Introduction of China Market

1. Basic Facts

China is the world’s most populous country, with 1.3bn people living on 9.6m sq km of land, stretching from its southern borders in the Himalayas to the deserts of Mongolia in the north, and from the East China Sea through the Yangzi River Valley plains, to the Tibetan Plateau in the western mainland. Only slightly larger than the US, it contains almost five times as many people. China covers an area of 9,596,960 square kilometers. The nation comprises 5 autonomous regions, 23 provinces, 4 municipalities and 2 special administrative regions. Due to its size, China’s climate is obviously very diverse, ranging from an unbearable 48ºC in the northwest during summer to an equally unbearable -40ºC in the far north in winter. The official language in China is Mandarin, but there are also many different dialects to listen for.

2. Investment Environment
According to the first national economic census, the country is divided into three regions: Eastern regions including Beijing, Tianjin, Hebei, Liaoning, Shanghai, Jiangsu, Zhejiang, Fujian, Shandong, Guangdong and Hainan; Central region including Shanxi, Jilin, Heilongjiang, Anhui, Jiangxi, Henan, Hubei, Hunan; Western region including Inner Mongolia, Guangxi, Chongqing, Sichuan, Guizhou, Yunnan, Tibet, Shaanxi, Gansu, Qinghai, Ningxia and Xinjiang. Among them, more than half units of the second and tertiary industries concentrate in the eastern regions, the ownership of unit show the situation that reduces from east to west. In the development of regional economy, it focused on the development of manufacturing and resource-based industries, neglect the development of tertiary industry and foundational industry, particularly the development of innovative regional economy, the competitiveness of industry in many regions declined, the development of various regions’ industries have emerged a similar trend

3. FDI in China
China’s absorption of foreign investment is an important content of China’s fundamental principle of opening up to the outside world, and is one of the great practices of building up socialist economy with Chinese characteristics. The Law of the People’s Republic of China on Chinese-Foreign Equity Joint Venture, was promulgated by the National People’s Congress in 1979, then the work of utilizing foreign capital as an important content of opening up to the outside world initiated as China’s fundamental principle. After twenty years of great efforts, the scale of absorbing foreign capital increasingly expanded as well as the level was increasingly upgraded when China’s law and managerial system on foreign investment have been gradually perfected. The achievements won the whole world’s attention, which effectively promoted the continuous, fast and healthy development of national economy. Here lists some encouraged foreign investment industries: mechanical industry; textile industry; communication and transportation as well as post & telecommunications services; coal Industry; power Industry; petroleum and chemistry industries; service business; medical industry and electric industry.

4. Forms of investment
The foreign investments are basically divided into direct investment and other means of investment. The direct investment, which is widely adopted, includes Sino-foreign joint ventures, joint exploitation and exclusively foreign-owned enterprises, foreign-funded share-holding companies and joint development. The other means of investment includes compensation trade and processing and assembling.

(1). Sino-foreign joint ventures
Sino-foreign joint ventures are also known as share-holding corporations. They are formed in China with joint capitals by foreign companies, enterprises, other economic organizations and individuals with Chinese companies, enterprises, other economic organizations and individuals. The main feature is that the joint parties invest together, operate together, take risk according to the ratio of their capitals and take responsibility of losses and profits. The capitals from different parties are translated into the ratios of capitals, and in general the capital from foreign party should not be lower than 25%.
The Sino-foreign joint ventures are among the first forms of China’s absorption of foreign direct investment and they account for the biggest part. At present they are still a great part in the absorption of foreign investments.

(2). Cooperative businesses
Cooperative business is also called contractual cooperation businesses. They are formed in China with joint capitals or terms of cooperation by foreign companies, enterprises, other economic organizations and individuals with Chinese companies, enterprises, other economic organizations and individuals. The rights and obligations of different parties are embedded in the contract. To establish a cooperative business, the foreign party, generally speaking, supplies all or most of the capital while Chinese party supplies land, factory buildings, and useful facilities, and also some supply a certain amount of capital, too.

(3). Wholly foreign-owned enterprises (WFOE)
Exclusively foreign-owned enterprises, which are totally invested by foreign party in China by foreign companies, enterprises, other economic organizations and individuals in accordance with laws of China. According to the law of foreign-funded enterprises, the establishment of foreign enterprises should benefit the development of our national economy and agree with at least one of the following criteria: the enterprises must adopt international advanced technology and facility; all or most of the products must be export-oriented. The foreign funded enterprises often take the form of limited liability.

(4).Joint exploitation
Joint exploitation is the abbreviation of maritime and overland oil joint exploitation. It is a widely adopted measure of economic cooperation in the international natural resources field. The striking features are high risk, high investment and high reward. The joint development is often divided into three steps: exploitation, development and production. Compared with the other three means mentioned above, joint cooperation accounts for a small ratio.

(5).Foreign-funded share-holding companies
Foreign companies, enterprises, other economic organizations and individuals can form foreign funded share-holding companies in China with Chinese companies, enterprises, and other economic organizations. The total capital of the share-holding company is formed by equal shares,shareholders will take due responsibilities for the company according to shares purchased; company will take responsibilities for all its debts through all its assets and the Chinese and foreign shareholders will hold the shares of the company. Among them, the shares purchased and held by foreign investors account for more than 25% of the total registered capital of the company. Limited company can be founded either by means of starting-up or raising, and the limited liability company invested by the foreigners can also apply to turn into share-holding companies. The qualified enterprises can also apply to issue A & B share and list abroad.

(6). New types of foreign investment
While expanding areas and opening-up domestic market, China is also exploring and expanding actively its new types of utilizing foreign investment such as BOT (Build-Operate-Transfer), investment companies and so on. Since multinational merger and acquisition has become the major type of international direct investment, Chinese government is now researching and enacting related policies so as to facilitate the foreigners to invest in China by means of merger and acquisition.

5. Intellectual Property in China
Trademark is connected with business setup to build a complete frame for development. China adopts “registration first” principle to protect the brand in China market. A trademark or trade mark, identified by the symbols ™ and ®, or mark is a distinctive sign or indicator used by an individual, business organization or other legal entity to identify that the products and/or services to consumers with which the trademark appears originate from a unique source of origin, and to distinguish its products or services from those of other entities. A trademark is a type of intellectual property, and typically a name, word, phrase, logo, symbol, design, image, or a combination of these elements. There is also a range of non-conventional trademarks comprising marks which do not fall into these standard categories.
The owner of a registered trademark may commence legal proceedings for trademark infringement to prevent unauthorized use of that trademark. However, registration is not required. The owner of a common law trademark may also file suit, but an unregistered mark may be protectable only within the geographical area within which it has been used or in geographical areas into which it may be reasonably expected to expand.

6. China taxation
As far as China tax department is concerned, China has two functional taxes: national tax and local tax, the former is for national use while the later is for local use.
Tax Return must claim Value Added Tax, Business Tax, Individual Income Tax monthly and Enterprise Income Tax quarterly for the registered sectors to the national or local taxation. Enterprise Income Tax needs to claim final settlement and payment yearly.
The main tax Category to the national taxation is Value Added Tax; Consumption Tax by customs, Enterprise Income Tax, and to the local taxation is Business Tax, Individual Income Tax, Resource Tax, City Maintenance and Construction Tax, House Property Tax, Stamp Duty, Urban and Township Land Use Tax.
Value Added Tax (VAT) is 0-17% for trading and manufacturing sectors; Business Tax (BT) is 3-20% for service sectors, Enterprise Income Tax (EIT) is 25%, and Individual Income Tax (IIT) is 5-45%.
The China tax could be classified as follows: Value Added Tax (VAT), Business Tax (BT), Enterprise Income Tax (EIT), Individual Income Tax (IIT), Consumption Tax by customs (CT), Resource Tax (RT), City Maintenance and Construction Tax (CMCT), House Property Tax (HPT), Stamp Duty (ST), Urban and Township Land Use Tax (UTLU).

7. Aspects of China
(1). Education
Basic education in China includes pre-school education, primary education and regular secondary education. Preschool, or kindergarten, can last up to three years, with children entering as early as age three, until age six, when they typically enter elementary school. The academic year is divided into two semesters. Secondary education is divided into academic secondary education and specialized/vocational/technical secondary education. Academic secondary education is delivered by academic lower and upper middle schools.

(2). Housing
Not only has the availability of housing increased, but the living conditions have improved. Most apartment buildings and individual homes now have electricity, central heating, and plumbing for kitchens and bathrooms. Housing for the better-off families often has hot water and air-conditionings. The coastal cities that in the past lacked such luxuries now have telephones and television.

(3). Living
Asian cities are among the most expensive in the world. In the Mercer Human Resource 2006 cost-of-living survey, Hong Kong emerged as the fourth most costly city in the world in which to live, up from ninth place in 2005, with Moscow and Seoul holding the top two spots. Beijing rose from 19th position to 14th, while Shanghai climbed from 30th place to 20th.Even so, with low prices for basic goods it is quite possible for a foreigner to live relatively cheaply in China, even in Beijing.

(4).Banks
Here is some list of China banks. Banks owned by the central government: Agricultural Bank of China; Bank of China; Bank of Communications; China CITIC Bank; China Construction Bank; China Development Bank; Hua Xia Bank; Industrial and Commercial Bank of China; Postal Savings Bank of China. Banks owned by local governments: China Merchants Bank; China Industrial Bank; Guangdong Development Bank; Shanghai Pudong Development Bank; Shenzhen Development Bank.

(5). Useful Tips in China
a. Some Useful Numbers
110–Police
112–Inner-city telephone mishaps
113–Operator of domestic long-distance calls
114–Inner-city telephone number inquiries
115–Operator of international long-distance calls
116–Information on domestic long-distance calls
117–Time
119-Fire
120–Ambulance
121–Weather forecasts

b. Climate
China has a continental and seasonal climate. Most parts are in the temperate zone but southern areas are in the tropical or subtropical zone while northern areas are in the frigid zone. Climates in different areas are complicated. For instance, northern Heilongjiang Province has a winter climate the year round without summer, while Hainan Island has a summer climate the year round without winter. The following is a reference table for tourists to prepare clothing on their trips.

c. Currency
The Chinese currency is called Renminbi, and is issued by the People’s Bank of China. The unit of Renminbi is the yuan and the smaller units are the jiao and fen (10 fen=1 jiao, 10 jiao=1 yuan). Yuan, jiao and fen are issued as paper banknotes but there are also yuan, five jiao and fen coins. Denominations of yuan banknotes are 1 yuan, 2 yuan, 5 yuan, 10 yuan, 20 yuan, 50 yuan and 100 yuan. Jiao banknotes are 1 jiao, 2 jiao and 5 jiao and fen banknotes are 1 fen, 2 fen and 5 fen. The abbreviation for Chinese currency is RMB¥. Many hotels and stores accept major credit cards. At present, the following credit cards can be used in China: Master Card, Visa Card, American Express, JCB, Diners Card. Holders of these cards can draw cash from the Bank of China, buy goods and pay for purchases at exchange centers of the Bank of China, appointed shops, hotels and restaurants.

Return to home page