FOREIGN DIRECT INVESTMENTS
Stabilize the Foreign Trade and Foreign Investment Mentioned in PRC Government Work Report 2020
A closing meeting of the third session of the 13th National People’s Congress was held in Beijing on 28 May 2020 and the resolution on the report on the work of the Government was adopted and approved. The key messages for foreign investors are the following:
- Promote a higher level of opening-up of the Chinese market to foreign investments
- Support further liberalization and facilitation of international trade
- Provide guidance of healthy development of Chinese outbound investments
Full text of the Report can be downloaded from here: Download Report
China’s Civil Code coming into force on 1 January 2021
China’s third session of the 13th National People’s Congress voted to adopt the Civil Code of the People’s Republic of China, which will come into force on 1 January 2021. The current Marriage Law, Inheritance Law, General Principles of Civil Law, Adoption Law, Guarantee law, Contract law, Property law, and Tort Liability Law shall be repealed simultaneously. It is a systematic integration and compilation of decentralized civil legislation since 1949. One of the key points of the amendment of the Civil Code is to strengthen the protection of personal information and privacy.
The State Council Issues the Overall Plan for the Construction of Hainan Free Trade Port
On 1 June 2020, the Overall Plan for the Construction of Hainan Free Trade Port, formulated by the State Council, was officially released. The key policies include but not limited to:
- Maximum personal income tax of 15 percent high-end talents;
- Corporate income tax of 15 percent on encouraged industrial enterprises;
- Exempt from import duties, import value-added tax and consumption tax on imported goods purchase by island residents;
- Conduct the negative list of cross-border trade in services for Hainan Free Trade Port;
- Conduct a negative list management system on the issuance of work permit for foreign employees.
TRADE, CUSTOMS AND INDUSTRIES
Further compliance management guidelines for online retail platforms
The China Council for the Promotion of International Trade has completed the drafting of The Compliance Management Guide for Online Retail Platforms. The draft was published on 5 June 2020 for consultation until 26 June 2020.
The Compliance Management Guide for Online Retail Platforms includes detailed rules on the online retail operators in adopting compliance grading, assessment, management & supervision of online retailers. It is suitable for online retail platform operators in evaluating and managing the compliance of online retailers applying for joining the platform.
EMPLOYMENT & LABOR
Guangdong Province’s guidelines on applying for China visa under existing travel restriction
On 28 May 2020, the Foreign Affairs Office of the People’s Government of Guangdong Province issued an announcement explaining the basic procedures of applying for an invitation letter for the purpose of China visa under existing travel restriction imposed by the Ministry of Foreign Affairs of PRC and National Immigration Administration since 26 March 2020.
Foreign nationals engaging in necessary economic, trade, scientific or technological activities may apply for an invitation letter with the local Foreign Affairs Office, which then can be used to apply for a visa to enter China.
Similar procedures apply to other provinces. Foreign nationals who wish to travel to China should contact the local Foreign Affairs Office.
Shanghai – employer subsidy scheme for training fees
All types of enterprises in Shanghai affected by the pandemic which organized online training for employees and dispatched workers during the shutdown period can receive 95% subsidy based on the actual amount spent on the training course. Platform enterprises (e-commerce enterprises) and new business enterprises are eligible to apply. (Responsible units: Shanghai Municipal Human Resources and Social Security Bureau and Shanghai Municipal Finance Bureau)
FINANCE & TAXATION
The Application Period for Preferential Policy of Personal Income Tax of GBA is from 1 July to 15 August 2020
In accordance with Interim Measures of Guangzhou for Administration of Financial Subsidies under Preferential Individual Income Tax (IIT) Policies in Guangdong-Hong Kong-Macao Greater Bay Area (GBA), overseas high-end talents and talents in short supply who work within the administrative areas of Guangzhou shall be given financial subsidies if their IIT paid in Guangzhou exceeding the tax amount computed at 15% of their taxable income. The application period of this year for preferential policy in Guangzhou city begins from 1 July to 15 August.
Announcement of the State Taxation Administration on Matters concerning the Deferred Payment of Income Tax in 2020 by Small Low-profit Enterprises
From 1 May 2020 to 31 December 2020, small low-profit enterprises may defer the payment of corporate income tax for the current period after completing the filing of tax returns with prepayment according to the provisions in the remaining filing period in 2020, and the payment of all income tax amount may be deferred to the first period for filing tax returns in 2021.
Small low-profit enterprises refer to enterprises engaging in non-restricted and non-prohibited businesses, which satisfy three criteria simultaneously, namely, annual taxable income amount does not exceed RMB3 million, staff headcount does not exceed 300 and total assets do not exceed RMB50 million.
Written by China Consultancy Team, CW CPA
Among 108 global cities, Shenzhen was ranked 11th in the Global Financial Centers Index (GFCI) 27 Report published by the Z/Yen from the United Kingdom and the China Development Institute from Shenzhen.
The index evaluates thoroughly and ranks the world’s major financial centers in terms of business environment, human resources, infrastructure, development level and reputation.
As mainland China’s first-tier cities, Beijing, Shanghai, Shenzhen and Guangzhou have entered the top 20 in the world. Shenzhen came first among mainland Chinese cities in the Greater Bay Area and has played its special role. Shenzhen is expected to be a marketplace for innovation capital, with its advantages concentrated in the capital market, innovation investment and the service provision for the “Belt and Road”.
In additional, the GFCI questionnaire revealed that, Shenzhen was the 6th most mentioned city in terms of prospects over the next two to three years and was considered the 6th most competitive location for fostering a FinTech industry.
Written by Toby Wong, China Consultancy Team, CW CPA
In an unprecedented fashion, Shenzhen is currently striving to become a world-class new-type smart-city benchmark by increasing digitalization in social governance. In 2019, Shenzhen was ranked first among Chinese cities in terms of smart city development, according to the Information Research Center of the Chinese Academy of Social Sciences. It superseded the others, such as Hangzhou, Shanghai, Beijing and Guangzhou, with flying colours, having earned a comprehensive score of 77.4 points and been awarded a prize for taking the lead in smart city construction. How did Shenzhen achieve such a result?
The Shenzhen government has invested substantial resources to upgrade its smart city and digital government construction. In order to achieve this goal, Shenzhen is learning from other world-class cities to form a sound data management and security system, rapidly expanding the use of applications of big data, artificial intelligence, 5G and blockchain, and opening a new space in the digital world by promoting the integration of technologies, data and businesses across regions, systems, departments and industries.
With great determination and ambition, Shenzhen has been ready to face the challenges and opportunities of the digital era. Shenzhen plans to develop a new type of smart city operation and management system that is comprised of one city center, 11 district centers and numerous industrial centers. The Shenzhen Municipal People’s Government has also implemented a one-stop system that automatically reviews the applicants’ information of service items and approves their applications.
Regarding the livelihood, the information on personal documents, such as identity documents, driver’s licenses, social insurance, library and bank cards, will be integrated into one single account, through which residents can enjoy different types of services via fingerprint, facial recognition, identity card number or phone number. All such services will be consolidated on an official app.
Written by Toby Wong, China Consultancy Team, CW CPA
EMPLOYMENT & LABOR
Guangdong High People’s Court Answers Some Questions Concerning the Trial of Labor Disputes Under Covid-19 Outbreak
On 26 April 2020, Guangdong high people’s court and the Guangdong human resources and social security department issue a notification to unify the trial standards for labor and personnel disputes under covid-19 outbreak. It mentions that:
- If the employer has serious difficulties in production and operation due to the epidemic, through negotiation with the employee, it may change the labor contract by means as salary adjustment, job rotation, reduction of working hours, waiting for work, etc.
- If the employer and the employee fail to reach an agreement through negotiation, the employer shall terminate the labor contract in accordance with the relevant provisions of the labor contract law and pay for economic compensation to the employee.
FOREIGN DIRECT INVESTMENTS
China Agrees to Set Up Comprehensive Experimental Zones for Cross-Border E-commerce in 46 Cities and Regions
On 27 April 2020, the Chinese Government agrees to set up comprehensive experimental zones for cross-border e-commerce in 46 cities and regions, including Meizhou city, Huizhou city, Zhongshan city, Jiangmen city, Zhanjiang city, Maoming city and Zhaoqing city which are in Guangdong province. The government will make great efforts to explore innovations in the technical standards, business processes, regulatory models and IT infrastructure in the business-to-business (B2B) mode of cross-border e-commerce and work out more supporting measures.
Ministry of Commerce (“MOFCOM”) issued the Letter on Promoting the 24 New Measures of Shanghai Municipality for Foreign Investment Stabilization
MOFCOM is introducing 24 measures (“Several Measures”) intended to stabilize foreign investment, in four aspects, including:
- Putting in place the national policies for wider opening up;
- Stepping up efforts to boost foreign investment;
- Improving foreign investment facilitation; and
- Strengthening the protection of foreign investment.
These measures are believed to help foreign businesses in countering the impacts of the epidemic and sustain an open and convenient environment for investment in Shanghai. Specifically, regarding strengthening the protection of foreign investment, the Several Measures highlight the need to improve the transparency of policies related to foreign investment and strengthen reviews of the legality of foreign-investment-related administrative normative documents before they are officially released. In this regard, China shall seek opinions and advice from foreign-invested enterprises and relevant chambers of commerce and associations beforehand.
To access the full Chinese version of the document, please click here: http://images.mofcom.gov.cn/wzs/202004/20200424092434547.pdf
FOREIGN TRADE & CUSTOMOS
Increase in the List of Imported Fruit Species and Exporting Countries and Regions
On 15 May 2020, the General Administration of Customs updates the directory of the countries and regions that are allowed to import fresh fruits and the directory of the countries and regions that are allowed to import frozen fruits. The fruits allowed to be imported include Chilean fresh citrus, American fresh blueberry and American Hass Avocado.
Cybersecurity Review Measures Will Take Effect on 1 June 2020
Cybersecurity Review Measures, developed based on State Security Law and Cybersecurity Law, aim to ensure the safety of the supply chain of critical information infrastructure and guarantee national security. When a critical information infrastructure operator purchases any network products or services with a potential effect on national security, this purchase must go through a cybersecurity review in accordance with the new measures. During a cybersecurity review, the state security risk, which may be generated by the purchase of network products and services, will be evaluated and the following factors taken into consideration:
- the risk of illegal control over, disturbance or destruction of critical information infrastructure and the risk of critical data being stolen, divulged or damaged after the use of products and services;
- damage to the continuity of critical information infrastructure business, due to interruption of supply for the products or services;
- the security, openness, transparency and the diversity of sources of products or services, the dependability of the supply chain, and the risk of supply interruption due to factors such as politics, diplomacy or trade;
- conditions of compliance with state laws, administrative regulations and department rules by the provider of products or services; and
- other factors which may endanger the safety of critical information infrastructure and state security.
FINANCE & TAXATION
A Financial Support Guideline for the Development of the Guangdong-Hong Kong-Macao Greater Bay Area Has Been Issued
The Greater Bay Area consists of Hong Kong, Macao and nine cities in Guangdong — Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen and Zhaoqing. The guideline was jointly issued by the People’s Bank of China, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission and the State Administration of Foreign Exchange on 24 April 2020. The guideline put forward 26 specific measures for these five areas:
- Promoting the Greater Bay Area’s cross-border trade and facilitating investment and financing;
- Expanding the opening-up of the financial sector;
- Promoting the connectivity of financial markets and financial infrastructure;
- Boosting innovation of the Greater Bay Area’s financial services; and
- Preventing cross-border financial risks.
Important tax matters for attention in May
For taxpayers who file tax return on a monthly basis, the deadline for filling tax returns in May is extended to 22 May 2020.
Although the monthly filing period has been extended, the enterprise still needs to complete the year 2019 final settlement of corporate income tax before 31 May 2020.
Written by China Consultancy Team, CW CPA
To alleviate the impact of the COVID-19, the Chinese government has introduced a series of supporting policies at both central and local level. In the following, we have summarized some of the key relief measures.
Measures at Central Level
Policies Related to Foreign Investment
Tariff on self-use equipment imported for foreign investment projects encouraged by the Catalogue of Industries Encouraging Foreign Investment will continue to be waived within the investment quota. For projects beyond the investment quota, project companies can make applications with the provincial development and reform commission to enjoy tariff exemptions.
Postponement in Principal and Interest Repayment for Loans to SMEs and Micro Enterprises
SMEs and micro businesses affected by the epidemic can make applications with banks to defer repayment of principal and interest expenses payable from 25 January to 30 June 2020. Overdue loan repayments in the period will not be subject to penalties. Before the end of June, enterprises can also apply for deferred payment of the housing fund.
Extension of Tax Filing Deadline
According to the latest Circular issued by China’s State Administration of Taxation, the tax declaration deadline in May is postponed to 22 May 2020, nationwide. Taxpayers who still have difficulties in meeting the new deadline due to the severe impact of the epidemic can apply to the relevant tax authorities for further extensions.
Supporting the “Difficult Industries”
Transportation, catering, accommodation, tourism industries are categorized as “difficult industries”. For losses incurred by enterprises in difficult industries seriously affected by the epidemic in 2020, the maximum carryover period may be extended from five years to eight years.
Measures at Local Level (Selected cities in Guangdong Province)
Local governments mainly formulate policies from the following two aspects:
- Reducing labor cost, social insurance premium and housing fund, e.g. SMEs are exempted from pension, unemployment and industrial injury insurance expenses borne by enterprises from February to June 2020.
- Launching preferential tax policies, e.g. the VAT rate of small-scale taxpayers will be reduced from 3% to 1%; Measures for tax deduction and exemption will be provided for manufacturers of key materials for epidemic prevention and control.
- Enterprises producing epidemic prevention materials are encouraged to expand investment in technological transformation. The enterprises can receive a maximum subsidy of 20 million yuan for not exceeding 50% of the investment in equipment.
- The housing provident fund contribution rate is reduced, in which the minimum deposit rate is reduced from 5% to 3%; the housing provident fund payment is also postponed. The period of enjoyment cannot exceed 12 months.
- Require all banking institutions to ensure that the credit balance and the number of households of small and micro businesses and individuals in the first half of 2020 are not lower than that of the same period in 2019.
- For catering, accommodation, tourism, trade, transportation and other industries that are greatly affected by the epidemic, banks are encouraged to reduce the original loan interest rate by more than 10%.
- Policy-based financing guarantee companies at the municipal and district levels will cancel the counter-guarantee requirements, and the guarantee rate of the affected enterprises will be lowered by 1% point compared with the same period last year.
- In 2020, the Bank of Guangzhou and the Rural Commercial Bank of Guangzhou plan to increase loans to micro, small and medium-sized enterprises by 57 billion yuan and cut the interest rate for new loans to micro, small and medium-sized enterprises across the board, by no less than 10% compared with the same period last year.
- The qualified enterprises, including the “Made In Dongguan” brand exhibition and sales center outside the province, shall be given subsidies of up to 1 million yuan.
- Provide employment subsidies to enterprises that directly recruit employees who are employed in Dongguan for the first time, expand social insurance subsidies for small and micro enterprises to college graduates within two years after graduation, and provide one-time employment subsidies to enterprises that recruit employees who register unemployment for more than half a year.
- 30 million yuan arranged for the development of local mask production equipment enterprises, providing subsidies for enterprises to produce and sell mask machine.
- Set up 10 million yuan of special funds, giving no more than 12% of the subsidies to insurance products related to resuming work and production of the enterprise products.
Following the implementation of various measures, we believe that China’s domestic market and its competitive advantages in attracting foreign investment will remain unchanged. The central and local governments are expected to roll out further stimulus measures for various industries. Companies should keep a close eye on these developments, evaluate their operations in China, and make prompt applications if they are eligible to benefit from these incentives and supporting measures.
Written by Delilah Li, China Consultancy Team, CW CPA
During this difficult period of Covid-19, the aviation market is trying to find the best way to work around the situation to avoid a further chaos.
“Thousands of health professionals are heroically battling the virus, putting their own lives at risk. Governments and industry are working together to understand and address the challenge, support victims and their families and communities, search for treatments and a vaccine.” (Michael Walsh CEO of Aer Mobi & PBEC Pacific Basin Economic Council, Hong Kong).
A lot of aviation companies all around the world reduced their schedule for many reasons, one of them is the lockdown and another due to the government traffic limitations. Some places such as Hong Kong, the Government authorities allow only their own citizens to enter in HKSAR or people who has the resident permit.
The governments of all countries are the main support to give assistance and stimulus for the companies avoiding their collapse. The sectors which are more affected are airliners, their suppliers and airports. For instance, the US has provided the largest amount of aid, offering $58B to airlines and cargo carriers while the Hong Kong Government has pledged to acquire 500,000 airline tickets from local carriers to help with liquidity efforts on top of airport subsidies.
China green shoots – Recovering from Covid-19
There are promising signs of a recovery in China, as the government has opened up a majority of major tourist attractions and there has been increased hotel occupancy and city transport use. Although air ticket sales have rebounded slightly as essential travel has returned, sales since then have plateaued, suggesting lasting caution from consumers and preference for local travel.
On 8 April, the Wuhan Tianhe International Airport reopened to a reduced schedule of domestic flights, as Chinese carriers gradually resumed flying to the then-epicenter of the outbreak. In total, it mounted more than 30 flights on the first day of operations. The airline company China Eastern Airlines reported that the first flight operated was a domestic flight to Sanya in Hainan province carrying a total of 46 passengers, the compatriot China Southern saw its first flight take off bound for Chengdu carrying 81 passengers. Air China’s first flight of the city was also bound for Chengdu.
The majority of the countries needs medical supplies to support the health professionals, patients and the population. And now with the resumption of the flights, China can resume the exportation of these supplies. Wuhan is one of the cities which has a large manufacture of medical supplies.
How will Sustainability efforts for a low carbon aviation industry by 2050 be adversely affected by Covid-19?
- Economic stimulus, there is an argument to be made that it should focus on advancing the energy transition—but there is no reason it must. Jobs will be a far more important driver than emissions, and it is easy to see investments to create jobs being sharply at odds with a low-carbon transition.
- Government intervention, it may offer a lifeline to industry without strings, or they might steer industry in a specific direction, or they might step back and let the market sort out who should survive and who doesn’t.
- Money talks, oil and gas companies are often profitable, and those profits can fund the energy transition—either directly, as in the case where they make investments in technologies that are essential (like carbon capture and storage) or when they invest in adjacent energy sectors like solar, wind, or battery charging; or indirectly, when they pay dividends to shareholders who can then pump that money into low-carbon energy sources.
- Sustainable Aviation Fuels transition, Covid-19 a definite body blow for SAF – Sustainable Aviation Fuels transition efforts. Airlines are already deferring committed batch orders in 2020 and the price gap between SAF v Jet A1 fuel cost per USG is going to be a lot harder to justify to stakeholders in the short term when saving jobs and the survival of the airline is at stake. However, in talking to Neste it is clear that they feel large airline groups and certain governments will and must play a major role. Mandating the transition and offering stimulus to those who commit can mean the SAF market set-back is only temporary. In fact, it allows for the industry in the meantime to ramp up infrastructure to accommodate the transition faster and further reduce the gap in cost.
- Business Aviation can play a role, it can actually be a catalyst for further uptake and adoption of SAF and used as part of the experiment to further its cause as a sustainably aware sector – whilst in parallel continuing its advocacy and lobbying efforts to remain an essential economic driver especially in the recovery phrase of a post Covid-19 world where safety, security and health will be priorities for returning senior executives requiring to fly again globally.
Finally coming to the ongoing sustainability efforts in aviation. Cost control has always been a driving factor sometimes over quality in the business aviation sector as margins are always thin and competition fierce. So it begs the question of whether Covid-19 has adversely affected the low carbon industry target of 2050, especially when being the main polluters alongside airliners, the sector has little or no cash to spare on more expensive alternative aviation fuels touted by the fuel giants without owners and users buying in.
*This article was based on a research by Michael Walsh CEO of Aer Mobi & PBEC Pacific Basin Economic Council, Hong Kong.
FOREIGN DIRECT INVESTMENTS
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.
FINANCE AND TAXATION
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.
Written by China Consultancy Team, CW CPA
2020 is destined to be remembered as a turbulent period in the human history. The outbreak of COVID-19, which is declared by WHO as a global pandemic, is impacting the world’s social and economic environment profoundly. As the first country hit by the epidemic, China is taking aggressive measures slowing down the spread of the coronavirus.
China nowadays is responsible for 17% of the world’s economy and drives 30% of the world’s GDP growth, taking a much higher stake compared to during the SARS epidemic period in 2003. Since mid-February when the outbreak in China reached its peak, the Chinese government has already started making plans to restart the economy by a series of economic and financial policies.
First and foremost, to save the small businesses from running out of cash, China’s central bank has injected RMB 1.2 trillion ($174 billion) into the market and reduced the interest rate for commercial lenders to 2.5%. The State Council also ordered large state-owned banks to increase lending to small businesses by at least 30 percent in the first half of 2020. At the same time, the central government encouraged local governments to draft up support policies to help small businesses pay less, including phased tax cuts, postponed payments, deduction and waiver of social insurance fees, as well as discounts in utilities fees.
Under the waves of economic stimulus, businesses in China are racing to find silver linings in the looming presence of economic slowdown. Supermarkets, traditional food markets, restaurants, gyms, and those used to rely on physical space are adapting to new business models for online sales. Many restaurants recently received takeout orders that have accounted for 90% of the business. Hema (盒马), a fresh food retailer, has seen a surge of online orders during the epidemic and has recruited more than 1,500 employees from over 30 suspended catering companies. The logistics industry, although largely impacted by the travel ban, is still busy arranging daily deliveries to the local communities. Some health clubs and gyms are aiming at online marketing to enhance customer relationship by streaming teaching videos. Online education, internet medical treatment and online office solutions are also developing rapidly.
In the space of just a few weeks, business owners have, of necessity, begun to transform their businesses in a digital way. Some may struggle, and hopefully most will make it through. Take a moment to remember how JD.COM became one of the biggest online retailers in China. During SARS outbreak in 2003, Mr. Richard Liu, the founder of JD.COM, suffered RMB 8 million in less than a month. When the company had only 3 months’ of cashflow available to burn, he closed his brick-and-mortar shop and launched a retail shop online, which evolved to JD.COM today.
All of that said, there are also sound reasons to be concerned about how small companies can survive the COVID-19 outbreak when China’s economic landscape is much different from that during SARS. Just before the COVID-19 made its entry on the stage, the country’s economy was already slowing with multiple consumer sectors suffering weak demand, rising labor costs, growing debt and rapid aging. During the coronavirus outbreak, the closure of businesses has inevitably caused many companies to suffer huge sunk costs such as rent, salaries, inventories, etc. Even when the outbreak is over, the public needs time to overcome the fear of activities that require social interaction. Businesses have legitimate reasons to be uncertain about sustaining profitability.
Regardless, one thing is clear – the coronavirus is staying with us for a while. Businessmen may be restricted from traveling to close deals by shaking hands. But they are not restricted from looking for new business opportunities through innovation and change. China will continue to roll out policies to stimulate the economy along with the measures to contain the outbreak. It is advisable to study these policies carefully, as the government policy is usually a good compass pointing to the direction of the country’s next economic focus. Funds and incentives are available in the development of strategic sectors. When the outbreak is over, China will accelerate the recovery by rewarding those who stick around.
Written by Delilah Li, China Consultancy Team, CW CPA
The ongoing coronavirus COVID-19 outbreak has caused disruptions to businesses in different sectors, not only in China but also across the globe. Ever since China’s annual Spring Festival holiday, the country has united to fight together against the spread of this epidemic through various methods, such as by extending the holidays and requiring people to stay at home. Recent statistics have indicated that the number of new infections is declining, and major cities in China have issued guidelines for companies that wish to resume work as soon as possible. This article provides a few suggestions on how businesses shall cope with the impacts of the Coronavirus COVID-19 Outbreak.
Wage payment calculation during the epidemic control period
China has stringent employment laws and regulations to protect the legal rights and benefits for the Chinese employees. Employment relationship management during the epidemic outbreak period is a real-life test to examine how strong your HR compliance management is. A lot of companies have asked their Chinese employees to work from home after the Spring Festival holiday. As we approach the end of February, please make sure that your payroll calculation is in line with the central and local government rules, especially for employees that have worked during the extension of Sprint Festival holiday ( 31 January – 2 February), delayed work resumption period (3 February – 9 February) and after 10 February.
Know how to apply interim policies to ease the cash flow burden
Healthy cash flow is vital to the survival of any business. The Central Government is committed to helping businesses in all sectors to resume work and production by providing financial relief such as loan interest discounts and tax benefits as well as encouraging local government to roll out further policies for reducing the financial burden of small-and-micro businesses. Pay attention to the provincial and district policies which may apply to your company, such as reducing rent and recruitment costs, extending tax filing and social insurance contribution deadlines, providing allowances for online employee training, adopting flexible hour working schedule, etc.
Is your company required to file an application before resuming work?
Affected by the outbreak, most provinces have announced a delay to work resumption until 10 February. After that date, a filing system with the local government has been implemented before companies resume work in many cities. This filing system requires most companies to assume responsibility for preventing and controlling the spread of coronavirus among employees and to cope with the on-site inspection by government personnel. While you are eager to see your employees back to work, please do not forget to check the local requirements for preparing for the resumption of work.
Fulfilling regulatory obligations while avoiding travel
As the outbreak is still ongoing, city lockdown and travel restrictions are currently in effect. Consequently, it is difficult to fulfill your regulatory obligations by filing applications physically. You may try to make telephone inquiries to the relevant local authorities on whether the online application of submission by mail/courier is possible. In most cases, it’s best to postpone your travel plans or engage a local agent to run the errands. If you need to send important documents to China, it is worth noting that the ongoing outbreak will cause some delay in cross-border customs clearance.
Risk management strategy
The WHO has declared the current outbreak as a “Public Health Emergency of International Concern”. Certainly, you should respond rapidly to protect the health and safety of the local workforce. But make sure that the management team is not too distracted by monitoring and mitigating the medical risk. Your risk management strategy should also address the business aspects, such as supply chain, sales and marketing, customer relationships, operations, and HR procedures, how to stay strong with minimal economic impact for now, and how to drive the business back on track after the outbreak is under controlled.
Transforming your organization digitally
Every threat comes with an opportunity. The coronavirus outbreak has caused many businesses to re-consider digital transformation in how they operate. As a result, online communication tools such as Skype, Zoom, Microsoft Teams, become a daily necessity. Employers are forced to use online software to monitor the whereabouts of the employees and their working schedules. How long the outbreak will last is still unknown. What’s certain is that many companies will continue to reap the benefits of integrating digital tools into their organizational management. Efficiency can be achieved by encouraging employees to work from home. Colleagues develop habits of participating in online discussions actively. Administrative overhead costs and paperwork can be reduced significantly.
Written by Edwin Yin and Toby Wong, China Consultancy Team, CW CPA
Has your team in mainland China returned to the office after the coronavirus outbreak? Please do not hurry in opening the physical premises immediately if your team has not resumed duty yet.
Enterprises should pay special attention to the local administrative rules regarding the work resumption. Please make sure that your enterprise has followed the policy measures closely and completed the necessary paperwork required by local authorities to apply for resumption of work with a disease control team at the street or district level in advance.
We have summarized some of the general requirements as follows.
1. Prevention and control mechanism are in place
Enterprises should formulate and improve epidemic prevention and control measures and emergency plans. Accountability system and the responsibilities of each person-in-charge at all levels shall be defined. An epidemic prevention and management system shall be established.
2. Staff monitoring is in place
Enterprises must do a good job of employee monitoring and registration. Each employee who resumes duties shall have his/her health conditions and travel history within the past 14 days reported to the enterprise. For those employees who are from or have been to seriously affected areas, a record should be set up and health management measures shall be taken. They may report duty if they do not have symptoms after 14 days of observation. Those who are still stranded in seriously affected areas should be asked to postpone their return to the office.
3. Facilities and materials are in place
Enterprises must prepare necessary epidemic prevention materials, such as infrared thermometers, disinfectants and surgical masks, and set up quarantine areas. Enterprises whose conditions do not allow such set up should specify the quarantine observation sites and register with the local bureau according to the unified arrangements of the located city and the district.
4. Internal management is in place
Enterprises should do a good job of ventilation, disinfection and sanitation management of the workplace and the staff quarters. In principle, enterprises should adopt “closed-off” management and a flexible work system. It is strictly forbidden that unrelated personnel enter the workplace of the enterprise. Body temperature of all entering personnel should be detected. Enterprises should encourage the implementation of shift work, online work platforms, videoconferencing and decentralized dining in order to reduce the staff movements and the risk of mass gathering.
5. Publicity and education are in place.
Enterprises should formulate staff training plans for epidemic prevention and control. Propagandas should be set up in prominent locations of the workplace for the mass education of epidemic prevention and control, improving the knowledge of the personnel. Publicity and education should be properly done through multiple channels.
Prior to the resumption of work, the company should take measures to ensure the health and safety of all the employees. Epidemic prevention facilities and materials, such as quarantine areas, surgical masks and disinfectants, should be prepared.
CW is glad to assist your company to prepare for resumption of work. Once you decide to resume the physical premises for work, please let us know and do not worry about the administrative work involved. Please plan ahead accordingly.
Written by Edwin Yin and Toby Wong, China Consultancy Team, CW CPA