China
EU–China relations disintegrating on autopilot
Author: Andrei Lungu, RISAP
In early December 2022, President of the European Council Charles Michel travelled to Beijing for his first face-to-face meeting with Chinese President Xi Jinping.
The visit came after two events that epitomise the state of EU–China relations. The Chinese side refused to run a pre-recorded speech criticising Russia’s invasion of Ukraine by Michel at the China International Import Expo. This was followed by the lack of any meeting between Xi and Michel or European Commission President Ursula von der Leyen at the G20 Bali summit, where Xi met other European leaders.
Michel followed in the footsteps of German Chancellor Olaf Scholz, whose visit to China, alongside a business delegation, received considerable criticism. The Michel–Xi meeting — like the Scholz–Xi meeting — did not deliver important results while EU–China relations have been spiralling downwards. But neither side seems to have any strategy on how to deal with the other.
In early 2019, the European Union started referring to China as a ‘cooperation partner’, ‘negotiating partner’, ‘economic competitor’ and ‘systemic rival’. But since then, the European Union has failed to figure out what it wants from China. Most EU actions have so far been defensive against what it considers unfair economic practices or risks coming from Beijing. The European Union has set up a foreign investment screening mechanism, set guidelines warning against using 5G gear from suppliers considered high-risk and is working on implementing an anti-coercion instrument and imposing restrictions on Chinese involvement in the EU public procurement market.
Different perspectives on relations with China and a lack of unity among and within member states, EU institutions and other European stakeholders prevented the creation of a coherent strategy. Some want to focus on economic relations while others want to prioritise political, security or human rights issues.
Despite individual perspectives, the political environment in Europe hardened against cooperation with China.
Yet trade and investment links to China continued to grow. Because the European Union and most European governments lacked a clear view of how they wanted to transform bilateral relations with China, EU–China ties continued to develop on autopilot.
Beijing also seems unsure of what it wants from Europe or how to achieve its goals. In theory, it is quite easy to say what China wants from the European Union — to avert a deterioration of relations and maximise economic, technological and political benefits and prevent the emergence of a trans-Atlantic united front against Beijing. But China has taken almost no concrete steps to achieve these goals.
Since 2019, China has not really tried to arrest the precipitous decline in its European relations. The Comprehensive Agreement on Investment should have been such an attempt, but after the conclusion of negotiations Beijing torpedoed hopes for the agreement’s ratification by sanctioning the very people who were supposed to approve it in the European Parliament. In areas like state distortion of markets, sensitive technology, human rights, worries of political interference in Europe or aggressive diplomacy, Beijing has only provided more ammunition to those who want to curtail ties with China.
Yet Chinese rhetoric consistently paints a different picture. The Chinese side calls the European Union a partner, pleads for closer cooperation, urges it to pursue ‘strategic autonomy’ and prevent any ‘third party’ from interfering in bilateral relations in every meeting or call with European officials. In 2022, China sent its special representative for Central and East European cooperation on two tours through the region to ‘explain’ China’s position on the Russian invasion of Ukraine and repair relations. It has also sent diplomatic officials on visits throughout Europe.
But Beijing’s actions have been limited to rhetoric and diplomatic gestures. There is no way EU–China relations can be improved without concrete action on China’s part — talk alone will not work.
As much as the Communist Party leadership would deny this, it also bears at least part of the blame for the deterioration of EU–China relations, and would have to compromise and change its behaviour and policies in order to improve relations with Europe. However, just like in Europe, the political environment in China makes any true detente unlikely. The Communist Party leadership’s grand narrative of China…
China
China Provides Tax Incentives on Special Equipment for Green and Digital Development
China has introduced a new tax incentive for companies investing in digital and smart upgrades of special equipment to encourage environmental protection and safe production. Companies can enjoy a 10 percent deduction from their corporate income tax payable. Eligibility and requirements are outlined by the Ministry of Finance and State Tax Administration.
A new China tax incentive aims to encourage companies to invest in digital and smart upgrades of special equipment. Companies upgrading certain equipment that aids environmental protection and safe production can enjoy a deduction of the investment at a rate of 10 percent from their corporate income tax payable. We explain the requirements of the new tax incentive.
China’s Ministry of Finance (MOF) and State Tax Administration (STA) have issued a new preferential corporate income tax (CIT) incentive for companies investing in digital and intelligent transformations of certain types of equipment. To be eligible for the incentive, companies must invest in the digital and intelligent transformation of equipment related to energy and water conservation, environmental protection, and safe production.
The new tax incentive aligns with a State Council Action Plan, released in March 2024, which aims to accelerate the renewal of large-scale equipment and consumer goods, promoting high-quality development and driving investment and consumption for long-term benefits.
If the annual CIT payable is insufficient for the offset, it can be carried forward to future years for up to five years.
The CIT payable refers to the balance after multiplying the annual taxable income by the applicable tax rate and deducting the tax reductions and exemptions according to China’s CIT Law and relevant preferential policies.
Note that companies enjoying the tax incentives must use the transformed equipment themselves. If the equipment is transferred or leased within five tax years after the transformation is completed, the incentives must stop from the month the equipment is no longer in use, and the previously offset CIT must be repaid.
The “special equipment” eligible for the preferential tax treatment covers equipment purchased and used by companies listed in the Catalog of Special Equipment for Safe Production for Corporate Income Tax Incentives (2018 Edition) and the Catalog of Special Equipment for Energy Saving, Water Conservation, and Environmental Protection for Corporate Income Tax Incentives (2017 Edition).
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
Revealing the Encouraged Industries of Hainan in 2024: Unlocking Opportunities
The 2024 Hainan Encouraged Catalogue, issued by the NDRC, MOF, and STA, aims to boost industries in the Hainan Free Trade Port. It prioritizes sectors like tourism, modern services, and high technologies, offering incentives for foreign investment and market access expansion since 2020. The Catalogue includes 176 entries across 14 categories, with 33 new additions focusing on cultural tourism, new energy, medicine and health, aviation, aerospace, and environmental protection.
The National Development and Reform Commission (NDRC), in collaboration with the Ministry of Finance (MOF) and the State Taxation Administration (STA), has issued the Catalogue of Industries Encouraged to Develop in Hainan Free Trade Port (2024 Version), hereinafter referred to as the “2024 Hainan Encouraged Catalogue.” The updated Catalogue took effect on March 1, 2024, replacing the previous 2020 Edition.
Beyond the industries already addressed in existing national catalogues, the new entries in the 2024 Hainan Encouraged Catalogue are based on practical implementation experiences and the specific needs within Hainan, prioritizing sectors such as tourism, modern services, and high technologies.
The Hainan FTP has been providing incentives to draw investors to invest and establish businesses in the region, especially foreign investment. Alongside a phased approach to opening the capital account and facilitating free capital movement, Hainan has significantly expanded market access for foreign enterprises since 2020, particularly in sectors such as telecommunications, tourism, and education.
The Hainan Encouraged Catalogue comprises two main sections:
Similar to the approach adopted by the western regions, foreign-invested enterprises (FIEs) should always implement their production or operations in accordance with the Catalogue of Encouraged Industries for Foreign Investment.
On top of the industries already addressed in existing national catalogues, the 2024 Hainan Encouraged Catalogue encompasses 14 distinct categories and a total of 176 entries especially encouraged in the region, including 33 new additions compared to the 2020 Edition. These new entries predominantly span cultural tourism, new energy, medicine and health, aviation and aerospace, and ecological and environmental protection, among others.
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
Key Guidelines for Companies in Compliance Audits for Personal Information Protection Standards
China’s standards authority has released draft standards for personal information protection compliance audits, potentially making them mandatory for companies in 2023. The audits will require companies to undergo annual or biennial checks based on the number of people’s information they handle. The draft standards outline the audit process and requirements, seeking public feedback until September 11, 2024.
China’s standards authority has released draft standards for conducting personal information protection compliance audits. Regular compliance audits to ensure compliance with personal information protection regulations may become a requirement for companies in China under draft measures released in 2023. We explain the audit processes and requirements proposed in the draft standards.
The Standardization Administration of China (SAC) has released a set of draft standards for conducting personal information (PI) protection compliance audits. Under draft measures released by the Cyberspace Administration of China (CAC) in August 2023, companies that process the PI of people in China are required to undergo regular compliance audits.
Specifically, companies that process the PI of over one million people must undergo a compliance audit at least once a year, while companies that process the PI of under one million people must carry out an audit at least once every two years.
While the draft measures stipulate the obligations of the auditing body and the audit scope, the draft standards outline the specific audit process, including evidence management and permissions of the audit organization, as well as the professional and ethical requirements of auditors.
The Secretariat of the National Cybersecurity Standardization Technical Committee is soliciting public feedback on the draft standards until September 11, 2024. Public comment on the draft measures released in August last year closed on September 2, 2023, but no updated document has yet been released.
The draft standards outline five stages of the PI protection compliance audit: audit preparation, implementation, reporting, problem rectification, and archiving management.
Auditors are required to accurately document identified security issues in the audit working papers, ensuring that the records are comprehensive, clear, and conclusive, reflecting the audit plan and its execution, as well as all relevant findings and recommendations.
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 Provides Tax Incentives on Special Equipment for Green and Digital Development
- Revealing the Encouraged Industries of Hainan in 2024: Unlocking Opportunities
- Key Guidelines for Companies in Compliance Audits for Personal Information Protection Standards
- A Comprehensive Guide to China’s Expanded 144-Hour Visa-Free Transit Policy at 37 Ports
- Regulatory Changes in China Aim to Boost Service Sector Growth in Six Cities
- Adhering to Updated Registered Capital Regulations in China’s Revised Company Law
