China Regulatory Brief: Carbon Trading in Shenzhen and New Measures for Outbound Investment

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Foreign Investors Allowed to Trade Carbon Permits in Shenzhen

The Shenzhen State Administration of Foreign Exchange (SAFE) recently announced that foreign investors will be allowed to trade carbon permits in Shenzhen, the nation’s first carbon trading platform open to foreign investors. In 2013, in a bid to curb emissions of key pollutants and clean up the environment, the National Development and Reform Commission (NDRC) launched a pilot carbon emission trading scheme in seven cities including Shenzhen, Shanghai, Beijing, Tianjin, Chongqing, Hubei and Guangdong. China also plans, within the next three years, to launch a nationwide pollution permit trading scheme to boost industrial restructuring.

China Clarifies Tax Refund Policy on Export Goods under Financial Leasing

The State Administration of Taxation (SAT) recently released its “Circular on Implementing Tax Refund Policies for Export Goods under Financial Leasing (Cai Shui [2014] No. 62),” which will take effect from October 1, 2014. Financial leasing or equipment leasing refers to a financial transaction where the lessee rents or purchases an asset (including vehicles, software or other equipment) from a financial leasing company (FLC). According to the Circular, if the contract is signed by a foreign lessee for a lease term of over five years (inclusive), then the export of goods by a FLC or its subsidiaries will be eligible for value-added tax (VAT) and consumption tax refunds. The exported goods should be among those fixed assets listed in the “Provisional Regulations on Value-added Tax” such as airplanes, engines and ships.

China to Relax Restrictions on Outbound Investment

On September 6, the Ministry of Commerce (MOFCOM) released the revised “Administrative Measures for Outbound Investment (MOFCOM Decree [2014] No. 3),” which will come into effect from October 6, 2014. According to the new measures, a “negative list” approach towards outbound investment by Chinese enterprises will be adopted. Under this system, investors are allowed to invest in any industry not explicitly prohibited on the list. Enterprises seeking to invest in outbound projects involving sensitive countries, regions or industries are required to obtain approval from MOFCOM. The new measures are expected to relax approval requirements and boost outbound investment by Chinese enterprises.

China and Texas Sign MOU for Closer Cooperation

On September 9, Texas Governor Rick Perry signed a memorandum of understanding (MOU) with five Chinese provinces including Tianjin, Fujian, Shandong, Jiangsu and Sichuan for closer cooperation in trade, investment, education and environmental protection. “Texas values its ties with China and expects to achieve substantial cooperation with the country,” said Perry. In 2013, Texas’s exports to China reached US$10.8 billion (118 percent growth), behind only California and Washington. Zhang Xiangcheng, vice minister of China’s Ministry of Commerce (MOFCOM) announced that a China-Texas joint working group on trade and investment will be soon established.

Shanghai FTZ Launches Outbound Investment Service Platform

On September 2, the Shanghai Free Trade Zone (FTZ) officially launched its outbound investment service platform – the nation’s first ever comprehensive service platform for outbound investment. The platform is expected to provide better services for enterprises established within the Shanghai FTZ, covering professional services such as comprehensive consultation and outbound investment filing services.

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