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Doing Business in China: Update and Opportunities


Targets by end of 2010. Double 2000 GDP per capita by 2010 ... Government Department. Regulations. Economic Zone. Regulations ' ... – PowerPoint PPT presentation

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Title: Doing Business in China: Update and Opportunities

Doing Business in ChinaUpdate and Opportunities
  • July 20, 2006
  • Andrew M. Pan
  • North American Representative Office of Shenzhen,
    China (NAROS)

  • China Trade and Economic Developments
  • China Economic Update
  • Domestic Market Momentum
  • New Economic Plan
  • Regulatory and Tax System
  • Emerging Market Opportunities
  • Manufacturing
  • Procurement
  • Service and Distribution
  • Acquisition of SOE
  • Industrial Zones
  • Shenzhen A Story of Chinas Success

China Trade and Economic Developments
Economic Update
  • Chinas economy grew 9.9 in 2005
  • Chinas GDP US 2,279 billion worlds 4th
  • Foreign direct investment (FDI) US 60.3
  • Foreign trade volume US 1,422.1 billion
  • Foreign currency reserve US 818.9 billion
  • Total household savings in banks US 1,838.1
  • Source China State Statistics Bureau, 2005

Domestic Market Momentum
  • Recent survey conducted by PwC
  • Survey of 1,410 CEOs from 45 countries
  • Projected overseas investment (2006-2009)
  • 55 of respondents will invest in China (vs. 36
    in India, 33 in Brazil)
  • 75 of respondents are attracted by China
    domestic market opportunities
  • 48 are attracted by lower manufacturing costs
  • Source PricewaterhouseCoopers

American Chamber of Commerce Survey Number One
Goal for China Business
100 345 companies
New Economic Development Plan
  • Chinas 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
  • Reduce energy consumption per GDP unit by 20
    from 2005 level

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)

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
Catalogue on Guiding Foreign Investment
Administrative Measure for Foreign Investment
in the Commercial Sector ...
China Taxation and Incentives
  • Corporate Income Tax rate is 33 (Central
  • Tax incentives and holidays
  • Manufacturing tax incentives
  • High technology incentives
  • Special Economic Zone incentives, e.g.
  • Shanghai 24, Pudong 15
  • Guangzhou 24, Shenzhen 15
  • Tax incentives and holiday rates are not
    applicable to service and domestic distribution
  • Value Added Tax (VAT), Business Tax etc. often
  • Transfer pricing has become an emerging issue

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

US Companies China Manufacturing Facilities
China Procurement
  • Direct purchase from manufacturers
  • Access to a larger manufacturer and supplier base
  • Lower purchasing cost
  • Better quality control
  • Better supply chain management

Domestic Service and Distribution
  • WTO opens the door of China domestic and
    distribution market
  • Distribution retail, wholesale, franchising and
    direct marketing
  • Banking, consumer lending and insurance
  • Telecommunication and content driven providers
  • Freight forwarding, transportation and package
    delivery service
  • Customer service
  • Entertainment film and TV production,
    audiovisual products distribution, movie theatres
  • Construction engineering and consultation
  • Hotels and restaurants
  • Education
  • Professional services legal, accounting, tax,
    medical, dental, management consulting and
    advertising services etc.
  • Business process outsourcing/offshoring (BPO)

Acquisition of SOE
  • Industries from banking, infrastructures, public
    utilities to retail chain stores, machinery
    equipments etc.
  • A good solution for US companies to expand their
    China operation without a substantial front-end
    cash investment
  • A shortcut for US companies to expand their China
    operation and enter China domestic market
  • May allow US companies to access China domestic
    regulated market segment
  • Some SOEs are down-sizing/spin off to increase
    efficiency at a fair low cost
  • Endorsed by central and local governments with
    various incentives (case-by-case)

Industrial Zones
  • Industrial zones provide various incentives and
    opportunities for US companies with different
    business models
  • Special Economic Zone (SEZ)
  • Economic and Technological Development Zone
  • Free Trade Zone (FTZ)
  • High-Tech Park
  • Export Processing Zone (EPZ)
  • Bonded Logistics Zone (BLZ)
  • Bonded Port

Shanghai Bonded Logistics Park
Shenzhen A Story of Chinas Success
Shenzhen in Greater China
Shenzhen and the Pearl River Delta
Shenzhen in 1982
Shenzhen Today
Facts and Figures
  • City founded in 1979
  • Became Chinas first SEZ in 1980
  • About 10 million population, average age about 30
  • Only city in mainland China borders on Hong Kong
  • GDP in 2005 USD 61.5 billion, ranks 4th among all
    mainland China cities
  • Average GDP growth rate over 25 per annum from
    1980 to 2005
  • Export in 2005 USD 115 billion, ranks the 1st
    among all mainland China cities for 13
    consecutive years
  • Hong Kong, US and EU ranks the top 3 trade
  • FDI in 2005 USD 3 billion, total USD 40 billion
    since 1980

Facts and Figures
  • 120 Global Fortune 500 companies have operations
    in Shenzhen
  • The home for Shenzhen Stock Exchange and the
    regional financial center in Southern China
  • Shenzhen Port-the 4th largest container terminal
    in the world, 16.2 million TEUs in 2005
  • Shenzhen International Airport-the 4th busiest
    airport in China
  • The corporate headquarters for Huawei, ZTE, China
    Merchant Bank, Pingan Insurance and many other
    local China big private companies
  • 10 five-star hotels, 10 world class golf
    courses. Mission Hills Golf Club is the biggest
    golf club in the world

Features and Characteristics
  • Major Industries
  • Traditional consumer products manufacturing
  • Technology products manufacturing and RD
  • Imp./Exp. trade city in mainland China
  • Logistic center for Southern China, especially
    Pearl River Delta
  • Regional financial center
  • A young, vigorous migrant city with the culture
    of creativeness and entrepreneurship
  • A coastal city with excellent infrastructures and
  • Chinas first SEZ with the most open market
    economy and a pro-business government
  • Much lower operation cost compared with Shanghai,
    Beijing and Hong Kong
  • One of the best living cities in mainland China
    (air quality, green space, foods and

NAROS and Our Services
  • Set up in 2001
  • Based in Los Angeles, CA
  • Shenzhens only investment and trade promotion
    office in North America
  • Our FREE services
  • Provide China general/business information
  • Consult on China business policies and incentives
  • Facilitate business setup and transaction
  • Build up Chinese government connections
  • Support daily operations

Thank You!
  • Please contact NAROS for more information.
  • Tel 213-628-9888 Fax 213-628-8383
  • E-mail
  • Web