The best China News & Insight from the web in one place.



The End of Zero-COVID and the Start of China’s Economic Recovery in 2023.

The End of Zero-COVID and the Start of China’s Economic Recovery in 2023.

China is back on a pragmatic path, with the lifting of zero-COVID and property market policies that throttled domestic demand in 2022. COVID cases are likely to continue to rise in the coming months, but that is unlikely to disrupt progress towards living with the virus, and an economic recovery in the second half of 2023.


Why I’m Bullish

I’d like to explain why I’ve gone from being cautiously optimistic about Xi Jinping returning to a pragmatic path, to now being bullish on China: Xi Jinping has, in recent weeks, given clear signals that he is returning to a pragmatic approach to COVID, to the economy, and to relations with the United States.


COVID Pragmatism

The return to pragmatism began soon after the end of the Party Congress, when Xi’s third term as leader was formally confirmed. In a November 11 speech, he announced 20 measures on COVID mitigation designed to reduce obstacles to normal life.


Since that time, four important things have happened. First, most zero-COVID restrictions have been abandoned in most places in China. Routine testing is no longer required, and the government has ended the forced quarantine of people who have COVID but are not seriously ill.


Second, the end of zero-COVID has resulted in a large wave of COVID cases across the country. Because frequent, mandatory tests have largely ended, the official case count is no longer a useful metric. (This is similar to most countries, where people who test positive at home rarely report those results to the government.) Anecdotally, however, it is clear that COVID is sweeping across the country, including Beijing, where the Party leadership lives.


Third, this wave of cases does not appear to have resulted in a spike in serious illness. For the whole country, there were only 147 cases classified as “severe” on December 12. Since Xi’s November 11 speech, only nine deaths have been attributed to COVID. This may reflect that the current variant of the virus circulating in China is less dangerous than earlier iterations, and that the domestic vaccine is providing significant protection. There is, of course, a risk that the impact of the virus changes and the health care system is overwhelmed, but that is not happening at this time.


Fourth, the government has begun to ramp up its campaign to raise vaccination rates, especially for the elderly. This is important because although by late November, 90% of Chinese had received two shots (compared to 69% in the U.S. and 88% in the UK), only 58% of Chinese had received a third jab (compared to 53% in the U.S. and 70% in the UK). Moreover, about 25 million Chinese over the age of 60 had not received any jabs, and 58 million older Chinese needed a booster.


Over seven days through December 12, a total of 5.7 million doses of vaccine were administered, compared to only 760,000 doses during the seven days prior to November 11. Much more needs to be done, and it is unfortunate that this second vaccination campaign did not begin much earlier, but the process appears to be finally back on track.


All of this adds up to a significant change in direction of policy, towards living with the virus, and away from zero tolerance for cases. It is very unlikely that this change in direction could be reversed next year.


Property Pragmatism

Xi also announced in November his intention to reverse several policies that had effectively shut down the residential property market. He endorsed new measures which encourage banks and trust companies to extend maturity for construction financing, as well as support for bond issuance by privately owned developers, both of which should improve cash flow and project completion. Government-directed banks have also cut average mortgage rates by 129 basis points (1.29%) since the start of 2022, and mortgage processing time has been reduced.


This pragmatic course correction should lead to a gradual, steady recovery in new home sales in the second half of 2023.


Focused On Growth

The return to pragmatism on COVID and property appear to be part of a coordinated effort to restore consumer confidence and jumpstart the economy.


This is consistent with what Xi said at the Party Congress in October. Xi said he is “focused on promoting high-quality development,” and that he wants to “bring per capita disposable income to new heights.” At the Congress, Xi said “development is our Party’s top priority,” and that “we will provide an enabling environment for private enterprise.”


It's also worth noting that in a December 9 speech, Premier Li Keqiang said his government will take measures to promote consumption, which he called “the main driving force of economic growth.” Li reiterated support for the property market, and he signaled a lighter regulatory approach towards on-line platform companies. “The platform economy has promoted consumption and employment,” Li said, adding that the government “supports the healthy and sustainable development of the platform economy.”


This more pragmatic path will be bumpy, and implementation may stray off course during the winter as cases rise and local officials struggle with the new direction. Consumers may be free from lockdowns, but at least for the coming few months, a wave of COVID cases, although mild, may dampen sentiment and activity. The need to vaccinate many millions of older people is also a challenge.


But, short of a public health catastrophe, it is hard to imagine that the Party will return to its zero-tolerance approach, especially since the change in policy direction was personally announced by Xi, and because the virus is now so widespread in China that lockdowns would clearly be pointless.


Washington Pragmatism

Another reason I’m bullish is that when Xi and Biden met in Bali in November, both made serious efforts to put a floor under the rapidly sinking bilateral relationship.


I do not expect U.S.-China relations to improve significantly, in large part because of domestic politics in the U.S., but the odds of further deterioration were reduced as a result of their first in-person meeting since Biden was elected president.


After the meeting, Biden said, “I do not think there’s any imminent attempt on the part of China to invade Taiwan.” That is an important change from what his Secretary of State told an audience at Stanford a few weeks earlier.


In Bali, Biden also said, “I absolutely believe there’s need not be a new Cold War,” and he said about Xi, “I think that we understand one another.”


In response to a reporter’s question, Biden said, “And do I think he’s willing to compromise on various issues? Yes.”


According to the official Chinese media, Xi’s message to Biden was also constructive. Xi said he “takes very seriously” Biden’s pledge to continue with a One-China policy, and Xi said “China and the U.S. need to have a sense of responsibility for history [and] put the relationship on the right course. . . The successes of China and the U.S. are opportunities, not challenges, for each other.”


The two leaders agreed to increase the level of dialogue between their advisors, and Xi added that he will “unswervingly pursue reform and opening-up, and promote the building of an open global economy.”


It is also positive that it appears that inspectors from the U.S. Public Company Accounting Oversight Board, or PCAOB, completed their initial audits in Hong Kong without incident— I’ve heard no rumors that they didn’t get all the access they needed—which means Chinese ADRs are likely to continue trading in New York. This represents another signal from Xi that he wants to stabilize relations with Biden, and does not want financial decoupling from the U.S.


I believe U.S.-China relations will remain tense, but conflict, including over Taiwan, will be avoided.


China’s economy is driven by domestic demand, and active investment in Chinese companies selling goods and services to Chinese consumers mitigates the impact of political tensions.


Optimistic for a second half recovery

These developments over the last few weeks—on COVID, property and relations with the U.S.—leave me feeling very optimistic about prospects for the Chinese economy, especially after the end of the winter flu season, when COVID cases are likely to subside. I expect the macro data to remain weak in the first half of 2023, before a gradual recovery begins in the spring.


I understand that some may be skeptical about whether Xi will follow through on these three issues, but in my view, these pragmatic paths are all in Xi’s own self-interest.


With these recent decisions, Xi has acknowledged that, in the past, pragmatic policies have made China rich and kept the Communist Party in power, and that pragmatism is the best course for his country’s future, and for his own legacy.


Three Things to Keep in Mind



As we continue to track milestones on this path to pragmatism, there are three things investors should keep in mind:


First, China is likely to remain the only major economy engaged in serious easing of fiscal and monetary policy, while much of the world is tightening.


Second, Chinese households have been in savings mode since the start of the pandemic with family bank balances up 42% from the beginning of 2020. The net increase in household bank accounts during this period is equal to US$ 4.8 trillion, which is larger than the GDP of the UK.


Third, those funds should fuel a consumer rebound in China and a recovery in mainland equities, where domestic investors hold about 95% of the market.


Source: By Andy Rothman for Matthews Asia


Why have Chinese foreign listed shares...

Why have Chinese foreign listed shares performed poorly in 2022?

Shares in Alibaba  (NYSE:BABA)NIO (NYSE:NIO), and XPeng (NYSE:XPENG) were surging yesterday. The jump at the market open was the largest that shares in these Chinese companies have seen since 2008. The catalyst for the move is an announcement from the Chinese government that it intends to do four things: 


  1. Support overseas stock listings
  2. Stabilise capital markets
  3. Resolve risks around property developers
  4. Speed up the process of regulating big tech companies



In doing so, the Chinese authorities have addressed three of the biggest risks that investors who have exposure to Chinese stocks face.  The market’s response to today’s announcement indicates that investors are generally feeling more comfortable about the risks. Let’s take Alibaba as an illustration of all three.


VIE structure

Investors who buy the NYSE-listed entity with the ticker symbol ‘BABA’ aren’t buying shares in Alibaba. Instead, they’re buying shares in a ‘variable interest entity’ (VIE) that is a separate company that has contracts that give it a claim on Alibaba’s assets and earnings. Why does such a thing exist? Because under Chinese law, it’s illegal for Alibaba to have non-Chinese shareholders. The VIE structure is intended to allow foreign capital access to Chinese companies (albeit indirectly) and to allow Chinese companies access to foreign capital.


The risk comes from the fact that a VIE is designed to circumvent Chinese law. As such, its contracts — which are the only things it has of any value or that connect it in any way to Alibaba, the company — might not be enforceable. That would mean that shares in the VIE could be worthless if the Chinese authorities ever decided to clamp down on VIE structures. Today’s announcement that China intends to support overseas stock listings goes some way towards limiting concerns about this possibility.



A second source of concern comes from the possibility of the US delisting Chinese stocks from the NYSE. The Holding Foreign Companies Accountable Act of 2020 requires Alibaba to submit audit documents in support of its financial statements. Otherwise, it can be delisted from the US exchanges. The trouble is, Chinese regulation prevents them from doing this. 


This concern is assuaged somewhat by the announcement that the Chinese authorities are prepared to support overseas stock listings. The details are still to be worked out, but the idea that there might be the will to work towards resolving the impasse is encouraging for investors.



The third major risk associated with Alibaba is the threat of government regulation. Alibaba has more history than most with this threat, after it picked up a record fine last year for abusing its dominant market position. But it’s far from unique. Various other Chinese tech companies have also faced similar sanctions.


The risk of further interventions against Alibaba and China’s other big technology firms has been a source of uncertainty around the stocks. Today’s announcement that the Chinese regulators intend to make things more transparent is positive news for investors.



China tech IPOs to watch in 2021

China tech IPOs to watch in 2021

A slew of Chinese startups went public in 2020, and it looks like Chinese tech IPOs will keep booming through 2021.

Three of China's "four AI dragons" (AI四小龙) are almost certain to go public this year. Some of China's biggest unicorns, such as ByteDance and Didi Chuxing, are also likely to join them. Here are the China tech IPOs you need to know for 2021.



Companies gearing up for IPOs


One of China's largest facial-recognition developers, Megvii is ready for an IPO on the Shanghai Stock Exchange's STAR board, according to an announcement posted by the China Securities Regulatory Commission in mid-January.


  • What it does: Megvii is often called one of China's "four AI dragons" alongside SenseTime, Yitu and CloudWalk. The Beijing-based company is the creator of the facial-recognition software Face++, the world's largest open-source computer vision platform. The company provides AI technologies to government agencies and enterprises including Alibaba, Lenovo and Huawei. Megvii was placed on the U.S. Department of Commerce's entity list in 2019 for its alleged role in mass surveillance of Muslim minorities in Xinjiang.
  • Funding: Megvii filed for an IPO in Hong Kong in August 2019, but the application has since expired. In its latest funding round in May 2019, Megvii raised $750 million from investors including Bank of China Group Investment, Alibaba and Australia's Macquarie Group at what Reuters reported was slightly north of a $4 billion valuation.
  • What to watch for: In 2020, Megvii launched Brain++, its own AI productivity platform, and made MegEngine, a major component of Brain++, an open-source deep learning framework. This is largely seen as one element of China's plan to develop home-grown AI tech and reduce Chinese companies' reliance on American open-source frameworks.


Yitu Technology

In November 2020, the Shanghai Stock Exchange accepted Yitu Technology's IPO request. The Shanghai-based AI unicorn intends to raise $1.16 billion.


  • What it does: Yitu claims to have provided AI tech for more than 800 governments and companies across more than 30 Chinese provinces and regions and more than 10 countries and regions outside China. It's also on the U.S. entity list for its alleged role in aiding the Chinese government's abuse of Uyghurs and other Muslim minority groups.
  • Funding: Valued at about $2.2 billion, the company has financial backing from leading VCs such as Sequoia China, Hillhouse Capital, Gaorong Capital and ZhenFund. Yitu plans to issue 36.4 million shares in the form of Chinese Depositary Receipt on the STAR market.
  • Financials: As disclosed in its prospectus, Yitu's revenue was $111 million in 2019, and it reported a net loss of $567 million in the same period.
  • What to watch for: Yitu has made its name in applying AI to the medical industry and is gradually expanding its business to other fields, including security and finance. The company is expected to lead the AI care sector as major Chinese hospitals continue to embed Yitu's AI products into clinical workflows.


CloudWalk Technology

In December 2020, the state-backed facial-recognition developer CloudWalk filed a prospectus with the Shanghai Stock Exchange, seeking to raise roughly $580 million in an IPO on the Star Market.


  • What it does: Founded in 2013, CloudWalk Technology is described as the "state team" (国家队) among the four AI unicorns because so many of its investors are state-owned. Its founder and CEO Zhou Xi came from the Chinese Academy of Sciences' Chongqing Research Institute, and a precursor to the company came out of the Chinese Academy of Sciences' facial-recognition research team. CloudWalk was added to the U.S. entity list in May 2020 for allegedly participating in human rights abuses in Xinjiang.
  • Financials: CloudWalk has also been losing money, just like its competitors. Compared with Yitu, CloudWalk's net profit loss is smaller. During the first half of 2020, its net loss reached approximately $44.5 million, and the 2019 annual net loss was about $265 million. Money-losing AI companies all attribute the net losses to business expansion and increasing investments in R&D. Valued at $3.1 billion, CloudWalk ranks No. 3 among the four AI dragons by valuation, according to the 2020 Hurun Global Unicorn Index.
  • What to watch for: Thanks to its state affiliations, CloudWalk will continue to focus on building projects for Chinese government entities, focusing mainly on fintech, smart security and transportation.


Rumored IPOs

ByteDance's Douyin and Toutiao

Competitor Kuaishou's $5.4 billion IPO has made people wonder just how big ByteDance's IPO could be. Last November, Bloomberg reported ByteDance was in talks with investors, including Sequoia, over funding that would boost its valuation to $180 billion, and was preparing some of its biggest assets — including Douyin and Toutiao — for an IPO in Hong Kong.

  • What it does: ByteDance is the creator of short video-sharing app TikTok, its original Chinese version Douyin and news aggregator Toutiao. The company makes money mainly through advertising, livestreaming and gaming. It has products available in over 150 markets, and has 100,000 employees across 126 offices.
  • Financials: ByteDance is one of the largest Chinese unicorns. While it spent last year at the center of U.S. controversy over data-sharing with Beijing, ByteDance's revenue more than doubled to about $35 billion in 2020, Bloomberg reported. And its operating profit in 2020 grew to around $7 billion, from less than $4 billion the year before.
  • What to watch for: ByteDance has been looking to diversify its revenue stream by expanding its business into fields like education, fintech and SaaS. Last October, ByteDance established an independent education brand, Dali Education (meaning "big power"), whose business encompasses K-12 and adult education software and hardware. Most recently, it reportedly set up a business unit dedicated to expanding the so-called "local life business" in sectors such as culture, tourism and restaurants, where Meituan is winning.


Didi Chuxing

The Information reported on Feb. 3 that China's other large unicorn, Didi Chuxing, is in early discussions with Goldman Sachs, Morgan Stanley and JPMorgan Chase about a potential IPO later in 2021, targeting a $100 billion valuation. Reuters previously reported Didi could go public this year in Hong Kong.


  • What it does: Didi Chuxing is the dominant carpooling startup in China, founded in 2012. It won a costly turf war with Uber China in 2016 by acquiring the American app's China business. Its other businesses include shuttle bus services, bike-sharing, designated driving, auto after-service, delivery and logistics.
  • Financials: Didi Chuxing has been known as a cash-burner; it didn't turn a profit in its first six years. However, according to The Information, it managed to make an annual profit of about $1 billion in 2020, its first time doing so.
  • Funding: Last valued at $56 billion, Didi's backers include SoftBank, Alibaba and Tencent.
  • What to watch for: In 2020, Didi announced an organizational restructuring, consolidating its services outside its core car-hailing business — including bike-sharing and freight — into a newly established "Urban Transportation and Service Business Group." In an attempt to diversify its revenue stream before its IPO, Didi directed much of its internal resources into community group-buying, which uses grassroots intermediaries to distribute groceries across the "last mile." Its CEO Cheng Wei reportedly said in early November that the company's investment in Chengxin Youxuan, Didi's community group-buying service, would not be capped: that the company would "go all out to take the first place in the market."



Tencent News broke the story late January that SenseTime had completed a pre-IPO round of fundraising at the end of 2020 with a valuation of $12 billion. Investors are mostly Chinese state institutions, including state-owned insurance companies and local governments. SenseTime is considering a dual listing in Hong Kong and China, Bloomberg has reported.


  • What it does: SenseTime is China's largest artificial intelligence unicorn by valuation. It has developed and established its own deep-learning platform and supercomputing center for its artificial intelligence technologies, which include facial recognition, image recognition, text recognition, video analysis and remote sensing. SenseTime was among eight Chinese tech companies placed on the U.S. entity list in 2019 for allegedly playing a role in massive human rights abuses against Muslim minorities in Xinjiang.
  • Funding: SenseTime has been an investor darling over the past few years, and became the world's most valuable AI startup after it raised over $2 billion in 2018, according to Bloomberg. Its investors include SoftBank, Singapore's Temasek Holdings and Alibaba.
  • Financials: According to Caijing, SenseTime's 2019 operating revenue was $780 million, with a gross margin of 43%, which is lower than Megvii's 64.6% and Yitu's 63.9%.
  • What to watch for: Like other AI unicorns, SenseTime has been getting many government contracts to help build smart cities across China. Caijing reported that its smart city revenue reached approximately $258.6 million in 2019 (nearly 33% of its total revenue). Management expected that in 2020, revenue from smart city projects would reach approximately $621.6 million, comprising about 42.7% of total company revenue.



The International Financing Review reported Hellobike is considering a U.S. IPO, seeking to raise up to $1 billion. Chinese-language tech website 36Kr confirmed the bike-sharing company's 2021 IPO plan. It would be China's first bike-sharing company to go public.


  • What it does: Hellobike is a mobility service platform based in Shanghai. Founded in 2016, it started as a bicycle-sharing company, later expanded its services to include rented e-bikes and e-scooters, as well as carpooling. Backed by Ant Financial, the company survived the bike-sharing battle that flared up in 2017. Because of its relationship with Ant, Alipay users can rent Hellobike's bikes without downloading a separate app. Hellobike claims to have 400 million registered users.
  • Funding: iFeng Tech reported Hellobike shed 20% of its value over the pandemic, and that the company is now worth $3.2 billion. Fintech giant Ant Financial is a major investor in Hellobike, which powered the startup through Series D to F funding rounds. Other backers include Primavera Capital Group and Fosun International.
  • What to watch for: Local governments distribute very limited compliance quotas to bike-sharing companies. Since 2019, 80% of Chinese cities have adopted quota systems, according to 36Kr. Bicycle-sharing is a business that requires bike distribution scale. Hellobike, even if it's public, will likely face a considerable regulatory challenge.



Online health insurance marketplace Waterdrop plans to file for a U.S. IPO in the first quarter of 2021, with an estimated fundraise of about $500 million, according to IPO Zaozhidao, a WeChat public account tracking IPO scoops. Goldman Sachs and Bank of America are among the underwriters. Last summer, Bloomberg reported Waterdrop was seeking a valuation of about $4 billion.

  • What it does: Waterdrop was established in 2016 by Shen Peng, a co-founder of Meituan's meal-delivery unit. The 4-year-old startup focuses on health care crowdfunding. Its major business units include Waterdrop Insurance Mall (its main source of revenue), Waterdrop Mutual Aid (a patient payout platform designed to reduce the financial burden on those afflicted with major injury or disease) and Waterdrop Crowdfunding. Shen Peng boasted more than 250 million paying users across the platforms in 2019. As of September 2020, the cumulative annualized signed premiums of Waterdrop Insurance Mall exceeded $2.8 billion, according to the company. The company has about 140 million users, with 76% from third-tier cities and below.
  • Financials: The startup, which works with China's 30 top insurance companies, announced in August a Series D financing round of over $230 million, co-led by Swiss Re and Tencent. Other backers include IDG Capital, Boyu Capital and Meituan Dianping. TMTPost reported that the valuation of Waterdrop was between $4 billion and $6 billion after its latest round of financing.
  • What to watch for: Waterdrop Mutual Help and Waterdrop Crowdfunding operate somewhat like public services. Waterdrop Crowdfunding allows people to chip in small amounts of money to help those with critical illness, and in return receive payouts when they are in need. But the company is walking on thin ice balancing public welfare and its business interests. The company has encountered scandals where it was accused of mismanaging funds, and a subsidiary was fined last year for deceiving insurers and policyholders and concealing material circumstances related to insurance contracts.


BOSS Zhipin

Internet recruitment platform BOSS Zhipin is working with Goldman Sachs and UBS on a U.S. IPO that could occur this year, with the goal of raising $300 million, according to IPO Zaozhidao.


  • What it does: BOSS Zhipin means BOSS Direct Recruitment. It's a provider of a recruitment mobile application that matches job candidates and applicants directly with recruiters, human resources staff and company executives. Founded in 2013, it also has features such as customized recommendations, online interview scheduling and candidate screening that enable companies to find ideal candidates with increased efficiency.
  • Funding: According to Qichacha, BOSS has finished five rounds of financing, with the latest round co-led by Tencent in late 2019. In 2019, the company was valued at nearly $500 million.
  • Financials: The company says it broke even in 2017, achieved monthly profitability for the first time in November 2017, and has continued to maintain profitability since 2018, with annual revenue exceeding $150 million in 2019.
  • What to watch for: TalkingData's "2020 College Graduate Job Search Research Report" shows that it was one of the most highly-rated job recruitment apps among Chinese college students and graduates. Between May and October 2020, the app's average number of daily active users was 2.8 million, up 80% from a year ago during the same period. More than 45% of its users spent over 20 minutes on the app each visit.


Source: By Shen Lu for Protocol

Who is funding the China Start Ups?

Who is funding the China Start Ups?

In 2019, 8 internet giants newly invested in over 400 startups in China and overseas. They have become more conservative about investing in B2C & startups since 2018. They eye on the next blue ocean market, i.e. B2B business.


Baidu - invested mainly on enterprise services, and medical & health
Alibaba - invested mainly on enterprise services, finance, IT, and media & entertainment
Tencent - invested mainly on enterprise services, finance, transport, and media & entertainment
Xiaomi - IT, and lifestyle services


The very detailed full reprort is avaialble from the Fung Business Intelligence website here:

The Liaoning FTZ: A portal to emerging...

The Liaoning FTZ: A portal to emerging regional markets
The establishment of the Liaoning Free Trade Zone (FTZ) was approved in September 2017 and since then, Dalian’s goal is to create a sufficient and stable business environment. The new FTZ will involve three major cities of Liaoning province, including Dalian, Shenyang and Yingkou. Dalian is already part of the Jinpu New Area, which helped to increase its international and domestic trade levels, including international partnerships with South Korea, Japan and Russia.
More than 70 percent of bulk goods transported by sea and more than 90 percent of container transportation in China's northeastern region are shipped via Dalian. 
Jinpu New Area is a strategic region for regional co-operation of firms in Northeast Asia. It was formed in 2014 and became the 10th of China’s Big National Districts as part of the 13th Five-Year Plan. The main aim of the Dalian Jinpu New Area is to develop the opening-up and reform of China, as well as to expand the coastal economic relationships in Liaoning Province and to boost the economic growth in the North-Eastern part of the country. The Jinpu New Area was approved by the State Council, in the hope of making Dalian a pilot zone for innovation. Since the formation of the New Area, large number of functional zones have been set up within the district. Some of these functional zones, include tariff-free zone, bonded port areas, national tourist resorts and export processing zones. The New Area helped Dalian to become a global logistics and international shipping centre. The New Area has both economic and geographical advantages for businesses, operating in Dalian and its surroundings.
The Free trade zone is made up of three sectors, Dalian, Shenyang and Yingkou. The new Liaoning Free Trade Zone covers state-level high-tech zones, bonded harbour area, the Jinpu New District as well as numerous industrial parks. The regions that will have special customs supervision, will have a focus on the search for institutional innovation that can improve the accessibility of trade, logistics and the processing of bonded services. On the other hand, areas which are not under special customs supervision will focus on exploring potential reforms of the investment system, innovation of the finance sector, the promotion of transformation of the manufacturing industry as well as on the opening-up of the Chinese service industry.  The government made registration convenient for companies, which are located at the Dalian Area of China, Liaoning Free Trade Zone, by setting up a special registration service window for organisations based in the Jinpu New Area and by helping companies to adopt a virtual registration service. Reports of the registration shows that half of the firms used the virtual registration mode to settle down in Jinpu New Area. These organisations include firms in the finance, trade, biological science, equipment manufacturing and port and shipping logistics industries. According to reports, Dalian has copied and promoted around 102 innovative measures of the Shanghai FTZ, as well as of other pilot Free Trade Zones.
The main gols of the zone are: to focus on speeding up the market-orientated institutional mechanism reforms. In order to do this, the Liaoning Free Trade Zone will mostly be based on the Shanghai Pilot Free Trade Zone and adapt new reforms and accomplish further institutional innovations, which are easily adaptable by the cities covered by the Liaoning Free Trade Zone. These changes should mainly focus on the function of the local government and expand the power of decentralization, improve services and to authorize supervision. These changes should help to improve the business environment and the restructuring and upgrading of industries in the involved areas.
Secondly, to focus equally on the introduction, development and show a new image in team building of talents. Introduction of new talents is important and should be done efficiently and high-level talents should be brought from global and international perspective. The involved are should improve the training and education and overall quality of cadres as well as to work hard, overcome difficulties and try to create a dynamic situation of competing for development.
Lastly, the cities in the Liaoning Free Trade Zone should also open-up further to the outside world in order to help to build and achieve a new economic system. They should take part in the international competition and cooperate with other areas, but at the same time fully connect to the national “One Belt One Road” strategy. They should improve their trade systems, so that it meets common rules of international investment and trade, and look for new competitive advantages in foreign trade. Regions in the Liaoning Free Trade Zone can achieve development in its foreign trade system by enhance their technologies, investment attractions and intelligence attractions.
Further information and current investment news can be found on the Dalian Governmental website:

New opportunities in the Shanghai FTZ:...

New opportunities in the Shanghai FTZ: revisions to restricted industries.
As of last year, the Shanghai municipal government has revised its restricted industries list for foreign investors and updated it for the Free Trade Zone (FTZ). Amendments made to current list are not considered a major change but a revision to the 2014 initiatives. The list below outlines industries where foreign investors are treated differently to domestic companies. There are number of changes where we believe there are various opportunities for new investors in the three FTZs.

Agriculture in General
 - Agriculture, crop seeds, fishery and animal husbandry is a critical subject and remains sensitive to Chinese citizens. Fishing in certain waters is due to approval from Chinese   government.

Mining, Natural Resources and Exploitation
 -All initiatives needs to be approved by concerned government bodies.
 -Oil and Gas exploitation needs to be contractual or joint venture with a Chinese partner

Other Sources/Materials
 -rare earths, radioactive materials, tungsten, molybdenum, tin, antimony and fluorite is prohibited. It is restricted for lithium, precious metals and graphite.

- Multiple restrictions in manufacturing industry is now lifted. These includes, the processing of rice, corn, edible oils, tea, alcohol, tobacco and chemicals, anesthesia and blood products are now allowed.
- Construction vehicles, motorcycles and new energy vehicle batteries is lifted.
- Aircraft, drones and helicopters requires prior approval
- Finished cars and car parts are fully open to foreign investment with maximum 50% stake of ownership
- Ships, ship engines and marine engineering equipment requires prior approval
- Rail transport equipment needs to be contractual or joint venture with a Chinese partner
- Satellites for civilian use, requires prior approval
- Tungsten, molybdenum, tin, antimony needs to be contractual or joint venture with a Chinese partner
- Processing of radioactive materials are prohibited
- Chinese herbal medicine prohibited
- Ivory, tiger bones and traditional Chinese handicrafts: prohibited

Utilities and Infrastructure
 -Airports; railroads; power grids; water, heat, gas and drainage supply for cities; postal services; telecom and internet infrastructures remains sensitive and prohibited

Wholesale and Retail
 -Restrictions on fertilizers, agricultural film (greenhouses), sale of petrol through petrol stations and books, newspapers and magazines are not lifted
 -tobacco, lottery tickets and auctioning of cultural relics remains restricted

IT and Telecom
- It is still prohibited to operate news websites, online publications, online audiovisual programs or broadcasting of information on the internet. Except for music and those sectors that have been lifted as China’s membership of the World Trade Organization.
- It is restricted to create and publish maps on the internet
- If a domestic enterprise cooperates with a foreign enterprise to create official online content and news, needs prior approval from National Security Review.
- Foreign investors can now set up e-commerce companies in Fujian, Guangdong, Tianjin as well as Shanghai.

- Wholly foreign-owned or a Sino-foreign joint venture must be a financial institution and the controlling entity a commercial bank
- The investor in a Chinese-owned bank or trust company must be a financial institution
- Only foreign banks may invest in Chinese rural-commercial banks, rural cooperative banks or rural credit cooperative unions
- The investor in a financial leasing company must itself be a financial leasing company
- The main capital contributor in a consumer finance company must be a financial institution
- The investor in a currency brokerage must itself be a currency brokerage
- The investor in a financial asset management company must itself be a financial institution, but not allowed to be involved in the establishment of a new asset management company
- The investor in a financial institution will be subject to asset requirements – the Negative List does not specify the amounts
- Foreign banks may not conduct the following activities, also included in the Commercial Banking Law: acting as an agent to issue, honor and underwrite government bonds, issuance of bank cards and the acting as an agent for receipt and payments of funds. Apart from taking time deposits for Chinese nationals of less than 1 million RMB, foreign banks in China may not engage in RMB activities for Chinese nationals.
- The parent company of a foreign invested bank in China must provide its operational funds free of charge. The foreign invested bank must operate with an eight percent RMB capital reserve. Banks providing RMB services must follow the minimum required business hours.

Professional Services
- Accounting: the main partner must be a Chinese national
- Foreign law firms may only be present in China through a representative office, which is subject to approval. Foreign nationals may not advice on Chinese law or become partners of a Chinese law firm. Representative offices of foreign law firms may not hire Chinese legal professionals, and its support staff may not provide legal advice.
- Credit rating activities are restricted
- Investment in polling and social surveys are restricted
- Market research is restricted to contractual or joint ventures with Chinese controlling interest.
- The legal representative of a visa agency must have Chinese nationality and domicile

- Foreign entities may not independently establish schools and educational institutions mainly enrolling Chinese nationals. This does not include "non-academic vocational training"
- Foreign entities may establish and run educational institutions in cooperation with a Chinese party, under the following conditions:
a. Education cannot cover; the military, law enforcement, politics or political activates

b. Foreign entities may not provide religious education

c. Regular high schools and other education institutions must be led by the Chinese party, i.e. the principal or main administrator must be a Chinese national and be domiciled in China; the board of the school must have a Chinese majority and the education program must be in line with Chinese law

Health Care
- Medical institutions can be set up as an equity or contractual joint venture.

Media, Culture and Entertainment
- The establishment and operation of television, radio, television channels, broadcast networks, satellite television, TV on-demand and other broadcast media is prohibited
- The production of television and radio shows is prohibited
- Foreign satellite channels are subject to approval by concerned government bodies
- Sino-foreign productions of television and film series are subject to a licensing.
- The establishment of news and press agencies, publishing companies, newspapers is prohibited
- Foreign news agencies may set up a representative office in China and employ foreign reporters upon approval of the Chinese government.
- Foreign press agencies may provide news services in China upon approval of the Chinese government.
- The production of newspapers, books, audiovisual materials, periodicals, electronic publications, is prohibited
- Cooperation between Chinese and foreign news agencies must be led by the Chinese party and subject to approval by Chinese government
-  Provision of financial information is subject to approval by Chinese government
-  The construction and operation of cinemas is prohibited
- The establishment of performing arts groups in China is prohibited, and performance agencies must have Chinese controlling.

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.


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

McKinsey & Co predict: What could happen...

McKinsey & Co predict: What could happen in China in 2014?

The year ahead could see companies focus on driving productivity, CIOs becoming a hot commodity, shopping malls going bankrupt, and European soccer clubs finally investing in Chinese ones. McKinsey director Gordon Orr makes his annual predictions. Please click here to open the report. 


Please login here

Create new account / Forgot password?

Create new account

And a little about you

Forgot your password?

Enter the e-mail address you used to create your account and we will send you instructions for resetting your password.

* Please check your email to get the temporary password we've just assigned you

Edit Password

To continue reading this article please register below as a site user. Thank you

Create new account

And a little about you

If you are already a member, please login here