China Pulse: News, Events, and Market Research

For More Information, please contact:

Mr. WANG, Cong
Tel: 86-532-81978683
Fax: 86-532-81978692
Email: Wang.Cong@sinoces.com

Ms. GAO, Yan
Email: yan.gao@mail.doc.gov

Webinar on China Standards Regime: Preparing for Export
Venue: Your Computer
Date: June 11, 2009 10:30-11:30 am ET [June 11, 10:30 pm China Time]
Learn more/register: http://www.buyusa.gov/asianow/chinastandardswebinar.html
Fee: $35

China Standards Regime: Preparing for Export
Understand CCC Mark ~ China ROHS ~ GB ~ AQSIQ and other Certifying Administrations
This live internet briefing will cover important China import standards and regulations -- what U.S. exporters need to know prior to shipment. Including, what standards and certifications may apply; variations in interpretation by province and port; interacting with AQSIQ and other key standard organizations; China's indigenous standards; what to do when problems arise; and resources available to exporters. Hear from and raise your questions with the Standards Attache at the American Embassy in Beijing. Date: June 10, 10:30-11:30 am ET.

For more information go to http://www.buyusa.gov/asianow/chinastandardswebinar.html or contact kellie.holloway@mail.doc.gov.

News Flash

Shandong Encourage Developing Aviation Matching Industry

Recently, Shandong Province brought forward to encourage and support speeding up the construction of the five aviation industrial parks and bases with comparative advantages in five cities, including Jinan, Weihai, Binzhou, Qingdao, and Weifang. In regarding to industrial distribution, Shandong Province will speed up the constructions of the aviation industrial parks and bases.

The first is Jinan Aeronautical Composite Materials and Maintenance Industrial Park. It will relying on High-tech Industrial Development Zone of Jinan, the leading is Shandong Air Limited, the other main parts including Jinan Special Structure Institute of Aviation Industry Corporation of China, Taikoo(Shandong) Aircraft Engineering Co, Ltd. The second is Weihai Carbon Fiber Material Industrial Park, domestic the largest, International advanced. It will relying on Weihai Industrial Park, the main part is Weihai Tuozhan Fiber Co., Ltd; the others are three light small aircraft production bases, their respectively main parts are Shandong Bin Ao Aircraft Industries Co., Ltd, Qingdao Haili Helicopter Co. Ltd, and Weifang Tianxiang Group Co., Ltd.

Ramrayt Co. (http://www.ramrayt.com)

China starts building 3rd-generation nuclear power reactors using Westinghouse technologies

China on Sunday started the construction of its first third-generation pressurized water reactors using AP 1000 technologies developed by U.S.-based Westinghouse. China launched bidding in 2003 for its nuclear power stations of the third generation. Foreign companies including Westinghouse, France's Areva and Russia's AtomStroy Export are major bidders. Westinghouse became the winner after China signed a memo with the United States on the introduction and transfer of third-generation nuclear power technologies in December 2006. The final agreement was inked between China's State Nuclear Power Technology Corporation and Westinghouse in July 2007, according to which China will buy four third-generation pressurized water reactors from Westinghouse. The agreement also involves technology transfer to China.

Xinhua News Agency, Apr.19, 2009 (http://news.xinhuanet.com/english/2009-04/19/content_11217433.htm)

China Signs Deals worth US$10 Billion with U.S. Companies
At yesterday’s forum hosted by the U.S. Chamber of Commerce and the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, Chinese companies signed 32 contracts with American companies worth US$10.6 billion. These companies included Ford Motor Co., International Business Machines Corp., Dell Inc., Cisco Systems Inc., Hewlett-Packard Co., Microsoft Corp., EMC Corp., Oracle Corp., Sun Microsystems Inc. and Amway Corp.

The new round of deals comes at a time when the slowing U.S. economy has led to dropping export demand in China. By the last quarter of 2008, the United State’s deficit decreased by US$132.8 billion. A senior vice president for Cisco in Beijing, John Ng, told Bloomberg said in that his company’s contracts with China Mobile, China Telecom Corp. and China Construction Bank Corp. was worth an estimated US$300 million. The contract signings also come when foreign businesses working in China have recently warned about rising protectionism in the country. The American Chamber of Commerce in China said in its 2009 White Paper, that protectionism was a top concern this year and that national policies using stimulus money is mostly limited for Chinese companies.

Beijing has always maintained restrictions on foreign investment in industries like the railway system, postal service, autos, chemicals and information technologies where it wants to nurture local or state-owned companies. Moreover, analysts told WSJ that some form of protectionism is built into China’s decentralized political structure that affects both local and foreign companies. Due to decentralization, even provinces will practice local protectionism and will ban purchases made from outside the province.

China Briefing (http://www.china-briefing.com/news/2009/04/28/china-signs-deals-worth-10-billion-with-us-companies.html)

New China Market Research

China: E-Banking (Online Banking) Industry

Following China’s accession into the World Trade Organization (WTO) in 2001, the Chinese government has honored its commitment to open the banking industry to foreign investors and foreign banks. The China Banking Regulatory Commission (CBRC) opened the Chinese banking industry by the end of 2006, marking the end of the five-year grace period allotted by the WTO. Since then, the presence of foreign banks has expanded quickly and become increasingly strong, and numerous foreign banking groups have purchased minority stakes in Chinese banks. Simultaneously, internet use in China has become more widespread than ever before, even surpassing the United States in total internet users to become the country with the most internet users in the world.

With these conditions in place, there is great potential for China’s online banking industry. Since 2000, the number of online banking users has increased significantly. Currently, the vast majority of online banking users are corporate banking users. Fifteen foreign banks have acquired licenses to provide online banking services. However, the market is still mostly dominated by domestic banks such as the Industrial and Commercial Bank of China and China Merchants Bank. Foreign banks face additional challenges including a strict regulatory environment and Chinese consumers’ traditional preference for cash transactions, although progress has been made in overcoming these challenges.

For the full report please go to http://www.buyusainfo.net/docs/x_3288835.pdf

China: General Aviation Industry Outlook 2009

The aviation industry in China has made remarkable progress to become the 2nd largest aviation market in the world. With an already enormous presence in commercial flights, the Beijing 2008 Olympics provided the motivation for the Chinese government to further expand its aerial industry. The addition of Terminal 3 at the Beijing International Airport is one of the many examples of measures the Chinese government has implemented to address the increased demand for domestic air travel.

In its 11th (and most current) 5-year plan, the Chinese government recognized the need to expand General Aviation (GA) infrastructure by funding the construction or renovation of 42 airports by 2010. This expansion would allow for growth throughout China’s GA industry. Any associated increase in the number of GA aircraft will launch new opportunities in the fields of tourism, agriculture, public safety, and aerial survey, among others.

According to a recent American Chamber of Commerce in Beijing study, when compared to benchmark countries, China shows significant room for growth in GA sectors. To meet this demand for growth, CAAC has begun to work with global industry players to advance the role that GA plays in public services, as well as the semi-public and private sectors. These areas of operation include disaster relief, air medical service, Public Security Bureau armed response units, search and rescue, power line surveillance, offshore oil and gas exploration, media coverage, fire fighting, and corporate business. However, realizing this growth potential is contingent on the further development of a safe and efficient air traffic control system, a significant increase in airspace & airport infrastructure, and most importantly, a wider opening of the tight military control of the airspace below 2000 feet.

For the full report please go to http://www.buyusainfo.net/docs/x_8069405.pdf

Further Market Research can be found in the Commercial Service's Market Research Library

Featured Articles

China’s VAT Reform

As part of the ongoing reform process, the State Council announced late last year that beginning in January, it would reduce VAT for all industries in an effort to encourage movement from a production-based VAT regime to a consumption-based one. Under the new system, the VAT-In paid on importation or local purchase of production equipment is deductible, reducing the expected VAT burden for all industries by more than RMB120 billion in 2009.
The main changes to the amended Provisional Regulations of the People's Republic of China on Value Added are as follows:

Full VAT credit on fixed assets, but VAT-In paid on consumer goods used by taxpayers themselves (for example, cars and yachts) can't be creditable
The VAT rate for small scale taxpayers was reduced to 3 percent from 4 percent or 6 percent
Cancellation of VAT exemption policy on imported equipment for companies in "encouraged" industries
Cancellation of VAT refund policy on purchasing domestically-manufactured equipment for companies in "encouraged" industries
Cancellation of VAT exemption policy on imported equipment for contract processing, assembly or compensation trade

This is good news for most companies because the measures are expected to reduce the tax burden on companies. However, please be aware that this change could adversely affect cash flow in companies in "encouraged" industries as the aforementioned VAT exemption policies have been abolished. VAT exemptions on imported equipment are now gone and companies will need to increase fund reserves to pay for VAT in advance. They may also lack sufficient VAT-Out to absorb VAT-In credit on fixed assets if they export all or most of their products.

The VAT reform will also present an additional tax burden for R&D centers that imported equipment on a tax-free basis in the past. They will now have to pay VAT on imported equipment under the new VAT regulation and will not be able to claim any credit against their business tax liability. Companies engaged in transfer sales with local customers should note that the VAT-In paid on imported equipment cannot be refunded. In another words, it will be an additional cost under the new VAT system.

Companies may consider setting up new entities in bonded zone to alleviate the impact on cash flow as well as tax burdens arising from the cancellation of preferential VAT exemption on imported equipment as there is no VAT and customs duty on equipment imported into bonded zones. China's nationwide VAT reform is a fundamental change from its tax policies of the past. As the country moves from a production-based to a consumption-based model, new investment in machinery and technology will occur. The system should encourage companies to expand their production scale and promote technology upgrades. The central government will continue to keep a close eye on its export markets in the coming months, and is expected to steadily cut export-related taxes and raise financial support for exporters to avert another sharp drop in external demand. In March, Commerce Minister Chen Deming told Chinese state media that the government would "steadily restore zero tax rates for export products," as well as ensure high-energy and resource-consuming exports are curtailed. Successfully taking advantage of these ongoing changes to the system and having a well planned and operational tax reclamation system will help companies reduce costs and alleviate cash flow issues that may otherwise occur.

Barring the Pharmacy Doors: China’s

Three Regulatory Barriers for Foreign

Pharmaceutical Players

With the Chinese pharmaceutical market growing 15 percent a year as China expands its healthcare system for its 1.3 billion people (by 2020, all Chinese should be covered by a basic medical insurance), it would appear to offer abundant potential for foreign players. In the past 20 years, top American, European and Japanese drug makers have spent billions trying to crack the market.

But the reality is that apart from a few big‐name multinationals, most players have made only modest advances in this market. Foreign manufacturers account for only 10% to 20% of the market, depending on the type of medicine. Even the largest players, such as Roche of Switzerland and Bayer of Germany, earn only a small fraction of their global turnover in China. A remarkable number of foreign‐invested drug makers are active here, but most are just sourcing inexpensive raw materials (API, or Active Pharmaceutical Ingredients) from Chinese suppliers for finishing preparations in their own plants elsewhere in the world. Given China’s huge market potential, what’s going wrong here? Why are foreign pharmaceutical makers, especially generic drug producers, not more active in China?

There are several ways to answer this question, but the main barrier to expansion by multinationals is found in China’s regulations and policies, which prevent foreign companies from applying proven business models used in Europe and the USA. After expending much effort to overcome those regulatory hurdles over the past 20 years, some multinationals have gained a foothold. But many small and medium foreign pharmaceutical companies face confusion, uncertainty and a high degree of risk in China. Basically, there are three main regulatory barriers:
1. Drug registration.
2. Prices.
3. No separation of production and marketing licenses.
For the full article please go to:
http://www.interchinaconsulting.com/files/barring_the_pharmacy_doors.pdf

Food Safety Law to Require

Registration for Foreign Importers

Apr. 24 - Following the draft of a new food safety law, foreign food importers will need to register with the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) every four years to ensure the safety of their products. The new law is set to take effect on June 1. A draft implementation rule of the law can be found on the State Council Legislative Affairs Office website. According to the AQSIQ, for now only foreign meat products manufacturers will need to register, without requiring renewals. Currently, foreign food importers must submit documents from a minimum of five categories to get registered. This includes evaluation reports from their home countries and information on the production process. Moreover, importers of foreign food products must also procure a safety certificate from China’s Ministry of Health before the products can enter China. The stricter food law comes after the melamine scandal that led to the death of six babies and sickened 300,000 children. Beijing has revised legislature in efforts to provide safe food. Registration will be revoked for companies found selling products causing major food safety incidents and containing fake materials.

http://www.china-briefing.com/news/2009/04/24/food-safety-law-to-require-registration-for-foreign-importers.html

AmCham-China in Action

Online Advertising in China in 2009:
Maximizing Ad Budget Return on Investment in the Current Economic Environment
Date: 3:00 - 5:30 PM, Wednesday, May 6, 2009
Venue: JW Marriott, Sculpture Room at B1 floor

Reviewing Progress, Renewing Purpose:
Sichuan Earthquake Relief and Opportunities for Further Support
Date: 1:30-4:00 PM, Tuesday, May 5, 2009
Venue: Raffles Hotel

Other Events:
Upcoming Events

About AmCham-China

The American Chamber of Commerce in the People's Republic of China (AmCham-China) is a non-profit organization which represents US companies and individuals doing business in China. AmCham's membership comprises nearly 2,700 individuals from over 1,100 companies. It has more than 40 industry- and issue-specific forums and committees, offers unique services such as the Business Visa Program, holds a wide range of networking and informational events, and meets with US and Chinese officials to discuss challenges and opportunities facing US firms doing business in China.

The Chamber's mission is to help American companies succeed in China through advocacy, information, networking and business support services. Find out how your firm can benefit from a membership with AmCham-China.

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