The reasons why and the implications of falling foul of Chinese regulations
By Eunice Ku

The State Administration of Industry and Commerce (SAIC) is the national governmental organization directly under the State Council that coordinates local Administrations of Industry and Commerce (AICs).

Among the many SAIC and AIC functions and responsibilities, those highly relevant to the foreign investor include:

Overseeing the registration and supervision of enterprises, including punishing businesses without licenses;

Managing IPR registration and protection, including investigating and punishing IPR infringement activities and handling IPR disputes;

Enforcing Anti-Trust Law, including investigating and punishing unfair competition, commercial bribery, smuggling and other illegal economic activities;
Categorizing enterprises by creditability and publicizing basic registration information;

Supervising trade in food commodities; and

Supervising advertising activities.

The “AIC blacklist” is part of an enterprise “credibility supervision information system” shared between AIC bureaus, but not made available to the public.

Specifically, the list categorizes enterprises into four categories (A, B, C, D) based on their creditability. If your name is listed in a key position of a company in categories B to D of this list, this may inhibit or prevent you from participating in a key position in new FIEs in the future.

Furthermore, while the directly relevant AIC policy does not state consequences for individuals beyond the legal representative, it is worth noting that during company establishment, the names of all people in key positions of an enterprise are registered with the AIC. Many people do not even know that their name is on the blacklist before applying to register a new FIE.

Source From: http://www.china-briefing.com/en/

 
China will resort to “market-oriented” measures to tackle its local debt issues, Chinese Premier Wen Jiabao said at a press conference last Wednesday after the closing of the Fifth Session of the Eleventh National People’s Congress. Wen’s remarks have signaled that China may allow more private investors to buy out some of the country’s state-owned assets.
 
When answering a question raised by Reuters on local government debt, Wen said the government attaches great importance to the debt issues and will not allow those issues to adversely affect China’s development. With regards to debt repayment, some of the debts borrowed for high-quality projects can be repaid by the projects’ own profits, and those used on projects for public interest will be repaid by both the central and local governments. China will also consider market-based approaches such as asset disposals, project transfers and equity sales during the debt repayment process.
 
That being said, private investors may have a chance to share a stake in the sectors that are mainly controlled by state-owned enterprises (SOEs) at present. The government seems willing to rethink the roles of state and private capital in industries, as the total amount of local debt runs high and risks in debt repayment grow.
 
Leo Zhang, chairmen of China-based Jumbo Consulting, believes the government should play a smaller part in specific industries.
 
“In industries where you can exit, you exit…Why do we need over 100 SOEs? It’s unnecessary. You should sell them all,” Zhang commented.
 
During the past wave of privatization back in the 1990s, China significantly shrunk the state’s stake in enterprises. However, the government still keeps an iron grip on sectors that it regards as “strategically important,” such as energy and finance.
 
Problems associated with strong state control – which often lacks full consideration to economic efficiency – have gradually risen to the surface. Analysts believe around 20 percent to 30 percent of the over RMB10 trillion in local debts will face a repayment challenge and most of those non-performing loans will be on the books of China’s big banks. While those banks which see weakness on their balance sheets recently started a new round of capital raising, it is again the large SOE-linked buyers who have helped pay most of the bills.
 
Some of the other government-controlled sectors – such as infrastructure development and power generation – are very attractive to both domestic and foreign private investors. As the world’s second largest economy, China’s spending on infrastructure is multiples of what is being spent anywhere else in the world, but private investors’ participation in this sector remains minimal.
 
While the Chinese government has come up with various approaches – such as extending the loans’ maturity period and raising more capital – to avoid a major bank default, faster privatization might be the ultimate measure that helps the country finally get away from a vicious lending and spending cycle.
 
David Roseman, global head of infrastructure, utilities and renewables at Australian investment bank Macquarie Group, offered an example on how more entrepreneurial activity will generate a virtuous cycle. By selling profitable infrastructure to investors, China could free up enough cash to build a toll-free road.
 
However, the goal for further privatization will not be an easy one to achieve. The complicated ownership structures may make it difficult for SOEs at different levels to agree on asset deals, and their growing financial power – a result of expansion at home and abroad – is also making them less willing to conduct restructuring.
 
Source From: http://www.china-briefing.com/en/

As their joint venture (JV) agreements in China approach their expiration dates, the Big Four global accounting firms had hoped that they would be allowed to extend the terms of their JVs. However, according to a variety of sources, Chinese authorities have been adamant in using the expiry milestone to force the four to convert into the same mode of practice as local firms.

Such new regulatory requirements could mean the four firms must transfer their JV structures into limited liability partnerships and their partners must have Chinese accounting qualifications.

It is worth mentioning that the direction Chinese regulators wish to go is in line with international practices. The Big Four in most countries are owned by local partners, operating more like a franchise than a typical multinational corporation. However, the policy change still brings the four firms serious challenges, especially when China’s accounting industry is still very young.

There is also difficulty in converting the existing non-Chinese auditors at the Big Four in accordance with China’s requirement, since the country’s accounting exams are among the toughest and are all offered in Chinese. The pass-rate of those exams is well below 20 percent, according to Reuters.

The United States has tried to negotiate with China about offering the accounting tests in English, but failed in that direction, according to a recent blog post by Paul Gillis, a member of the U.S. Public Company Accounting Oversight Board Standing Advisory Group.

Western countries are paying keen attention to the potential change for the Big Four in China, as the overhaul comes at a delicate time when Chinese companies listed overseas (especially in U.S. stock markets) are facing a rash of audit scandals and are becoming high recommendations by short-sellers. Any reduction in the audit capacity of the four firms would increase Western regulators’ and investors’ concerns over the integrity of Chinese auditing.

There are also concerns at the Big Four’s global headquarters that they may have less control over their Chinese practices, if those are dominated by Chinese-qualified partners in the future.

“If the change in the structure of audit firms loosens their ties to the United States, the challenges for the SEC enforcement program in China will increase,” said William McGovern, partner at the Hong Kong unit of law firm Kobre & Kim. The U.S. Securities and Exchange Commission (SEC) has previously met a setback when requesting audit information from the Chinese unit of Deloitte Touch Tohmatsu (Deloitte), one of the Big Four firms which did the audit work for the U.S.-listed company Longtop. According to the SEC, the information asked was necessary for its investigation into Longtop’s possible fraud; however Deloitte said it could not comply with the SEC subpoena as this could breach China’s state secrecy rules.

As time starts ticking for the Big Four, the firms are now busy negotiating with Beijing, hoping the authorities will make some compromises and allow them to retain the roles of their foreign partners for a few more years during the transition period.

The authorities can consider granting a Chinese Certified Public Accountant license to some of the Big Four’s partners from Hong Kong and Taiwan, based on recognizing their foreign credentials. Such a solution will not only allow those foreign partners to finish out their careers, but also enable local partners to gain further experience and become more prepared for the future leadership of the firms, writes Gills in his blog.

Three of the “Big Four” firms – Deloitte, KPMG and Ernst & Young – will see their 20-year JV arrangements expire later this year. PricewaterhouseCoopers’s JV agreement will come to an end in 2017, as it formed a new JV at the time of the Price Waterhouse/Coopers & Lybrand merger.

Source From: http://www.china-briefing.com/en/

<em>An overview of social welfare obligations and costs for employers of Chinese staff</em>

By Adam Livermore

This week, China Briefing is running a special human resources theme concerning the employment of staff in China. We will be featuring topics such as regional industry clusters, minimum wage levels compared on a national basis, employee termination procedures and costs, in addition to looking at how to arrange employment for Chinese nationals overseas.

Today we look at the various issues that employers must consider when hiring permanent staff in China, and outline the full social security package that must be made to Chinese employees.

<strong>New Social Insurance Law</strong>
On July 1, 2011, China implemented its new Social Insurance Law (“new law”) with three main objectives in mind:
<ol>
<li>Take more direct control over the funds contributed to the system;</li>
<li>Tighten administration so that companies are compelled to make contributions in full; and</li>
<li>Improve the overall social security safety net for Chinese residents.</li>
</ol>
Of these objectives, the third can be considered the ultimate goal and the first and second a means by which to meet this goal. The Chinese government is acutely aware that in the long term it cannot rely on foreign investment, a cheap labor force and heavy fiscal spending to continue to drive the economy. What is lacking is an appropriate amount of domestic spending by Chinese households.

One major reason that Chinese people are reluctant to spend is the lack of an effective safety net in the event something undesirable happens to them or to a family member, as well as a general distrust that funds contributed for mandatory pension will still be available when they reach retirement age. Instead they save, and a side-effect of this phenomenon is that, in the absence of alternative avenues to invest the money that is being hoarded by Chinese households, too much of the money is flowing into unsustainable real estate investment, creating a potentially dangerous bubble.

By overhauling the social security system, the government is making an effort to address the problems mentioned above as well as related issues affecting Chinese society in recent years. However, as always in China, the difficulty is in the implementation.

<strong>The Five “Insurances” Plus the Housing Fund</strong>

The five “insurances” covered by the mandatory welfare system refer to: pension, medical, work-related injury, unemployment and maternity insurances, which have been part of the existing social security framework in China for a number of years now. In addition, housing fund contributions are generally included within the scope of mandatory welfare because the additional costs are mandatory and come from both the employer and the employee.

Below, we look at the costs and benefits of the Chinese insurance system one by one. However, before commencing the analysis in detail we should point out an important concept that will largely influence the potential costs to both employer and employee.

The concept we refer to is the ceiling on the amount used when calculating social insurance contributions. At the time of writing this document, most cities in China implement a ceiling (or cap) on contributions. The calculation for the ceiling figure is usually the average monthly social salary over the previous year for that city multiplied by 300 percent. Therefore, the actual percentage contribution for employers and employees is lower than the percentages indicated below when the individual is a particularly high earner. As a general rule of thumb, the further the salary increases above RMB12,000, the lower the effective percentage that needs to be contributed.

<em>1. Pension</em>

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Interestingly, the new law makes a clear distinction between employers (who must make contributions based on the total wages paid to all their employees),and individuals (who make contributions based on their gross salary). There is speculation that the legislation has been drafted in a way to allow the removal of the employer’s contribution cap in the future. However, at the time of writing the effective contribution bases for both employer and employee remain identical

The new law also clarifies that employees who move from one jurisdiction to another will be able to transfer their pension funds, and that when they retire they will be able to receive a pension based on the entire amount of their accumulated funds. However, the specific method for calculation when “merging” these funds will be detailed in a separate piece of legislation that has not been finalized yet.

This aspect of the new Social Insurance Law addresses one of the most serious problems under the current system. The lack of transparency for individuals relating to treatment of their pension often dissuades them from transferring to jobs outside of the city they are living in. This in turn reduces the overall mobility of labor, which is a major problem in a society that lacks sufficient skilled workers across the country.

<em>Implementation challenge for consolidation of pension funds nationwide</em>
Merging pension pools under a central administration is going to be an arduous task. The groundwork has been done by the central government in passing and implementing this law, but cooperation and agreement between the innumerable local governments concerning the practicalities of these transfers will be time-consuming. It is unlikely that China will be able to realize the ambition of the central government to ensure a smooth transition of pension funds between jurisdictions for several more years.

The new law also refers to introducing a pension system for rural workers, even opening up the possibility of merging the system with the urban pension system in the future. This provision is aimed at reducing the effect of the <em>hukou</em> system, which limits the options available to the rural Chinese population and is a source of much dissatisfaction in China in recent years. Again, realization of an effective integrated system still seems a long way off, and the law provides only the direction without specifying tangible methods of reaching this ideal situation.

<em>2. Medical Insurance</em>

<a href=”http://www.beingfunchina.com/media/uploads/2012/03/1231.jpg”><img title=”123″ src=”http://www.beingfunchina.com/media/uploads/2012/03/1231.jpg” alt=”" width=”540″ height=”320″ /></a>

Similar to improvements mentioned in the pension system above, the government is intending to enhance the overall operation of the Chinese healthcare system. One particular point of note is that the medical insurance fund will be responsible for directly refunding medical expenses to the hospital that carries out the treatment, avoiding the situation that happens frequently where the patient has to first pay treatment fees in advance and later receive compensation from the fund.

The current system has a particular weakness in that when an employee travels and becomes sick or injured in an area remote from his/her administrative jurisdiction, there are considerable complications when paying for the treatment and getting reimbursed by the insurance fund. Article 29 specifically proposes to resolve this solution through creating administrative units to process such payments directly from medical funds to medical institutions. Once again, this may take a long time to realize in practice.

<em>3. Work-Related Injury Insurance</em>

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The law mainly concerns itself with the circumstances under which compensation will be provided, and clarifies which payments will come from the work-injury funds and which payments from other funds, such as pension.

The most important point relates to the government’s commitment to ensure provision of treatment for work-related illness or injury even in the absence of contributions made by employers. The law states clearly that it is the employers that must make the contributions, but in the absence of such contributions the employee can still claim the relevant treatment expense, the administrative agency is then obligated to chase up the employer for the cost of the treatment (as well as, presumably, outstanding work injury insurance contributions).

<em>4. Unemployment Insurance</em>

<a href=”http://www.beingfunchina.com/media/uploads/2012/03/1233.jpg”><img title=”123″ src=”http://www.beingfunchina.com/media/uploads/2012/03/1233.jpg” alt=”" width=”533″ height=”337″ /></a>

Most of the law is simply a generalization of previous laws and circulars. Key points include the length of time that unemployed people may claim benefit (depending on the amount of time they worked) and the amount they may receive (to be designated locally, but not related to the salary they used to receive / the premiums they paid while employed).

One point that has been included to resolve a particular problem is an obligation on the employer to provide the “termination of employment” evidence to the employee within 15 days of his/her release from the company. This is to resolve a particular problem whereby the employer refuses to release such a document for some reason, putting the terminated employee under unreasonable pressure because without this document they cannot start claiming unemployment benefit.

<em>5. Maternity Insurance</em>

<a href=”http://www.beingfunchina.com/media/uploads/2012/03/1234.jpg”><img title=”123″ src=”http://www.beingfunchina.com/media/uploads/2012/03/1234.jpg” alt=”" width=”533″ height=”422″ /></a>

There has been an important change to the rules here. Article 56 of the new law states that monthly payments from the insurance fund to women during their maternity leave will be made based on the average salary paid by the company to its employees. This is in contrast to the previous practice, where the woman on maternity leave received an amount equal to her salary (as defined by the social insurance contributions made by the company prior to her maternity).

This change will also have a couple of interesting side effects. The first will be that employees will become aware of the average salary paid in the company. This will cause issues of confidentiality (especially for small organizations) and also possibly encourage certain employees to seek salary increases to what they consider to be “fair” levels – no valued employee wants to know that they are earning way below the company’s average salary!

Secondly, this policy could encourage a trend of “maternity arbitrage,” where employees who expect to become pregnant in the near future consciously look for work at a company paying a high average salary. This situation is likely to be more prevalent in cities such as Dalian, which provides a total of five months of maternity leave to employees, as the financial benefit to an individual of taking maternity leave would be higher. We can take the case of an individual leaving a company paying an average salary of RMB3,000 and joining a company paying an average salary of RMB9,000. The switch would potentially benefit such an employee by RMB30,000.

More recently, Beijing’s Human Resources and Social Security Bureau released the “Circular on Adjusting the Municipal Maternity Insurance Policy for Employees (<em>jingrensheyifa</em> [2011] No.334)” on December 20, 2011, clarifying a few loose ends. Under the new calculation system, female employees working in the city will receive compensation according to the combined average monthly salary of all company employees during the previous calendar year. Furthermore, if a female employee’s actual monthly salary level is higher than the company’s combined average monthly salary, the company shall make up the difference in the two amounts; eliminating concerns over the possibility that senior-level employees may end up receiving less benefits during their maternity leave. Whether this policy is rolled out on a national basis remains to be seen.

<em>6. Housing Fund</em>

China’s housing fund, although in the strictest sense not a kind of social welfare, is generally included within the scope of social security because the contributions are mandatory and come from both the employer and the employee (apart from in some special areas like Shenzhen, where the employee does not need to make a contribution).

As its name suggests, the housing fund is designed to ensure that workers save some money in order to purchase a house or an apartment. The employer will usually have to contribute between 7 percent and 13 percent of the employee’s salary. In many cities, the employee matches this contribution with an equal contribution of their own, although certain cities have different policies.

It is possible in many cities to make housing fund contributions in excess of 300 percent of the local social average salary for an employee. The limit is generally 500 percent, although some cities do not set a limit at all. The portion over 300 percent will be deemed as taxable income of the employee. The key point for employers to note is that if you hire employees earning a salary of higher than 300 percent of the local social average salary, you should make sure to clarify in the offer letter that both employee and employer contributions will be limited by this cap. This can avoid potential problems in the future if the employee claims that higher contributions should be made.

When the employee wishes to purchase a house, the money in the housing fund can be used to pay the initial down-payment on the house, and it can also be used to subsequently pay back the loan to the bank. Furthermore, by producing evidence that funds have been accumulated in an individual’s housing fund, the bank may provide a lower rate of interest on the loan. Upon retirement, any remaining balance in the housing fund account can be withdrawn and used for any purpose by the individual.

<strong>Final Thoughts</strong>
The above summary covers the main scope of the first 56 articles of the new Social Insurance Law. The remaining 42 clauses relate mainly to methods of strengthening collection and the responsibilities and liabilities of the various government organs that collect and handle these funds. These clauses reflect the importance the government attaches to transparency. They realize that there is general public distrust relating to the current usage of funds, and have addressed some of the issues in this law.

For instance, Article 80 is quite interesting. It proposes that committees be setup consisting of employers, social insurance participants and trade unions, legal experts and economic experts to oversee the management of these funds as supervisory bodies. That sounds very promising in theory. How these committees are formed in practice will determine how much transparency is injected into the system.

Despite all the legal provisions aimed at enhancing transparency and creating a more healthy system, the law can be accused of lacking teeth. For instance, Article 87 and Article 88 impose punishments for organizations or individuals that make fraudulent claims or forge documents. However the fines imposed on such organizations or individuals are restricted to 200 percent to 500 percent of the amount of the claim made, hardly a punitive punishment. There may be organizations and/or individuals that come to the conclusion that the punishment does not adequately fit the crime, and will continue to abuse the system.

Source From:<a href=”http://www.china-briefing.com/en/” target=”_blank”> http://www.china-briefing.com/en/</a><a href=”http://www.beingfunchina.com/media/uploads/2012/03/1235.jpg”><img title=”123″ src=”http://www.beingfunchina.com/media/uploads/2012/03/1235.jpg” alt=”" width=”466″ height=”297″ /></a>

By Vivian Ni

Twitter, the U.S.-based micro-blogging service provider, has recently found itself at the receiving end of criticism due to its new policy that will allow content censorship on a country-by-country basis. The policy adjustment may have revealed Twitter’s interest in returning to the cash-flowing Chinese market, where the government implements strict internet censorship regulations and blocks an array of Western social media web sites.

In a blog post last Thursday, Twitter said that it had refined its technology and gained “the ability to reactively withhold content from users in a specific country – while keeping it available in the rest of the world.” Previously, when the company took down a post at the request of a country’s government, the “tweet” invariably disappeared across the worldwide web.

Advocates for freedom of speech have found Twitter’s new policy hard to accept. Reporters without Borders, a France-based international non-governmental organization that support freedom of the press and information, expressed concern over Twitter’s new move in a letter it wrote to the U.S. company’s executive chairman Jack Dorsey.

“By finally choosing to align itself with the censors, Twitter is depriving cyber dissidents in repressive countries of a crucial tool for information and organization…Twitter’s position that freedom of expression is interpreted differently from country to country is inacceptable. This fundamental principle is enshrined in the Universal Declaration of Human Rights,” the group wrote.

However, from a business point of view, Twitter’s new move makes complete sense. The company is in pursuit of an ambitious expansion goal to increase its global users from the current 170 million to more than 1 billion, and may be willing to abide by individual country’s specific laws in order to reach that target.

Among potential countries, the Chinese market – with a micro-blogger population of 140 million already on its dominant domestic micro-blogging platform Sina Weibo – is too huge for Twitter (or any other social media web site) to miss. Even Twitter’s co-founder Biz Stone admitted the fact that the company will not be able to ignore China forever.

“Our philosophy is that open exchange of information can have a positive global impact, and that’s not China’s philosophy…we’re not going to be able to ignore it forever,” said Stone at the CTIA wireless convention held last year, adding that the company was still working on a way to deal with the censorship issues.

Twitter has been banned in China since July 2009, when government attempts to censor the information on the July 2009 Ürümqi riots were largely hampered by Twitter’s powerful message dissemination platform. Together with Twitter, U.S. social media web site Facebook was also blocked in China during the same time.

But indeed, it has been proved many times that China does not really intend to refuse the business opportunities brought on by the emerging social media technology. The country welcomes all the commercial advancement on one condition: companies must follow China’s own rules and keep off the political bottom line. On August 28, 2009, shortly after the blocking of Twitter, China’s largest information portal Sina launched its own micro-blogging service Sina Weibo, and within only 66 days, the number of Weibo subscribers surged to 1 million.

In a two-year period, micro-blogging services have become one of the most important markets that big-name Chinese internet companies are competing to share. Following Sina’s success, Tencent, Baidu, Sohu and Netease have all developed their own micro-blogging platforms, attracting a combined 250 million subscribers by the end of 2011. Homegrown players are able to enjoy this huge market because they can (and do) filter content according to government requirements.

Following the maturity of micro-blogging services in China, Sina expects US$75 million in income from Weibo in 2012 – US$50 million of which will be income from advertisements.

If Twitter does return to China someday, the commercial income from the market will be a welcome addition to Twitter’s global revenue – which the U.S. company aims to increase from US$139.5 million in 2011 to US$540 million in 2014.

The availability of Twitter will also likely help both domestic and foreign companies in China gain more exposure to international clients. Nowadays in China, more and more companies practice their online marketing by incorporating social media directly onto their business sites, but such efforts are partly in vain due to a lack of access to such social media platforms in the country.

Even if we look beyond business interests, Twitter’s new policy may not be that harmful to freedom of speech and may actually find a way to improve free information in countries like China.

The new Twitter policy means the removal of “tweets” will only happen in one part of the world, and such deletions will be clearly announced on the web site Chilling Effects, which will end up drawing attention to cases where it’s been obliged by local law to remove content, said Zeynep Tufekci, an assistant professor at the University of North Carolina at Chapel Hill.

An example echoing Tufekci’s point can be found on Sina Weibo, which established an account called “Weibo Rumor Buster (Weibo Piyao)” to announce the removal of posts proved untrue. Such announcements have in fact raised public awareness of “forged news,” which are often related to collisions between authorities and ordinary people.

Of course, it is still too early to assert any of Twitter’s strategy towards China, as Twitter will still struggle to comply with China’s strict internet regulations even if it implements its new policy. For example, Twitter will only be able to erase a tweet if it is requested by the government based on valid legal grounds; in contrast, its Chinese peers can delete posts on a broader range of topics without legal review. Additionally, the recently-practiced real-name registration represents another potential roadblock to Twitter’s entry to China.

“We would love for people in China to express themselves…(but) under the current situation, that’s not possible,” said Twitter’s Chief Executive Officer Dick Costolo, who on Monday denied that the new policy was designed for the Chinese market.

In a recent blog post, Reuters journalist Doug Young speculated on the future progress of the event: “…I suspect this move by Twitter may be designed to test the China waters and will be followed by a visit to Beijing to see what regulators think. If the reaction is positive, I wouldn’t be surprised to see Twitter taking some kind of modest initiative in China by the end of this year, though it will face a difficult road catching up to (Sina) Weibo.”

Source From: http://www.china-briefing.com/en/

Hangzhou, the capital city of Zhejiang Province, has recently announced a new regulation on maternity insurance, a move that may bring employers in the city higher expenses on social security coverage.

 
The new “Measures on Hangzhou Municipality Maternity Insurance Scheme (Hangzhengban [2011] No.22),” issued by Hangzhou’s local government on November 15, 2011, stipulates that the employer contribution rate to maternity insurance within Hangzhou City shall stand at 1.2 percent (compared to the existing 0.8 percent), whilst the contribution rate in suburban and rural Hangzhou shall be determined by the local governments of the districts/county-level municipalities.

 
The wage base for maternity insurance remains unchanged. An enterprise shall take the total monthly salary of all of its employees as the base for maternity insurance payment. However, where the monthly salary of an enterprise’s employee is below 60 percent or above 300 percent of the average monthly wage in Zhejiang Province last year, his/her wage base for maternity insurance shall be calculated at 60 percent (for a low salary employee) or 300 percent (for a high salary employee) of Zhejiang’s average monthly wage of the previous year.

 
According to the new document, an employee covered by maternity insurance can enjoy:

 
an allowance for giving birth (total amount = average monthly wage of all employees of the entity last year × maternity leave duration [month]) (varies depending on the pregnancy term, surgeries required such as cesarean section, as well as whether multiple births are involved)

 
an allowance for surgeries related to birth control and pregnancy termination (to comply with China’s one-child policy) (total amount = average monthly wage of all employees of the entity last year × sick leave duration [month]) (varies depending on the method of birth control, method of pregnancy termination, and pregnancy term prior to termination)

 
coverage of medical care expenses on giving birth

 
coverage of medical care expenses related to compliance with one-child policy

 
The Measures took effect on July 1, 2011, but according to Hangzhou’s Labor and Social Security Bureau, local authorities are still waiting for details on how to implement such increase.

Source From: http://www.china-briefing.com/en/

In a recent statement, China’s State Administration of Taxation (SAT) has vowed to offer more tax incentives to the country’s cultural industries, especially those emerging cultural industries essential to China’s advancement in technological innovation.

Favorable policies will mainly go to high-tech as well as emerging cultural industries, and nonprofit cultural organizations.

High-tech industries
The SAT says it is working on a more reasonable taxation system for the country’s high-tech industries, in a move to realize further technological progress, boost innovation, and push forward technology transfer.

So far, China has granted a series of tax incentives to high-tech industries. These incentives include:

Reduced corporate income tax (CIT) rate: The CIT rate for high-tech enterprises – if they meet the criteria specified in the SAT’s “High-tech Enterprise Recognition Standards (guokefahuo [2008] No.172 ) ” – is reduced to 15 percent.

Favorable CIT treatment for research and development (R&D) expenses:
1) Where a company’s R&D expenses (the expenses on technology, techniques and products R&D) have been counted into the profit/loss during a certain period, but have not formed intangible assets, 50 percent of the actual R&D expenses during the period may still be deducted from the company’s taxable income.
2) Where a company’s R&D expenses have formed intangible assets, 150 percent of the intangible asset cost shall be amortized before taxation.

Business tax (BT) exemption on technology transfer and development: The revenue from the technology transfers and development (including related technology consultation and other services) conducted by an individual (including a foreign individual) and an enterprise (including a foreign-invested enterprise and a foreign-invested R&D center) is exempt from BT.

Emerging cultural industries
The SAT will offer more preferential tax policies to emerging cultural industries that belong to the seven strategic industrial sectors China has identified earlier. The seven strategic sectors include high-end equipment manufacturing, alternative energy, biotechnology, new generation information technology, alternative fuel cars and energy-saving and environmentally friendly technologies.

A few specific emerging cultural industries have already received some tax incentives:

Animation development and production: The products imported for an enterprise’s animation development and production are exempt from import tariffs and import value-added tax (VAT), if the animation enterprise meets certain criteria.

Digital cable TV reception maintenance: The basic digital cable TV reception maintenance fees charged by certain enterprises (specified by the SAT and Ministry of Finance) are currently exempt from business tax in 11 specified provinces/municipalities/cities.

Cultural and creative services: In the comingVAT reform that is to commence in Shanghai next year, cultural and creative services have been included in the first batch of modern services that will be subject to VAT. The VAT rate will be charged at 6 percent.

Non-profit cultural organizations
The SAT will also aim at reducing the tax burdens of non-profit cultural organizations, so that those organizations can bring more benefits to the whole society’s cultural development.

China currently has a range of favorable tax policies for non-profit organizations (NPOs), for example:

Certain incomes are exempt from CIT

Revenue from certain services is exempt from BT

Materials received free-of-charge from foreign governments and international organizations are exempt from customs duties

Properties for certain NPOs’ self-use are exempt from property tax

Certain vehicles/vessels for certain NPOs’ self or public use are exempt from vehicle and vessel tax

Lands for certain NPOs’ self-use are exempt from land use tax

Source From: http://www.china-briefing.com/en/

By Vivian Ni

Apple has recently hit a roadblock in its key growth market China, as a local Chinese court rejected the company’s ownership claim of its iPad trademark. The giant California-based technology company may therefore be forced to either change the name of its tablet computer products in China, or pay a large sum as compensation to its Chinese rival.

Apple’s loss in the legal case – where the U.S. company sued the Hong Kong-listed Proview Technology (Shenzhen) for trademark infringement – has been the latest development in a series of back-and-forth lawsuits between the two parties since 2006.

According to a report by the Financial Times, the Taiwanese-owned flat screen contract manufacturer Proview registered the trademark named IPAD in the European Union, China, Mexico, South Korea, Singapore, Indonesia, Thailand and Vietnam between 2000 and 2004, long before Apple launched its popular tablet computer.

In 2006, Proview Electronics (Taiwan) sold off its “global trademark” for the IPAD name for US$55,104 to a U.S. registered company called IP Application Development, which later turned out to be an agent secretly working for Apple.

However, after the 2006 deal was struck, the two signing parties disagreed on whether or not the package included China. Apple failed to obtain the ownership of the iPad trademark before it started selling the iPad on the Chinese market early last year, as the Chinese trademark office rejected its application based on the fact that the trademark in China is owned by Proview Technology (Shenzhen) – a separate Proview International affiliate with a Hong Kong holding, rather than the Taiwan one.

Apple then filed a lawsuit against Proview Technology (Shenzhen) at the Shenzhen Intermediate People’s Court, but its request on regaining the rightful ownership of the iPad trademark was again rejected, with the court ruling that it was Apple’s responsibility to do its due diligence.

Unfortunately, the legal disputes do not seem to simply stop here. Proview says it may also take a legal action in return, seeking a compensation of US$1.5 billion from Apple for trademark right infringement.

The astronomical sum of compensation is a significant climb in the monetary amount that Proview Technology (Shenzhen) originally demanded. Apple turned down their original offer of US$10 million for the trademark transfer and chose to resort to legal means as a result.

In the mean time, Proview Technology (Shenzhen) has also sued Apple resellers in the southern Chinese cities of Shenzhen and Huizhou, a move that may potentially block iPad sales in the two cities. In addition, the Chinese company says it will consider going after Apple resellers elsewhere in China, if its initial legal move succeeds in getting iPad sales stopped.

The situation may seem ironic for Apple if Proview gets its way. While the U.S. company itself is normally the one that is busy fighting against counterfeits – which range from Apple products to Apple stores – it now has to worry about an interruption in its robust iPad sales in China due to accusations of intellectual property right infringement.

It still remains a puzzle as to why Apple’s lawyers somehow failed to notice that the trademark rights in China were not actually held by Proview’s Taiwan unit, but according to Xiao Caiyuan, the lawyer representing Proview, the Apple side “tried to claim in court this was because they could not read Chinese.”

Xiao also acknowledged there had been negligence on both sides, since Proview in Taiwan should have realized that it did not have the right to sell the trademark.

In a recent commentary on his China Hearsay blog, Beijing-based IP/IT lawyer Stan Abrams warned the Apple-Proview case may reveal a downside, as the names of Apple’s “i”-series products – although appearing to be a great branding idea – are relatively easy to predict by competitors. With Proview’s success, other companies may follow suit and will have good chances of hitting paydirt.

Abrams also predicted that Apple may just end up paying the compensation for the ownership of the trademark in China, as there seem to be “no other options.”

The right to use the iPad name in China is crucial for Apple as the company is in a successful process of developing the Chinese market. Apple’s four official stores and over 1,000 resellers in the country reported soaring sales in the past three quarters, while executives say they have just scratched the surface in China in terms of sales.

Source From: http://www.china-briefing.com/en/

Faced with the threat of a significant power shortage this coming winter, China has announced an increase in its electricity prices for the first time in six months. The move – which aims at boosting power generation during peak season – will likely reduce the losses power plants have been suffering, but at the same time will add more cost pressure to industrial electricity users.

Since December 1, wholesale rates charged by thermal power plants, or the on-grid tariff, have risen by RMB0.026 per kilowatt hour, and surcharges on power users – which are collected to subsidize the country’s renewable energy projects – have doubled to RMB0.008 per kilowatt hour from the original RMB0.004 per kilowatt hour, according to the National Development and Reform Commission (NDRC). The rate hikes therefore have led to an average increase of RMB0.03 per kilowatt hour in retail power prices for non-residential users.

Residential power users will also be affected during this wave of electricity price lifts, but only mildly. According to a recent NDRC “Guidance (fagaijiage [2011] No.2617),” a progressive power pricing system will be implemented, where electricity charges for 80 percent of households will remain stable, but the top 20 percent of power consumers will likely face a price hike ranging between RMB0.05 and RMB0.30 per kilowatt hour.

While boosting power prices, the NDRC is also taking measures to restrict coal prices after seeing the benchmark coal cost reach a three-year high in November. In an announcement released on November 30 (fagaidian [2011] No.299), the NDRC said it will limit the price gains on contract thermal coal to 5 percent next year, from this year’s price set at RMB570. It will also control FOB prices under the level of RMB800 per ton at the country’s coal benchmarks with a heating value of 5,500 kcal/kg.

The NDRC hopes these policies combined will create greater profit margins at China’s power plants and motivate them to boost generation, which is essential for filling an estimated supply-demand gap of 40 gigawatts this coming winter and spring. Lin Boqiang, professor at China Energy Economics Research Center of Xiamen University, has estimated that every RMB0.01 per kilowatt hour increase in on-grid tariffs will bring power enterprises additional revenues of RMB42 billion.

The surge in coal prices has become one of the most important reasons behind the power price adjustment this time around, according to a report by China’s major information portal Tencent. As mounting coal costs continue to eat away at the profits of power plants, many local power stations have intentionally curbed their generation to prevent larger losses.

However, experts point out the new policy may only lead to a short-term fall in coal prices. In the medium and longer-term, the policy will drive coal prices up, according to Henry Liu, head of commodities research at Mirae Assets.

“The price hike will be good for both coal demand and prices. From past experiences, government interventions on spot prices are ineffective and are often a lip service too because it is not possible to enforce,” Liu said. “[Longer term spot coal prices] will be due to the hand of the market rather than by government tinkering…but in the medium term, prices could rise fairly strong on the back of increased demand.”

The temporary effect of NDRC’s price measures has also been questioned by Lang Xianping, professor at the Chinese University of Hong Kong, who recently indicated the excess earnings of China’s power grid companies is the real culprit behind the narrow profit margins of power plants.

“Not only do I firmly believe electricity rates should not go up, I think there is a space for prices to go down if grid companies earn less profit.” Lang said in his micro-blog.

Related statistics reveal that, while power plants had to leave some generation capacity unused last year to prevent further losses, the highly-monopolized power grid sector still continued harvesting huge profits. State Grid, China’s largest grid company, reported a stunning 1,828 percent increase in profits during the first 11 months of 2010, and its revenue was estimated to have taken up 65 percent of the whole power sector’s proceeds.

Source From: http://www.china-briefing.com/en/

“Well, isn’t Bohemia a place where everyone is as good as everyone else?” (Djuna Barnes)

Imagine a world where you could be yourself without worrying about what others might think, imagine a world where everyone is as good as everyone else, imagine a world where there is no hate. This may be a little difficult to do at first, and you’ve probably already come to the conclusion that a place like this doesn’t exist. But, maybe, just maybe, it does…

When most people think of the term Bohemia or Bohemian they are met with visions of bright vivid colours, hallucinogenic drugs, hippies, flower power, acceptance and art. It’s portrayed as a world of irresponsibility, a world with no structure or rules. However, within this verse everybody is equal and everybody shares the same dreams. The dreams of finding, being and accepting yourself and those around you.

Making this a reality doesn’t mean getting high and wearing a flower in your hair, contrary to popular belief. (Sorry to be a buzz kill) It also doesn’t mean rejecting convention and joining a commune. It simply means to be and let be.

Most people channel their inner bohemian through art, music and of course fashion. But what about those individuals who do more than this? This issue is about celebrating those people. The people who put it out there for all to see. So, forget hippies, flowers, drugs and everything else you thought you knew about this mystical world, because behind its allusions there lies so much more…

La vie bohème!

Want to see more and experience more? please visit:http://www.beingfunchina.com/magazine/the-getgo-vol-13/now!