Shenzhen is special indeed
May 21, 2009 by Chinatex
Shenzhen, China is approximately 80 kilometers (50 miles for those of us who have trouble with the metric system) north of Hong Kong. It used to be a fishing village, and while there are locals and native Shenzheners, they are few as everyone seems to be from somewhere else. Shenzhen was established as a “Special Economic Zone” (”SEZ”) as part of China’s reform policies in the late 70’s and early 80’s. You can learn more at this link: http://en.wikipedia.org/wiki/Special_Economic_Zones_of_the_People’s_Republic_of_China
Anyway, for the last 6 years I have been a “legal consultant” here in Shenzhen and I consider it my second home. It is a beautiful city and I particularly like the tropical climate and proximity to the sea. As an SEZ, Shenzhen is filled with techonology, consumer electronics and other companies and to me is the Silicon Valley of China. We have about 12 million people here, but I tend to believe that it’s considerably more as I always have to wait in line for everything. This article just in from the China Daily concerning Shenzhen and it’s expansion. Remember what Old Chinatex has been telling you about the plans for Free Trade in the Pearl River Delta and loosening of forex rules in the region. This is big news and another example of the methodical and strategic approach taken by the government here to continue to make the PRD into a global economic power. As always, Yeeha!! Chinatex.
Shenzhen SEZ aims to be 5 times bigger
By Chen Hong in Shenzhen, Joey Kwok in Hong Kong and Xin Dingding in Beijing (China Daily)
Updated: 2009-05-22 07:40
The Shenzhen government has drawn up a blueprint to expand the country’s first special economic zone (SEZ) to the whole city - as a restructuring strategy to increase its competitiveness amid the economic downturn.
“Legislators are working on the proposal to expand the scope of Shenzhen SEZ to the whole city, but it needs the approval of the State Council,” an official with the legislative affairs office of the Shenzhen People’s Congress, who did not want to be identified, told China Daily Thursday. Earlier this month, the State Council added the city to the list of two more areas to pilot comprehensive reforms. But “important reforms regarding the scope of the SEZ, land and finance should get approval case by case,” the document specifies.
If the proposal is approved, Bao’an and Longgang districts, which make up four-fifths of the city’s land mass, will become part of the SEZ, whose area will swell from the current 395.81 sq km to more than 1,900 sq km.
“In the face of the economic downturn, the SEZ has been retooling its strategy to bring in more high-tech enterprises in place of labor-intensive industries. The economic restructuring will sharpen its competitive edge,” explained Cheng Jiansan, an economist with the Guangdong Academy of Social Sciences.
In the land-strapped SEZ, where the government also needs to develop commercial facilities and green areas for residents, IT enterprises like Huawei have hardly any room for expansion, he said. Huawei is moving its production base to Longgang district, which is not yet part of the SEZ. “But, if in the future, Longgang district becomes part of the SEZ, IT companies like Huawei will be able to enjoy preferential policies like lower income tax,” he said.
The city can also have balanced development with the removal of long-existing policy and legal differences inside and outside the SEZ, scholars said. Bao’an and Longgang are separated from the four districts in the SEZ by a 100-km-long border although in recent years, the government has allowed entry to the SEZ with special passports.
But “if the merger is approved, the two districts would enjoy the same legislation, same urban planning and same infrastructure. The integration will allow the city to achieve balanced development,” said Guo Wanda, vice-president of the China Development Institute, a government think tank.
For example, people living outside the SEZ cannot enjoy the superior education and healthcare resources inside the zone. Also, the Shenzhen government tended to be partial to the SEZ, Cheng said. Likewise, the infrastructure and industrial planning in the two districts were often not in tune with the SEZ.
Cheng said the Zhuhai and Shantou SEZs face a similar problem and “if Shenzhen’s proposal for expansion is approved, I believe Zhuhai will try to go down the same path”.
Linus Yip, strategist at Hong Kong-based First Shanghai Securities, believes the expansion of Shenzhen SEZ will also benefit development in the Pearl River Delta region (PRD). Yip also said it is just a matter of time for Shenzhen to further expand and combine with Hong Kong. “The two cities are, at the moment, quite closely correlated in terms of economic activities, and it will be irresistible for them to merge,” Yip said, adding a merger would bring synergy.
Since 1980, the government has set up five SEZs (Shenzhen, Zhuhai and Shantou in Guangdong province, Xiamen in Fujian province, and Hainan Island). In 2005 and 2006, the State Council designated Shanghai Pudong and Tianjin Binhai as comprehensive reform pilot areas, with Shenzhen added to the list this month. On May 6, Shanghai Pudong secured approval to expand by merging with Nanhui District, to facilitate its plan of becoming an international financial and shipping center.
The tax man cometh…..
May 5, 2009 by Chinatex
…….and Obama taketh away. Like many of my clients, your company will also be hit by the changes the Obama administration is proposing to the U.S. corporate tax laws. While you should know and understand these changes, there are solutions and they are right here in the Pearl River Delta - Guangdong Province China, Hong Kong and Macau. While business planning generally involves risk, market factors, compliance, labor and other issues, it must also include tax planning and tax strategies for tax avoidance. Old Chinatex helps his clients - those that will listen - legally avoid as much tax as possible. Check out this article below and my comments. As always - Yeehaa!!! Chinatex
Obama to crack down on business taxes
(Agencies)
Updated: 2009-05-04 23:53
WASHINGTON – President Barack Obama plans changes to tax policy certain to be unpopular with corporations with international divisions and individuals who use tax havens. Obama’s two-part plan, which he is slated to unveil at the White House on Monday, also calls for 800 new federal tax agents to enforce the system. New taxes always need new thugs to collect them.
The president’s proposal would eliminate some tax deductions for companies that earn profits in countries with low tax rates, ie: Hong Kong as well as consider US citizens who use tax havens in the Bahamas or Cayman Islands guilty of violating US tax laws. If Obama wins congressional approval for the changes - and he faces a challenge on Capitol Hill - it could deliver $210 billion in tax revenue over the next decade. It always works this way, government overspends and screws up and gets us into such a huge deficit that they have to squeeze us until we bleed.
Officials described the administration’s plan ahead of the announcement on the condition of anonymity so they wouldn’t upstage the president’s remarks. Or so they wouldn’t be dragged out and beaten to death by the pissed off business owners. However, they acknowledged the political challenges facing the plan. The administration won’t seek a complete repeal of overseas tax benefits and, although the rule changes are narrower than some anticipated, business leaders still oppose them as a tax hike. Obama aides countered that the plan is a step toward a massive overhaul of international financial regulations the president has promised. They think we are stupid, so we will just have to find a way to avoid their massive overhaul.
In exchange, Obama said he was willing to make permanent a research tax credit that was to expire at the end of the year and is popular with businesses. Officials estimate that making the tax credits permanent would cost taxpayers $74.5 billion over the next decade. Hmm, take in 210 billion, but leave the 74 billion scraps to the corporations - sounds fair!!
It was small comfort. Companies who shelter profits in international accounts and your companies who are doing business in Asia, stand to lose billions if Obama’s plan becomes law. Under the existing regulation, those companies pay taxes only if they bring the profits back to the US if they keep the profits offshore, they can defer paying taxes indefinitely - and many do. Now they are going to make you claim the monies that you leave in offshore bank accounts. Sound familiar - remember the earlier story i shared with you on the G20 communique. Tax Haven or Heaven?? http://chntxlaw.com/2009/04/tax-heaven-or-haven/
Obama’s plan wouldn’t go into effect until 2011; Obama has said he does not want to tinker with tax revenues until his $787 billion stimulus plan has run its course. He means he doesn’t want to start robbing from Peter to pay for Obama’s spending just yet or he will be run out the country. The proposals, however, were far from complete, and aides said this was just one piece of the administration’s plan for sweeping overhaul.
Administration officials depicted the move as a way to close unfair tax loopholes that encouraged companies to send jobs overseas. Obama paying back the labor unions for his massive campaign war chest. They argued that if it costs the same amount to do business in, say, Ireland as in Iowa, why not do it entirely in Des Moines? Officials said Obama would characterize the move as a way to keep jobs in the United States and fight a system that is rigged against US companies who keep their entire business operation domestic.
Obama also planned to ask Congress to crack down on tax havens and implement a major shift in the way courts view guilt. Unbelievable!! Under Obama’s proposal, Americans would have to prove they were not breaking US tax laws by sending money to banks that don’t cooperate with tax officials. It essentially would reverse the long-held assumption of innocence in US courts. And continue the erosion of our Constitution.
In the news
May 1, 2009 by Chinatex
Old Chinatex, being a veteran of Shenzhen, China, was invited to sit on a panel of foreign experts to discuss ways to improve our beautiful city. The conference was sponsored by The Shenzhen Special Economic Zone Daily, which is “the newspaper” in Shenzhen. Now, I’m no expert, but after listening to one of the foreign experts spew a bunch of fei hua (bullshit) on the obvious value of the form of government in China, I had my turn to give my advice. I don’t really remember much of what I said, but if you can read Chinese, the article is right here at this link:
http://sztqb.sznews.com/html/2009-04/29/node_666.htm
Hope everyone has a great May Day holiday. Yeeha!! Chinatex
