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China Updates – December 2023

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Upgraded GDP Growth Forecasts for China

Recently, the International Monetary Fund (“IMF”) has revised upwards its GDP growth forecasts for China in 2023 and 2024. According to the IMF, China’s economy is expected to expand by 5.4% this year, surpassing its earlier projection of 5%. China’s decision to greenlight a one-trillion-yuan sovereign bond issuance and its adoption of various measures to stimulate the economy were the primary drivers behind the upgrade of growth forecasts.

The IMF observed that headwinds in the property sector and lacklustre external demand may limit GDP growth to 4.6% in 2024. Despite this, the forecast is an improvement compared to the 4.2% projection stated in the IMF’s World Economic Outlook released in October. In addition, economic growth is forecast to gradually decelerate over the medium term, reaching around 3.5% by 2028.

On a more positive note, China’s imports grew by 3% in October compared to last year. The surge defied expectations and brought an end to the 11-month streak of decline in imports.

China recognises the need to shift its growth model from an investment-centric approach to a consumption-led one. According to the IMF’s First Deputy Managing Director, Gita Gopinath, the focus of Chinese authorities extends beyond the headline number. Rather, efforts are directed towards attaining high-quality and sustainable growth, along with promoting inclusivity. To this end, authorities have been working diligently on various fronts.

Hong Kong Gazettes Bill on Tax Deductions for Spectrum Utilisation Fees

On 1 December, the Inland Revenue (Amendment) (Tax Deductions for Spectrum Utilisation Fees) Bill 2023 (“Bill”) was gazetted. The Bill introduces provisions for tax deductions on spectrum utilisation fees that mobile network operators are required to pay for acquiring radio spectrum in future auctions. The aim of the Bill is to incentivise mobile network operators to increase their investments in infrastructure, thereby enhancing communication services for both businesses and the general public.

“The amendments aim to implement the proposals in the 2023-24 Budget,” stated a spokesperson from Hong Kong’s Commerce and Economic Development Bureau. The spokesperson emphasised the importance of communications infrastructure as a key building block for advancements in telecommunications, and innovation and technology. These play a vital role in Hong Kong’s digital transformation and long-term economic growth. Further, the Bill demonstrates the Hong Kong Special Administrative Region Government’s commitment to enhancing the city’s communications infrastructure, with the aim of benefiting not only the telecommunications and innovations sectors but also the wider community.

The Bill proposes that mobile network operators should be able to deduct spectrum utilisation fees paid for acquiring radio spectrum in future auctions. The deduction would be spread over the 15-year term of the spectrum assignment. The proposed change will not have any impact on past auctions or the spectrum utilisation fees derived from them. It will only apply to fees derived from auctions conducted after the Bill comes into effect. In simple terms, this means that fees from previous auctions, whether already paid or yet to be paid, will not be affected and will, therefore, not be eligible for tax deductions.

Beijing to Expand Opening-up of Service Sector

China’s State Council has recently endorsed the Work Programme for Beijing to Build Itself As a Comprehensive Demonstration Zone for Deepening Reform and Expanding Opening Up of the Service Sector (“Work Programme”). 

The aim is to develop replicable and scalable mechanisms that can lay the foundation for a strong institutional framework. Through its implementation, China seeks to support the growth of the service industry and the modernisation of the industrial system. This will, in turn, promote the opening-up and innovative growth of the entire service industry in the nation.

The Work Programme details 23 tasks encompassing six aspects, which include the following:

  • Introducing and extending preferential tax policies that promote the development of cultural enterprises;
  • Implementing relevant tax policies to facilitate the repatriation of Chinese cultural artefacts;
  • Refining and optimising financial service models and management practices;
  • Exploring the application of the digital yuan in tax collection and payment;
  • Formulating rules and regulations that align with the innovative development of the service sector;
  • Considering the introduction of specialist agencies to facilitate trade in services;
  • Adopting new methods for overseas companies to voluntarily declare and pay taxes. 

According to data released by the Ministry of Commerce, the value of China’s trade in services experienced a growth of 8.7% during the first ten months of this year, compared to the same period last year. From January to October, the service trade value surpassed 5.34 trillion yuan. During the same period, China experienced consistent growth in the trade of knowledge-intensive services, with a year-on-year increase of 8.9%, totalling approximately 2.23 trillion yuan.

More Banks Participate in China’s Digital Currency Initiative

Three additional banks have joined the ranks of foreign banks participating in China’s e-CNY initiative, also known as the digital yuan. This expansion highlights the growing involvement of international financial institutions in the country’s digital currency initiative.

Following Standard Chartered’s entry, HSBC, Hang Seng Bank, and Fubon Bank have recently incorporated e-CNY integrations into their platforms. This move enables users to easily transfer and withdraw e-CNY. The participating banks are taking significant steps towards expanding accessibility and promoting the widespread adoption of the digital currency.

Hang Seng Bank has implemented a convenient feature that enables its personal banking customers to link their debit cards to the official e-CNY app. This allows them to easily access and utilise digital renminbi. In addition, customers can conveniently add funds to their e-wallet via the Hang Seng China Mobile Banking App. Similarly, HSBC has introduced comparable functionalities to cater to the retail e-CNY needs of its clientele.

Fubon Bank also offers its customers the option to top up their e-CNY wallets through its mobile banking app. The bank has affirmed its commitment to further exploring the different applications of e-CNY in different areas, such as cross-border trade, smart contracts, cross-border payments, and supply chain finance.

The e-CNY was recently used in a high-value cross border oil transaction. PetroChina International successfully acquired one million barrels of oil, making it the inaugural use of the digital currency in such a transaction.

New Lower Stamp Duty Rate for Stock Transfers Implemented in Hong Kong

In the 2023 Policy Address, Hong Kong’s Chief Executive announced a reduction in the stamp duty rate on transfers of Hong Kong stock from 0.13% to 0.1% for both the buyer and the seller. The Legislative Council passed the Stamp Duty (Amendment) (Stock Transfers) Bill 2023, and the corresponding Amendment Ordinance came into force on 17 November 2023.

Both the buyer and seller shall be subject to a stamp duty rate of 0.1% of the consideration or market value (whichever is higher) of the stock being transferred. In Hong Kong, stamp duty is borne by the buyer and seller each separately.

In addition to the legislative amendment above, the 2023 Policy Address contained other proposals to adjust the stamp duty rate in respect of transfers of residential property in Hong Kong. These include:

  • Lowering the rate of both the Buyer’s Stamp Duty and the New Residential Stamp Duty by half, from 15% to 7.5%;
  • Reducing the applicable period of the Special Stamp Duty from 36 months to 24 months;
  • Suspending stamp duty for the acquisition of residential property by eligible incoming talents who are non-Hong Kong permanent residents at the time when the property is acquired. This talent attraction measure exempts eligible incoming talents from liabilities in respect of Buyer’s Stamp Duty (7.5%) and the New Residential ad valorem Stamp Duty (7.5%). However, they are still required to pay ad valorem stamp duty at Scale 2 rates.

The three aforementioned measures came into operation on 25 October 2023.

China to Implement Measures to Boost Cross-border Investment

China’s State Administration of Foreign Exchange (“SAFE”) is set to ramp up efforts to boost cross-border investment and provision of financial support for tech-oriented small and medium-sized enterprises. To enhance the competitiveness of China’s financial industry, measures will be implemented to expedite the opening-up of capital accounts.

As part of ongoing efforts to promote cross-border trade and investment, the SAFE will continue to roll out policies to improve cross-border financing facilities for eligible SMEs. Targeted SMEs should possess exceptional innovation capabilities, operate in specific niche sectors, and have gained significant market share.

According to the Bank of China, tech-oriented SMEs contribute greatly to bolstering China’s prowess in science and technology. They play a pivotal role in sharpening China’s industrial chain competitiveness and providing solutions to innovation-related challenges. The aim is to enhance funding opportunities for these SMEs so that they can focus on research and development, industrialise their research outcomes more quickly, and acquire cutting-edge equipment.

In 2022, pilot programmes facilitating cross-border financing were extended to include tech-oriented SMEs, widening their access to borrowing from overseas. According to the SAFE, these initiatives have assisted 280,000 high-tech companies, which constitute 80% of such enterprises in China. In addition, as of the end of October 2023, China saw almost 1,000 multinational companies take advantage of cross-border capital pooling services. In addition, over 1.25 million facilitated capital account income payment transactions, to the tune of more than USD 200 million, were recorded in China.


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