China Economic Quarterly May 2017

What to expect from Made in China 2025 and China’s first Belt and Road Forum

The China Economic Quarterly is a market outlook prepared on a quarterly basis by PwC to share the latest economic and policy updates. In this third quarter update, the overview of China’s macro trends are followed by a summary of the main policy developments and hot topics of interest such as policy updates for a new economic zone Xiong’an New Area, insights into the “Made in China 2025” initiative and the Belt and Road Forum for International Cooperation to be held in Beijing on 14 and 15 May 2017.

China’s economic growth in the first quarter of 2017 delivered a much better result than market expectations. GDP increased by 6.9% year-on-year – the highest growth over the past five quarters, thanks to more pro-active fiscal stimuli and continued expansionary monetary policies.

Here are some highlights of the report:

  • The primary, secondary and tertiary (services) industries all grew, with services as a share of GDP reaching a new high of 56.6% and contributing 61.7% to overall economic growth.
  • In the first quarter of 2017, China maintained its expansionary monetary policy. The increments of Aggregate Financing to the Real Economy (AFRE) were RMB 6.93 trillion, which was RMB 226.8 billion more than the same period last year.
  • In a bid to address severe traffic congestion and air pollution in Beijing, the Chinese government announced a historic plan on 1 April 2017 to create Xiong’an New Area, a new economic zone about 100 km southwest of Beijing, with an initial area of around 100 square km and eventually expanding to nearly three times the size of New York City.
  • “Made in China 2025” is China’s first ten-year plan for manufacturing expansion and upgrading and has attracted criticisms for being “problematic” with the potential to be used to “discriminate against foreign firms in favour of Chinese competitors”.

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china_economic_quarterly_nov2016To read more, you can access the latest issue of China Economic Quarterly by clicking the following links:

China:           www.pwccn.com/ceq
Hong Kong:  www.pwchk.com/ceq

 

Switzerland: New social security treaty between Switzerland and China

A social security treaty between Switzerland and the People’s Republic of China (China) will enter into force on 19 June 2017. The maximum posting period is 72 months. For the duration of the posting employees (regardless their nationality) are exempt from the compulsory insurance obligations of the country of occupation which are covered in the social security treaty. As from 19 June 2017 it will be possible to obtain a Certificate of Coverage.

 

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Contact

Véronique Schaller
+41 58 792 5036
veronique.schaller-wiesli@ch.pwc.com

Natalia Graf
+41 58 792 4324
natalia.graf@ch.pwc.com

 

Business Review of Premier Li Keqiang’s Government Work Report 2017

March 2017

China recently held the 12th National People’s Congress in Beijing. Premier Li Keqiang announced a number of key policies and initiatives which sets the country’s economic direction. These changes will have profound implications on the business landscape in 2017 and beyond. As part of the Congress, Chinese Premier Li Keqiang delivered the Government Work Report which provides a review of:

I.   Government’s achievements in 2016;
II.  Government’s goals and priorities for 2017; and
III. Government’s plans and actions to improve quality and effectiveness of growth.

Key highlights of the Report

Economic growth rate

  • GDP growth rate for the coming year has been set realistically at “around 6.5%, or higher if possible in practice,” relative to the range of 6.5-7% for 2016.

Fixed and private investments

  • The government will invest 800 billion yuan in railway construction and 1.8 trillion yuan in highway and waterway projects in 2017 while continuing its massive investments in major state projects.
  • To encourage growth in private investments, the government plans to improve policies as well as public administration and promote Public Private Partnerships.

Emerging industries and investment hot-spots

  • The government plans to accelerate the R&D and commercialisation of new materials, artificial intelligence, integrated circuits, and bio-pharmacy and 5-G mobile communications.
  • The government has also set aggressive targets for environmental protection and plans to launch extensive ‘Fitness-for-All’ initiatives, creating business opportunities in education, elderly care, healthcare, tourism, e-commerce and creative services.

Pro-business reforms

  • The government plans to make service industries, manufacturing, and mining more open to foreign-invested firms (FIEs).
  • There are also plans to treat FIEs the same as domestic firms on applications, standards-setting and government procurement and allowing FIEs to enjoy the same preferential policies under the Made in China 2025 initiative.

Real estate sector

  • In 2017, the government will establish robust long-term mechanisms to promote steady and sound development of the real estate sector to restrict further investment and “speculative” purchases by residents and investors.

RMB exchange rate and bad debt

  • To address the rising non-performing loans, Premier Li has pledged to reform the financial regulatory system and work systematically to defuse major potential risks.

Leap ahead: 2016 China tax policy review and 2017 outlook

China Tax Policy Review and Outlook is a series of PwC China Tax annual publication designed to review key tax policy developments in China and discuss the trends and impacts to Chinese businesses from a forward-looking perspective. This 2016 China Tax Policy Review and 2017 Outlook is the second issue in the series.

2016 was a year of transition for China. It was also the first year of the 13th Five-Year Plan. The State Administration of Taxation has released a series of tax policies to support the transition of China’s economy. Turning eyes to the international taxation, China has voiced out her stance on international collaboration to foster growth, innovation and transparency, and her goal to establish a modern tax administrative system by 2020.

Highlights of the 2016 China Tax Policy Review and 2017 Outlook: 

  • Impact of the Business Tax to Value-added Tax Transformation Reform and outlook of the next phase of VAT reform
  • Innovation-driven tax incentives related to High-New Technology Enterprises, equity incentive plans, etc. and “green tax” initiatives (Resource Tax and Environmental Protection Tax)
  • Development of tax transparency (e.g. Country-by-Country Report and Common Reporting Standard) echoed by China’s digital administrative strategy (“Golden Tax III” and “Thousand Groups Project”) New trend of tax dispute resolution mechanism (e.g. tax administrative appeal and court litigation, Advance Pricing Arrangement, Mutual Agreement Procedure)
  • Key words for 2017 outlook, e.g. anti-tax avoidance, localisation of BEPS recommendations, details of Environmental Protection Tax Law, further cut in tax and government levies

With China’s increasing influence on the global economy and international taxation, we have more to expect in the years to come. As Mr. Wang Jun, the SAT Commissioner, commented, “The SAT will step up effort in 2017 to balance its focus on inbound and outbound taxation, and refine some of the existing rules to add more certainty and clarity.” Policies in the 2017 pipeline may include revised anti-avoidance rules related to Controlled Foreign Corporations, Thin Capitalization, etc.; rules to further implement the BEPS project recommendations regarding anti-treaty abuse; landmark reforms in terms of Individual Income Tax, Property Tax; the elaboration on the implementation of the Environmental Protection Tax Law; further cut in non-tax government levies; and what taxpayers are most earnestly waiting for, the new look of the Tax Collection and Administration Law.


Download the full report here.

 

Asia: digitally diverse, economically attractive

Digitisation is in full swing in Asia, and is having an impact on both business and society. But the picture is mixed: while Asian countries are setting the trend and the pace in some areas, they need to catch up in others. As a leader in innovation and engineering, Switzerland will continue to play a key role in the economic and geocultural exchange with Asia.

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China Economic Quarterly February 2017

China announces new measures to attract foreign investment in 2017

The China Economic Quarterly is a market outlook prepared on a quarterly basis by PwC to share the latest economic and policy updates. In this fourth quarter update, the overview of China’s macro trends are followed by a summary of the main policy developments and hot topics of interest such as what China plans to do in 2017 and what’s next for the Renminbi.

Major economic indicators

pwc_china economic quarterly q4 2016

 

  • China’s GDP in the fourth quarter of 2016 increased by 6.8%, resulting in the overall GDP growth of 6.7% for the whole year over 2015.
  • Fixed asset investment remained a key driver for China’s economic growth, growing 8.1% over last year and accounting for 80% of GDP.
  • Massive money supply has exerted great pressure on RMB’s exchange rate, which fell from RMB 6.55 per dollar at the beginning of the year to RMB 6.92 per dollar at the end of 2016.
  • China’s manufacturing purchasing managers index (PMI) experienced the highest performance since 2012 in the fourth quarter of 2016, thanks to booming domestic demand, rising prices and growing activities in high-end manufacturing.

Policy update

  • China’s State Council announced on 17 January 2017 an unprecedented set of new measures to attract foreign investment. These measures aim to lower market entry restrictions on foreign investment in several sectors including banking, insurance, futures and others.
  • China has issued its 13th Five-Year Plan (2016-2020) to strengthen the protection and utilisation of intellectual property rights (IPRs). The plan laid out 7 major tasks for the development of IPRs, such as improving the legal system and protection for IPRs, promoting industrial upgrading and international cooperation.

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To find out more about the market outlook and its implications for businesses in China, please click this link:

China: www.pwccn.com/ceq
Hong Kong: www.pwchk.com/ceq

 

The Chinese Cybersecurity Law has been finalised – what is it about?

China’s Cybersecurity Law enforces the cybersecurity rights and obligations of the government, network operators and users.

Compliance with the new law is ushering in a range of new challenges for both government and business. In order to protect the rights of all stakeholders, it will be essential to ensure appropriate network operations, encourage network innovation, identify security risks and comply with regulatory requirements.

Highlights

  • China’s top legislature adopted its cybersecurity Law on Nov 7, 2016. After a third reading at the National People’s Congress (NPC) Standing Committee, it is now set to take effect on June 1, 2017.
  • The law defines the scope of critical infrastructure, and sets the foundations for enforcing penalties on overseas organisations and individuals who attack or break the nation’s critical infrastructure.
  • The law puts more emphasis on personal information security, cybercrime, network product and service security, obligations of network operators, and sovereignty rights over cyberspace.

All organisations collecting “personal information” and “critical data” in China could be impacted, including:

  1. Network operators. The law enforces the security obligations of network operators, which are widely defined to include owners, administrators and network service providers. This includes, but is not limited to, telecommunication operators, network information service providers, and important information system operators.
  2. Network product and service provider. Organisations which provide information through networks or provide services for the purpose of obtaining information, including users, network service providers and non-profit organisations which provide network tools, devices, information, media, access, etc.
  3. Critical infrastructure. The law specifies requirements related to the operational security of critical infrastructure, and stresses the importance of protecting the critical infrastructure for public communication, media, energy, transportation, water conservation, financial services, public services and e-government industries.
  4. Overseas organisations and individuals. Includes, but is not limited to, foreign trade enterprises, organisations, groups and individuals.

What is the impact for other countries?

  • With the new cybersecurity law taking effect on 1st June 2017, transferring/storing of personal data outside China, and using network and password equipment not certified by the government will be prohibited.
  • More stringent regulations and requirements will be applied; for instance, the requirement of security assessment prior to the cross-border transfer of personal, sensitive data by enterprises.
  • Foreign organisations and individuals found guilty of attacking China’s critical infrastructure are subject to punishment specified by the law.

What penalties might be incurred?

Organisations found violating the law will be liable to fines, with the responsible managers subject to imprisonment and banned from taking network security and operation management positions in the future.

How PwC can help

As a multidisciplinary company, we are the ideal partner to help you adapt to the new regulatory environment. Our regulatory team includes cross-border initiatives and compliance specialists, IT auditors, lawyers and strategy consultants. They are globally oriented and have local expertise.

If you are interested in this topic or if you have any questions, please feel free to contact me.

ceo Magazine “Near and Middle East”

_MG_0210With the December issue of ceo Magazine, we want to bring you closer to the sprawling, multifarious world of the Near and Middle East.

395 million people, a surface area of 69 million square miles, 26 countries, three world religions – as diverse and contrastive as this region might be, it is all the more homogenous in one respect: its economic, social and geopolitical dynamism.

The magazine gives voice to personalities who have recognised this potential and are helping to shape the future of the region. What can Western cultures learn from our Eastern neighbours? What drives the people on the crest of this new wave of entrepreneurial creativity?

Frank Duggan, ABB Group Executive Committee member, is fascinated to see how the region is changing.
Samih Sawiris emphasises the impermanence of the Onsi Sawiris Scholarship Program.
And “Jane Bond” Shira Kaplan shares her experience in starting up a company that specialises in cyber security from Israel.

We wish you inspiring reading with interesting new perspectives.

Read more.

Doing business in China: Three ways executives in China will adapt to new market realities

The APEC 2016 CEO Survey China report, Doing business in China, was launched last week. The theme focuses on a story of change and adaptation as executives in China develop their strategy in response to new market realities.

PwC surveyed over 1,100 CEOs and business leaders across APEC’s 21 economies (including 222 based in Hong Kong and China). They were asked to give their perspectives and plans for doing business in China in the run up to the APEC Business Summit in Lima, Peru (17-19 November).

Some of the hot topics from this year’s China report include:

  • Business outlook for a changing China
  • Investment plans of China executives
  • Strong sector growth stories in technology and financial services
  • Strategies to seek quality growth

 

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aepec_ceo_survey

You can find more information here.

China Economic Quarterly November 2016

China remains on track to grow in the third quarter of 2016 buoyed by service sector growth and fixed asset investment

The China Economic Quarterly is a market outlook prepared on a quarterly basis by PwC to share the latest economic and policy updates. In this third quarter update, the overview of China’s macro trends are followed by a summary of the main policy developments and hot topics of interest such as Xi Jinping’s speech on the role of the Party in the management of state-owned enterprises (SOEs), China’s supply-side structural reform and pilot programme on SOE reform.

Graphic 1

According to key economic data released by China’s National Bureau of Statistics for the third quarter of 2016, China’s GDP grew at the rate of 6.7%, an increase of 1.8% from the previous quarter, thanks to strong investment and expansionary monetary policies.

Here are the key findings:

  • Services maintained its strong momentum, growing 7.6% year-on-year in the first three quarters, contributing to just over half of total GDP growth.
  • Fixed asset investment grew 8.2% (or 9.5% real growth rate) to RMB 42.69 trillion, remaining one of the key drivers of the overall economy.
  • National Development and Reform Commission (NDRC) has expedited the approvals for urban rail projects. Up to now, urban rail plans of nearly 50 cities have been approved with a total investment of more than RMB 2.5 trillion.
  • Sales of residential buildings surged by 43.2% in response to new government restrictive policies on house purchase and land supply and rising inflow of hot money into the market.
  • Consumption maintained its growth momentum, becoming a major contributor to China’s economic growth.

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china_economic_quarterly_nov2016To find out more about the market outlook and its implications for businesses in China, please click this link:

China:           www.pwccn.com/ceq
Hong Kong:  www.pwchk.com/ceq