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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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.
China
Foreign Tourist Groups on Cruise Ships Fully Permitted Visa-Free Entry in China
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.
China
China’s New Tariff Law: Streamlining and Standardizing Current Tariff Regulations
China’s new Tariff Law consolidates import and export duties, clarifies rules for imposing counter-tariffs, and sets a December 1, 2024 effective date. It codifies existing practices on cross-border e-commerce and rules on the origin of goods into law, impacting trade relations.
China’s new Tariff Law consolidates rules on import and export duties that were previously implemented via several legal documents and makes important clarifications and additions to prior regulations. Among other changes, it stipulates provisions for the Chinese government to impose counter-tariffs on imported goods, codifying these powers into law for the first time. We outline all the notable updates to the China Tariff Law and discuss the implications for the country’ current trade relations.
On April 26, 2024, the National People’s Congress (NPC), China’s legislature, adopted the Tariff Law of the People’s Republic of China (the “Tariff Law”) after several rounds of revisions.
The new Tariff Law will replace the Import and Export Tariff Regulations of the People’s Republic of China, which fall under the purview of the State Council, and adopts many of its provisions.
Previously, Chinese law had not stipulated legislative powers to implement countervailing tariffs, although China was nonetheless able to impose counter-tariffs on trade partners through other means.
China’s new Tariff Law comes into effect on December 1, 2024.
China’s Tariff Law elevates several existing provisions and practices to the level of law. For instance, Article 3 of the Tariff Law clarifies the obligations of cross-border e-commerce platforms for tariff withholding and implementing consolidated taxation.
The Tariff Law also solidifies the rules and regulations on the origin of goods, stipulating that the application of tariff rates shall comply with the corresponding rules of origin. Although this has been previously implemented in practice, it is the first time this has been codified into law.
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
- China’s New Tariff Law: Streamlining and Standardizing Current Tariff Regulations
- Outlook on Bilateral Trade and Investment between China and United Arab Emirates (UAE)
- 2024 Tax Incentives for Manufacturing Companies in China
- Exploring the Revamped China Certified Emission Reduction (CCER) Program: Potential Benefits for International Businesses
