LOGO Doing Business in China

Presentation structure  Some facts about China  Regulatory and Tax System 1. Forms of Doing Business in China 2. China’s tax reform in Emerging Market Opportunities

Map of China

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.

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.

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.

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.

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.

Opening policies and Reform ( 1978-now)  Chinese students who studied abroad during 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

 9.3% annual economic growth during the last 28 years  No. 3 trading power in the world, its trade volume amounted to US$ 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  Women’s increase in their social status

The Trade Relations with its major trading partners EU: The biggest trading partner and the biggest export market. The bilateral trade volume reached US$ billion IN USA: The second trading partner. The bilateral trade volume reached US$ billion in Japan ASEAN Hong Kong South Korea Taiwan India Russia Australia

Capital Outflow from Top-10 FDI Participants in China 2009(1-6) Unit:US$100million Country/RegionInvestment in ChinaShare in China H.K British Virgin Island Japan Singapore Caymen Island United States Korea,Rep.of Samoa Taiwan Province Germany

New Economic Development Plan  China’s 11 th 5-year Socioeconomic Development Plan ( )  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 RMB(1292 USDollars) in 2006]

China Regional Economy

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) Joint Stock Company  Indirect Investment Forms Direct purchase and sales Toll/Contract manufacturing Licensing Financing Representative offices Foreign Investment Enterprise (FIE) Foreign Enterprise (FE)

China’s tax reform in 2007 Chinese domestic owned companies Foreign- owned companies Before Income tax at a rate of 33 percent Dual tax system After Income tax at a rate of 25 percent Income tax at a rate of approximately 15 percent Income tax at a rate of 25 percent

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

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

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%

Encourages and discourages investment sectors High-tech service sectors Environmentally friendly investment New restriction and prohibition Logistic or business outsourcing are encouraging sectors Chemical, auto parts meet new restriction, media-related industries are prohibited Encour aging sectors

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 Government Department Regulations Economic Zone Regulations “Administrative Measure for Free Trade Zone” “Administrative Measure for Export Processing Zone” … “Foreign Investment Enterprise Income tax Law” “Rules of the PRC on Foreign Exchange Control” … “Catalogue on Guiding Foreign Investment ” “Administrative Measure for Foreign Investment in the Commercial Sector” …...

Emerging Market Opportunities

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

US Companies – China Manufacturing Facilities

Shanghai Bonded Logistics Park

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