdong Province.

Another area in which professional services in China have developed slightly differently from, say, the United States, is that China, to some extent, allows the existence of ‘hybrid’ firms which can offer both legal and tax services. In fact, tax planning for foreign investment into China is one of the key areas of expertise in demand – a service not provided or understood by many pure law firms.

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China Regulatory Brief: Work Injury Insurance and Steel Dumping Duties

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China Social Security Bureau Clarifies Issues Concerning Work Injury Insurance

The Ministry of Human Resources & Social Security (MOHRSS) recently issued the “Opinions on Several Issues Concerning the Implementation of the Regulations on Work Injury Insurance.” It clarifies that employers should enroll employees in work injury insurance even if their place of registration and place of operation are not under the same overall arrangement. Employees that are not enrolled in a work injury insurance scheme in the place of registration can be enrolled by the employer to a work injury scheme at the place of operation. In addition to this, the Opinion also explains that in cases where construction enterprises enroll in insurance schemes on a project basis, work injury insurance must be enrolled at the project location.

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Hard Knock Life: China’s Life Services Industry Undergoes VAT Reform

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VATBy Dezan Shira & Associates
Editor: Jake Liddle and Rainy Yao

On March 7, China’s Minister of Finance Lou Jiwei announced that the country’s value-added tax (VAT) reform, which will fully replace business tax (BT), is to be implemented nationally across all industries on May 1, 2016. Following his announcement, the Tax Bureau and the Ministry of Finance jointly released the Caishui [2016] No 36 to state that the VAT reform will be expanded to include three crucial sectors: real estate/construction, finance, and life services. The reform is poised to fundamentally alter the accounting systems of small and medium sized enterprises operating in China, and is expected to reduce the tax burden on companies by eliminating the duplicate taxation brought on by the current coexistence of the BT and VAT systems.

Life services, which have always been considered too broad and opaque in scope and definition, are one of many industries that will be heavily affected by the reform. Life services are finally covered by VAT and will receive substantial tax benefits during the transition period. The notice explicitly clarifies that the life services industry covers various services that satisfy day-to-day living needs of urban and rural residents.

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