China
Changing economic trends in Taiwan
Author: Min-Hua Chiang, NUS
Taiwan’s economic growth has long been based on exporting intermediate goods to mainland China for final assembly, but this is now showing signs of change. Taiwan’s monthly exports to China and Hong Kong have registered negative growth since November 2018 according to Taiwan’s official statistics.
In January–June 2019, Taiwan’s exports to China and Hong Kong shrank by 8.8 per cent compared to the same period in 2018. In comparison, Taiwan’s exports to the United States grew by 17.4 per cent. Overall exports declined by 3.4 per cent during the same period. As a result, China’s share in Taiwan’s total exports declined from 41 per cent in 2017 to less than 39 per cent in the first half of 2019. China’s falling significance was balanced by the growth of exports to the United States from 12 per cent to 14 per cent during the same period.
Taiwan’s decreasing investment in China explains the shrinking exports to the country. Although China remains Taiwan’s largest outward investment destination, its importance has dropped to 37 per cent in the first half of 2019 from its peak of 84 per cent in 2010.
Taiwan’s decreasing investment in and export to China has been caused by China’s transformation towards a more consumption-based economy. The growing trade dispute between the United States and China has accelerated the shift in Taiwanese investment away from China. In 2016, 8 out of the top 10 US-bound exporting companies in China were Taiwanese firms.
Taiwan’s declining investment in China did not boost its investment in developing countries in Southeast Asia as China and Southeast Asia are within the same supply chain networks — Southeast Asian countries supplied raw material and intermediate goods for final assembly in China. Trade interdependencies mean that Taiwanese firms’ withdrawal of their factories from China might negatively impact their investment in Southeast Asia.
Some Taiwanese firms choose to invest at home in the face of US trade retaliation against Chinese products. From January–June 2019, the total return on investment from China amounted to over NT$440 billion (about US$14 billion). This considerable return sustained Taiwan’s economic growth despite falling exports.
The Taiwanese government tried to reduce Taiwan’s investment in China before in the 1990s but the result was not fruitful. The opening of US markets to Chinese goods following US–China reconciliation underpinned export-oriented investment in China. As most Taiwanese exports produced by Taiwanese firms in China are destined for the US market, Taiwan has transmitted its economic reliance on the United States to intermediary China.
Unlike president Lee Teng-hui (1988–2000), president Chen Shui-bian (2000–2008) realised the prohibition only resulted in extensive hidden investment that the government could not control. He then adopted a relatively open economic policy towards China. When Ma Ying-jeou took office in 2008, he opened Taiwan’s economy a step further to China as he believed greater cross-strait economic integration would rescue Taiwan’s ailing economy.
Ironically, Taiwan’s investment in China started to decrease and its exports to China also became stagnant during Ma’s administration (2008–2016). China’s rising wages and stricter rules for environmental protection explained diminishing investment from Taiwan. China’s industrial upgrading further reduced its demand for intermediate goods from Taiwan. Beyond weak global demand, Taiwan’s wearying investment-driven exports to China also explained its bleak economic performance.
Unlike Ma, current President Tsai Ing-wen vowed to revitalise the economy through diversifying economic relations after she took office in 2016. This comes in the wake of China’s economy facing downward pressure exacerbated by the worsening investment environment and prolonged US–China trade tensions. Tsai’s policy of economic diversification may succeed because it complements the current US economic policy towards China as well as China’s economic structural changes.
The future of Taiwanese investment remains largely contingent upon US–China relations. A complete shift of its supply chain network from China to other countries seem unlikely in the short term. Given China’s huge population, the China market-oriented firms may continue to stay.
US President Donald Trump’s plan to bring manufacturing back to the United States may also delink the traditional US–Asia economic connections where Asia produces and…
China
New Publication: A Guide for Foreign Investors on Navigating China’s New Company Law
The sixth revision of China’s Company Law is the most extensive amendment in history, impacting foreign invested enterprises with stricter rules on capital injection and corporate governance. Most FIEs must align with the New Company Law by July 1, 2024, with a deadline of December 31, 2024 for adjustments. Contact Dezan Shira & Associates for assistance.
The sixth revision of China’s Company Law represents the most extensive amendment in its history. From stricter capital injection rules to enhanced corporate governance, the changes introduced in the New Company Law have far-reaching implications for businesses, including foreign invested enterprises (FIEs) operating in or entering the China market.
Since January 1, 2020, the Company Law has governed both wholly foreign-owned enterprises (WFOEs) and joint ventures (JVs), following the enactment of the Foreign Investment Law (FIL). Most FIEs must align with the provisions of the New Company Law from July 1, 2024, while those established before January 1, 2020 have bit more time for adjustments due to the five-year grace period provided by the FIL. The final deadline for their alignment is December 31, 2024.
In this publication, we guide foreign investors through the implications of the New Company Law for existing and new FIEs and relevant stakeholders. We begin with an overview of the revision’s background and objectives, followed by a summary of key changes. Our in-depth analysis, from a foreign stakeholder perspective, illuminates the practical implications. Lastly, we explore tax impacts alongside the revisions, demonstrating how the New Company Law may shape future business transactions and arrangements.
If you or your company require assistance with Company Law adjustments in China, please do not hesitate to contact Dezan Shira & Associates. For more information, feel free to reach us via email at china@dezshira.com.
This article is republished from China Briefing. Read the rest of the original article.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.
China
Lingang New Area in Shanghai Opens First Cross-Border Data Service Center to Streamline Data Export Process
The Lingang New Area in Shanghai has launched China’s first Cross-Border Data Service Center to facilitate data export for companies in Shanghai. The center will help with applications, data catalogs, and management, aiming to provide legal and safe cross-border data transfer mechanisms.
The Lingang New Area in Shanghai’s Pilot Free Trade Zone has launched a new cross-border data service center to provide administrative and consulting services to companies in Shanghai that need to export data out of China. The service center will help facilitate data export by accepting applications from companies for data export projects and is tasked with formulating and implementing data catalogs to facilitate data export in the area. The Shanghai cross-border data service center will provide services to companies across the whole city.
The Lingang New Area in the Shanghai Pilot Free Trade Zone has launched China’s first Cross-Border Data Service Center (the “service center”). The service center, which is jointly operated by the Cybersecurity Administration of China (CAC) and the local government, aims to further facilitate legal, safe, and convenient cross-border data transfer (CBDT) mechanisms for companies.
The service center will not only serve companies in the Lingang New Area but is also open to companies across Shanghai, and will act as an administrative service center specializing in CBDT.
In January 2024, the local government showcased a set of trial measures for the “classified and hierarchical” management of CBDT in the Lingang New Area. The measures, which have not yet been released to the public, seek to facilitate CBDT from the area by dividing data for cross-border transfer into three different risk categories: core, important, and general data.
The local government also pledged to release two data catalogs: a “general data” catalog, which will include types of data that can be transferred freely out of the Lingang New Area, and an “important data” catalog, which will be subject to restrictions. According to Zong Liang, an evaluation expert at the service center, the first draft of the general data catalog has been completed and is being submitted to the relevant superior departments for review.
In March 2024, the CAC released the final version of a set of regulations significantly facilitating CBDT for companies in the country. The new regulations increase the limits on the volume of PI that a company can handle before it is required to undergo additional compliance procedures, provide exemptions from the compliance procedures, and clarify the handling of important data.
Also in March, China released a new set of technical standards stipulating the rules for classifying three different types of data – core, important, and general data. Importantly, the standards provide guidelines for regulators and companies to identify what is considered “important” data. This means they will act as a reference for companies and regulators when assessing the types of data that can be exported, including FTZs such as the Lingang New Area.
This article is republished from China Briefing. Read the rest of the original article.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.
China
A Concise Guide to the Verification Letter of Invitation Requirement in the China Visa Process
The application procedures for business visas to China have been simplified, with most foreigners now able to apply for an M/F visa using only an invitation letter from a Chinese company. Some countries are eligible for visa-free entry. However, a Verification Letter of Invitation may still be needed in certain cases. Consult the local Chinese embassy for confirmation.
In light of recent developments, the application procedures for business visas to China have undergone substantial simplification. Most foreigners can now apply for an M/F visa using only the invitation letter issued by a Chinese company. Additionally, citizens of certain countries are eligible to enter China without a visa and stay for up to 144 hours or even 15 days.
However, it’s important to note that some applicants may still need to apply for a “Verification Letter of Invitation (邀请核实单)” when applying for an M/F visa to China. In this article, we will introduce what a Verification Letter of Invitation is, who needs to apply for it, and the potential risks.
It’s important to note that in most cases, the invitation letter provided by the inviting unit (whether a public entity or a company) is sufficient for M/F visa applications. The Verification Letter for Invitation is only required when the Chinese embassies or consulates in certain countries specifically ask for the document.
Meanwhile, it is also essential to note that obtaining a Verification Letter for Invitation does not guarantee visa approval. The final decision on granting a visa rests with the Chinese embassy abroad, based on the specific circumstances of the applicant.
Based on current information, foreign applicants in Sri Lanka and most Middle East countries – such as Turkey, Iran, Afghanistan, Syria, Pakistan, and so on – need to submit a Verification Letter for Invitation when they apply for a visa to China.
That said, a Verification Letter for Invitation might not be required in a few Middle East countries, such as Saudi Arabia. Therefore, we suggest that foreign applicants consult with their the local Chinese embassy or consulate to confirm in advance.
This article is republished from China Briefing. Read the rest of the original article.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.