FOREIGN DIRECT INVESTMENTS 

China works to further stabilize foreign trade and investment 

In a circular published by the State Council on 12 August 2020China urged efforts to further stabilize foreign trade, investment, and industrial supply chain.  The circular contains 15 opinions in six areas, namely employment, people’s livelihoods, the development of market entities, food and energy security, stable operation of industrial and supply chains, and operations at grassroots levels. It also seeks to stabilize employment, finance, foreign trade, foreign investment, domestic investment and market expectations. 

From CW’s perspective, we think the key highlights are: 

  • To facilitate foreign businessmen’s trips to China. With strict epidemic prevention and control measures in place, negotiations on green channels with other countries should continue in order to facilitate personnel exchanges in important business, logistics, production and technical services of foreign trade and foreign enterprises. 
  •  To encourage foreign capital to flow to high-tech industries. China will promote the facilitation of management and services in qualifying “new and high technology enterprises, and further strengthen the training and publicity of the application requirements for the recognition of new and high technology enterprises. 
  •  To lower the threshold for foreign R&D centers to enjoy preferential policies. China will reduce the required number of full-time R&D personnel in foreign-invested R&D centers that are subject to preferential tax policies. (Currently, to set up a foreign-invested R&D center in China, personnel possessing a Bachelor’s degree or a higher degree and directly engaged in R&D activities shall constitute no less than 80% of the total staff number in China.) 

Source: 国务院办公厅关于进一步做好稳外贸稳外资工作的意见 国办发〔202028 (http://www.gov.cn/zhengce/content/2020-08/12/content_5534361.htm) 

 

IMMIGRATION 

China borders reopen for 36 European countries 

The Embassy of People’s Republic of China in Denmark issued an announcement on 10 August 2020 stating that foreign nationals from the countries listed below who hold valid residence permits, including work permit, permit for family reunion and personal matters, may apply for visas for free at any Chinese embassy or consulate in these countries.  

Upon entering China, these foreign nationals will be subject to the epidemic prevention regulations of the local governments. 

List of applicable countries: 

Albania, Ireland, Estonia, Austria, Bulgaria, North Macedonia, Belgium, Iceland, Bosnia and Herzegovina, Poland, Denmark, Germany, France, Finland, the Netherlands, Montenegro, Czech Republic, Croatia, Latvia, Lithuania, Luxembourg, Romania, Malta, Norway, Portugal, Sweden, Switzerland, Serbia, Cyprus, Slovakia, Slovenia, Spain, Greece, Hungary, Italy, United Kingdom 

 Source: Visa Facilitation for Some Foreign Nationals with Valid Chinese Residence Permits (https://www.fmprc.gov.cn/ce/cedk/eng/cs/t1805331.htm)  

HUMAN RESOURCES

Notice Regarding Several Issues on Participation of Labor Dispatch Companies and Human Recourses Service Companies in Social Insurance Scheme  

Given the common situation of “paying social security on behalf” in labor dispatching companies and human resource service companies, the Beijing Social Insurance Fund Management Centre issued the Notice which took effect on July 5, 2020. 

By forcing the companies to fill in the information related to labor contracts when registering or adding new employees through the online service platform and the three-insurance business system, the Center takes strict control of such situations of these companies in advance. Especially for companies that have not yet registered entity in Beijing, if the actual labor entity entered does not exist in the system, there will be a corresponding prompt alert, which will not be able to complete the insurance registration or adding new employee. Labor dispatching companies and human resource service companies in Beijing can no longer pay social insurance on behalf in Beijing for employees who are hired by companies registered outside Beijing, nor can dispatch employees to companies registered outside Beijing.  

Even though the notice applies to the city of Beijing, the notice may serve as a reference in other cities in regulating the labor dispatch and human resources service agencies paying local social insurance on behalf of companies registered in a different city.  

 

CUSTOMS 

China reinstated tax exemption and reduction for the importation of 20 commodities 

From 5 August 2020, 20 categories of commodities, imported either by consumers or businesses, can now enjoy applicable tax exemptions and reduction policiesThese commodities include TV, video cameras, video recorders, disc players, audio equipment, air conditioners, refrigerators, and freezers, washing machine, cameras, copiers, program-controlled telephone switches, microcomputers and peripherals, fax machines, telephones, wireless paging system, electronic calculators, typewriters and word processors, furniture, lamps and lanterns, meal (seasoning, meat, eggs, aquatic products, fruit, beverage, wine, dairy products). 

Currently, duty-free customs clearance applies to items for personal use obtained abroad and brought in by Chinese nationals with a total value of no more than RMB 5,000 and items for personal use brought in by foreign nationals with a total value of no more than RMB2,000Before 5 August 2020, cigarettes, alcohol, and the aforementioned 20 categories of commodities are excluded from the exemption. With the new announcement in place, the 20 categories of commodities can benefit from the duty-free policy. 

Source: 财政部 海关总署 税务总局关于不再执行20种商品停止减免税规定的公告 (http://gss.mof.gov.cn/gzdt/zhengcefabu/202008/t20200813_3566883.htm) 

 

FINANCE AND TAXATION 

China’s State Administration of Taxation clarified issues related to the creation of permanent establishment as well as the residence status of companies and individuals during COVID-19 crisis 

Due to the COVID-19 outbreak, many countries have imposed restrictions on entry and exit, resulting many key employees of many companies stranded and forced to work in other countries, which has raised a number of cross-border tax issues. On 14 August 2020, China’s State Administration of Taxation published responses to frequently asked questions related to the creation of permanent establishment and the residence status of a company (place of effective management) as well as issues related to a change to the residence status of individuals, based on the Agreement Between the Government of the People’s Republic of China and the Government of the Republic of Singapore on Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income and the Interpretations on the Articles in the Protocol [Guo Shui Fa (2010) No. 75] 

Key takeaways: 

  • Home Office: The exceptional and temporary change of the location where employees exercise their employment because of the COVID-19 crisis, such as working from home, should not create new PEs for the employer. 
  • Agency PE: During the COVID-19 crisis, an employee or an agent temporarily working from home and exercising an authority to conclude contracts for a non-resident employer is usually considered as emergent behavior and unlikely to be regarded as habitual. However, a PE should be considered to exist where the relevant activities took place long before the COVID-19 crisis, or continue for the long term after the COVID-19 crisis, since such activities have a certain degree of permanency and are not purely temporary or transitory. 
  •  Construction site PE: Many activities on construction sites are being temporarily interrupted by the COVID-19 crisisSuppose there is a construction site that has not constituted or will not constitute a PE under the applicable tax treaty according to its original time schedule. However, due to the COVID-19 crisis, the construction and management personnel have all been evacuated from the construction site, causing the temporary interruption of the construction project. As a result, the actual duration of the construction site exceeded the PE time-threshold. In calculating the duration of the project, deductions shall be allowed for the dates of total shutdown due to the impact of COVID-19.  
  • Residence status of a company (place of effective management): Due to the temporary changes in the decision-making places of some senior executives due to COVID-19, the judgment on the location of the actual management will not be affectedA temporary change in location of the chief executive officers and other senior executives is an extraordinary and temporary situation due to the COVID-19 crisis and such change of location should not trigger a change in residency. 
  • Residence status of individuals: A person who is temporarily away from their home and gets stranded in the host country by reason of the COVID-19 crisis and attains domestic law residence in the host country, the “tie-breaker test” shall be used to determine the individual’s tax residencybased on the individual’s permanent residence, center of vital interests, habitual adobe and nationality (in the order in which they appear in the treaty). 

Source: 疫情防控期间税收协定执行热点问题解答 (http://www.chinatax.gov.cn/chinatax/n810219/n810744/c101510/c101520/c5155584/content.html) 

Written by China Consultancy Team, CW CPA

The recent outbreak of COVID-19 has severely disrupted our daily lives and business operations. As of 19 July 2020, the total confirmed cases in Hong Kong has reached over 1,800Tminimize transmission of imported cases, a mandatory 14-day quarantine for persons entering Hong Kong was implemented on 8 February 2020. Under the travel restrictions, multinational companies requiring routine travelling have been forced to suspend business trips, changing their work patterns. 

 

Recently, the Government of Hong Kong SAR announced that Hong Kong enterprises with manufacturing operations in the Mainland can apply for exemption from the compulsory quarantine arrangement. Under the amended section 4(1)(b) of Cap. 599C, the Chief Secretary for Administration has exempted the following category of persons from the compulsory quarantine arrangement with effect from 4 May 2020 –  

 

(a) either the owner of a Hong Kong enterprise with a valid business registration certificate issued under the Business Registration Ordinance (Cap. 310) and with manufacturing operations in the Mainland, and up to one personnel employed and so authorized by the enterprise; or 

(b) up to two personnel employed and so authorized by such an enterprise as described in (a). 

Upon successful application, the exempted person may travel to and stay in the city where the Mainland factory of the enterprise’s manufacturing operations is located, for supporting the operation and business of the factory. When returning to Hong Kong, the person is exempted from the 14-day quarantine, but will be subjected to medical surveillance arranged by the Department of Health during his/her stay in Hong Kong, and will be required to wear masks and check body temperature daily, as well as to report to the Department of Health on any discomfort. 

 

The above arrangement would allow flexibility for Hong Kong companies to send personnel to designated Chinese cities and support their manufacturing operations.  The personnel are not subject to mandatory quarantine in Hong Kong when they return from their business trip.  However, they may still be subject to local quarantine requirements in mainland China when they travel outbound from Hong Kong. 

 

What CW can do for you: 

CW can assist our clients with the application of the above-mentioned exemption including 

  • analyzing the application criteria, and 
  • preparing and submitting the application. 

 

Contact: 

 

Toby Wong  

toby.wong@cwhkcpa.com 

 

Written by Toby Wong, China Consultancy Team, CW CPA 

FOREIGN DIRECT INVESTMENTS 

The 2020 edition of the Negative List of Foreign Investment Access released. 

 

On 23 June 2020, the National Development and Reform Commission and the Ministry of Commerce respectively issued the Special Administrative Measures for Foreign Investment Access (Negative List) (2020 Edition) and the Special Management Measures (Negative List) for Foreign Investment Access in Pilot Free Trade Zones (2020 Edition), effective as of 23 July 2020. The national negative list of foreign investment access has been reduced from 40 to 33, and the negative list of foreign investment access in pilot free trade zones has been reduced from 37 to 30. The main changes include the following: 

 

  • In the pharmaceutical industry, the prohibition on foreign investment in traditional Chinese medicines prepared in ready-to-use forms will be removed 
  • In the education sector, wholly foreign-owned vocational education institutions with schooling are allowed to be established. 
  • In the financial sector, the restrictions on the ratio of foreign shares in securities companies, securities investment fund management companies, futures companies and life insurance companies will be removed. 
  • In the infrastructure sector, the provision that the construction and operation of urban water supply and drainage networks with a population of more than 500,000 must be controlled by Chinese investors will be removed. 
  • In the manufacturing sector, the restrictions on foreign shares in commercial vehicle manufacturing will be removed, and the provisions prohibiting foreign investment in radioactive mineral smelting, processing and nuclear fuel production will be removed. 
  • In the agricultural sector, the proportion of Chinese shares shall not be less than 34% on breeding of new wheat varieties and seed production. 

 

China to tighten regulations on cosmetics business.

 

On 29 June 2020, The Regulations on Supervision and Administration of Cosmetics (hereinafter referred to as the “New Regulations”) was officially promulgated and will take effect on January 2021.  

Compared to the existing regulations, the new regulations have stepped up to tighten the administration and supervision of market players in the cosmetics industry. Highlights include: 

  • The new regulations clearly stipulate the types of new raw materials that need to be put on record and registered, as well as the specific procedures, the materials submitted, and the review period. 
  • Reclassify the categories of cosmetics.  
  • It further clarifies the responsibilities and obligations of relevant personnel, and their legal liability of noncompliance. 
  • The new regulations put forward requirements for the actual effect of efficacy components and raise higher expectations on cosmetics producer’s management and research and development. 
  • The new regulation has increase penalties for violations and committed drive serious offenders out of the market. 

 

 

IMMIGRATION 

Personnel entering Guangdong Province at Guangdong Macao port will no longer be subject to centralized isolation from 15 July 2020. 

Since 6:00 a.m. on July 15, personnel entering Guangdong Province from Guangdong and Macao ports will no longer be subject to centralized isolation for 14 days of medical observation, except for those diagnosed with COVID-19suspected to be infected, having had close contacts with patients, showing signs of fever or respiratory symptoms, or having been visited by overseas personnel within 14 days prior to arrival in Guangdong province. Pre-entry preparations include: (1) Completion of nucleic acid testing. (2) Application for “Macao Health Code” and “YueKang Code”. 

Personnel who enter the Guangdong province through Macao can only conduct activities in nine cities, namely Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen, Zhaoqing. 

For Macao residents who work or live in Guangdong province and mainland China residents who come back to Guangdong province after visiting Macao, their movements are limited to Guangdong province. 

 

FINANCE

The People’s Bank of China to Launch Two Year Trials for Large-sum Cash Management. 

The People’s Bank of China recently issued the “Notice of the People’s Bank of China on the launch of Large-amount Cash Management pilot project”,  in which it has decided to carry out the pilot project in Hebei Province, Zhejiang Province, and Shenzhen from July 2020.  

In all the pilot areas, cash transactions of 500,000 yuan or more in business accounts will be monitored and regulated.  

For personal accounts, Hebei, Zhejiang and Shenzhen have set regulation thresholds at 100,000 yuan, 300,000 yuan and 200,000 yuan, respectively. Residents the pilot areas will need to provide information about the source of deposits or the purpose of withdrawals for transactions over the threshold.  

Financial institutions should make sure personal deposits or withdrawals exceeding the threshold amount are traceable and associated with serial numbers of physical cash. 

 

Greater Bay Area – “Cross-border Financial Management Link” iabout to bimplemented. 

To support the development of Guangdong-Hong Kong-Macao Greater Bay Area (“GBA”) and facilitate cooperation between mainland China and Hong Kong as well as Macao, on 29 June, the People’s Bank of China, the Hong Kong Monetary Authority, and the Macao Monetary Authority decided to launch a “Cross-border Financial Management Link” program in the GBA . 

“Cross-border Financial Management Link” facilitates cross-border investments of individual residents of GBA in financial products sold by the Banks in GBA. Mainland residents in GBA may open special investment accounts with banks in Hong Kong and Macao to purchase eligible investment products sold by these banks. Residents of Hong Kong and Macao can open special investment accounts with mainland banks in the mainland GBA cities to purchase eligible wealth management products sold by mainland banks. 

 

TAXATION 

 

Shenzhen issues guidelines on applying individual income tax subsidies in the Greater Bay Area. 

 

On July 2020, Shenzhen issued the Notice on implementing the Preferential Policies of Individual Income Tax in the Greater Bay Area of Guangdong province, Hong Kong and Macao, and the Guidelines for the Application for Subsidies of Individual Income Tax for 2019 for high-end talents and talents in short supply.  

 

Eligible applicants will be granted subsidies according to the difference of individual income tax burden between the mainland and Hong Kong. And the subsidies will be exempted from individual income tax. 

 

 

China announced new tax policies to support film businesses. 

 

In order to support the development of film and other industries, the relevant tax policies are announced as follows: 

 

  • From 1 January 2020 to 31 December 2020, the income obtained by taxpayers in providing film projection services shall be exempted from VAT. 
  • The longest period for loss carried forward of film industry enterprises in 2020 will be extended from 5 years to 8 years.  
  • From 1 January 2020 to 31 December 2020, the construction fee of cultural undertakings will be exempted. 

 

Written by China Consultancy Team, CW CPA

Six months after the human-to-human transmission of the COVID-19 virus was confirmed, economic recovery has begun in countries in the Asia Pacific region. As of today, most of the economies in this region have emerged from confinement and commercial activities have been gradually resumed. Thanks to their previous experience with SARS, these countries appear to have managed to control health crisis in a short period of time. Just a few weeks ago, the first online edition of the Canton Fair was held, meanwhile several countries are exploring the possibility of opening “travel bubbles” to allow the traffic of businessmen and tourists.

In the case of Mexico and other countries of the American continent, the peaks of the epidemic are barely being reached, so it will take at least another three months to significantly reduce the number of infections. Therefore, it is very likely that for the rest of 2020, travel restrictions will continue to be

imposed, and it is practically impossible to make trips abroad to participate in specialized events and business meetings.

Despite the fact that technology has played a key role during confinement, many aspects of business cannot be carried out through a computer. Facing this new reality, commercial representatives have become an important ally in an international business strategy.

WHAT DO COMMERCIAL REPRESENTATIVES DO?

As the name indicates, a commercial representative represents a company, public entity or an individual who hires him/her, to carry out tasks of marketing and promotion of products or services. One of the major requirements for being a commercial representative is that in addition to having interest in the country that the company locates, he/her must have necessary skills for efficient communication at the local level, that is, a broad knowledge of the language and business culture.

Job duties carried out by a commercial representative include direct contact with the company’s clients or suppliers, contact with potential clients, representation in negotiations, presentations at specialized events, participation in trade fairs, and identification of business opportunities.

WHAT ARE THE ADVANTAGES OF HAVING A COMMERCIAL REPRESENTATIVE?

In addition to the significant reduction in travelling cost, a commercial representative can carry out sales activities, promotion of the brand, identification of potential clients, participation in specialized fairs, informal and formal meetings, and mapping of trends in our sector. This allows the

company to save time and resources, which should otherwise be taken from other areas of the company.

Cities like Hong Kong offer an ideal business environment to establish a Commercial Representation. On one hand, it is possible to establish a company without having a physical presence in the city, in addition to the fact that the tax system allows us to carry out purchase and sale operations through our company with a minimum of taxes. On the other hand, Hong Kong has a privileged location in Asia, from here you can travel to the entire continent, and is the center of a large number of international corporate and specialized trade fairs, allowing a significant reach of clients.

WHAT ARE THE MAIN ASPECTS TO CONSIDER WHEN RECRUITING A COMMERCIAL REPRESENTATIVE?

In addition to his/her knowledge and experience at a local level, it is important that the Representative knows the services and products in detail, so that he can offer the best solution to our clients.

On the other hand, it is very important to sign a collaboration agreement specifying the needs of our business, the economic terms of representation, confidentiality and the intellectual property clause, to ensure that our project and clients are in good hands.

As of today, no country has an exact date of returning to “normalcy”. In fact, various analyses indicate that the world will continue to face the waves of COVID-19 during the rest of 2020 and 2021. Now more than ever, it is necessary to rethink our internationalization strategies, identifying actions that represent lower costs and better results. Therefore, a commercial representative / commercial representation can offer a short- and medium-term solution for our internationalization projects.

IF YOU WOULD LIKE TO KNOW MORE ABOUT COMMERCIAL REPRESENTATION SERVICES IN ASIA, DO NOT HESITATE TO CONTACT US.

https://gbalatamtradeinvestment.com/

Susana.munoz@gbalatamtradeandinvestment.com

Written by Susana Muñoz Enríquez, Managing Director in GBA LatAm Trade and Investment Advisors 

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.  

Currently, out of the 9 mainland cities in the GBA, GuangzhouJiangmenZhongshanZhuhaiFoshanDongguanHuizhou have issued implementation measures on applying for the subsidies. 

 

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 waconsidered 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:

  1. Putting in place the national policies for wider opening up;
  2. Stepping up efforts to boost foreign investment;
  3. Improving foreign investment facilitation; and
  4. 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

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:

  1. Promoting the Greater Bay Area’s cross-border trade and facilitating investment and financing;
  2. Expanding the opening-up of the financial sector;
  3. Promoting the connectivity of financial markets and financial infrastructure;
  4. Boosting innovation of the Greater Bay Area’s financial services; and
  5. 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)

 

Overview

 

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.

 

Shenzhen

  • 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.

 

Guangzhou

  • 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.

 

Dongguan

  • 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.

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