Region

Brexit Shows UK Has Turned its Trade Face Towards China, India & the East

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CDE Op-Ed Commentary

With the United Kingdom voting to leave the European Union (EU) bloc, current media is having a field day promoting either the dreadful fate that awaits the country or celebrations of its newfound ‘freedom’. Neither camp – in or out –  have yet provided a detailed breakdown of what can in fact be reasonably expected to happen. Yet having dealt for nearly 25 years with British investment in Asia – about 15 percent of our total clients at Dezan Shira & Associates have been from the UK, totaling an investment of about GBP200 million over that period – we have pedigree when it comes to assessing the mood for outbound and inbound investment coming from and into Britain.

First though, let’s examine the makeup of the EU, review its bilateral trade agreements, look at where some of the EU trade frustrations are, and the potential bilateral opportunities there for taking by the UK in light of the country leaving the EU.

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China Based Foreign Manufacturers – Finding “Beyond China” Investment Intelligence

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CDE Op-Ed Commentary

As China’s economy continues its path towards reform, the make up of its still-growing receipts of foreign investment dollars continue apace. China’s FDI increased by 4.7 percent in 2015, yet the form of investment is changing. A whopping 72 percent of the US$126.3 billion invested last year was in the services sector, as global businesses continue to invest to support the selling of goods and services to Chinese consumers.

This fits right in line with Chinese government policy – China wants and needs to attract dollars into services, and has said as much.  According to President Xi, “The economy has entered a new stage of slower but more resilient growth.” which Xi calls the new normal. “The essence of which is an improved economic structure that relies more on domestic consumption, the service sector and innovation.”

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Mossack Fonseca Leak Highlights Importance of Data Security and Client Protocols

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CDE Op-Ed Commentary

The so-called “Panama Papers” involving a huge leak of client information from the Panamanian Law Firm Mossack Fonseca highlights the absolute need for strong IT protection and security. Over 11 million documents were shared with a German newspaper, investigating the financial backgrounds of world leaders, in a haul larger than the documents released by Edward Snowden.

Thus far, the media has concentrated on world leaders and politicians, although the firm also has a significant presence in China. In fact, I was engaged at the practice in Hong Kong for a short while back in the early 1990s, assisting to process corporate documentation, mainly involving clients in the British Virgin Islands. Mossack Fonseca’s clients at the time were nearly all other Hong Kong based law and accounting firms, with only a handful of individuals. Most clients were using BVI companies to hold WFOE and similar investments into China, which was standard practice at the time given that China was still perceived as having some political and development risk in those days. Those that weren’t were simply using companies to own properties in Hong Kong, China, and elsewhere. All perfectly normal, standard procedures.

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China’s Human Capital Capabilities Being Overtaken by ASEAN

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CDE Op-Ed Commentary

The concept of Human Capital, defined as “the skills, knowledge, and experience possessed by an individual or population, viewed in terms of their value or cost to an organization or country,” is an interesting decision making feature that is increasingly entering the corporate foreign investment mindset.

In short, it is an economic value of an employee’s skill set built on the production input of each employee, based on the assumption that all labor is equal. However, the concept of Human Capital also recognizes that not all human labor is equal and quality can be improved by investing in them. The education, abilities and experience of an employee has an economic value for the employer and the national economy as a whole.

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Meet Yong Bao, and His Impact on Child Product Sales to China

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yong bao 1Op/Ed by Chris Devonshire-Ellis

The news that the beloved children’s series “Thomas the Tank Engine” is to include new characters is an interesting aside to how MNC’s and marketing are reaching out to attract new customers. The series, originally a set of books written by the Reverend Wilbert Awdry for his young son Christopher in 1945, has subsequently developed over the years – including a successful BBC TV series voiced by Ringo Starr, and more recently by the Japanese voice actor Kumiko Higa. It is also a successful global franchise in the form of the “Thomas & Friends” TV franchise, which has been sold to over 121 countries in a business worth over US$1 billion.

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Dezan Shira’s 2016 Hong Kong Report – a Hub for the Maritime Silk Road

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CDE Op-Ed Commentary

I should begin this with a disclaimer – I am the Chairman of the firm that produced An Introduction to Doing Business in Hong Kong 2016. That said, I had nothing to do with its creation – the content has come purely from professionals within the firm’s Hong Kong office, and I hadn’t seen the text until very recently. What I will suggest, however, is that it makes for important reading when one considers the position the territory has found itself in as concerns mainland China.

While the report focuses on the foreign investment and tax aspects of doing business in Hong Kong – which frankly is what Dezan Shira & Associates does best and has done since 1992 – I have been a bit wary of the direction Hong Kong has been taking over the past few years. Its population doesn’t quite see eye to eye with Beijing, and calls from the CCP for Hong Kong residents to “love” China have been greeted in some quarters with a certain amount of ridicule. Hong Kong has recently been inundated with millions of mainland tourists, who while encouraged by the tourism and retail industries, have also stripped local supermarket shelves bare of hard to come by products in China – incidents of Hong Kong mothers not having baby milk to purchase in local shops due to mainlanders buying all imported products up created a barrier between local Hong Kongese and mainland Chinese. Beijing’s reaction to these tensions caused it to reference Hong Kong locals as ‘splittists’, while the local government wisely stepped away from that rhetoric and named such complainants as ‘localists’.  The upshot of all this is that, socially, Hong Kong’s citizens are not enjoying the best of relations with China right now. Understandably, it is this aspect that has garnered much media attention.

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China Stock Market Suspension Ushers In A Tough 2016

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CDE Op-Ed Commentary

China’s primary stock markets in Shanghai and Shenzhen were suspended today after plummeting during the morning of a volatile first day’s 2016 trading. The suspension, which is active for 24 hours, is triggered when markets rise or fall by more than seven percent in a daily session. This so-called ‘circuit-breaker’ was introduced at the behest of the Chinese Securities Regulator just last September; today is the first time it has been enacted. The fall was pre-empted both by a decline in China’s manufacturing output for the tenth consecutive month, and the imminent lifting of a suspension of trading in China’s own publically listed State Owned Enterprises, which have in turn been suspended from trade since the summer due to “negative sentiment” concerning their viability. At the time, several journalists were also punished for “creating uncertainty” in the markets as share prices fell. It is unclear what policies Beijing has managed to implement since then that makes this situation any better.

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Chris Devonshire-Ellis – The China Year in Review and Looking at 2016

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CDE Op-Ed Commentary

In this 2015 year end annual review I assess the practical issues concerning the China slowdown, the comparisons with other Asian FDI markets, the reasons why China CEOs cannot now be held fully responsible for assessing the China market, the state of play concerning the evolution of the foreign invested professional services industry in China, provide some glimpses of how our own business operations have performed, and take a look at what 2016 may hold in store. But first, let me justify the reasons why my practice in particular is a useful primer as concerns China and Asian FDI trends.

Dezan Shira as a Benchmark China FDI Practice

Firstly, Dezan Shira & Associates is one of the oldest established independent professional foreign firms in China, incorporated in the country since 1992. Next year represents our 24th year of operations. Secondly, we are one of the largest of the privately owned practices in China, with some 12 China offices and several hundred professional legal and tax personnel. No-one else – except for the blue chip international law practices, the Big 4 audit practices and the recent VC funded practices – comes close. Third – in assessing China, we are also able to put it into context with the rest of Asia – a unique ability very few other firms can match. Our firm possesses offices in India as well as Vietnam, Singapore and liaisons across ASEAN – meaning we are not China-Centric, allowing us to effectively see the wood through the trees.

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