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China’s New Regulation to Improve the Business Environment

Posted by: Fabia Meinhold
Category: Business in Asia, Tax and Regulations
New Regulation to Improve the Business Environment in China

On October 23, China’s State Council passed a new national regulation to give companies and investors more institutional guaranties and a more transparent, stable and fair business environment. Effective from January 1, 2020, this regulation should result in more foreign investments, boost consumption and support growth in China.

Have a look at our previous article: The Startup Business Environment in China

In this article, you will discover the new measures implemented by the government and how they affect the business environment in China. Keep reading!

Streamlining administrative procedures

Some of the new measures aim to facilitate the handling of some administrative procedures that businesses have to go through. The main changes are listed below:

  • Simplification of business setup and liquidation through online procedures (the time required for business setup procedures will be made public)
  • Electronic customs clearance and tax declaration
  • One stop for real-estate registration, transaction, and tax payments
  • Decoupling of business licenses from operation permits

Protection and fair treatment of all market players

In order to offer foreign-invested companies and investors a transparent and stable business environment, China is seeking to implement basic institutional norms such as:

  • The protection of all market players and of their property rights: the government aims at achieving equal treatment of foreign and Chinese companies and easing the market access for all businesses. According to the regulation, the managerial autonomy, property rights and other important rights of market players will be better protected. On October 16, the Chinese government also decided to ensure equal treatment and market access to both, domestic and foreign-invested producers of new-energy vehicles.
  • Better and more transparent oversight and government services: arbitrary behaviors from governmental bodies and agents will be dealt with seriously.

Furthermore, a provincial inspection will be launched in Beijing to ensure a law-based business environment. Visits of private enterprises will be conducted, and the opinions of the people will be taken into consideration.

Additional Measures

On October 16, the government also announced measures to reduce the tax burden on some industries and to open up more sectors in order to ease foreign investments.

  • New tax and fee cuts will be introduced for major industries such as the manufacturing and construction industry. According to China Daily, “it is estimated that total tax and fee reductions will exceed 2 trillion yuan by the end of this year”.
  • In order to further open up the finance sector, the State Council also amended some provisions related to foreign-funded banks and insurance companies. A number of restrictive measures for financial entities (such as foreign fund management companies, foreign banks and foreign securities firms) are being removed.

Key Takeaways

In an attempt to attract foreign-invested businesses and foreign investments to China, the government is introducing new measures that are meant to improve the business environment in the country. The targeted areas are mainly the administration, government services and oversight, as well as taxes and regulations for specific industries.

With easier administrative procedures, new institutional norms, tax cuts and less restrictions on the finance sector, China aims at introducing an institutionalized framework of rules for all businesses and investors. This will pave the way for further reforms and make the Chinese business environment more competitive.

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Author: Fabia Meinhold

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