The Shanghai Municipal Government has released revised regulations for encouraging multinational corporations to establish regional headquarters in Shanghai. The revision mainly improves the incentives contained in the original policies, including financial support and compensation for multinational corporations’ headquarters, and that they can enjoy incentive policies for capital management. Entry and exit formalities, talent introduction, and customs clearance will also be simplified for such personnel.
The General Office of the State Council has issued guiding opinions on innovating the investment and financing systems and mechanisms for infrastructure in rural areas. It states that a long-term mechanism should be established for investing in the development of infrastructure in rural areas, and that a mechanism for the management and protection of such infrastructure should also be established. Reform of power management systems in rural areas will be a key aspect of realizing this, and the development of telecommunications facilities in rural areas are to be open to receiving private capital. Sustainable water supply prices in rural areas should be enforced by establishing a rural household fees payment system for sewage and waste disposal. Internet and broadband networks should be improved to facilitate this aspect.
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The National Development and Reform Commission and the Ministry of Commerce have jointly issued a revision of the catalogue of priority industries for foreign investment in the Central-Western regions of China. The revision will become effective on March 20, 2017. The new catalogue covers 22 regions and cities, and supports industrial transfer of foreign investors into the central and western regions in order to improve the development and opening of the economy. Projects undertaken in the fields covered by the catalogue can enjoy imports of equipment necessary for their investment duty free, land transfer price at 70 percent of the minimum price (according to the National Standards for the Minimum Transfer Prices of Land for Industrial Purposes), and enterprises meeting certain conditions can enjoy preferential income tax policies.
The State Council has pledged to further relax the access of private investment to areas such as elderly care and education. It also aims to formulate programs to guide social forces to build and operate medical, elderly care, education, culture, and sports facilities. Private service organizations in the social sector will be subject to parallel approvals, and pre-approvals will not be required. It was also established that market oriented investment funds should be based on social capital, and that ease of access should be given to investment and financing, such as stocks and bonds. Disused plants and warehouses that are converted for cultural and fitness facilities will be able to enjoy the usage right and policies attached to the original purpose, while unoccupied school buildings should be used by the social sector. Such private service organizations will be able to enjoy the preferential policies for utilities and other tax charges.
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In this edition of China Briefing, we guide readers through a range of topics, from the reasons behind foreign investors’ preference for the WFOE as an investment model, to managing China’s new regulations. We discuss how economic transformations have favored the WFOE, as well as the investment model’s utility, and detail key requirements that businesspeople need to examine before initiating the WFOE setup process. We then walk investors through the WFOE establishment process, and, finally, explain the new and idiosyncratic “Actual Controlling Person” regulation.
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