As China continues to grow and expand, this development is creating increased efficiencies and improved infrastructure benefiting the supply side, as well as higher wealth and disposable income levels for individuals across the country, representing a potential boon for those targeting the demand side. This is translating into exciting opportunities for international business both selling to, and sourcing from, the Chinese market.
In 2012, China’s foreign trade totaled US$3.87 trillion, among which exports reached US$2.05 trillion and imports amounted to US$1.82 trillion; surpassing the United States as the world’s largest trading nation. The China-U.S. trade surplus stood at US$219 billion, while China’s surplus with the EU stood at US$122 billion.
By: Eunice Ku and Rosario Di Maggio, Dezan Shira & Associates
Date: April, 2013
When an international company has reached a certain level of success in selling to or trading with China, or simply wants an on-the-ground presence in the country, it is common that a trading company is established in the form of a foreign-invested commercial enterprise (FICE).
The FICE structure has become the most common type of legal entity that foreign investors establish in China, as it is the most convenient, adequate and cost efficient type of business structure available for foreign traders wishing to conduct the following activities:
By: Chris Devonshire-Ellis, Dezan Shira & Associates
Date: April, 2013
China is not the only solution for export-driven manufacturing, and Asia’s trade evolution is determining that business models move on for adventures elsewhere.
At the turn of the 21st Century, there were two main schools of commercial thought with regards to China. The most popular was that China represented a massive market to sell to with roughly 1.3 billion potential consumers. The second was that China had a young, available and inexpensive work force that was relatively skilled and disciplined. While the latter has proven the dominant economic driver for the past two decades, China’s one-child policy (implemented nationwide in 1982) has meant that the nation’s supply of cheap labor has been drying up – and is now doing so at an increasingly rapid rate.
Importing to and exporting from China generally involves three types of taxes:
1. Value-added tax;
2. Consumption tax; and
3. Customs duties
1. Value-added Tax for Imported Goods
Imported goods to China are subject to value-added tax (VAT), and the applicable tax rates are the same as those applied to goods sold within the domestic market (i.e. 17 percent, and 13 percent for some goods). VAT is payable on the day of customs clearance.
The input VAT imposed on importing goods can be used to deduct the output VAT paid when the imported goods are sold in the domestic market.
As part of China’s efforts to internationalize its currency, China initiated the “RMB Qualified Foreign Institutional Investors Pilot Program (RQFII Pilot Program)” at the end of 2011, which allows qualified foreign institutions to invest offshore RMB back into Mainland China’s capital market.
So far, China’s State Administration of Foreign Exchange has approved 27 financial institutions in Hong Kong to participate in the program, and the available quota of the RQFII Pilot Program has been boosted significantly from the initial RMB20 billion to RMB270 billion.