Trends and Reforms That Will Make It Easier to Run a Business in China
In recent months, we are bombarded with pessimistic reports concerning the trade dispute between the United States and China, almost all from the American point of view. Serious publications like The New York times again and again point out China’s weaknesses and economic shortcomings. At the same time, the Chinese Government initiates reforms and countermeasures directed at compensating for the expected losses and focuses on creating and improving trade agreements with other countries. The list of reforms is long and will be meaningful to anyone doing business in China. Whether an American PR “campaign” or Chinese “propaganda”, any news can teach us something and especially of interest to us is what is missing from the news. When only one side is represented, we try to dig deeper looking for the missing parts.
Here are some less-discussed items that paint a different picture, and which present an optimistic outlook for 2019:
- IP Protection. China has made moves to improve its intellectual property (IP) rights, which is an issue on the forefront of US complaints. Numerous IP-related policies were issued over the past year, among them is the establishment of a new national-level court under the Supreme People’s Court (SPC), which from January 1st will handle IP appeals across the country. The court will manage IP disputes in high-tech fields, including matters related to trademarks, patents, and trade secrets..
- Tariff and export duty cuts. China announced a wide variety of tariff and export duty cuts for businesses in 2019. Beginning January 1st China will lower or remove tariffs for imports on 706 types of products in a bid to lower costs for consumers and further open the country’s economy. The complete list of tariff cuts can be found here.
- Trading Across Borders. Remarkable progress has been made in China on almost all components of Trading Across Borders. According to a World Bank report, the time and cost of Trading Across Borders were reduced by implementing a single window, eliminating administrative charges, increasing transparency and encouraging competition. For instance, the cost to import (border compliance) has been reduced to $326, from $745. As a result of this and other improvements, China has advanced over 30 places to a global rank of 65 in the Trading Across Borders parameters.
- MFN tariff Reduction for IT products. From July 1, 2019, China will reduce the Most-Favored Nation (MFN) tariff rates for 298 information technology products, including medical diagnosis machines, speakers, and printers. Further 14 IT products will have their tariff rates provisionally lowered on that date. The complete list of affected products can be found here.
- Starting a Business. According to a World Bank report, China is now ranked 28 in the domain of Starting a Business. Starting a Business was made easier through the introduction of online registration systems and simplifying social security registrations. A new “one-stop, one-form” procedure for Foreign-Invested Enterprise will replace the existing lengthy complex process. The new procedure will reduce existing bureaucratic processes from over twenty days to eight and half days. As a result, by the end of 2019, about 90 percent of provincial-level authorities’ services and 70 percent of services offered by city and county-level authorities will be accessible online.
- SMEs, Entrepreneurship, Private Enterprise. In 2019 China will intensify its support for the development of the private sector, and small and medium-sized enterprises (SMEs). Bert Hofman, World Bank Country Director for China said that, “China has made rapid progress in improving its business climate for domestic small and medium enterprises in the past year. This progress, which now puts China among the top 50 economies in the world, signals the value the government places on nurturing entrepreneurship and private enterprise”. The private sector in China, which is mainly composed of SMEs, accounts for 90% of all businesses, now contributing more than 50% of all tax revenues, over 60% of GDP, more than 70% of technological innovations, and over 80% of urban employment.
And on this positive note we wish all of you a happy and successful business year!