East China

Shanghai: The Economic Nexus of China

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With a population of over 25 million, Shanghai, often referred to as the “Paris of the east,” is the economic nexus of China. Situated in the Yangtze River Delta (YRD) in east China, the city aims to be the world’s global financial and economic center and international transport hub by 2020.

In this article, Rainy Yao from Dezan Shira & Associates takes a closer look at this modern metropolis with its well-developed infrastructure and sound investment environment.

Economic overview

Shanghai accounts for one-eighth of China’s total financial income while taking up only 0.06 percent of the nation’s land. In 2013, the city’s gross domestic product (GDP) exceeded RMB 2.16 trillion, the highest in all of China. Of this total, the city’s primary industry contributed RMB 12.9 billion and its secondary industry RMB 802.7 billion (up 6.1 percent from 2012). The most notable contribution was from the service sector – a monumental RMB 1.34 trillion, or 62.2 percent of total GDP. In the first half of 2014, the city’s GDP stood at RMB 1.09 trillion with a stable annual growth rate of 7.1 percent.

The finance sector has also played a key role in Shanghai’s economic development, with an added-value in 2013 of RMB 282.3 billion (up 13.7 percent from 2012). By the end of 2013, 215 foreign-invested financial institutions and 198 representative offices had been established in the city.

From January to September 2014, Shanghai has witnessed a sharp increase in foreign direct investment. Over 400 foreign-invested projects were introduced in September alone – a y-o-y growth rate of 34.1 percent. Continue reading…

Case Study: Using the Shanghai FTZ to Access the Outbound Tourism Industry

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By Maria Kotova and Kate Wang

A client in the tourism industry recently contacted Dezan Shira & Associates to advise them on how to best expand their scope of operations in the tourism industry. With the rise in income levels in China, outbound tourism has become one of the most profitable operations for travel agencies in China. The client, who had already engaged in domestic and inbound tourism in China for several years, requested that we investigate the options for foreign investment in the outbound tourism industry.

Pursuant to Article 21 of the Regulation on Travel Agencies (the “Regulation”) issued by the State Council on May 1, 2009, foreign investment in travel agencies is permitted for Sino-foreign equity joint venture (EJV) travel agencies, Sino-foreign cooperative travel agencies and wholly foreign-owned travel agencies, restricted to domestic tourism and inbound tourism only.

Further, according to Article 23 of the Regulation, “foreign-invested travel agencies shall not engage in overseas travel for Chinese mainland residents or business travel for Chinese mainland residents to the Hong Kong Special Administrative Region, Macao Special Administrative Region and Taiwan.” Therefore, our client’s goal of expanding operations by adding outbound tourism to their business scope was determined to be impossible under the normal regulatory environment in China. Continue reading…

Cross-Border Forex Cash Pooling in the Shanghai FTZ

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CB 2014 09_Revisiting the Shanghai Free Trade ZoneBy Matthew Zito

One often overlooked feature of the Shanghai FTZ is the unique advantages it affords foreign investors for transferring funds between their China domestic and overseas entities via two-way cash pooling. This refers to a transaction in which banks facilitate multi-national companies in moving capital between their onshore subsidiaries to an offshore headquarters (or vice versa) via inter-company loans. Companies use cash pooling for a variety of purposes, such as to deploy greater liquidity, more efficiently manage finances, or obtain a better deposit rate than in the revenue’s country of origin.

Cross-border forex cash pooling only recently became possible in China with the lifting of the ban on such activity in the Shanghai FTZ in February of this year. While the People’s Bank of China has announced that cross-border RMB cash pooling will soon be available nationwide, the FTZ retains the unique ability to offer forex cash pooling. Continue reading…

China Regulatory Brief: NOC Annual Reporting, China-Spain Trade Deals, New Measures for Domestic Delivery

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Hong Kong, Macau Professionals Permitted to be Partners in Accounting Firms in the Shanghai FTZ

On September 17, the Shanghai Municipal Government released the “Measures for Accounting Professionals in Hong Kong and Macau to be Partners in Accounting Firms in the Shanghai Free Trade Zone (Trial, Hu Fu Ban Fa [2014] No.43),” which will be effective October 1, 2014 to September 30, 2016. The Measures stipulates that accounting firms with partners from Hong Kong and Macau should meet the following conditions:

  • The number of partners from mainland China should be over 51 percent of the total partners;
  • The chief account (partner) must be a mainland partner; and
  • The Hong Kong/Macau professionals must work in the firm for at least 180 days each year.

Continue reading…

Wuxi: The Birthplace of China’s Modern Industry

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One of the birthplaces of modern industry in China and cultural center of the south Yangtze, Wuxi is known as “the pearl of Lake Tai.” Historically, the city has been famous as an important rice and silk market in South China since the Ming Dynasty. In this article, Rainy Yao from Dezan Shira & Associates takes a look at how today this city is transforming itself from a textile manufacturing center into a high-tech industrial hub. Continue reading…

Shanghai Chosen as Site of BRICS Development Bank

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SHANGHAI — Things came down to the wire in Brazil this week—not in the World Cup final but for the details of a development bank to be jointly funded by BRICS (Brazil, Russia, India, China and South Africa). In the end it was confirmed that the bank, aptly named the New Development Bank (NDB), would be headquartered in Shanghai and its initial presidency held by an Indian national. The move is widely expected to bolster Shanghai’s bid to become an international financial center by 2020.

The NDB, designed to finance infrastructure projects in BRICS and other emerging nations, will have an initial subscribed capital of US$50 billion, contributed in equal shares of US$10 billion by its 5 member states. Voting rights will be split between the five founding members and decisions made via a two-thirds majority. Although membership will be open to future additions, it is stipulated that BRICS must retain a controlling stake of at least 55 percent. Continue reading…

Qingdao’s Blue Economy: Marine Investment on the Rise

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Source: apec-china.orgQINGDAO — China’s State Council recently approved the establishment of the Qingdao West Coast New Area in eastern Shandong Province, ushering in a “bluer” economy for the city of Qingdao. The blue economy, generally defined as the sum of ocean-related industries, is widely seen as the economic future of Qingdao. As such, it presents significant opportunities for foreign investment.

China is the world’s second-largest oil consumer, behind the United States. In 2013, growth in China’s oil consumption accounted for one-third of the equivalent global figure. This latest initiative in Qingdao indicates the importance given to the development of deep-sea oil sources by the Chinese government. Despite the abundance of marine resources in the country, China’s lack of supporting technology and professional personnel have greatly impaired the development of its blue economy. Continue reading…

Pingtan Implements Pilot Foreign Investment Reforms

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SHANGHAI – On June 3, the Pingtan Comprehensive Pilot Zone (PCPZ) released the “Catalog of Simplified Approval for Foreign Investment Access to the Pingtan Comprehensive Pilot Zone (2014)” and the “Interim Measures on the Administration of Foreign-invested Enterprises (FIEs) in the Pingtan Comprehensive Pilot Zone,” which took immediate effect.

Pingtan, located in Fujian province, is situated next to Taiwan and therefore enjoys unique advantages in cross-strait exchanges and cooperation. With high-tech and modern service industries introduced from Taiwan, the PCPZ aims at further development in the wind power, sea water desalinization and tourism sectors. Continue reading…

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