By Jennifer Wu

July 14 - Much to the alarm of the United States government and investors everywhere, shares of Fannie Mae and Freddie Mac, the government-chartered mortgage financiers, plummeted last week. Fear bred in the midst of suspicion that the two largest home-loan lenders in America did not have enough capital to survive the housing crisis.

Having lost more than US$11 billion or around 50 percent of their value, the public-owned institutions have raised approximately US$20 billion of capital since the crisis started. Today, they guarantee about US$5 trillion of home-mortgage debt or half of the United States’ total.

As Washington now scrambles to bail out Fannie and Freddie, investors worldwide cannot help but nervously watch the fragile American economy attempt to avoid collapsing. The U.S. Treasury and Federal Reserve announced a plan yesterday to shore up the firms, suggesting money lending and equity purchase in the two companies if need be. (more…)

July 14 - You’ve arrived late in a Chinese city, but you left your passport in your office. You need a bed for the night. What can you do?

At present, in many Chinese cities, such a scenario—being out and about, without a passport—will prevent you from staying in a hotel. As we reported last month, China has been clamping down on the law and insisting that all foreigners register “within 24 hours” with the local Public Security Bureau and provide their passport details. This obviously contains proof of who someone is as well as their visa status.

Inevitably, however, a handful of unlucky souls slip through the cracks, especially those traveling by train, coach or car. Maybe the passport was required for other China business registration purposes, or maybe it was just left it in a drawer by mistake. Either way – without a valid passport to help facilitate hotel check in, that person will be turned away, out on the street. So when without a passport, what choices does one have? (more…)

July 11- This year’s Global Fortune 500 list included 35 Chinese firms: 26 from the mainland, three from Hong Kong and six from Taiwan.

It is the best showing of Chinese companies in the list thus far.

The country’s largest refiner Sinopec, led the Chinese group at 16th place, followed by State Grid, ranking at 24th place, China National Petroleum at 25th and Hon Hai Precision Industry at 132nd place and ICBC at 133rd.

The list also included 19 State-owned Chinese companies under the central government that dealt in the energy, financial and telecommunications industries.

(more…)

July 10 - China’s textile and garment exports have significantly plunged, resulting in a 3.7 percentage decline in the growth rate from September to May. China Customs attributes the slowdown to the rapidly appreciating RMB, increasing production prices, in addition to an export rebate rate cut and the slowing global economy.

Xinhua reported that textile and garment exports—worth US$66.2 billion at the beginning of 2007—saw a growth rate drop of 0.2 percent last year. Under strain, Chinese exporters have moved large portions of their mainland production to the central and western regions where labor costs are relatively lower.

During the first five months of 2008, central provinces like Henan, Hunan, and Sichuan, saw a 30 percent increase in their textile and garment output as they began to appeal to domestic textile enterprises more. (more…)

July 9 – According to a study released by the Carnegie Endowment for International Peace, China’s economy will become twice its size and surpass the United States as the world’s biggest by 2035.

The study called, China’s Economic Rise—Fact and Fiction, by Albert Keidel says the country’s engine of growth is fueled by domestic sales rather than exports.

Data on the sources of China’s economy show that it is affected by shifts in local investment and consumption rather than trade surplus.

He writes, “Its growth this decade has averaged more than 10 percent a year and is still going strong in the first half of 2008. Because its success in recent decades has not been export-led but driven by domestic demand, its rapid growth can continue well into the 21st century, unfettered by world market limitation.”

(more…)

July 8 - Over the last two months, China has tightened up its visa policies, drawing widespread concern from the business communities across China and in Hong Kong. Tourist visas now require round-trip air bookings and confirmed reservations at hotels in the destination city, students are having trouble obtaining visas to study in Beijing, and investors of all types have seen their F visa status weaken as round tripping to Hong Kong for renewal is now prohibited. The latest visa procedures to receive this tightening is the chief representative visa.

In the past, it was often common practice for a chief representative to arrive in China on an F visa, and then have their documentation and visa status changed in-country. According to the Public Security Bureau, that is no longer acceptable. Chief representatives must now obtain a Z visa in their home country before coming to China if they are a planning on residing in the country.

The procedure, and approximate time, for obtaining a visa as a chief representative is as follows (please note that these procedures do not apply to those from Macau, Hong Kong, or Taiwan): (more…)

SHANGHAI, July 7 –Shanghai reported blackouts on Monday as summer temperatures continued to rise. The city’s power network is struggling to meet electricity demands brought by increased use of air-conditioning.

According to sources, the city’s electrical grid is fully loaded with all backup power generation systems are in use. On Saturday, city temperature reached 38.8 degrees Celsius, the hottest July 5 on record.

Provinces surrounding Shanghai were also not spared of blackouts that did not allow them to send spare capacity to the city.

The Shanghai Meteorological Bureau says that there will be temperatures of 35 degrees on at least three days this week. Last June, the State Electricity Regulatory Commission warned that the country would experience serious power shortages in summer.

(more…)

BEIJING, July 6 - The U.S. Internal Revenue Service is opening an office and place an attaché within the U.S. Embassy in Beijing.

The office, which will open “by the end of the 2008 fiscal tax year” according to Barry Shott, the deputy commissioner for the large and midsize business division, will focus on the Asia-PAcific region serve countries including Australia, New Zealand, Pakistan, India, Sri Lanka, South Korea, and Japan in addition to China.

The office “will be the face of the IRS in the Far East,” says Shott. The creation of the post is an agency response to the growing importance of the Asia-Pacific markets.

The IRS has already established overseas offices in London, Frankfurt and Paris, and this latest move is seen as an acceptance of the growing importance of developing relationships between foreign governments’ state tax departments and the co-sharing of tax data on both American individuals and multinational earning money overseas. It has not been uncommon elsewhere for U.S. businesses abroad to face visits from IRS officials.

For more information on filing taxes in the United States while living overseas, please visit the IRS website.

U.S. expatriates in China requiring advice over the paying of individual income tax in China and the implications of maintaining part U.S. paid salaries, or for the consolidation of China based accounts to U.S. GAAP standards, please contact tax@dezshira.com.

By Jennifer Wu

SHANGHAI, July 4 - Red-bean Frappucinos at Starbucks, porridge at KFC, mooncake-shaped ice cream at Häagen-Dazs—don’t be surprised to find these products or variations at any of their respective chain stores in China.

It may seem like an obvious route to take: catering to local preferences and culture as a surefire way into the Chinese market. Though this strategy may not guarantee success, increasingly it has become more and more obvious that any foreign company looking to penetrate the local economy must incorporate it, or suffer the consequences.

When B&Q opened its first store in China in 1999, it hoped to capitalize on the growing numbers of Chinese buying homes and on the burgeoning middle class in particular. As of this year, the British home improvement chain has more than 60 stores in China and has established itself as the leading home improvement retailer. Last year, it announced plans to open about a dozen stores each year in China, reaching over 100 by 2010.

So when Access Asia reported that B&Q is set to close five of its stores in China this year and to downsize another three, as well as cull main administration and restructure its management, speculation on the health of its China operations grew. (more…)

July 4 - China is implanting a new system to control the inflow of speculative funds from abroad.

The rules state that starting from July 14, it will be mandatory for companies to provide evidence to the State Administration of Foreign Exchange for verification.

Exporters will be required to park their export receipts in temporary verification accounts till they are cleared as genuine trade revenue, according to a statement issued by the SAFE, the Ministry of Commerce and the General Administration of Customs.

The new rules are aimed at stopping overseas traders from inflating their invoices to bring in more foreign money, a common way of pushing overseas speculative capital into China. (more…)