China’s Support for Foreign Investors, Trading Companies as Coronavirus Impacts Supply Chains

By Dorcas Wong, Dezan Shira & Associates 

Last week, China’s central government announced a slew of new measures supporting the operational capacity of trading companies, as well as investment projects, during this critical time of coronavirus control and prevention. These circulars have so far been released on a rolling basis, responding to the challenges and needs as they have arisen.

These have included circulars dealing with the timely supply of consumer medical necessities, prioritizing the import-export of technology (reducing import tariffs consistent with the Phase One US trade deal) and opening up more financial channels of assistance for foreign trading businesses.

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However, a growing number of businesses, such as Nintendo and Hyundai have now suspended their production and shipping operations, due to halts in business operation and curbs on transportation, which have weighed heavily on the retail, manufacturing, and trading sectors.

In response to these challenges, China is now offering more support to businesses and bolstering its online administrative channels to establish a more coordinated link throughout its industry chains.

The focus is first on the supply of essential products, and then on the resumption of work for existing enterprises to resume full production. In this article, we provide a more holistic look at some of the measures the government has put forward, just last week, to assist businesses and reduce the loss suffered by them where possible.

Financial incentives for the import-export of essential supplies to China

To ensure the timely and sufficient supply of essential necessities, registration fees will be exempted for specific drugs and medical devices, and manufacturers of essential supplies and products will benefit from a one-time tax deduction for equipment purchases.

In addition, revenues from shipping key epidemic control supplies and providing public transportation, consumer services, and express delivery will be exempted from value-added tax. Civil aviation companies will also be exempted from paying the fee for aviation development funds. For more information see the announcement made by the Ministry of Commerce here.

Application of China import-export licenses streamlined

Local government departments are to actively guide and encourage enterprises to apply for import and export licenses online and further simplify the materials required for paperless applications for import and export licenses.

Relevant units must work to further optimize the electronic key application and update process to ensure that the applications for permits are handled in a timely manner. For more information see the announcement made by the Ministry of Commerce here.

Online channels for technological import-export strengthened

The import and export of technology by local companies is to be prioritized and receive special assistance from local departments to overcome short-term difficulties and enable them to resume their production and business activities as soon as possible.

Specifically, this notice promotes the utilization of paperless contract registration and opens up online registration to ensure trade flows are normalized as much as possible. This will apply to documents, such as registration applications, contracts, and legal status certifications.

Online functions are to be popularized and improved, and front-line staff to be educated for improved handling of online registration management. A more thorough overview of the paperless contract system will be performed on a national basis.

Authorities are also encouraged to activate a rapid response mechanism in the import and export of technologies that are needed to fight the novel coronavirus. For more information, see the announcement made by the Ministry of Commerce here.

Chambers of commerce called to assist foreign trading companies

The Ministry of Commerce has called upon six chambers of commerce to assist businesses with maintaining their legitimate rights, interest, and reducing their economic loss.

Related services will also be provided, such as “force majeure” certificates, (read more on handling force majeure in China here) legal consultation, exhibition coordination, supply and demand docking.

The relevant names and contact details of six chambers of commerce have been provided for the following industries:

• Textiles;
• Light industry;
• Minerals and chemicals;
• Food, native animals, and livestock;
• Mechanical and electrical products; and
• Medicines and health products.

For more information see the announcement made by the Ministry of Commerce here.

China investment channels optimized

The National Development and Reform Commission has also sought to strengthen the remote approval of investment projects during the coronavirus outbreak. According to the circular, if an investment project is only required to be registered, the registration should be made online at the national platform of project approval and supervision.

If a project requires examination and approval, the provincial development and reform commission should instruct project applicants to submit electronic documents so that the approval process can be carried out through the online platform.

For the registration and approval documents, the project applicants shall print the forms, or the approval departments shall mail them to applicants.

For more information see the announcement made by the National Development and Reform Commission here.

As businesses resume operations, more notices can be expected. We will keep readers and clients updated as these are announced. To obtain a complimentary subscription to our China Briefing updates, please click here.

China’s economy prepares to get back to work

Last week, 24 provinces and municipalities in China extended their lunar new year holiday and requested businesses to delay the resumption of operations until today, Monday, February 10. Some regions and provinces have requested an even longer break. Our China national map of regions and work resumption dates is here.

According to China’s CNBC calculation of data, these regions accounted for 80 percent of national GDP, and 90 percent of exports in 2019. However, according to estimates from investment consultancies like Morgan Stanley, the extended holiday could affect industrial production by as much as 5 to 8 percentage points during 2020.

To mitigate against this, and as most businesses prepare to resume work operations, the Chinese central government is doubling down on putting in place incentives and measures to try and ensure as far as possible that businesses can continue to operate back to normal capacity. The measures above are a precursor to the types of measures that are likely to follow.

Foreign investors in China should pay special attention to any changes in procedures that apply to their specific industry and sector and consult their local professional adviser to determine the full effect of these measures on their business. Our firm, Dezan Shira & Associates, has twelve offices servicing foreign investors in China and is always happy to assist: china@dezshira.com.

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