PBOC Lowers Lending Rates Again
As a result of the economic impact of the Covid-19 pandemic, China’s central bank, the People’s Bank of China, has decided to further lower the Lending Prime Rate (LPR) beginning on 20th April 2020. The new rate is 3.85% for 1-year LPR and 4.65% for LPR over 5 years. This is the second decrease in 2020 following the previous one announced on 20th January.
Official National Holidays 2020
China’s General Office of the State Council has released the “Notification of Holiday Arrangements in 2020” which lays out the official national holiday schedule for 2020 as follows:
| Holiday | Dates | Days holiday | Official Working days |
| Qing Ming – Tomb Sweeping Festival | April 4 – 6 | 3 | – |
| May Labour Day | May 1 – 5 | 5 | April 26 (Sunday) and May 9 (Saturday) |
| Dragon Boat Festival | June 25 – 27 | 3 | June 28 (Sunday) |
| October National Day | October 1 – 8 | 8 | September 27 (Sunday) and October 10 (Saturday) |
“Two Certificates in One” System
China’s Ministry of Commerce, General Administration of Customs and Council for the Promotion of International Trade have jointly issued a notice (no. 39) announcing that the foreign trade operators filing and enterprises of origin filing will be included into the “two certificates in one” system nationwide from October 15.
After the implementation of the “two certificates in one”, exporters can directly obtain the filing qualification of enterprises of origin after completing the registration of foreign trade operators, which means they can complete the filing at one time. Enterprises do not need to re-enter information and upload materials a second time, which will simplify the procedures, save cost and improve the efficiency.
Shanghai Launches Single Window Service for Foreign Permits
On 2nd December 2019 Shanghai Administration of Foreign Experts Affairs and Shanghai Science and Technology Commission of Shanghai Municipal Public Security Bureau (Municipal Foreign Experts Bureau) launched a new “single window” service for foreigners holding the category A work and residence permit. The single window is located in the foreigner certificate centre on the third floor of the Exit-Entry Administration Department of Shanghai Municipal Public Security Bureau at 1500 Minsheng Road, Pudong District, Shanghai.
After the approval by Shanghai Administration of Foreign Experts Affairs and the Exit and Entry Administration Bureau of Shanghai Municipal Public Security Bureau, foreigner applicants (Category A) can obtain work and residence permit in one place at the same time.
China Lowers Import Tariffs
Starting from 1st January 2020 China has reduced import tariffs on several categories of goods to boost trade.
Consumer goods, agricultural products, pharmaceuticals, semiconductor components and automobiles have all seen tariffs adjusted. Adjustments to food products include a cut in import duties on frozen pork from 12% to 8%, frozen fish from 7% to 2% and frozen orange juice from 30% to 15%. Duties on medicines for pharmaceutical products containing alkaloids for asthma treatment and raw materials for the production of new diabetes medicines have been eliminated.
Texts and Data to be Valid Evidence in China Supreme People’s Court
According to the notice of the Supreme People’s Court published on 26 December, electronic data on China’s popular WeChat and Weibo platforms can be used as evidence in the future. Electronic data includes:
· Messages posted on web pages, blogs, Weibo and other network platforms;
· Communication information of mobile phone SMS, e-mail, instant messaging, communication groups and other network application services;
· User registration information, identity authentication information, electronic trading records, communication records, login logs and other information;
· Documents, pictures, audio, video, digital certificates, computer program & other electronic documents;
· Other information stored, processed and transmitted in digital form that can prove the facts of the case.
The law is set to take effect on 1st May 2020.
China’s New Foreign Investment Law
On 31 December 2019 the State Council published the Implementing Regulations for China’s new Foreign Investment Law.
The Regulations clarify the Foreign Investment Law which came into force on 1 January 2020. The law aims to promote more equal treatment of foreign and domestic enterprises, better protect investors rights and improve protection against compulsory technology transfer. It replaces existing legislation on Wholly Foreign Owned Enterprises (WFOE), Sino-foreign Cooperative and Equity Joint Ventures (CJV and EJV respectively).
Companies that were incorporated prior to the implementation of the new Foreign Investment Law have 5 years from 1st January 2020 to continue operating under the previous laws. After that, they are expected to comply with the new Foreign Investment Law and modify their Articles of Association and Joint Venture contracts. The process of modification still needs to follow the old regulations which means unanimous vote of the Board of Directors.
According to Article 31 of the new Foreign Investment Law, the organizational form and institutional framework of FIEs will be subject to the provisions of the Company Law. Because the existing WFOE law is already largely in line with the Company Law, there will be a limited impact for existing WFOEs. Sino-foreign equity joint ventures on the other hand need to make changes to comply with the new law’s requirements (see following table). If a WFOE has more than one shareholder, the same changes are applicable.
One important change is that the new law, at least theoretically, gives majority shareholders greater decision-making power compared to the past.
During the transitional period, local bureaus of the AIC may in practice require companies to update their articles of association and joint venture agreements to bring them in line with the New Foreign Investment Law before they will process registration of any corporate changes. It is not clear yet whether companies need to get a new approval, go through supplementary record-filing, or make relevant changes to its business registrations within the five-year period.
| Company Law | Law on Sino-Foreign Equity Joint Ventures (EJV Law) | |
| Investment % of foreign investor | No restriction | Generally no less than 25% |
| Highest authority | Board of Shareholders | Board of Directors |
| Minimum number of members in the board | Permitted to have one executive director | No fewer than three directors |
| Quorum | None for shareholding meeting
1/10 shareholder voting rights 1/3 director voting rights |
Two thirds or more directors for board meeting |
| Term of directors | No more than 3 years | 4 years |
| Voting mechanism for major matters (e.g. increase or decrease of registered capital, amendment of AoA, liquidation of company) | Approval by shareholders representing more than two-thirds of the voting rights, unless otherwise agreed in AoA | Unanimous approval by directors present at the meeting |
| Profit distributions | Distributions based on proportion of paid-in capital, unless otherwise agreed by all shareholders | Distributions based on registered capital ratios |
| Equity transfer restrictions | Approval by more than half of the other shareholders, unless otherwise agreed in the articles of association | Unanimous approval by the other shareholders |
During the transitional period, local bureaus of the AIC may in practice require companies to update their Articles of Association and joint venture agreements to bring them in line with the New Foreign Investment Law before they will process registration of any corporate changes. It is not clear yet whether companies need to get a new approval, go through supplementary record-filing, or make relevant changes to its business registrations within the five-year period.
The new law needs to be interpreted in the context of China’s negative list and restricted industries. Foreign investors should be given equal treatment to Chinese firms in sectors which are not prohibited or restricted. The law states that local governments must abide by the commitments made by them within their statutory authority on the support policies, preferential treatment and facilities applicable to foreign investors when attracting foreign investment.
JV Allowed With A Chinese Natural Person
Shanghai, Jiangsu, Zhejiang and Anhui provinces are to allow the formation of Sino-foreign joint ventures with a Chinese citizen.
The details were released on December 25th jointly by the State Administration for Market Regulation in these areas in notice No. 9 on “Allowing Chinese natural persons to set up foreigner-funded enterprises with foreign investors in Shanghai, Jiangsu, Zhejiang and Anhui ”
Previously Chinese natural persons were not permitted to enter directly into Sino-foreign joint ventures with foreign investors but instead needed to set up an entity to use as an investment vehicle. The new regulation allows a Chinese natural person to be a shareholder of a Sino-foreign JV with the approval of the authority.
The new law came into effect on 1 January 2020 and is valid until 31 December 2021.
SECOND CHINA INTERNATIONAL IMPORT EXPO (CIIE) EXTENDED SCHEDULE
The Shanghai Municipal Government has announced that the Second China International Import Expo (CIIE) to be held from November 5 to 10 will be extended to include November 13 to 20 from 9:30 am to 4:30 pm. Entry is free after registering online. During the Expo there will be the opportunity to join seminars on different topics.
| Event | Host | Date |
| Better Design, Better Life | China Furniture & Decoration Chamber of Commerce (CFDCC) | 2019/11/6 |
| Opportunity to Wine made from ‘the Belt and Road Initiatives’ Countries from CIIE | Shanghai Waigaoqiao International Exhibition & Trading Centre of Wine & Beverage Co., Ltd. / Shanghai Waigaoqiao International Trading Operating | 2019/11/7 |
| The 10th China International Meat Conference | China Chamber of Commerce of Foodstuffs & Native Products, Tianjin Municipal Bureau of Commerce | 2019/11/7 |
| Smart Cities and Urbanization | Italian Trade Agency | 2019/11/7 |
| The 2nd Global Dairy Forum | China Chamber of Commerce of Foodstuffs & Native Products | 2019/11/8 |
EXTRA VAT DEDUCTION FOR CONSUMER SERVICE COMPANIES
On October 8th the Ministry of Finance and the State Administration of Taxation announced an extra VAT deduction policy for taxpayers operating in consumer service sectors such as culture, sport, tourism, entertainment, health care, education, accommodation and catering.
According to announcement No. 87 issued jointly by the two bodies, from 1 October of this year to 31 December 2021, taxpayers with consumer services accounting for over 50% of their total sales will be allowed to apply an extra 15% deduction of input VAT.
