New Investment Opportunities-China Business Environment 2022Source:原创
Key Words
“ In today's world, a century change are intertwined with pandemic, wars, conflicts, stock market volatility and the Unknown. The 2022 TWO Sessions of China (the fifth Session of the 13th CPPCC National Committee and National People's Congress) were held in Beijing from March 4 to 11 at this critical moment of global economic recovery is full of uncertainties and the international landscape is under going complex changes. Premier Li Keqiang's report on the work of the Government (hereinafter referred to as “the report”) has set major development targets of China for 2022 ” The Key Expected Targets are：
5. Improve the amount and quality of Imports & Exports steadily. And maintain a basic equilibrium in the balance of payments. 6. The central government will invest RMB 640billion yuan in 2022 7. Create more than 11 million new urban jobs 8. Personal income grew basically in line with economic growth 9. Further improve the ecological quality of the environment and continue to reduce the discharge of major pollutants 10. Newly added renewable energy and raw material energy will not be included in total energy consumption control 11. Improve the "dual carbon" standards and establish a unified and standardized statistical accounting system for carbon emissions 12. Maintain Grain output to more than 1.3trillion pounds 01 — Explore the Trend of Two Sessions from the Perspective of Investment key messages signaled by the Two Sessions include not only a continuation of long-term policy principles to maintain the economic stability, but also presetting and adjustments of policies on multiple industries including consumption, environmental protection, education, housing, culture & sports and communications due to the circumstance changes.
Summary of past 5 years Two Sessions, Source from Mantou Finance
The Development of Digital Economy has become a Highlight In addition of continually to support new energy vehicle (NEVs) consumption, encourage to use green smart home appliances in the countryside, alleviate burdens on compulsory education and the construction policy of affordable housing, etc., the development of digital economy has become a highlight of 2022 Two Sessions, which means huge industrial opportunities. The 14th Five-Year Plan specifies that thedigital economy will grow at a rate of 12.7% in the next five years. Thereport also calls to "enhancing the innovation and supply capacity of key software and hardware technologies" and "strengthening the construction of digital government and promoting the sharing of government affairs data". The National Development and Reform Commission (NRDC) and the Ministry of Industry and Information Technology (MIIT) have jointly launched the construction of national big data hub inthe 8 regions including Beijing-Tianjin-Hebei, the Yangtze River Delta, the Guangdong-Hong Kong-Macao Greater Bay Area, Chengdu-Chongqing, Inner Mongolia, Guizhou, Gansu and Ningxia. At present, the three major China telecom operators, Byte dance, JD.com, Lenovo Group and other relevant enterprises have set up their strategic operations to strengthen the upstream and downstream industrial and supply chains of Western big data hub. The new infrastructure is expected to become an important investment direction of the technology industry this year, in addition, smart transportation, smart government and other areas of people's livelihood investment is also worth looking forward to. A Structural Change on Commercial Real Estate Sector Housing prices are not likely to rise sharply as the policy against of vicious speculation. However, on commercial real estatesector, the rapid development of the digital economy will drive the demand fordata centers and office buildings. According to IDC China, the scale of China's big data center industry is expected to reach 595.2 billion yuan by2025, three times the current figure. In 2022, the NPC will arrange 3.65 trillion yuan of special bonds for local governments, from the perspective of capital investment, cold chain logistics infrastructure and sectors involved in industrial parks have become the focus of investment in commercial real estate. A structural change in the supply of rent and sale can be expected in the future real estate industry, and the long-term rental apartments and affordable rental housing is also expected to enter a fast track of development.
Further Easing Monetary Policy will Push up the Growth of Social Financing In terms of monetary policy, "expand the scale of new loans" and "encourage financial institutions to lower real loan interest rates" means that further policy easing will push up the growth of social financing. In terms of investment orientation, more financial resources will be directed to small companies, green development, and scientific & technological innovation. The Decarbonization Industry will Maintain High Growth The report committed "orderly promote carbon peak and carbon neutrality (dual carbon)" and encourage the planning on building large-scale photovoltaic power base and its supporting power regulations to ensure energy supply. It is expected that the scale of investment in the "dual carbon" industry will continue to maintain high growth. The "dual carbon" goal also brings bright future for the development of green finance to provide strong support for the transformation and development of national green industry in terms of raising funds, providing risk management tools, and improving the efficiency of capital use. (Click the link here to see more detailed information on China Green Economy related opportunities ) Further Stimulate Service Consumption China will further promote and tap the sustained recovery of service consumption as according to data from the National Bureau of Statistics, per capita consumer spending onservices account for 44.2% of consumer spending in 2021, compared with 62% oftotal consumption in the US before the pandemic, this shows big room for improvement. Therefore, the report proposes to develop consumption in communities, counties, and townships, to build digital information infrastructure, and to promote smart cities development and digital rural revitalization. Anti-monopoly has been carried out comprehensively and deeply to the Internet industry since 2021. The 2022 Report stated of "correctly understand characteristics and behavior rules of capital" and "create a good environment for all types of companies" to ease the mood. Focus on improving the level of legalization, deepening fair competition and international exchanges in this field, to standardize the development of Internet companies as the goal. 02 — New Fiscal and Tax policies - Massive Tax and Fee Cuts According to the report, the largest tax and fee cuts in history are expected to be made in 2022, with 2.5 trillion yuan of tax reduction and refunds. The main tax cuts benefits will be extended from small-scale VAT taxpayers to micro businesses and sole proprietors. This will stimulate the market vitality. Another major target is focused on comprehensively address the issue of tax rebates for manufacturing, scientific research & technical services, eco-environment protection, electric power & gas, and transportation businesses.
Small-scale VAT taxpayers in China would be exempt from VAT from April 1st, 2022 "Compliance" has once again become a hot topic during 2022 Two Sessions. As economic growth enters a new era of high quality and sustainability after "savage growth", Digital government construction has been mentioned to an unprecedented strategic height is written into the report for the first time in China. In the context of this structural transition, compliance management is bound to step into a new stage. Financial and tax compliance is a core part of compliance management. Since 2021, news about online celebrity anchors and entertainment celebrities being fined for tax evasion has been hot topics, which sends out an important signal that tax collection and management for high-income groups will continue to be intensified in 2022. (Please contact us for specific preferential tax policies that companies and individuals should pay close attention to in 2022) 03 — Prospects of Business Opportunities for Foreign Invested Companies On the concern of what are the opportunities and challenges for foreign companies in China, the NRDC and the Ministry of Commerce (MOC) indicated that China is accelerating the building of a new development pattern, optimizing the business environment, actively utilizing foreign investment, and promoting green & low-carbon development. This will open big market opportunities for more foreign companies. The journalist of International Finance Daily has interviewed executives from several well-known multinational companies (MNC) such as Meng Pu, chairman of Qualcomm China, Yang Baoyan, president of Asia-pacific region of Tapestry Group, Zhang Wenyi, executive director of Amazon Cloud Technology greater China, and Dani Reiss, president of Canada Goose. According to them, the latest financial results from these long-established foreign companies in China showed that China was one of the fastest growing markets for their global businesses in the last quarter despite the impact of pandemic. For example, Tapestry's consumer products sales are up more than 35% from pre-pandemic levels, and Canada Goose's digital business is up more than 60% compared with last year. The Korea International Trade Association (KITA) said in a report released recently that South Korean companies should seize the opportunity to expand their investment in the Chinese market as investment in digital information infrastructure, low-carbon, clean energy, and environment-friendly consumption are expected to be beneficial.
The 2022 negative list for market access further reduced, especially the service sector On March 25, the NRDC and MOC jointly released the negative list of market access (2022 version), which has six fewer items than the 2020 version, especially in the service sector. This has sent a clear signal that China will continue to pursue high-level opening-up, the negative list was narrowed three times in 2019, 2020 and 2022, by about 23 %, down from 151 items in 2018 to 117 in 2022. While continuing to be optimistic about the Chinese market, for most MNCs, if entering the Chinese market was mainly about the huge market space at the beginning, now they are more interested in the huge investment opportunities brought by China's new economic drivers. As addressed by the Two sessions, Infrastructure construction, information technology & innovation, new and renewable energy are widely regarded as China's economic development priorities in 2022. Despite core tensions and stringent COVID-19 controls will stay for now, the door remains open for cooperation, it’s the time to “set out on a new journey” and focus on areas of cooperation. Please email us at info@sirmionecg.com for detailed information on the tax preferential policy and China market entry strategy for 2022.
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