Chinese New Year passenger travel discouraged in favor of energy supplies – more heavy snowfalls forecast 

February 4th  - China continues to have problems with its worst winter weather for 50 years as further heavy snow hit already stressed cities and towns in much of the country. With the military already deployed and tanks on the roads in some areas to assist with snow and debris clearance, power shortages threaten anew as raw materials such as coal and coke have been delayed in getting to power plants. Rail rolling stock has been diverted away from the normal passenger transit duties as this time of year, with Chinese New Year’s eve just 36 hours away, in order to allow reasonable chances of the power supply being maintained. Up to 60% of all passengers are now expected to stay put rather than travel back to their homes, effectively missing Chinese New Year celebrations with their families. A record number of over 42,000 rail container trucks laden with coal and coke were transported just today (Monday) alone to ensure national power supplies could be maintained – over 25% more than the norm at this time of year. Both army and civilian maintenance crews were also working around the clock to repair broken or damaged power lines in Guangdong, Guizhou and Henan Provinces, where millions of people have been without power for over a week.

Several energy intensive metal producing plants have also been ordered to shut down to conserve fuel, with the aluminum and steel industries worst hit, a situation reflected in the world’s trading bourse, the London Metal Exchange, where futures contracts have shown sharp increases in value and the daily trading rate have shot up by more than 10% in the past few days for these commodities as shortages loom. The supply chain knock-on effect has also led to several auto manufacturers in China to either close or reduce capacity as sheet metals are not reaching their production lines. Nissan, Honda, Toyota, Ford and Mazda have all closed some or all of their plants.   (more…)

By Andy Scott

SHANGHAI, Jan. 29 - The biggest winter storm to hit many parts of eastern China in 50 years brought down buildings, closed train stations and left millions stranded throughout the country just days ahead of the biggest holiday season.

One day after the storm killed at least a dozen people and brought much of central and eastern China to a halt; it continues to wreak havoc on the country’s road, rail and airport networks. Most flights out of Hongqiao Airport were delayed or canceled for a second straight day, while traffic slowly returned to the region’s rail and roadways. Trains out of Shanghai continued to see major delays of up to 10 hours today and travelers found themselves having to make the best of a bad situation, often transferring tickets and taking round-about routes to reach destinations in the Yangtze River Delta. (more…)

This is the first in a series in which we look at China’s borders and the relationships that Beijing is building with the 15 countries that share its borders. As China has grown in the last 30 years, so have the often complicated relationships it has with its many varied neighbors. In this article, we take a look at Vietnam.

China paving its way into Southeast Asia
By Joyce Roque

Dec. 10 - If East Asian growth figures were taken into account and translated into basketball terms, China would clearly be its towering center with Vietnam hovering not far behind as its nimble point guard with 10.8 percent and 8.2 percent growth figures respectively slated for 2008, according to the World Bank.

Of late, China’s ambitions have led it to carefully plot economic alliances with its Asian neighbors to jockey its ascent to the path of becoming a superpower. It was only natural that it should make its most strategic moves to penetrate mainland Southeast Asia through expanding its relations with Vietnam. (more…)

Macau takes its place in the international gaming big leagues 

What’s in a Renaissance-era derived international brand name?

By Chris Devonshire-Ellis

So what of Chinese gambling, real and fake Italian Renaissance art, and its impact on the big league stakes of gaming? Purely by chance, the happy co-incidence of international conference attendance and one Grand Prix, I’ve been able to visit over the past six weeks three Venices. The real one in Italy, from where Marco Polo set off to discover the East, the Venetian Casino in Las Vegas, and its upstart offspring in Macau.

Macau, the tiny old Portuguese enclave, returned to China in 1999 after 500 years (the Brits had Hong Kong, by comparison, for just 150) is about to achieve a massive explosion of world ranking concerning income generation. This will add huge revenues to China’s coffers, and make a deep impression in terms of its new found financial muscle. It is about to become the wealthiest territory in terms of revenue generated per square mile than anywhere else on earth. (more…)

The sixth border checkpoint between Hong Kong and Shenzhen has been given the go ahead according to Shenzhen party secretary Li Hongzhong.

Talking one the sidelines of the Chinese Communist Party’s 17th National Congress in Beijing, Li said that both sides had reached an agreement to build the checkpoint, which connect Heung Wai in Hong Kong’s northeastern New Territories with Shenzhen’s Liantang.

“There are already five checkpoints between Hong Kong and Shenzhen. But they are not enough due to the two sides’ close relations,” Li said.

The project has faced difficulties including roads in the proposed location that are too narrow due to a high population density.

“The two sides are discussing this issue,” Li said. “However, the construction of Liantang checkpoint would definitely go ahead.”

The new checkpoint with economic integration between Hong Kong and greater Guangdong province, connecting the New Territories to the Shenzhen-Shantou and Shenzhen-Huizhou superhighways which will provide speedier access to eastern Guangdong.

Macau is taking yet another page from Las Vegas and turning to the lucrative trade show circuit as yet another way of boosting profits in this money-driven metropolis.

Having surpassed Las Vegas in gambling revenue last year, Macau is looking to broaden its economic base by keeping tourists in the city for longer periods of time. While casino earnings constitute nearly all of Macau’s earnings, in Las Vegas, they make up only about 40 percent of tourist-related revenue. According to a recent article in The Atlantic Monthly by James Fallows, the average Las Vegas visitor stays for nearly four days, while in Macau, the casino-centered day trip remains the norm.

But Macau is hoping to change that by cashing in on the lucrative convention trade with halls and exhibition centers, as well as plenty of new hotel rooms for all the conventioneers quickly taking shape.

Kenfair International Limited, a leading trade fair organizer in Hong Kong, is taking the lead to capitalize on business opportunities in former Portuguese colony by launching a brand new trade fair-Mega Macao. Held from October 18-20, Mega Macau will be the first-ever trade exhibition of its kind and scale according to the firm’s press release. (more…)

Oct. 12 - The State Council moved ahead with plans for the country’s fourth bonded port in Hainan province Xinhua reported yesterday, yet another of the steps China is taking towards establishing a free trade zone with the Association of Southeast Asia Nations (ASEAN).

The Yangpu Bonded Harbor Area in the Yangpu Economic Development Zone, located near the city of Haikou and covering 9.21 square kilometers, will be completed in three stages, the first phase of which has already begun construction, said Hainan vice governor Jiang Sixian.

Construction is estimated to cost upwards of RMB50 billion and the area will host industries with a total output value of RMB100 billion, generating RMB12 billion in taxes annually by 2012. According to Jiang, the port will be transformed into a logistics center for oil, natural gas, chemical materials and paper pulp, as well as being a key processing base for chemical products in the country. (more…)

SHENZHEN, Oct. 9 - Processing factories located in South China have until October 23 to decide if they want to register with the Shenzhen or local bureau of trade and industry if they want to retain their ability to import or export restricted materials should they decide to convert themselves into a foreign invested enterprise (FIE) in the future.

According to Article 5 of Announcement No. 44 of the Ministry of Commerce and the General Administration of Customs, the government will “refuse to accept the applications of the eastern region’s enterprises that have not obtained foreign trade rights prior to July 23, 2007 for engaging in processing trade on restricted goods.” However, a recent circular from the Shenzhen Bureau of Trade and Industry states that this article is not applicable to: “productive enterprises that have undertaken consigned processing before and have no foreign trade rights; enterprises that apply for reference before October 23, 2007 and transform into enterprises with foreign trade rights within a specified time; and enterprises that have once been renamed due to restructuring and reorganization but whose legal representatives have not been changed.”

The regulations on the registration of enterprises processing with materials supplied by customers are as follows: (more…)

By Lily Xu and Rosario Di Maggio/Dezan Shira & Associates 

GUANGZHOU, Sept. 30 - Individual income tax (IIT) in China is a complex subject and often misunderstood. Ask one expatriate, then ask another, and they’ll give you different opinions. However unfortunately, expatriates do not decide China’s tax regulations. Neither is the situation short of clarity in the eyes of China’s tax bureau, who are quite clear on the subject and who are progressively clamping down on abuse of non-working visas and the under-declaration of income by expatriates in China.

Nearly a year after the State Administration of Taxation released guidelines on self reporting IIT, and more than nearly two years since the IIT payment system was strengthened, we still find confusion and carelessness on the part of expatriates and local inconsistency and sometimes even unjustified abuses from the tax authorities. There is however, a welcome trend developing to simplify the taxation system that is leading some cities to modernize and simplify people’s life.

Here is a practical case that occurs often when dealing with IIT, many times leading to a contradictorily situation.

According to the minimum payroll list for foreigners* in Dongguan, for example, a U.S. or European general manager working for a medium-large enterprise, with an investment of US$2 to 3 million in China is supposed to have a taxable salary of (at least) RMB23,400 and an IIT of RMB3,345, while a technician of a small Italian or Spanish WFOE would be supposed to receive RMB16,080 and pay RMB1,881 as income tax. Furthermore, according to the law, there are expenses such as rental fees, meal allowances and even laundry that can be deducted before taxes so that may actually be a consistent part of the gross income (there are, of course, limits on the deductible welfare). (more…)

By Stefanie Knirsch and Richard Hoffmann/Dezan Shira & Associates

In August 2006, China and Hong Kong signed an arrangement that provides certainty and preferential tax treatment between the two tax jurisdictions, known as the “Arrangement for the Avoidance of Double Taxation on Income and Prevention of Fiscal Evasion”.

Since 1995, Hong Kong has been seeking to negotiate a comprehensive double taxation treaty with China in order to clarify the tax rules and ease the tax burden for the growing number of companies based in the territory that are doing business with the mainland. An agreement signed in 1998 permitted Hong Kong based companies that maintain manufacturing operations in China to split their profits equally between the two jurisdictions. However, the rules did not apply to companies in the service industry and excluded regulations on withholding taxes on interest, royalties and dividends.

The August 2006 agreement extends the scope of the original agreement and came into effect with respect to Hong Kong taxes from the year of assessment beginning on or after April 1, 2007. With respect to mainland taxes, it will apply to the taxable year beginning on or after January 1, 2007. (more…)