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Doing Business in China
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Presentation structure
Some facts about China
Regulatory and Tax System
1. Forms of Doing Business in China
2 . China’s tax reform in 2007
3. Emerging Market Opportunities
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Map of China
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Population
China, as the world's most populous
country, has a population exceeding 1.3
billion, which makes up 22 percent of the
world total. It is concentrated in the east
and south of China. To bring population
growth under control, the country has
followed a family planning policy since the
1970s. We have adopted the one-child
policy since late 1970s.
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Ethnic Groups (Chinese Minorities)
China is a multiracial country with 56
ethnic groups,,The Han people account
for 92 percent of the population. No
matter how big or small the population
is, all peoples share equal rights.
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Religion
China is a multi-religious country. Taoism,
Buddhism, Islamism, Protestantism and
Catholicism have all developed quite a lot
in this country. Freedom of belief is a
government policy, and normal religious
activities are protected by the
constitution.
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Administrative Units
China is divided into 35 administrative regions.
They are 23 provinces, five autonomous regions,
four municipalities under the direct jurisdiction
of the Central Government, two special
administrative regions and Taiwan. The four
municipalities are Beijing, Shanghai, Tianjin, and
Chongqing; Hong Kong and Macao are the
special administrative regions. Taiwan is to be
reunited with the mainland of China.
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Capital
Beijing is the capital of the People's
Republic of China. A center for politics,
economy and culture, Beijing has been
developed into a world-class
metropolis in which the modern world
is blended harmoniously with the glory
of an imperial past.
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Opening policies and Reform
( 1978-now)
 Chinese students who studied abroad during 1978-2008 reached
933,400,but only 232,900 (25%) returned to China.
 International students studying in China: over 160,000 in 2008
 Foreign direct investment in China: the biggest recipient of FDI
among the developing countries for the last 15 years.
 Foreign-invested enterprises: 508,941
 Over 400 of 500 biggest transnational corporations invested in China
and about 30 of them have established or moved their head-quarters
to China.
 86% of FDI is in the east and southeast regions
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 9.3% annual economic growth during the last 28 years
 No. 3 trading power in the world, its trade volume
amounted to US$2561.63 billion in 2008 and maintained the
trade surplus value reaching as much as US$290 billion
 China WTO entry on December 11, 2001
 Foreign exchange reserves amounted to US$875.1 billion
by March 2006, No. 1 in the world
 Foreign exchange reserves reached US$1950 billion till
2008.
 Women’s increase in their social status
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The Trade Relations with
its major trading partners
EU: The biggest trading partner and the biggest export market.
The bilateral trade volume reached US$425.58 billion IN
2008.
USA: The second trading partner. The bilateral trade volume
reached US$333.74 billion in 2008.
Japan
ASEAN
Hong Kong
South Korea
Taiwan
India
Russia
Australia
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Capital Outflow from Top-10 FDI Participants in China
2009(1-6)
Unit:US$100million
Country/Region
Investment in China
Share in China
H.K
1999896
46.5
British Virgin Island
585220
13.61
Japan
203497
4.73
Singapore
190447
4.43
Caymen Island
157668
3.67
United States
137405
3.19
Korea,Rep.of
135263
3.15
Samoa
117596
2.73
Taiwan Province
87152
2.03
Germany
51317
1.19
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New Economic Development Plan
 China’s 11th 5-year Socioeconomic Development Plan (2006-2010)
 Establish a “harmonious society”
 Coordinate growth among different regions
 Stimulate development of the agricultural sectors
 Facilitate healthy growth in urban areas
 Transform from export-processing to higher-technology-content
products
 Convert from a manufacturing driven economy to a more diversified
domestic services economy
 Targets by end of 2010
 Double 2000 GDP per capita by 2010 (US$856)
 Reduce energy consumption per GDP unit by 20% from 2005 level
 [1.21tons of coal equivalent per 10000 RMB(1292 USDollars) in 2006]
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China Regional Economy
West and Central
Regions
Northeast Region
Beijing
China
Dalian
Beijing-TianjinHebei Region
Tianjin
Xian
Suzhou
Shanghai
Chongqing
Guangzhou
Chengdu-Chongqing
Region
Macau
Shenzhen
Yangzi River
Delta Region
Pearl River Delta
Region
Hong Kong
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Regulatory and Tax System
 Forms of Doing Business in China
 Direct Investment Forms
• Equity Joint Venture (EJV)
• Contractual Joint Venture (CJV)
• Wholly Foreign-Owned Enterprise (WFOE)
• Investment Holding Company (CHC)
Foreign Investment
Enterprise (FIE)
• Joint Stock Company
 Indirect Investment Forms
• Direct purchase and sales
• Toll/Contract manufacturing
• Licensing
• Financing
Foreign Enterprise (FE)
• Representative offices
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China’s tax reform in 2007
Dual tax system
Before
Chinese
domestic
owned
companies
Foreignowned
companies
Income tax at a rate
of 33 percent
Income tax at a rate
of approximately 15
percent
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After
Income tax at a rate
of 25 percent
Income tax at a rate
of 25 percent
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Industrial Zones
Industrial zones provide various
incentives and opportunities for US
companies with different business models
 Special Economic Zone (SEZ)
 Free Trade Zone (FTZ)
 High-Tech Park
 Export Processing Zone (EPZ)
 Boned logistics area
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Export processing zone
Presently , in China , there are about 40 export
processing zones, mainly distributing in Yangtze
River Delta Areas, Pearl River Delta Area, Bohai
area.
For example:
1.Shanghai:JinQiao export processing zone
2.Guangzhou:Guangzhou export processing zone
3.Shandong:Weihai export processing zone
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Free trade Areas
Presently , only Hong Kong serves as the
Free trade area in China.
Hainan is applying for being the FTA soon.
Tax Heaven: income tax rate at about 10.5%
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Encourages and discourages
Logistic or business
outsourcing are
encouraging
sectors
High-tech service
sectors
investment
sectors
Encour
aging
sectors
Environmentally
friendly
investment
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New
restriction
and
prohibition
Chemical,
auto parts
meet new
restriction,
media-related
industries are
prohibited
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Foreign Investment Regulatory
Framework
Principal Laws Applicable to Foreign Investment
(Company Law, Wholly Foreign-Owned Enterprise Law,
Equity Joint Venture Law, Contractual Joint Venture Law )
Industry Regulations
“Catalogue on Guiding
Foreign Investment ”
“Administrative Measure
for Foreign Investment in
the Commercial Sector”
… ...
Government Department
Regulations
Economic Zone
Regulations
“Foreign Investment
Enterprise Income tax Law”
“Administrative Measure for
Free Trade Zone”
“Rules of the PRC on Foreign
Exchange Control”
……
“Administrative Measure for
Export Processing Zone”
……
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Emerging Market Opportunities
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Manufacturing in China
 Take advantage of low cost,
skillful labor force and
college-graduated engineers,
lower manufacturing cost
 Incentive income tax rates
and other tax holidays
 For some products, Chinese
government only allows
those manufactured in China
to enter into China domestic
market
 Good OEM/ODM capability,
covering almost all industrial
sectors of consumer and
capital products
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US Companies – China Manufacturing Facilities
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Shanghai Bonded Logistics Park
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LOGO
Questions?
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