China Regulatory Brief: Coal Reform, RMB-Euro Trading, Import Measures

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Shanghai FTZ Further Revises FIE Regulations 

The State Council recently released the “Decision on Temporarily Adjusting and Implementing the Special Administrative Access Measures in the China (Shanghai) Free Trade Zone (Guo Fa [2014] No.38),” which took immediate effect. According to the Decision, wholly foreign-owned enterprises (WFOE) have been newly approved in certain industries such as:

  • Research and application of new technologies for petroleum exploration and development;
  • Research, development, design and manufacture of passenger service facilities and equipment to support high-speed rail, dedicated railway passenger lines and urban railways; and
  • Design of luxury cruisers and yachts.

A total of 27 liberalization measures were introduced for business scope items and foreign equity ratios.

China to Launch Coal Tax Reform

The Chinese government recently announced plans to launch a coal reform program, including a coal resource tax to be levied on an ad valorem basis – meaning that the rate will be set based on the resource price rather than quantity. In order to reduce the burden on the coal industry, other coal-related fees shall be cancelled, including the coal price regulation fund, ecological compensation fund for primary mineral products and local economic development charge. The reforms, which will begin on December 1, 2014, are aimed at promoting energy savings and emissions reductions.

RELATED: The East is Green: The Future of China’s Environmental Regime (Part 1 and 2)

RMB-Euro Direct Trading Opens

On September 29, the People’s Bank of China (PBOC) announced that China would allow direct trading between the yuan and the euro from September 30, 2014. Direct trading is expected to promote the internationalization of the renminbi, according to Ryan Song, Head of Global Markets at HSBC China. According to official data, bilateral trade between China and Europe reached US$291 billion in the first half of this year alone, growing at 12 percent year on year. The euro is now the sixth foreign currency to allow direct trading with the yuan – the others being the Japanese yen, Australian dollar, New Zealand dollar, Malaysian ringgit and Russian ruble.

China Implements Measures to Strengthen Imports

An executive meeting of the State Council, held by Premier Li Keqiang, has released a package of policies to strengthen imports and promote further liberalization of the industry. The meeting clarified that the import of advanced technical equipment and key components shall be highly encouraged. As a result of the meeting, China will adjust the “Catalog of Encouraged Imported Technology and Products”; further support enterprises engaged in import equipment financing and leasing services; and improve import tax policies for products connected with scientific and technological development. These measures come as a response to China’s declining imports volume and the likelihood of missing trade targets for a third consecutive year. In the first five months of this year, the country’s import volume was decreased by 1.6 percent (RMB 4.9 trillion).

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