Negative List Shortened in Shanghai FTZ

On July 1st, the Shanghai Free Trade Zone government has released an update of its Negative List, the list referencing the industries in which foreign investments are forbidden. This update reduces the number of restricted industries from 190 to 139, in an effort to increase the zone attractiveness for foreign capital. Key changes affect:

Important Reform of Foreign Exchange Administration System for Trade in Goods

On Dec 01, 2011 China rolled out a pilot reform of its foreign exchange control system for international trade in goods in pilot regions including Jiangsu, Shandong, Hubei, Zhejiang (excluding Ningbo), Fujian (excluding Xiamen), Dalian, and Qingdao. 


  • From 1 January 2012 qualified businesses in Shanghai will be required to charge VAT following approval by the local tax bureau;
  • Input VAT is creditable both for qualified pilot participants and their customers;
  • Generally, the program follows existing VAT mechanisms;
  • Two new VAT rates will be introduced, 6% and 11%, adding to the existing rates of 13% and 17%;
  • Treatment of exports is yet to be determined but likely 0% or tax exempt;
  • The first VAT return is due on 15 February 2012;

Introduction to Social Insurance for Foreign Workers


  • Social Insurance Laws for foreign workers were promulgated on July 1, 2011;
  • Regulations on payment came into force on October 15, 2011;
  • Companies are now required to register and commence payment on behalf of eligible foreign employees;
  • No measures have been released to deal with the issue of back payment to July 1, 2011, but companies are advised to set aside adequate funds.

State Council tightens fapiao rules

--Reforms clarify use of fapiao seal--

China’s State Council has issued new regulations on the management of fapiao.

Previously, companies could issue a fapiao by chopping the receipt with either their financial seal (财务专用章) or their fapiao seal (发票专用章). The new regulations stipulate that from Feb 1st only a fapiao seal (发票专用章) will be recognized as creating a valid fapiao.

PRC extends tax break for small business

--Government hopes to stimulate growth of smaller enterprises--

This week, the Chinese government announced it will continue a temporary relief measure designed to ease the tax burden of small businesses. According to the policy, small businesses are only required to pay half their normal income tax if the total annual amount due RMB 30,000 or lower.

The policy was first implemented from January 1st 2010 in an effort to create a better financing and growth environment for small businesses following the global economic crisis.

China announces new M&A review board

--New rules will attach greater scrutiny to inbound transactions--

China’s State Council has announced the formation of a new investment review board aimed at evaluating inbound merger and acquisitions (M&A).

The body is set to play a role similar to Australia's Foreign Investment Review Board, assessing deals in terms of 'national interest' with a regulatory requirement to direct the Ministry of Commerce on whether to let a transaction proceed.



On February 1st, new anti-monopoly regulations come into force that aim to bring China's competition and pricing practices closer to international standards.


8 things to know about setting up your company in China


During a recent business seminar in Beijing, an American lawyer with 25 years experience in his field offered a poignant piece of advice to foreign companies entering the Chinese market: “Remember you are in China”. 

PRC approves joint ventures for J.P. Morgan and Morgan Stanley

-- U.S. Banks win approval for first new PRC securities joint ventures in six years --

On Friday, Chinese securities regulators helped J.P. Morgan and Morgan Stanley get one step closer to operating in the highly sought-after securities market in one of the world’s fastest growing economies, approving their bids to launch ventures with Chinese partners, according to the Financial Times.

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