China
The EU risks losing the contest for influence in Central Asia
Author: Donaev Mukhammadsodik, OSCE Academy
The EU and China have become more dynamic players in Central Asia since the United States withdrew from Afghanistan and Russia started losing its geopolitical reputation following its invasion of Ukraine. While Russia’s regional influence is gradually being replaced by China’s presence, the EU should adjust its strategy. Otherwise, the EU’s plans for closer connectivity with Central Asia will exist only on paper.
After the grandiose Shanghai Cooperation Organization meeting in Samarkand in September 2022, several summits were held to further EU–Central Asian connectivity. The President of the European Council, Charles Michel, visited Uzbekistan and Kazakhstan in October. Chinese President Xi Jinping also visited these countries — his first foreign visit since the beginning of the COVID-19 pandemic.
EU delegates, who have been making more frequent visits to Central Asia, often criticise China’s active engagement in the region. German Foreign Minister Annalena Baerbock stated during her last visit to Uzbekistan that ‘Germany does not threaten the sovereignty and integrity of the state by giving ‘tricky’ loans, but wants to establish partnerships on equal terms, honesty and transparency. When it comes to investment and loans, the EU does not assume subordination, and involvement in the sphere of influence unlike others’.
The EU claims that it is the biggest investor in Central Asia. But it is the largest investor in Kazakhstan only, which is the biggest economy in the region, and most European investment there has been directed towards the energy sector. Kazakhstan is considered less dependent on China compared to other countries in Central Asia. Although China was not among the top five investors in Kazakhstan in 2021–22, it is still the country’s biggest trading partner.
The other four countries in Central Asia have received most of their FDI from China. China’s investment in the region has been more diverse than Europe’s. According to statistical reports in 2021, China’s investment in Uzbekistan reached US$2.2 billion. This was followed by Russia — US$2.1 billion — and Turkey — US$1.18 billion. China’s investment in Tajikistan accounted for about 62 per cent of total inward FDI. As for Kyrgyzstan, 27 per cent of FDI was from China. There are no exact statistics for Turkmenistan, but according to some sources, China remained the biggest investor in 2021. As Chinese businesses steadily enter many sectors such as telecommunications, industry, manufacturing, construction and services, the influence of Chinese companies is becoming ubiquitous.
For China, Central Asia is an important geopolitical location and transport corridor. The China–Kyrgyzstan–Uzbekistan railway project is also expected to boost connectivity. China is not a member of the Paris Club — meaning it does not share information about its official loans to other countries — and is also known for ‘debt trap’ diplomacy. Because of this, loans and investments from China worry the intellectual elites of Central Asia.
Due to fears of economic dependence and China’s actions towards the Uyghur minority in Xinjiang, anti-Chinese sentiment has been growing, and several protests have occurred in Kyrgyzstan and Kazakhstan. Such protests are usually ignored and sometimes stopped with force because of strong diplomatic ties with China.
Central Asia does not want to disappoint either side and maintains equal diplomatic ties with the East and West. Uzbekistan reached a US$15 billion agreement with China in September 2022, and also cooperated closely with the EU to increase its export capabilities.
The same goes for Kazakhstan, whose relationship with China is at an ‘unprecedented level’. During Xi’s visit, both countries affirmed to respect and support each other’s sovereignty and territorial integrity. But Kazakhstan also agreed to step up its relations with the EU during a meeting of the Cooperation Council in Luxembourg on 20 June 2022.
The EU’s attempt to connect more with Central Asia is an opportunity for Central Asian states to cooperate with a ‘neutral and experienced’ partner to improve their economic situation and diversify political relations. The EU also provides a good example to Central Asia of a successful model of regional integration. Diversifying their relations and keeping a balance of power is important for both Central Asia and the EU — depending on just one partner in any sector comes at a heavy cost, as the energy crisis in both…
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
