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Investing in the Chinese Stock Market

Investing in the Chinese Stock Market

Foreigners can indeed buy stocks and shares in both the Chinese mainland and Hong Kong, although it’s not always as straightforward as it might be for them back home. 

 

Playing the Chinese stock market

 

 

The Chinese stock market is divided into three kinds of shares: A Shares, which are restricted to Chinese citizens and Qualified Foreign Institutional Investors; B Shares, which are open to all foreigners, and H Shares, which are Hong-Kong-based shares and also open to foreign investment.

 

In order to trade in A Shares, which are bought and sold in RMB, foreign companies must first get a bank to submit a Qualified Foreign Institutional Investor application form to the China Securities Regulatory Commission (in order to get a permit allowing them to invest in RMB) and also submit an Investment Quota Application to the State Administration of Foreign Exchange.

 

Once these have both been done, the company can then approach a Chinese securities company to make the investment. However, there is a high threshold for entry: the company must own at least $500 million (for insurance companies, asset management companies etc) or $5 billion (for foreign securities firms and banks). 

 

The B Shares use US dollars or HK dollars as denominations and are issued by Chinese companies listed in the Chinese mainland – although ironically they cannot be bought by Chinese citizens. If you want to trade in these shares, take your passport and residence permit to a securities firm to open a B Share account. You will need to deposit at least $1,000.

 

H Shares are bought in HK dollars, and are issued by Chinese companies listed in Hong Kong. In order to invest in these shares, you must go to Hong Kong and open an investment account in a HK bank, putting in at least 10,000 HK dollars. The account can be opened with your HK visa, your passport and your Chinese mainland residence permit. You must go to Hong Kong in person to open the account, but then you can return to the mainland to make deals online. It is open to anyone, foreign or Chinese.

 

Foreigners can also buy funds and bonds in China from commercial banks, securities firms and other sales agencies, by opening a fund or bond account at said agencies. 

 

Security tips for investing in stock market

 

  • If you are signing up to a securities firm online, make sure that the website is legitimate and not a clone or fake. Genuine securities firms do not promise profits or returns, and they will sign printed consulting contracts with you if you use their services. In addition, they are only allowed to receive money via company or business accounts, not personal accounts.

 

 

  • Do not trust anyone who claims to have insider information on stock market trading.

 

  • Do not trust anyone – even a so-called expert – who claims to be able to give precise predictions of the stock market. Likewise, don’t trust trading software that claims to be able to predict the stock market’s movements.

 

Employing Chinese staff: Tax & welfare...

As an employer in China, you have obligations regarding tax and welfare contributions for your Chinese staff – the following sets out the various taxes you are obliged to pay on their behalf.

 

Tax

Employees pay Individual Income Tax on their earnings. It is the employer’s responsibility to calculate and deduct each employee’s contribution from their wages or salaries every month. The company then submits the tax deduction to the tax authority. The company’s role in this is purely administrative. The company itself does not need to make a separate contribution on behalf of Chinese employees.

 

Different kinds of welfare contributions

Welfare contributions are a different matter. Employers must make contributions on behalf of each Chinese employee to China’s social insurance system, known as the “Five Insurances,” plus a housing fund. The Five Insurances comprise a pension fund, medical insurance, industrial injury insurance, unemployment insurance and maternity insurance.

Below is an outline of what the employer and employee respectively contribute to each fund.

 

Pensions

What employer contributes: Varies from region to region, but usually equivalent to around 20 percent of employee’s salary.

How employer benefits: No direct benefits for employer.

What employee contributes: ​Eight percent of salary.

How employee benefits: Upon retirement, employees who have contributed to their personal pension fund for at least 15 years can receive a pension based on the total amount they have contributed personally in their working life. If personal fund runs dry, the employee can receive a pension drawn from the public fund (which employer contributions are directed into).

 

Medical insurance

What employer contributes: There are regional variations, but it’s usually equivalent to between seven and 12 percent of the employee’s salary.

How employer benefits: No direct benefits for employer.

What employee contributes: ​Regional variations, but usually two percent of the employee’s salary.

How employee benefits: If the employee is sick or injured, a percentage of their treatment costs is covered by medical insurance (how much depends on what they are being treated for). Employees also carry a health insurance card; its value is equivalent to the total contributions they have made to their personal medical insurance fund to date. The money on the card can be used to pay for medicines and hospital out-patient costs. 

 

Industrial injury insurance

What employer contributes: Ranges between 0.4 and three percent of employee’s salary (varies based on type of work).

How employer benefits: If an employee is injured at work, their medical care is covered by this fund. However, the employer must continue to pay the employee’s salary for as long as they are unable to work (up to a maximum of 12 months).

What employee contributes: No contribution required.

How employee benefits: If the employee is injured at work, their medical care will be covered by the industrial injury insurance fund (as well as the medical insurance fund).

 

Unemployment insurance

What employer contributes: Usually two percent of employee’s salary.

How employer benefits: No direct benefits for employer.

What employee contributes: ​Usually one percent of salary.

How employee benefits: Employee will receive unemployment benefits for up to 24 months if they are made redundant (but not if they quit their job). Employee must have been making contributions to Unemployment Insurance fund for at least one year continuously to qualify for benefits.

 

Maternity insurance

What employer contributes: Usually equivalent to between 0.5 and one percent of employee’s salary.

How employer benefits: Employer does not need to pay employee’s salary during employee’s maternity leave (usually three months).

What employee contributes: ​No contribution required.

How employee benefits: Employee receives a fixed sum for each month (paid for by maternity insurance fund) during their maternity leave. Alternatively, they can receive a lump sum to help cover cost of birth. Fathers may also apply for compensation during paternity leave (up to 15 days, but allowance depends on region).

 

Housing fund

What employer contributes: Usually equivalent to between seven and 13 percent of employee’s salary.

How employer benefits: No direct benefit for employer.

What employee contributes: ​Usually equivalent to employer’s contribution (though there are regional variations).

How employee benefits: Fund contributes to employee’s house purchase.

 

Mobile commerce: The App`s China uses

Mobile commerce: The App`s China uses

5G is coming and with it means the ability to use mobile devices in ways not possible today. While there are already more mobile devices than people on the planet, they will continue to have increased capacity and capability. Announcements and advertisements must now be appealing on the small screen.

 

Chinas Mobile advertising market is currently the fastest growing sector for companies involved in retail. Now exceeding PC users, the mobile internet market represents the forefront of technology and dynamism in China. In Q1 2015, the total transaction value of China e-commerce market is estimated to have exceeded RMB 3.48 trillion (USD$567.49 billion). With these sorts of numbers no company can afford to ignore the apps where potential clients spend a large proportion of their time. Mobile devices have become the customer's primary means of interaction with companies. 

 

WeChat is leading the field in app`s and is unique in both being a native mobile application and including integrated e-commerce and mobile payments: A quick referral of a product from a friend and a purchase can be made in a matter of moments while the user may never have to leave the WeChat application on their mobile phone.

 

Brands can use WeChat in a few ways to support sales growth, including setting up their own brand shops (as service accounts), working with malls (WeChat operates a couple of their own), using direct sales platforms for user-generated sales (like Weidian that has payments linked to WeChat), and using loyalty cards for location-based promotions and member offers (managed by WeChat inside the app under "QQ iCard").


 

Chinas Most populat Mobile Apps

 

 

Sohu News

Type: News

No of active users: 78,59 million

 

 

Sogo Input

Type: Chinese Pinyin input method

No of active users: 80.08 million

 

 

360 Mobile Assistant

Type: App store

No of active users: 85.91 million

 

 

Taobao

Type: Online shopping

No of active users: 98.01 million

 

 

UCWeb

Type: Mobile browser

No of active users: 98.14 million

 

 

QQ Browser

Type: Mobile browser

No of active users: 106.08 million

 

 

360 Phone Guardian

Type: Anti-virus security

No of active users: 110.33 million

 

 

QQ Music

Type: Music

No of active users: 129 million

 

 

QQ

Type: Instant messaging

No of active users: 307.33 million

Having lost ground in terms of users to Wechat, qq is now the 2nd most popular messaging app in mainland China, it allows users to write and maintain their own blog/diary, as well as photo album.

 

 

WeChat

Type: Instant messaging

No of active users: 359.87 million

Most of us are familiar with WeChat, which is now the most popular messaging app in Mainland China. In addition to messaging functions, the app allows you to search for people in your area and also allows users to maintain a blog along with some photos

 

Data source: compiled by EnfoDesk, an online research institute, Rankings are based on the number of active users as of May 2015.

The Branding Dichotomy: Trust & Pricing...

The Branding Dichotomy: Trust & Pricing point.

Chinese consumers are both brand conscious and price sensitive: the key to understanding this dichotomy is to appreciate Chinese culture, where face and social status are crucial as well as the prevailing attitude of a lack of trust in product quality. This skepticism leads Chinese shoppers do significantly more research, across many more channels, than their counterparts in the West. If a brand can signal a higher social and/or economic status, Chinese consumers are happy to pay a premium. If it doesn’t, they become very price sensitive as well as skeptical about quality.

 

 

eBay requires buyers to pay first and then wait for an item to be delivered. This model works in societies where the trust level is high. However, there is a serious lack of trust in China between consumers and manufactures, so asking buyers to pay first without seeing the product is a hard sell. That’s why eBay failed in China. Conversely Taobao came up with a different model: It introduced a third-party payment system, namely AliPay, where buyers pay to a third-party account owned by Alibaba (Taobao’s holding company), and only after they have confirmed receiving the products in good order, Alipay will transfer the money to the seller. This model effectively solved the trust issue in e-commerce.

 

Throughout China`s history companies of all sizes have consistently lied to their consumers, and this is why, even today, the Chinese are so cynical and suspicious about purchasing products, especially online. Facts that might be taken for granted by western consumers will be questioned vigorously in China, and it is necessary to cultivate trust from a low starting point. The challenge for companies is to prove to consumers that their products are rigorously inspected and tested.

 

Whilst having a natural advantage in the trust area, foreign brands now have to compete move vigorously with domestic brands, especially in budget/mass consumer products. There is also a growing sense of pride in “buying Chinese” which is being utilized to the max by a growing force of domestic brands such as Xiaomi and Anta. A spate of investigations into foreign big name brands a few years ago has eroded the unquestioning faith in western brands, who must now concentrate on the core values of integrity and honesty.

 

The Chinese may be relatively new to the consumer world, but they are far from naive. They look much deeper than colorful billboards and TV commercials. Increased foreign travel, burgeoning Social media and increased awareness of consumer rights have helped the Chinese consumer become ever more sophisticated.

 

One area in which foreign companies still outdo their Chinese counterparts is in customer service: with rising expectations amongst the growing middle classes there is still a stark difference between a walk trough an Apple store compared to a domestic computer shop with a traditional sell and forget attitude. However this is also fast changing with Private Banks and Airlines taking the lead. Consumers are becoming savvier, and insistent on, good service, and domestic producers are taking notice. In the high growth regions of 2nd and 3rd tier cities the personal touch is an incredibly effective marketing tool where the standards of customer care remain low.

 

The days of “Made in China” are now progressively being replaced by “Made for China” foreign companies have to truly understand the needs and changing characteristics of Chinese consumers, and build quality products and services to meet these needs. Crucial to the message is their utilization of social media and brining the latest in consumer services to China.

Urban China: Toward Efficient, Inclusive...

Urban China: Toward Efficient, Inclusive, and Sustainable Urbanization

 
In the last 30 years, China’s record economic growth lifted half a billion people out of poverty, with rapid urbanization providing abundant labor, cheap land, and good infrastructure. While China has avoided some of the common ills of urbanization, strains are showing as inefficient land development leads to urban sprawl and ghost towns, pollution threatens people’s health, and farmland and water resources are becoming scarce. With China’s urban population projected to rise to about one billion – or close to 70 percent of the country’s population – by 2030, China’s leaders are seeking a more coordinated urbanization process. Urban China is a joint research report by a team from the World Bank and the Development Research Center of China’s State Council which was established to address the challenges and opportunities of urbanization in China and to help China forge a new model of urbanization. The report takes as its point of departure the conviction that China's urbanization can become more efficient, inclusive, and sustainable. However, it stresses that achieving this vision will require strong support from both government and the markets for policy reforms in a number of area.
 
 

The report proposes six main areas for reform:

1. Reforming land management and institutions

  • Because most of the urban expansion in recent years was on converted rural land, the report says currently the amount of farmland available is close to the “red line” of 120 million hectares, which is considered to be the minimum necessary to ensure food security.
  • More efficient use of land will require stronger property rights for farmers, higher compensation for land requisition, new mechanisms for converting rural construction land to urban uses, and market-driven pricing for urban land allocation.
  • Legal limits should be set up on rural land taken for public purposes by local governments.

2. Reforming the hukou household-registration system to provide equal access to quality services for all citizens and create a more mobile and versatile labor force

  • The system should remove barriers to labor mobility from rural to urban areas, as well as between cities, to help boost workers’ wages.

3. Placing urban finances on a more sustainable footing, while creating financial discipline for local governments

  • The report recommends moving to a revenue system that would ensure a higher portion of local expenditures is financed by local revenues, such as property taxes and higher charges for urban services. 

4. Reforming urban planning and design

  • In cities, basing the government prices for industrial land on market value can encourage land-intensive industries to move to smaller, secondary cities.
  • Cities can also make better use of existing urban land through flexible zoning, with smaller plots and more mixed land use, which would lead to denser and more efficient urban development.
  • Linking transport infrastructure with urban centers and promoting coordination among cities would encourage better management of congestion and pollution. 

5. Managing environmental pressures

  • China already has tough environmental laws, regulations and standards, so the most important task for achieving greener urbanization is enforcement.
  • Market-based tools, such as taxes and trading systems for carbon, air and water pollution, and energy, can also be used more to meet environmental targets. 

6. Improving local governance

  • The performance evaluation system of local officials could be adjusted to give greater incentives for a more efficient, inclusive and sustainable urbanization process.
Click here to download the full World Bank report English PDF (20.66Mb)
 
Source: World Bank Group

China`s Agricultural Sector: changing...

China`s Agricultural Sector: changing realities.

As China’s agricultural sector struggles to keep up with the country’s growth in demand, its ability to meet the agricultural demands of its population will usher in a new era off opportunities for agricultural companies.

 

 

China’s struggle to consistently secure adequate food supplies of a sufficient quality has resulted in its agricultural sector being placed under increasing pressure. Since February 2014 the State Council has suggested that the country will no longer aim to match demand for grain through domestic production alone. These are the first public signs that Beijing is coming to terms with the realities facing China’s agricultural sector.

 

 

The situation

If China were self-sufficient with regard to agricultural products, it would have to feed 20% of the world’s population with only 10% of the world’s arable land and 6% of global water resources. In the past, this situation was manageable due to the fact that Chinese citizens generally depended on vegetables and grains for energy with only small portions of meat for flavour. Arguably, these dietary preferences arose as a consequence of many not possessing the wealth to buy more expensive food products, as many can today.

 

 

However, China’s meat and calorie intakes have kept pace with the country’s GDP. In 1980, for example, China’s average level of protein consumption was a mere 12% of most developed countries. By 2009, China’s protein consumption had risen to 56% of the above sample’s average. China’s large population and the apparent remaining growth in China’s appetite illustrate how much food will be needed to meet future demand.

 

 

One of Beijing’s responses to China’s lack of food security was to set a 95% ‘self-sufficiency’ target on key grain products—corn, rice and wheat—to shape the way land and water resources were prioritised and insulate the country from fluctuations in global grain prices. However the production of meat is more land and water intensive - putting extra pressure on already strained resources. A pound of beef requires a staggering 6,810 litres of water, pork 2,180 litres, soybeans 818 litres, potatoes 450 litres, corn 409 litres and apples 70 litres.

 

 

The Organisation for Economic Cooperation and Development (OECD) estimates that 70% of China’s arable land is low-yielding, and erosion, salinization and acidification are leading to a further reduction in the quality of China’s soil. Further, these estimates do not take into account the effect of pollution on China’s arable soil. Some analysts say between 8-20% of China’s arable land is contaminated by heavy metals.

 

 

Interestingly though, this ‘self-sufficiency’ target has been abandoned for a more open policy according to guidelines released by the State Council. Analysts have proposed that land and water-intensive products, like beef, offer higher profit margins than vegetables, fruits and grains. Beijing may be attempting to ameliorate China’s high inequality by allowing farmers to choose to farm more profitable produce. However, this policy alone will be insufficient to overhaul China’s agricultural sector.

 

 

Unsurprisingly, China’s growing middle class is demanding the quality and safety assurances associated with imported food and beverages. The apprehension around the quality of domestically-produced powdered baby milk, in particular, has had profound effects around the world. Supermarket stores in Hong Kong, Australia, New Zealand and even as far as the UK have implemented policies aimed at rationing baby formula due to a surge in demand from China.

 

 

Regardless of whether Beijing abandons its ‘self-sufficiency’ targets, opportunities for investors lie in the Middle Kingdom’s future nutritional needs. The Chinese market’s sustained growth will result in an increase in demand for a wide range of food commodities – foreign intervention and innovation will help meet this demand.

 

 

Outlook

If President Xi Jinping follows through on his commitment to double China’s GDP per capita by 2020, demand for the more expensive categories of food, such as animal protein, will rise the fastest and will be met via an increase in imports.

 

 

The OECD and Food and Agriculture Organisation (FAO) have estimated that by 2022, China’s consumption of food commodities will increase considerably across all food classes. Possibly as a result of China’s struggle with tainted milk, the dairy category holds one of the largest gaps between domestic production and consumption.

 

 

The solutions

There is little doubt that Beijing faces a challenge in solving the country’s dramatic mismatch between supply and demand of food products. While many propose that it is inconceivable for China to achieve food security due to its scarcity of water and land resources, Beijing can reduce its dependence on imports in the long term through the implementation of strategic policies.

 

 

Remnants of Maoist collectivism, for example, remain present in China’s rural land policies and reduce motivation to increase agricultural production. Providing farmers the opportunity to own, sell and borrow against land to expand business opportunities and profits may solve some of China’s food woes. Allowing for consolidation could create an environment that makes unprofitable enterprises financially unsustainable and reward those that are profitable. The economy of scale achieved through the consolidation of farms will likely achieve higher production volume at a lower unit cost (as per developed nations in the 50`s and 60`s).

 

 

Since 1997, an estimated 8.2 million hectares of arable land, roughly the area of Austria, has been lost to property developers catering to a growing urban population. While increasing the size of China’s urban population is an important step towards shifting China to a consumption-driven economy, this process has been administered in a haphazard fashion, which has jeopardised the country’s limited fertile land. A policy that preserves the most fertile land while using infertile land for infrastructure could provide for greater efficiency and productivity in the agricultural sector. China’s urbanisation and property development also presents an opportunity to increase productivity in the agricultural sector.

 

 

Urbanisation has resulted in roughly 25 million Chinese farmers becoming defacto urban residents every year. According to a report by the Ministry of Agriculture, only 33% of China’s corn and 69% of its rice are mechanically harvested every year. The report also stated that China performs 72% of its post-harvest processing tasks, such as sorting and packaging, by hand. The opportunity for the mechanisation of the agricultural sector is evident. Mechanisation may, however, result in unforeseen consequences related to unemployment in China’s labour market, so policymakers and the business community would benefit from a coordinated approach to solving challenges in the agricultural sector.

 

 

Even if new policies could maximise the amount of arable land, China will continue to suffer from its unproductive use of land. Advanced agricultural techniques and technologies for fertilisation and irrigation, for example, could help with increasing productivity. Gradually opening up the agricultural sector to foreign investment, which the central government currently forbids, is a potentially effective strategy to transfer such techniques and technologies. Unfortunately, Beijing may not have the luxury of time if it wants to reduce its reliance on imports.

 

 

Beijing’s ‘Going Out’ policy, through which the central government aids firms, private and state-owned, to make acquisitions and investments abroad with the intention of securing physical assets and the associated intellectual property, could complement the reform of the agricultural sector. From 2010 to 2013, Chinese food and beverage companies made over USD 9 billion worth of deals overseas according to the National Australia Bank. Deals such as Shuanghui’s acquisition of Smithfield, the world’s largest pork producer and processor, in May 2013 and COFCO’s March 2014 acquisition of majority stakes in Noble Group’s agribusiness unit and Nidera stand out, but there are countless examples from around the world. With China already having established good relationships in Africa, Australasia and South America, where some of the most fertile farmlands in the world exist, the opportunity for increased OFDI in agriculture is certainly available.

 

 

Genetically modified (GM) food may also provide a partial solution to China’s food supply woes. GM crops have the potential to overcome many of the challenges of agriculture in China, such as low-yielding arable land and decreasing soil quality. Furthermore, the benefits of lower costs will also aid in keeping inflation in check. However, GM food is a sensitive topic in China—the public remains cautious as to whether the government has fully addressed the potential risks. Nevertheless, the Ministry of Agriculture has taken the lead in publicly declaring the safety of GM food and is slowly pushing domestic production ahead. Currently 17 GM products from five plant species are sold on the domestic market: soya beans, corn, oilseed rape, cotton and tomatoes. The only GM crops approved for domestic commercial production are cotton and papaya.

 

 

Lastly, firms can mollify China’s food safety fears by exporting from their home country or by producing strategically within China. Tyson Foods, one of the world’s largest processors and marketers of chicken, has shifted from its conventional business model of sourcing from independent chicken farmers and has built its own network of farms in China, providing direct oversight over the production process. In 2010, Tyson did not have any farms in China; today, they have 20, and they plan to own and operate 90 by 2015.

 

 

Business potential

Not unique to China, numerous countries face the prospect of having to rely increasingly on importing food to meet domestic demand. What magnifies China’s challenges is the size of its population, which has the potential to create shocks on global markets. If China cannot meet demand with domestic supply, global prices of certain food commodities will undoubtedly continue to rise. Should prices rise too much, affordability will become a crucial issue around the world. While farmers may benefit the most from this situation, worldwide consumers will be on the receiving end. China’s challenge, to a certain extent, will become the world’s challenge.

 

 

China’s growth in domestic food production in the last thirty years is an astonishing feat, yet the country’s deteriorating quality and dwindling availability of natural resources mean that this growth is still not adequate. Pollution must be minimised. Arable land must not be sacrificed for urban sprawl. Land policies should reward profitable agricultural enterprises. Together, these actions could alleviate pressure on China’s agricultural sector.

 

 

Companies able to navigate China’s shifting agricultural landscape will be primed to benefit from this key market. China’s agricultural players desire advanced labour-saving technology and will undertake joint ventures to attain it. Agricultural exporters around the global will benefit from increasing levels of demand for agricultural commodities and increasing flows of capital from China.

 

 

Choppy waters for the property sector...

Choppy waters for the property sector.

The slump in China's property market looks to be accelerating with new home prices last month falling at the fastest pace on record. The sector is emblematic of problems such as rapid credit expansion and policies that promote short term growth over a more balanced economy.

 

 

House prices in the major cities surveyed by the National Bureau of Statistics, fell on average by 5.7 per cent compared to February last year. It's the sixth consecutive month house prices have fallen, including drops of 5.1 per cent in the year to January and 4.3 per cent in December. Only one city of the 70 surveyed saw any increase in house prices. Representing between 20-25% of the economy, the government however, still believes that the increased pace of urbanization will stabablize the declines this year: however, perhaps, China has simply built too much? Provincial governments meanwhile, will have to be persuaded to reduce their dependency  on their sales of state owned lands to the developers: which will be no easy task since some estimates put this at around 40% of their annual revenue. 

 

 

A further concern is the effect on property developers (still supplying over 15m housing units a year), who will be caught in a situation of tight cash flow, which is bound to churn up the shadow banking sector in China: the sector is largely built on implicit guarantees and any meaningful defaults there may jeopardize the stability of the financial system. When developers are limited access to credit, they have to reduce prices to unload their unsold housing units (and pay back their debts), which gives investors second thoughts about whether to continue plowing their money into property, starting a deflationary spiral. Falling asset prices undercut the basis for both past and future lending.

 

 

However a saving grace is that Chinese households continue to have a relatively low level of household debt, due to large mortgage down payments (China buys in cash, in full). 

 


2015 is likely to be a choppy period for China, as we see the realities of President Xi Jinping's "New Normal".

 

NPC roundup March 2015.

NPC roundup March 2015.

As one of the most important annual political gatherings in China, the NPC lays out the leadership’s plans and priorities for the coming year. Outcomes from the legislature are closely scrutinised by global businesses keen to anticipate the future direction of the Chinese economy and plan accordingly. 

Chinese Premier Li Keqiang’s annual government work report, delivered to the NPC earlier this month, featured a number of important announcements related to the following areas:

 

 

  • Lowered expectations for economic growth: China’s GDP growth target was lowered from 7.5% in 2014 to 7% this year, with Premier Li characterising the lowered expectations for economic growth as the “new normal”. Last year, the Chinese economy grew at its slowest pace since 1990, and the government is clearly accepting this lower rate of expansion as it continues to focus on restructuring the economy. Following Premier Li’s speech, the head of the National Development and Reform Commission (NDRC) emphasised that China will not introduce strong stimulus measures to boost economic growth this year.

 

  • Supporting employment and job creation: Premier Li said that over 10 million jobs would be created in urban areas in the coming year. With the number of college graduates expected to reach nearly 7.5 million this year, job creation is a top priority for the government. Premier Li also pledged to help people who have lost their jobs due to structural adjustments or steps taken to reduce overcapacity to secure new employment.

 

  • Improving environmental protection: As the government continues to focus on reducing pollution and improving environmental protection, energy intensity will be reduced by a target of 3.1% this year to cut emissions from major polluters.  

 

  • Fighting corruption: Premier Li reiterated the government’s commitment to continue fighting corruption and pledged to tighten supervision over public funds and state-owned assets.

 

  • Opening up China’s stock exchanges: Premier Li announced plans to link up the Shenzhen and Hong Kong stock exchanges on a trial basis, similar to the scheme launched between the Shanghai and Hong Kong bourses last November.

 

  • New plans for infrastructure investment: China plans to invest more than RMB 800 billion in railway construction and another RMB 800 billion in major water conservation projects in 2015.

 

  • Encouraging greater foreign investment: Premier Li vowed to further open up the service and manufacturing sectors by reducing the number of industries in which foreign investment is still restricted by half.

 

  • Supporting economic growth through Internet applications: Premier Li announced an Internet-plus action plan, which aims to further accelerate the contribution of new Internet applications to the Chinese economy. McKinsey forecasts that Internet applications could fuel between 7-22% of China’s incremental GDP growth until 2025.  

 

Elderly Care Institutions: New law for...

Elderly Care Institutions: New law for Foreign Investment
With a projected 636 million people over age 50 by 2050, or nearly 49 percent of the population (up from 25 percent in 2013) the government is now seriously looking at expanding care home facilities in China (there are currently estimated to be just under 3 million care home beds across the country). 
 
 
 
With the development of the economy, people's ideas on care-giving for the elderly are changing: A Chinese proverb calls filial piety, or respect for one's parents, "the first among 100 virtues. However many families have now moved away from traditional ideas of taking care of the elderly at home, especially in the larger cities and prefer well-equipped nursing homes. With this in mind the government is now courting investment into the sector with a new law pertaining to foreign investment in Care Institutions.
 
 
Announcement of the Ministry of Commerce and the Ministry of Civil Affairs on Matters Relating to Foreign Investors' Establishment of For-profit Elderly Care Institutions
Now 2014.
 
With a view of promoting the healthy development of the elderly care service industry in China and the opening-up of social service industry, and further implementing the Decision of the Central Committee of the Communist Party of China on Several Major Issues Concerning Comprehensively Deepening Reforms and Several Opinions of the State Council on Speeding the Development of the Elderly Care Service Industry (Guo Fa [2013]No.35), and in accordance with the Law on Sino-Foreign Equity Joint Ventures, Law on Sino-Foreign Cooperative Joint Ventures, Law on Wholly Foreign-owned Enterprises, Law on the Protection of the Rights and Interests of the Elderly and Measures for Permitting the Establishment of Elderly Care Institutions and other relevant laws, regulations and departmental rules, the Announcement of the Ministry of Commerce and the Ministry of Civil Affairs on Matters Relating to Foreign Investors' Establishment of For-profit Elderly Care Institutions (hereinafter referred to as the "Announcement") is hereby issued to announce matters relating to the establishment of for-profit elderly care institutions by foreign companies, enterprises and other economic organizations or individuals (hereinafter referred to as the "foreign investors") to engage in elderly care services in China as follows:
 
Article 1 Encourage foreign investors to establish for-profit elderly care institutions in China independently or with Chinese companies, enterprises and other economic organizations in a joint venture or cooperative way.
 
 
Article 2 The foreign-invested for-profit elderly care institutions shall abide by relevant laws, rules and regulations, aim at providing social services, pay tax in accordance with the law and operate in compliance. Their legal operating activities and their contributors' legitimate rights and interests are under the protection of law.
 
 
Article 3 Foreign investors intending to establish for-profit elderly care institutions shall submit the following materials on the application for establishment of foreign-invested enterprises to the competent departments of commerce at the provincial levels where the institutions are proposed to be located (namely the competent departments of commerce of all provinces, autonomous regions, municipalities directly under the Central Government, cities specifically designated in the state plan and Xinjiang Production and Construction Corps):
1. application for the establishment;
2. description about the conditions (including the place, security, health care and so on);
3. contract and articles of association (a foreign-invested enterprise only needs to submit its articles of association);
4. name  list of the members of the Board of Directors and directors delegation letter;
5. notice on the pre-approval for the names;
6. description of the foreign investors' working experience and relevant supporting documents, or the descriptive document on the engagement of management team equipped with corresponding experience in the elderly care service industry; and
7. Other materials required to be provided according to the laws, rules and regulations.
 
 
Article 4 A competent department of commerce at the provincial level shall make a written decision on approval or disapproval within 20 days upon its acceptance of the application concerned. Where the application is approved, the foreign investor concerned shall be awarded the Approval Certificate of Foreign-invested Enterprise, with words as "operate under the Permit for Establishment of Elderly Care Institutions" added in the column of business scope; where the application is disapproved, reasons therefor shall be told.
 
 
Article 5 A foreign investor shall handle the formalities for registration of foreign-invested enterprises within one month upon receipt of the Approval Certificate of Foreign-invested Enterprise with the administration for industry and commerce concerned.
 
 
Article 6 After the registration, the foreign-invested enterprise shall apply for and obtain the Permit for Establishment of Elderly Care Institutions in accordance with relevant provisions of the Measures forPermitting the Establishment of Elderly Care Institutions. No foreign-invested for-profit elderly care institutions or foreign investors shall provide elderly care service or charge fees or admit the elders in any name before obtaining the said permit and being approved for registration in accordance with the law.
 
 
Article 7 Foreign investors are encouraged to participate in the transformation into the enterprises from the institutions of public elderly care specifically providing for-profit services to the society. During the transformation, issues such as the protection of employees' interests and the value maintenance and appreciation of state-owned assets shall be handled properly.
 
 
Article 8 Foreign-invested for-profit elderly care institutions can engage in domestic investments relating to the elderly care service. Foreign investors are encouraged to develop the elderly care institutions on a grand scale, operate the same in a chain mode and develop quality brands of elderly care institutions.
 
 
Article 9 Foreign-invested for-profit elderly care institutions enjoy the same preferential tax policies and policies on reduction and exemption of administrative and institutional fees as those available to domestic-invested for-profit elderly care institutions.
 
 
Article 10 The application for establishing foreign-invested real estate enterprises that are set up through changing such usage conditions as the land use or the plot ratio of the land for construction of elderly care facilities shall not be approved. Foreign-invested for-profit elderly care institutions shall not engage in business such as residential discount for elderly care.
 
 
Article 11 Where the business scope of a foreign-invested for-profit elderly care institution includes the medical and health service, such institution shall handle the formalities for submission for approval in accordance with relevant policies.
 
 
Article 12 The competent departments of commerce at the provincial level shall strengthen the statistical work concerning foreign-invested for-profit elderly care institutions, and when issuing the certificate for approval, choose "Elderly and Disability Service"(Paragraph 8414 of National Economic Industrial Classification) in terms of the category of industry.
 
 
Article 13 Foreign-invested for-profit elderly care institutions established in accordance with the Announcement shall participate in the joint annual report of foreign-invested enterprises on time.
 
 
Article 14 The Announcement applies mutatis mutandis to the establishment of for-profit elderly care institutions by investors from Hong Kong Special Administrative Region, Macao Special Administrative Region and Taiwan Region. In case of any inconsistence between former provisions and the Announcement, the Announcement shall prevail.
 
 
Article 15 If the local competent departments of commerce and civil affairs encounter with any problems, please feel free to contact the Ministry of Commerce and the Ministry of Civil Affairs in a timely manner.
 
 
Contact person: Sun Xiaoyu, Department of Foreign Investment Administration, the Ministry of Commerce
Tel.: 010-65197327 Fax: 010-65197322
Contact person: Zhang Xiaofeng, Department of Social Welfare and Charity Development, the Ministry of Civil Affairs
Tel.: 010-58123258Fax: 010-58123256
 

 

 

Infographic by Smithstreet Consulting

Yinchuan

Yinchuan

A snapshot

 

Aptly known as the Phoenix city, Yinchuan is a city that is gradually rising into economic prominence. Located in the North West of China in the Ningxia Hui autonomous region, a third of Niangxia’s population is Muslim, compared to the national average of 1.8% in 2010. In recent years, Ningxia has been the centre of a government campaign to promote Arab investment there, resulting in promising investments and high tech development on top of the existing coal and mineral industries.

 

Province: Ningxia Hui autonomous region, North West China

Population: 2 million (3 million including those without residence permits)

Average residential cost: 5000RMB/sqm

Key Industries: Coal, metallurgy, Chemical manufacture, Agriculture, High-tech industry.

Provincial Government website: http://www.nx.gov.cn/

 

 

Development zones

 

Yinchuan Economic and Technological Development Zone (YETDZ), established in 2001 is home to over 2000 enterprises, focussing on pioneering high tech progression and information industry developments to modernise existing industries. The development forms part of the national ‘Go West’ development programme (西部大开发) designed to increase the infrastructure and industrial output of inland China. The area is rated a BB standard development zone indicating the area is still in the development stage. Within the development zone are 4 sections: the Overseas Returnees Pioneering Park, the Ningxia Software Park, the Ningxia SMEs Pioneering Park and the Ningxia High- and New-Tech Pioneering Service Center.

Email: ycda.edb@ycda.gov.cn

Website: www.ycda.gov.cn

 

In 2012 Yinchuan was also designated as an Inland Opening-Up Economic pilot zone. Given that Muslims make up one third of the Ningxia population, in 2013, the China-Arab States Expo was help in Yinchuan, and the government has invested in developing this area as a hub for trade between China and Arab states. This drive has resulted in rapid increase in foreign investment and trade, in 2013 the total foreign trade in Yinchuan amounted to US$2.41 billion, up 80.9% year from 2012, and 2013 Utilised FDI in Yinchuan stood at $129 million. The gross industrial output value of the zone reached RMB 23.5 billion in 2012.

 

CBD

 

In 2012 construction was begun on a new CBD in Yinchuan, with around CNY 800 million invested in the project in that year. Named the Yue Haiwan CBD, it will complement the existing development parks and forge the way for further investment and development, with a view to being specially aimed at Arab investors. In mid 2013, the CBD development had already attracted 24 projects with a total investment of 17.9 billion yuan. While Yinchuan’s existing CBD is mostly empty, the imminent opening of the new project should create a thriving hub in the heart of the city.

 

 

Key industries

 

Aside from the development zone, Yinchuan has a strong infrastructure of existing industries contributing to the city’s GDP of RMB 127.35 billion in 2013, up 10% from 2012 and accounting for approximately 49.6% of Ningxia’s total. In an area rich in energy and mineral reserves, the energy industry is a key source of income to the area. 9 out of 10 Chinese national coal companies have bases in Yinchuan and Yinchuan is also a centre for petroleum processing and chemical manufacture. This heavy industry realised RMB 41.26 billion in 2013, up 12.5% from a year earlier.

 

Yinchuan is also a hub for certain agricultural industries. It is a designated national centre for beef and mutton imports, hosting the International Beef and Mutton Industry Development Forum in 2014. Yinchuan is also the most prolific area in China for the production of Chinese wolfberry products (also known as goji berries).

 

Logistics hub

 

Located on the end of the new Silk Road and near the Yellow river, Yinchuan has become a logistics hub both for land transport into and out of China and for transport between the East and West of Hina itself. By the end of 2015, Yinchuan will be linked to the high speed rail network, further improving its transport links. The main existing railway connections are the Baotou-Lanzhou railway and Baoji-Zhongwei railway, with an average 15 hour journey from Yinchuan to Beijing.

 

Foreign Investment preferential policies

 

Article 1: All the natural resources, industries, and marketsin Ningxia except those especially stipulated by the state are open to the whole country. State-owned, collective-owned, private-operated, the three types of enterprises, businessmen working on their own, colleges, universities, and research institutes in and outside of Ningxia are welcome to carry out multi-level, multi-form, multi-factor economic and technological cooperation or run enterprises with investment of their tangible and intangible assets. The autonomous region shall render prompt, satisfactory service in registration, approval of the establishment of projects, and the creation of necessary conditions.

 

Article 2: Productive enterprises with exclusive foreign investment (including bases established for the production of raw materials) may enjoy exemption from the income tax for five years upon the commission of the enterprises and a refund of 25 percent of the value-added tax, urban construction and maintenance tax, tax regulating the orientation of investment of fixed assets, and house tax within a period of five years after the enterprises are in operation. They shall be exempt from the tax for the use of land during the period of construction and for another five years after they are in operation. Enterprises engaged in the development of resources shall be entitled to a refund of the resource tax for three to five years and exemption from the additional fees of the circulation tax. The income of the enterprises during the income-tax exemption period shall be regarded as duty-paid. After the expiration of tax exemption, proper tax reduction shall be granted to the enterprises which have difficulties in operation or need a large amount of investment for technical renovations and expansions. Preferential policies can be liberalized to a proper extent in Taole County and the eight counties in the mountain area of southern Ningxia.

 

Article 3: Productive joint ventures and cooperative enterprises newly established in Ningxia as well as key extension projects approved by the state and autonomous region with the amount of investment by outside partners accounting for more than 25 percent of the total investment and the term of joint venture and cooperation more than ten years may enjoy a three-five years’ exemption of the income tax for the newly-added economic result in accordance with the ratio of investment by the outside partners, a 25 percent refund of the value-added tax and a 50 percent refund of the urban construction and maintenance tax, tax regulating the orientation of investment of fixed assets, tax for land-use, and house tax for five years. They shall also be entitled to exemption from the additional fees of the circulation tax as stipulated by the government of the autonomous region. During the tax exemption and reduction period, the profits distributed to them shall be regarded as duty-paid. Preferential policies may be liberalized in the eight counties in the southern mountain area and Taole County to a proper extent.

 

Article 4: Ventures with exclusive foreign investment and cooperative enterprises (with outside partner’s investment more than 500,000 yuan and the term of cooperation longer than five years) in tertiary industry (not including the development of real estate, recreational businesses, catering industry, and hotel industry) shall be entitled to a 3-4 years’ exemption from the income tax, a 1-2 years’ refund of the business tax, a three years’ refund of 50 percent of the urban construction and maintenance tax, tax regulating the orientation of investment of fixed assets, tax for land-use, and house tax.

 

Article 5: Ventures with exclusive foreign investment, joint ventures, and cooperative enterprises established in the autonomous region may enjoy a 30-50 percent discount of the fixed land price for using cultivated land upon approval by the government. They shall be allowed to transfer the right for the use of land after five years of operation.

 

Article 6: Those engaged in the development of agriculture, forestry, animal husbandry, and fishery shall be exempt from the agricultural tax and tax for special agricultural and forestry products for six years from the year they begin to make profit. Those engaged in the development of poverty-relief projects in the eight counties in the mountain area and Taole County shall be exempt from the agricultural tax and tax for special agricultural and forestry products for ten years. The wasteland they need can be provided by means of assignment.

 

Article 7: Ventures exclusively with one’s own investment and proprietary cooperative enterprises engaged in highly-processing agricultural resources and the amount of investment surpassing two million yuan shall be exempt from the income tax for eight years beginning with the year they are in operation. Those with investment surpassing five million yuan may enjoy income-tax exemption for ten years beginning with the year of operation.

 

China Overseas: Looking beyond the headl...

China Overseas: Looking beyond the headlines.

A special report by China Dialogue on China's overseas investments, including articles on Africa, South America and Asia. Please click here to download the full report

 

 

 

Chinese companies stuck in image crisis overseas

How NGOs can help Chinese firms do better overseas

Social instability main threat to China overseas

Why China must strengthen environmental standards

China’s non-interventionist aid stance on the way out

Why does no one like Chinese companies overseas?

China and Latin America: Which way now?

China develops Latin America’s clean energy

Who will feed China’s pigs? And why it matters

China’s firms battle each other in Africa

China’s energy footprint in Central Asia

Chalco: praised overseas but a major polluter at home

Don’t get excited about Chinese nuclear exports yet

Chile’s pollution grows to meet China's copper demand

Combating illegal timber: what action will China take?

Chinese banks ignore Ecuador mining campaigners

Chinese influence creates mixed feelings in Cameroon

 

APEC 2014

APEC 2014

With the closing of APEC earlier this month, its staging in Beijing has provide the organization with some much needed limelight. The aspirations expressed and announcements made were by no means small: A USD 40 billion fund for infrastructure development, blueprint for the pursuit of a Free Trade Area for the region (FTAAP), US-China agreement of the reduction of Carbon emissions, Russian-Chinese agreement to use national currencies for trade settlements, as well as many other bi-lateral agreements between APEC members.

 

  

 

With the emphasis of agreements firmly on Infrastructure development China has taken a leading role in the pursuit of what was described by President Xi as the ‘Asia-Pacific dream’, described as: having more economic vibrancy, free trade and investment facilitation, better transportation links, and closer cultural exchanges. He urged the region's economies to explore new drivers for growth and draw a blueprint for comprehensive connectivity.

 

The following documents represent the major initiatives and findings of the meeting:

 

Report to implement the APEC connectivity blueprint.

The Report to Implement the APEC Connectivity Blueprint supports the implementation of the APEC Connectivity Blueprint for 2015-2025 which was endorsed by APEC Leaders

 

APEC Economic Policy Report on Good Regulatory Practices.

This is an executive summary of the 2014 APEC Economic Policy Report which highlights the challenges of APEC economies in implementing Good Regulatory Practices and suggests further steps in promoting the use of GRPs.

 

Key Trends and Developments relating to Trade and Investment Measures and their Impact on the APEC region.

Prepared by the APEC Policy Support Unit (PSU) to inform APEC ministers, officials, and stakeholders on recent trade and investment trends in the region, as well as trade and investment-related measures recently implemented by APEC member economies.

 

Trade and Economic Growth: 25 Years of a Stronger Relationship within APEC.

The purpose of this Policy Brief is to explore the correlation between trade and the gross domestic product (GDP) within APEC and show the importance that trade plays in APEC’s economic growth vis-à-vis the rest of the world.

 

Education insight report.

Education insight report.

A snapshot of education and related developments that occurred in China in the first half of 2014, prepared by Education New Zealand. 

 

 

China’s Ministry of Education released its full year figures on the number of students who travelled abroad in 2013. The figures show a record number of students – 413,900 – studied overseas.While the number of students heading overseas reached an all-time high last year, the rate of growth slowed significantly. Whereas previous double digit growth in the number of students heading overseas had almost become expected, 2013 bucked the trend with 3.5 per cent growth. This compares to a growth rate of 18 per cent in 2012 and an annual growth rate of 28.2 per cent between 2000 and 2010. 

 

For the full report please click here to open the PDF.

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