China
From China’s climate commitments to action
Author: ZhongXiang Zhang, Tianjin University
As the world’s largest carbon emitter, China has a crucial role in the reduction of global carbon emissions through its own commitment and its collective international engagement. Fortunately, in the past decade, China has shifted its stance on international climate negotiations and is making significant commitments to global governance addressing climate change.
Before the Copenhagen UN Climate Change Conference (COP15) in 2009, China pledged to cut its carbon intensity — its emissions per unit of GDP — by 40–45 per cent by 2020 relative to 2005 levels. While this was consistent with China’s longstanding opposition to hard emissions caps on the grounds that limits could restrict economic growth, the pledge marked a turning point in China’s climate policy. It was followed by a commitment at the 2015 Paris UN Climate Change Conference (COP21) to peak absolute emissions and cut intensity levels by 60–65 per cent by 2030.
In September 2020, President Xi Jinping reiterated China’s commitment to peak carbon emissions by 2030 and announced a goal to achieve carbon neutrality before 2060. Given the unexpected nature of this announcement it was significant when China’s Central Economic Work Conference made ‘carbon peaking and carbon neutrality’ one of the eight key economic priorities for government in 2021.
These announcements are welcome, but commitment without action is meaningless and the global community is concerned about how China will honour its commitments.
Achieving peak carbon and carbon neutrality will require China to rapidly decarbonise its economic and energy structures. China has established the 1+N framework, which sets out the policies and actions required across economic sectors and in key industries such as energy, industry, transportation, infrastructure and construction. Huge investment in renewable energy, industry retrofitting and new low-carbon or carbon-free technologies is necessary to realise these objectives. Government financing can only cover a small portion. Private capital must close the gap.
China’s national emissions trading scheme (ETS) — launched in July 2021 — establishes a price for carbon in the electricity sector to incentivise investment in low-carbon projects. So far, the price for carbon has remained stable and overall compliance with the scheme is high. But there are significant differences across provinces, particularly measured against the number of entities.
China will need to strengthen its national carbon trading regulations to fully realise the benefits of its price on carbon. It also needs to accelerate the expansion of industries included in the national ETS, diversify market players and increase the variety of tradeable market instruments to deepen market liquidity. The Chinese government should prioritise the inclusion of the steel, cement and aluminium industries in the national carbon market. The petrochemical, chemical, building materials, nonferrous metals, papermaking and aviation industries should be included in the next five years. That will incentivise energy-saving and least-cost carbon abatement.
Because climate change is a collective action problem international cooperation is required to meet the global average temperature targets outlined in the Paris Agreement. If China fulfils its carbon neutrality commitment it could reduce global average temperature rises above pre-industrial levels by 0.16 to 0.30 degrees Celsius. This would greatly improve the chances of achieving the Paris Agreement’s 2 degree target with China’s commitment to climate action having the single largest impact of any country.
Cooperation with the United States — the world’s second-largest emitter after China — is also crucial to fulfilling global agreements. China and the United States issued the US–China Joint Glasgow Declaration on Enhancing Climate Action in the 2020s. The two countries outlined that they will cooperate on regulatory frameworks and environmental standards, clean energy transition, decarbonisation and electrification of end-use sectors, carbon capture, utilisation and storage technologies and increased action to control and reduce methane emissions. Such statements have enhanced the two countries’ commitments to climate action and their follow-through on meeting the Paris Agreement.
China also has a crucial role in helping developing countries to meet their climate ambitions. Developing countries are required to make contributions to global efforts but are not supported…
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
