China
Hong Kong is now over, says China’s former good friend
Once seen as a good friend of China’s and former chairman of Morgan Stanley in Asia, Stephen Roach has said Hong Kong is over, attributing the city’s “demise” to its domestic politics, China’s structural problems and global developments namely worsening U.S.-China tensions.
“It pains me to admit it, but Hong Kong is now over,” Roach wrote in a commentary in the Financial Times on Monday.
“Since the handover to China in 1997, the Hang Seng index has been basically flat, up only about 5%. Over that same period, the S&P 500 has surged more than fourfold; even mainland China’s underperforming Shanghai Composite has far outdistanced the Hong Kong bourse.”
Roach said the turning point for Hong Kong’s decline was when former Chief Executive Carrie Lam introduced the extradition bill that triggered large-scale democratic demonstrations in 2019. Beijing’s subsequent imposition of the national security law in 2020 “shredded any remaining semblance of local political autonomy,” and cut the 50-year transition period to full Chinese takeover by half, he pointed out.
With the political change came an economic downturn on the back of waning confidence in the business and investment environment, as well as the legal framework, as reflected by foreigners, firms and even locals leaving the city.
According to Roach, Hong Kong’s decline was due to a confluence of three factors. The first being local politics. A relatively stable environment was shaken by the 2019-2020 protests, which resulted in the Beijing-centric national security law.
Second was China’s economic structural problems. While the Hong Kong stock market has always played a leveraging role in the mainland economy, the Chinese economy has recently “hit a wall”. Structural problems, especially with high debt, deflation and an aging population, compounded by the impact of the COVID-19 epidemic and the real estate crisis, have weighed on the Hong Kong market.
Global developments are also not helping, primarily the worsening U.S.-China rivalry since 2018. In addition, the United States’ “friendshoring” campaign has put pressure on Hong Kong’s Asian allies to choose sides between the U.S. and China, driving a wedge between the city and its trading neighbors.
A “shock bomb”
Financial commentator Ngan Po Kong described the commentary as a “shock bomb” which could prompt others to re-evaluate the political risks of doing business in Hong Kong, given Roach wasn’t just an investment banker, but holds sway in economic, political and business circles.
“Roach has been a ‘great friend’ of China’s for many years. He is basically optimistic about China’s economic reform and opening up, whether it is political or financial market performance. You can say he is a representative of the mainstream voice on Wall Street, an important voice that represents investment banks and financial institutions,” Ngan said in a Radio Free Asia Cantonese talk show.
Separately, the American law firm Latham & Watkins LLP, is cutting off access to its international database for its Hong Kong lawyers this month, according to a separate FT report, citing unnamed sources familiar with the matter
The report said the move underscores the growing difficulties for multinational companies operating in Hong Kong, which made its name as an international financial hub, and comes after Beijing imposed anti-espionage and data laws restricting information flows out of China. The law firm is also separating the Hong Kong database from the rest of Asia to create a new database shared with the Beijing office, the report said.
Hong Kong Chief Executive John Lee has vowed to complete legislation of Article 23 of the Basic Law – Hong Kong’s mini constitution – with laws to prohibit acts of treason, secession, sedition and subversion against Beijing. Public consultation for the draft law ends this month.
Translated by RFA staff. Edited by Mike Firn.
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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
