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China Updates – April 2020

State Council Announced Measures to Stabilize Foreign Investment and Trade

On 7 April 2020, China’s State Council announced several decisions to stabilize foreign investments and trade. These decisions are:

  • To build another 46 cross-border e-commerce comprehensive pilot zones and implement preferential policies, including exemption of value-added tax, consumption tax and assessed levy of corporate income tax for retail export goods within the zones;
  • To support companies engaged in processing trade by suspending interest on deferred taxes until end of 2020 for companies that sell bonded materials and products on domestic markets, expanding fields for foreign investment and reducing goods categories forbidden for processing trade;
  • To hold the 127th China Import and Export Fair (Canton Fair) online during mid-late June.
  • To continue parts of expired preferential tax policies including exemption of value added tax for interest income of financial institutions.


China’s Absorption of Foreign Investment in the First Quarter of 2020

In January-March 2020, China’s utilization of foreign investment nationwide was 216.19 billion yuan, down 10.8% year on year, excluding banking, securities, and insurance, the same below). However, the utilization of foreign investment in high-tech service industry increased by 15.5% year on year, accounting for 29.9% of the service industry. Of the total amount, information service, e-commerce service, and professional and technical service increased by 28.5%, 62.4% and 95% year on year respectively.


China’s Ministry of Foreign Commerce Introduces Policy Initiatives to Support Foreign-Invested Enterprises (FIE)

On 10 March 2020, Premier Li Keqiang chaired a State Council executive meeting which determined six measures on addressing the impact of covid-19 and stabilizing development of foreign trade and foreign investment. The Ministry of Foreign Commerce then introduced the following initiatives to support foreign investments in China:

  • Keep expanding market access for foreign investment and add more encouraged industries allowed for foreign investments;
  • Offer policy support for foreign trade companies to comprehensively resume work and production;
  • Promote the innovation and upgrading of 218 national economic and technological development zones and giving Free Trade Zones more autonomy for reform and innovation;
  • Improve the efficiency of multilateral and bilateral investment promotion mechanism and leverage the roles of China International Import Expo, China International Fair for Investment and Trade and other major exhibition platforms in investment promotion;
  • Implement well the Foreign Investment Law and its supporting regulations, establish a service system for foreign investment and improve a working mechanism for foreign investment companies to file complaints in order to attract, reassure and keep business.


Temporary Suspension of Entry by Foreign Nationals Holding Valid Chinese Visas or Residence Permits

China has decided to temporarily suspend the entry into China by foreign nationals holding visas or residence permits still valid to the time of this announcement, effective from 0 a.m., 28 March 2020. Foreign nationals coming to China for necessary economic, trade, scientific or technological activities or out of emergency humanitarian needs may apply for visas at Chinese embassies or consulates. Entry by foreign nationals with visas issued after this announcement will not be affected.


China strengthens regulation of medical equipment for export

Starting from 26 April 2020, all non-medical-use face masks to be exported must meet the quality standards of China or export destinations; if a purchase contract has been signed before the date, the exporter shall present a joint statement, electronic or written, signed by the importer when it makes customs declarations. Furthermore, if an export company has obtained certification or registration for their COVID-19 testing kits or other medical supplies, the customs department shall clear their exports based on a list of certified or registered producers provided by the Ministry of Commerce, which requires that relevant departments should examine and confirm the list of foreign certified or registered producers of anti-epidemic supplies.


Lower Export Fares and Facilitate Transportation of Trade Goods

Importers and exporters will be exempted from port construction fees, and other expenses for port operation, port security and oil damage compensation fund will be reduced. Foreign trade companies are supported to have a greater say in determining shipping fares; shipping companies are guided to adjust the price structure of shipping services and reduce the proportion of shipping surcharges.


Guangdong Province Issued Implementation Opinions on Reduction of Enterprise Social Security Premium Contribution in Phases

Social security participating organizations in Guangdong Province can now refer to the Implementation Opinion to enjoy reduction of the company’s social security premium contribution. Small, medium and micro enterprises who are qualified to enjoy the reduction policy can be exempted from social security premium contributions from February to June 2020. For large enterprises and other organizations, the payment of social security premium contributions borne by the employers will be halved.


China and Chile Amend Agreement on Avoidance of Double Taxation and Prevention of Fiscal Evasion

China’s State Taxation Administration released on 14 April 2020 the Announcement on the Entry into Force and Implementation of the Agreement between the Government of the People’s Republic of China and the Government of the Republic of Chile for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and the Protocol.


Optimize Foreign Exchange Management and Support Development of Foreign-related Businesses

The State Administration of Foreign Exchange (SAFE) will launch nationwide reform to facilitate payment of capital account items, simplify registration procedures for some capital account businesses, and relax restrictions for export-background domestic companies to buy foreign currencies and repay foreign-currency loans. Besides, the SAFE will make it more convenient for companies to use electronic certificates and documents to process foreign exchange businesses, optimize foreign exchange settlement procedures for cross-border e-commerce operators and support banks to introduce innovative financial services.


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