Newsletter June 2019
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Chairman’s Corner – Poul G. Kristensen 

Dear Members and Friends of DCCC Shanghai,

May has been a very busy month for DCCC with many events and activities, not only for us in Shanghai (East / Central China) but also for the whole PAN China Cooperation of DCCC.

Among other events we held “Leading Successfully in Uncertain Times” as a part of our Emerging leaders training’s program. Later on in connection with our working groups we arranged a very successful event about the new Foreign Investment Law.

Together with the PAN China group we published the report “Workgroup Efforts in China 2018”. The report was also shared by WeChat because of its size of 34M, you can also download Here.

Basically the report presents the key findings of the Danish Chamber of Commerce in China’s (DCCC) work groups for 2018. The report seeks to highlight the main challenges faced by Danish companies in operating in China, and provide recommendations.

Actually the DCCC hosts bimonthly workgroups under the areas of Public Affairs (only in Beijing), Legal, Finance and Human Resources. The purpose of the work groups is to create a space for Danish companies to voice their concerns and work as a platform for communication to external stakeholders in China and Denmark. Under the DCCC work group framework, companies may raise matters and seek advice from other Danish companies on given topics. The workgroups are conducted in Chinese, and external experts are invited to share their knowledge on the topics of the work groups. This report summarizes the findings of the work groups for the past year, with additional insights from members and partners.

Please note that some items of legislation are represented under several work group-topics as they were voices by several workgroups due to their broad relevance.

As you know among other things DCCC promotes, studies and enhance the exchange of information regarding commercial relations, investments and trade between Denmark and China.  The chamber has been present in China since 1995 and has since expanded to consist of three chapters: DCCC North (Beijing), DCCC Central / East (Shanghai) and DCCC South (Greater Bay Area).

The Danish Chamber represents Danish Business interests in China and serves as a platform for Danish Business to network and exchange best practices concerning commerce in China. The DCCC can also provide information and advice to Danish companies and organizations having or considering a presence in China.

The DCCC organizes regular member activities such as seminars, talks and workshops on topics relevant for our members throughout China, both in Chinese and English.

The DCCC works closely with the Royal Danish Embassy (and its Consulates) and the EU Chamber of Commerce with advocacy on behalf of Danish businesses located in China. The findings of the work groups are communicated to DCCC’s external stakeholders for the purpose of advocacy and reporting.

In connection with the report the DCCC also cooperated with key stakeholders in Denmark, such as the Danish Chinese Business Forum (DCBF) to ensure that the experiences and knowledge of Danish businesses in China reaches the relevant stakeholders in Denmark.

The key findings of the report by groups are:

Finance
China’s position as one of the top three destinations for investment remains stable. Besides economic zones like Beijing and Shanghai, other areas are seeking to attract foreign investment through preferential policies.

Individual income Tax IIT

• China is among the 20 countries with the highest personal IIT, placing burdens on employers and employees, and increases the cost of labor. For SMEs, this affects their productivity level and ability to attract talent.
• The reform of IIT is aimed to respond to and match the social economic level and residents’ income level. The standard tax deduction will be raised to 60.000RMB per year for all resident and non-resident tax payers. There will be special deductions for resident taxpayers. For non-resident tax payers, the original tax-free items such as housing allowance, children tuition fee, home visit costs, etc., are still valid. Meanwhile, the taxable income ranges of low tax rate (3% to 20%) are expanded. The purpose is to ease the tax burden for low- and mid-income earners and boost consumption.

EPTL

• A transition from emission discharge fee-based system to tax collection system, aiming at reducing pollution by creating incentives to reduce waste. Companies involved in pollution-intensive industries should expect an overall rise on the cost of doing business in China.

EU-China Comprehensive Agreement on Investment CAI

• The investment area list has been exchanged between China and EU, heading in the direction of agreement on mutual investment.
• China’s commitment to addressing key challenges in its business environment and expand the investment sectors for European enterprises may increase their confidence to increase investments.
• The agreement will increase dialogue and cooperation.

Concerns

• There are concerns regarding the predictability of the capital controls, rising labor costs, administrative inefficiency and other longstanding concerns over market access and fair treatment. Foreign banks especially, still face challenges and constraints to growing their business in the Chinese market.
• European and Danish businesses are positive towards the EPTL, but calls for increased transparency, predictability and consistency in its implementation, especially at the local level.
• Implementation would require industrial enterprises to do the following: apply for the relevant pollutants-discharge permit, undertake pollutant discharge control measures, perform self-monitoring, establish a comprehensive environmental management accountant and supply periodic report that establishes a complete environmental compliance chain.

Recommendations

• In 2018, the tax cut regulations and measures issued by Chinese authorities mainly applied small and medium-sized enterprises. Foreign companies should take notice of these new laws and regulations to fully utilize preferential tax policies.
• The introduction of the golden tax system and adoption of big data technology by the tax authority is expected to increase transparency and improve tax filing and administration. Compliance on tax and social insurances, etc., have become increasingly important, requiring professional capability for all businesses, either via their in-house people or outsourced professionals.

HR
China’s economic and technological development has brought major changes to Chinese society. With a rising middleclass and higher market demands, HR departments have to adapt to a fast-changing work environment. Resilience and future-oriented strategies are keys for achieving long-term goals.

Individual Income Tax

• The reform of IIT is expected to reduce bureaucracy and increase efficiency by addressing the obstacles to paying taxes in China.
• This means an increased work burden for HR firms during the phase period.

Changes in social insurances

• Basic pension-, medical-, unemployment-, work-related injury and maternity insurance will be collected by the taxation departments. This may influence companies’ employment and legal compliance.
• Basic Pension Insurance Operation Mode.
• Fund Accumulation System: establishment of personal accounts, where corporate and individual contributors are entered into individual accounts as retirement benefits.
• Mutual Exemption Agreement between China and Demark (May 14^th, 2014).
  • China is the basic endowment insurance for employees; Denmark supplements pensions (ATP) for social pensions and labor markets, basic pension only.
• Part-time employees working at several companies are subject for social insurance, however only to be covered by one of the employers. This may be a burden among SMEs.

Concerns

• Unclear rules and regulations remain an obstacle in addition to administrative issues, discretionary enforcement of rules and regulations, market access barriers and investment restrictions, licensing requirements and registration processes for products.
  • These trends impede business opportunities, notably for pharmaceuticals, legal services and financial services (incl. insurance).
• Due to current social security framework, companies face difficulties in dismissing employees and employing a flexible workforce.
• Companies feel obliged to financially compensate workers to make up for the shortages in the social security framework.
• Social insurance for part-time employees should be distributed more fairly among employers.

Recommendations

• Visa and work permit procedures should be simplified and requirements on acquiring a visa should be relaxed.
• Social insurance and tax systems should to a larger extent take into consideration employees’ social and familial background.

Legal
European companies operating in China continue to face challenges regarding Chinese legislative, judiciary and administrative bodies due to lack of legal and regulatory transparency. Technological developments have generated opportunities, but also challenges concerning cyber security.

Cyber Security Law (CSL) (June 1^st, 2017)

• The Cyber security Law governs network and information security and outlines general requirement and obligations regarding critical information infrastructure (CII) protection, cross-border transfer and location of data, among others.
• In 2018, China established the Office of the Central Cyberspace Affairs Commission (CAC), stressing the importance of cyber security.

SME Promotion Law

• Created special public funds and provides access to direct financing and public procurement.
• Simplifies administrative procedures for SMEs.

Concerns

• The CSL has caused uncertainty among foreign companies and may discourage future investment for fear of non-compliance.
• The law places limitations on internet access and cross-border flow of data.
• Chinese cyber security regulation may generate a discriminatory environment, harming international companies.
• MNCs still receive favorable treatment compared to SMEs who remain at a disadvantage.

Recommendations

• Increased transparency and proportionality in law enforcement to prevent discriminatory market access.
• Clarify definitions and restrictions of the CSL.
• Remove limitations and simplify cross-border data transfer for foreign companies.
• Legal firms to aid in facilitating cross-border deals and help resolve contract disputes.
  • Limited by demand for transparency and better access to relevant project information and funding.

P.A.
The recent years have seen significant change in terms of marketing and communications. The emergence of artificial intelligence (AI) and the fading of traditional mediums like newspapers and television. Stronger purchasing power among young consumers are more inclined to be influenced by other means than traditional marketing are among other things foreign companies must take into consideration.

Advertising Law (2015)

• To protect consumer rights and interests.
• Establishes strict regulations on the scope and content of advertisements such as restrictions on advertisement directed towards children and advertisement of specific products and services e.g. healthcare and tobacco.

Online Content Regulations

• Regulative Measures on Internet Forums and Community Services & Regulative Measures on Internet Reposting and Commenting Services (August, 2017) .
• Regulative Measures on Public Accounts Information Services and the Regulative Measures on Internet Group Information Services (September, 2017).
• The Regulative Measures on Micro-blog Information Services (February, 2018).

Concerns

• Recent policy developments have resulted in stricter requirement for publishing online content.
• Due to varying standards of law enforcement, excessive punishment has been applied to non-compliance by foreign companies.

Recommendations

• The Advertising Law needs further clarification. The State Administration for Market Supervision unify and standardize the understanding and implementation of the Advertising Law among relevant local authorities.
• Staying up-to-date with developments and changes within online marketing.

Besides the groups for HR, Legal & Finance, in Shanghai we will also be working with Marketing, Design, Technology and Innovation.

If you want to know more / get sent the report or register yourself or some of your colleagues for the working groups please contact the GM of DCCC Shanghai, Laura Li by email or phone.

I want also to use this opportunity to thanks Peter Karup for his participation at the board and congratulate him with his new role in Grundfos Denmark. We wish him all the best.

Remember to follow our activities in our homepage as well through WeChat. You can also follow DCCC Beijing & DCC-SC, and if you decide to participate at theirs events, you will just pay the normal member fee.

Reserve the below dates:
June 2 – When History Meets Future
June 11 – Culture & Communication Management – Questioning & Listening (Emerging Leaders program)
June 11 – Danish Visa Application Guide & Meet the General Consul in Shanghai
June 13 – HR Workshop: H.R. Colleagues N.A.I. (Non-Authority Influence)
June 21 – Danish Friday

We welcome our new members:
R&P China Lawyers

Sincerely Yours,
Poul G. Kristensen

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Save the Date

Danes Worldwide Corner

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Update from the Royal Danish Consulate 

Arctic Circle China Forum
May started with a delegation visit from Greenland headed by Jacob Isbosethsen, Head of Representation in Iceland for Greenland that participated in the Arctic Circle China Forum on the 10th to 11th May.

Sustainable insect dinner
Sustainable Insect dinner – Sounds tempting?  On the 9th May the Consulate General in Shanghai invited the Chinese/Malaysian Chef Brian Tan and restaurant owner of HoF and the Gourmet Library to create an 4 course dinner by using insect together with bio-farmed vegetables and organic Danish cheese. The aim of the dinner was to put focus on using insects as sustainable food and reduction of food waste.

EU Day
The Consulate General celebrated the EU Day together with EU members Countries representations and EUCCC in Shanghai with a reception for member companies and local authorities.

Food promotion
16 Danish food companies promoted their products during SIAL Aisa’s largest Food Innovation Exhibition and BIOFAC, the world’s leading trade fair for organic products in Shanghai. The Danish Agriculture and Food Council organized the Danish pavilions at both exhibitions and together with the Consulate General of Denmark in Shanghai hosted a networking evening for the companies and their customers. Consul General Mr Jakob Linulf was invited by SIAL and BIOFACH to speech at their opening ceremonies followed by a visited to the Danish Pavilions at SIAL and BIOFACH

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Leading Successfully in Uncertain Times on the 15th of May

(Photo by Maria Matar)

“Foreign Investment Law” Seminar- How to apply for the Headquarters on the 28th of May

(Photos by Laura Li  )

R&P China Lawyers

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Upcoming Events

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