July 2020 / China

The General Office of the State Council released on July 21, 2020 the Implementation Opinions about Further Optimizing Business Environment and Better Serving Market Entities, in a policy move to further reduce restrictions on foreign and trade companies' investment and business activities. The document expressed support for foreign trade companies to sell their products originally designed for foreign consumers in the domestic market, and they can make self-declarations to replace domestic certifications. If they have already obtained international certifications according to product standards that are not lower than domestic standards, they can issue a written statement and then sell their products at the domestic market. All prefecture-level cities are authorized to register foreign-funded enterprises.

Premier Li Keqiang signed a decree on July 14, 2020 to release the Regulation on Payment Protection for Small and Medium-sized Enterprises, to be effective from September 1, 2020. The regulation has 29 articles and aims to address three problems. The first is to set rules for contract conclusion and payments; the second is to ensure timely payment and prevent payment arrears; the third is to strengthen credit oversight and services. The regulation stipulated that systems for payment information disclosure, complaint handling and regulatory evaluation should be established to safeguard the legitimate rights and interests of SMEs and optimize the business environment.

The General Administration of Customs revised and released on July 6, 2020 the Regulatory Measures of the Customs of the People's Republic of China for Duty-free Shopping of Tourists Leaving Hainan Island, to be effective from July 10, 2020. Four announcements released by the GAC in 2015, 2016, 2017 and 2018 will be revoked at the same time. The regulation made provisions about supervision of the sales of duty-free items, the delivery and departure of duty-free items, and legal responsibilities. If shoppers provide fake or illegal identity certificate or travel document, they will be deprived of duty-free shopping policies for three years, and their unlawful activities will be recorded as part of their credit information.

The State Taxation Administration released an announcement on July 1, 2020 to revise the Tax Return for the Monthly (Quarterly) Prepayment of Enterprise Income Tax (Type A, 2018 Version) and (Type B, 2018 Version), with effect from July 1, 2020.   The revisions are overall amendment to the sample forms and instructions to the 2018 and 2019 versions of the respective documents. These documents will be abolished from July 1, 2020.

China unveiled new, shortened negative lists for foreign investment, as part of efforts to further open up the economy and improve its business environment amid the novel coronavirus epidemic. The new negative lists will go into effect on July 23. Items on the national negative list will be cut from 40 to 33, and the negative list for pilot free trade zones (FTZs) will shrink from 37 to 30. The shortened nationwide list further improves the level of openness in the service, manufacturing, and agricultural sectors. In the service sector, foreign ownership caps on securities, fund management, futures and life insurance companies will be removed. Foreign investors will be allowed to take majority shares in joint ventures that engage in the building and operation of water supply and drainage networks in cities with a population of more than 500,000. Regulations prohibiting foreign investment in air traffic control also will be canceled. In the manufacturing sector, foreign ownership caps on commercial vehicle manufacturing will be lifted, and regulations prohibiting foreign investment in the smelting and processing of radioactive minerals and nuclear fuel production also will be eliminated. In the agricultural sector, ownership limit on foreign investors in wheat breeding and seed production will be raised up to 66 percent. The role of FTZs as a pioneer in the country's reform and opening-up will be further strengthened. In the field of medicine, regulations prohibiting foreign investment in ready-to-use traditional Chinese medicine will be canceled. Foreign investors will be allowed to run wholly owned vocational education institutions. From 2017 to 2019, China was the second-largest foreign direct investment (FDI) recipient despite continuing declines in global transnational investment, with FDI inflow of over $141 billion in 2019.   Source: State Council of PRC

China will allow foreign banks to gain access to fund custody business in its market, as part of efforts to further open up the financial sector, the country's securities and banking regulators said on July 10. Eligible Chinese branches of foreign banks will be able to apply for permits for fund custody business, according to the newly-revised fund custody rules jointly issued by the China Securities Regulatory Commission and the China Banking and Insurance Regulatory Commission. Applicants should have sound internal control mechanisms and good business performance, with major indicators including the scale of fund custody business, profits and market share ranking among the top in the world in the past three years, according to the rules. While allowing applicants to use performance indicators of their overseas headquarters, the rules also revised the bar for net assets to 20 billion yuan (about $2.86 billion) for applicants. The rules also specified that headquarters of foreign banks should bear civil liability for their Chinese branches and put in place a liquidity support mechanism commensurate with the scale of their fund custody business in China.   Source: Invest in China

China will build national high-tech zones with better layout and innovation capability by 2025, according to a circular issued by the State Council on July 17. Mechanisms in the high-tech zones will be continuously updated to improve the environment of innovation and entrepreneurship and build high-tech industrial systems, as planned in the circular. High-tech zones should gather high-quality resources and attract top talents to enhance independent innovation and stimulate enterprises' business vitality for innovation by supporting technology-based small and medium-sized enterprises, according to the circular. Meanwhile, industries in high-tech zones should be pushed to upgrade toward higher ends, and emerging industries should be encouraged. Further opening-up and more innovation were also stressed, with regional integrated development urged and new growth engines to be discovered. An environment of high-quality development should be established for high-tech zones, and reform of management systems and mechanisms should be deepened, the business environment optimized, and financial services strengthened.   Source: State Council of PRC