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China

Rural underemployment threatens China’s growth

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Children walk along a road to their school after having their lunch at home in Min County, Gansu Province, China, 1 June 2011 (Photo: Reuters/Stringer).

Authors: Scott Rozelle, Stanford University and Dorien Emmers, KU Leuven

According to World Bank data, only a handful of economies have risen from middle- to high-income status since 1960, when economic catch-up growth in many developing economies took off. Examples include South Korea, Singapore, Israel and Ireland. Some countries that were high income in 1960 remain so today, such as Denmark and Japan. Others, like Myanmar and North Korea, have stayed poor. Many countries have stayed at middle-income status for decades, seemingly unable to reach high-income status. How does China compare to these other countries stuck at the middle-income level?

One key factor that may account for the disparate development paths of countries is education. According to the OECD, in 2015 the average share of workers — people aged 18–65 — that completed secondary education in countries that graduated to high-income status was 72 per cent when they were still at middle-income status. But in countries that have failed to exit middle-income status the share is much lower — 36 per cent on average.

Having a large supply of educated workers ensures that enough talent exists to meet and drive demand for high value services, thereby sustaining growth. When too many unskilled workers are squeezed out of upgraded industries their wages stagnate, curtailing demand and hampering growth. This eventually leads to serious social problems, such as higher rates of unemployment and increased crime and social unrest.

Education attainment metrics help reveal China’s potential future development and growth trajectory. The share of uneducated workers in China’s labour force is larger than that of virtually all middle-income countries. According to 2010 census data, there are roughly 500 million people in China between the ages of 18 and 65 without a senior high school diploma, which is 74 per cent of the labour force. This makes China the least educated middle-income country in the world.

A large population of uneducated workers was not a problem when China moved from low- to middle-income status. Unskilled wages were low and there was growth in low-cost manufacturing and construction. But China’s growth model is changing as it becomes wealthier. Unskilled wages are much higher but the lure of cheaper labour elsewhere and China’s massive push to automate is rendering low-skilled workers redundant. Construction jobs have tapered off as investment in infrastructure cools. These factors suggest China’s unskilled workers may be increasingly unemployable as the economy upgrades.

The only destination for China’s unskilled workforce — whether new entrants to the labour force or laid-off workers — is the informal service sector. Data from the 2018 China Statistical Yearbook shows that informal employment is currently the fastest growing sector in China, increasing from 33 per cent in 2004 to 56 per cent in 2017. This rising supply of workers has ushered in stagnating wages for unskilled workers. Meanwhile, strong demand for skilled work means higher wages are going to those with an education. The result may come to resemble Mexico, where solid macroeconomic performance, export success and an accumulation of physical capital has not translated into growth in the formal economy.

Recognising the critical need for secondary education, China’s government has expanded access to high school throughout the country. High school attainment among the youngest cohorts in the labour force is close to 80 per cent. But hundreds of millions of less educated people will remain in the labour force for the next 30 years. The government will face huge challenges trying to either retrain workers or provide a social safety net.

The quality of China’s expanded secondary school education is also uncertain. Almost all low-skilled labour comes from rural areas where school and health systems are under-resourced. Many of China’s new secondary school graduates attended poor quality vocational schools. Systemic shortfalls in early childhood education and health in rural areas may also render many young people unprepared to learn complex skills as they age. A systematic review and meta-analysis found that 45 per cent of children in rural schools across China have delayed cognitive development before they reach the age of five.

Investments during the first years of life in a safe home environment with sufficient learning opportunities, healthy nutrition and responsive caregiving are crucial for healthy child development. But a study published in 2017 on…

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Lingang New Area in Shanghai Introduces Whitelists for Data Export to Enhance Cross-Border Data Flows

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The Lingang New Area in Shanghai has introduced trial general data lists to simplify data export procedures for companies in automotive, biopharmaceuticals, and mutual funds sectors. This aims to reduce regulatory burdens and facilitate cross-border data flows, following efforts to improve business environment for foreign companies.


The Lingang New Area in Shanghai has introduced trial general data lists aimed at simplifying data export procedures for companies in the automotive, biopharmaceuticals, and mutual fund sectors. These lists outline specific scenarios where businesses can export data out of China with reduced regulatory burdens, bypassing more stringent compliance requirements.

The Lingang New Area of the Shanghai Pilot Free Trade Zone (FTZ) has released the first batch of trial lists of general data for three sectors, facilitating cross-border data flows for companies operating in the area. This announcement closely follows the release of the Tianjin FTZ’s Negative List, which similarly seeks to facilitate cross-border data flows for companies operating in the FTZ by specifying the types of data that are restricted from being exported without certain approval procedures.

The first batch of general data lists has been provided for the fields of intelligent connected vehicles, biopharmaceuticals, and mutual funds, three sectors with a significant presence in the Lingang New Area. The general data lists are scenario-based, meaning they outline various situations in which data export is required and freely permitted. These include scenarios, such as multinational production and manufacturing of intelligent connected vehicles, medical clinical trials and R&D, and information sharing for fund market research.

The general data lists will be implemented for a trial period of one year from their date of implementation, May 16, 2024.

In January 2024, the Lingang New Area announced a new system for data management and export in the area, which included the release of two data catalogs, one for “important” data and one for “general” data. This new system will help facilitate cross-border data transfer (CBDT) for key sectors in the area by delineating the types of data that are restricted or subject to additional compliance measures to be exported (through the important data lists) and data that can be more easily exported (through the general data lists).

In March, the area released the Measures for the Classification and Graded Management of Data Cross-border Flow in the China (Shanghai) Pilot Free Trade Zone Lingang Special Area (Trial) (the “Lingang CBDT Management Measures”), which outlined the rules and requirements for this new system, including how companies can use the general data lists.

These developments follow many months of efforts by the central Chinese government as well as local authorities to improve the business environment for foreign companies in particular, a core part of which has been resolving headaches surrounding data export.

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.

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The New Company Law brings substantial changes with implications for new and existing foreign invested enterprises and stakeholders. Foreign investors must assess if adjustments to existing structures

Despite recent economic challenges, many organizations’ China operations provide unparalleled access to one of the world’s largest and most competitive global supply chains. Over the past 30 years, a significant number of foreign invested enterprises (FIEs) have been established in China. As of the end of 2022, the number of FIEs operating in China had exceeded 1.12 million.

Compared to their domestic counterparts, FIEs demonstrate greater caution regarding legal revisions and are diligent in making swift adjustments. This stems not only from the closer scrutiny FIEs face from regulatory authorities but also from their commitment to compliance and maintaining a competitive edge.

Clearly, there has been a shift in China’s corporate regulations—from merely encouraging an increase in the number of companies to focusing on attracting mature enterprises and higher-quality investments. While the transition from a broad approach to a more refined one may cause short-term challenges, it ultimately benefits the company’s long-term development. By returning to the original intent of setting registered capital, it not only protects the interests of creditors but also shields shareholders from the operational risks of the company.

In China’s foreign investment landscape, while most FIEs exercise commercial prudence in determining registered capital—factoring in capital expenditures, operational costs, and setting aside surplus funds—some opt for higher registered capital levels to avoid future capital increase procedures. This typically involves lengthy document signing and registration changes, lasting 1-2 months.

Joint ventures (JVs) often impose stricter payment deadlines for registered capital in their articles of association to ensure both parties’ simultaneous contributions align with operational needs. Conversely, wholly foreign-owned enterprises (WFOEs) tend to favor flexibility in payment deadlines, often allowing full payment before the company’s operational period expires.

Given these circumstances, despite the generally stronger capital adequacy among foreign companies compared to domestic entities, many FIEs could be affected by the new capital contribution rules.

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.

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Foreign Tourist Groups on Cruise Ships Fully Permitted Visa-Free Entry in China

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China will allow visa-free entry for foreign tourist groups arriving by cruise ship at 13 ports along the coast, starting May 15, 2024. Visitors must stay with the same ship and in permitted areas for up to 15 days. This policy aims to boost tourism and facilitate high-quality development in the cruise industry.


China’s immigration agency announced that it will grant a visa-free policy for foreign tourist groups to enter China by cruise at all cruise ports along the coast of China, starting May 15, 2024. The tourist group must remain with the same cruise ship until its next port of call and stay within permitted areas for no more than 15 days.

Effective May 15, 2024, the National Immigration Administration (NIA) has officially implemented a visa-free policy for foreign tourist groups entering China via cruise ships. This progressive move aims to enhance personnel exchanges and foster cooperation between China and other nations, furthering the country’s commitment to high-level openness.

Under this policy, foreign tourist groups, comprising two or more individuals, who travel by cruise ship and are organized by Chinese domestic travel agencies, can now enjoy visa-free entry as a cohesive group at cruise ports in 13 cities along the Chinese coast.

The tourist group must remain with the same cruise ship until its next port of call and stay within China for no more than 15 days. The eligible areas for this policy are coastal provinces (autonomous regions and municipalities) and Beijing.

Furthermore, to support cruise tourism development, seven additional cruise ports—Dalian, Lianyungang, Wenzhou, Zhoushan, Guangzhou, Shenzhen, and Beihai—have been included as applicable ports for visa-free transit.

The recent implementation of the visa-free policy for foreign tourist groups entering China via cruise ships is poised to have several significant effects. The policy will provide crucial support for the cruise economy and the overall cruise industry. By facilitating smoother travel for foreign tourist groups, it acts as a catalyst for high-quality development in this sector.

Additionally, under this policy, international cruise companies can strategically plan their global routes by designating Chinese port cities, such as Shanghai, Xiamen, and Shenzhen, as docking destinations. This move is expected to attract more cruise ships to Chinese ports, ultimately bringing in a larger number of international visitors to the Chinese market.

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.

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