Top 5 Articles in 2022

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With the year 2022 coming to a close, it is important to look back and reflect on all the highlights of the past year. In this article we highlight 5 of our top posts which discussed major events, policy changes and other relevant topics pertaining to doing business in China, which we found most relevant for our readers.

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1. Are Companies Leaving China?

In consideration of China’s firm stance and non-relenting enforcement of the ‘zero-COVID’ strategy during the year’s inception, infection rates were kept at a minimum while the economy experienced a notable stagnation.

Strict lockdown measures and travel restrictions had led to public discontent from individuals and operating companies, causing some to consider redirecting their investments or leaving the Chinese market altogether.

While many disruptive factors have inspired companies to reconsider their position in the market, the majority have no plans of reducing their investment or removing themselves from the market (especially with the restrictions being lifted).

While this article discusses the negative impacts of COVID restrictions and shifting perceptions regarding doing business in China, it also provides insight into the overarching sentiment which is that the Chinese market remains a highly opportunistic and a necessary market to be involved in, despite the unpredictable policies that were in place.

Even with the harsh stance the government had taken, it still promoted initiatives to encourage investments in China through the reduction of Negative List industries, while allowing for additional services to facilitate foreign investment. Many foreign businesses in the future will benefit from the introduction of new policies and the long-term prospect for operating a business in China remains highly valuable.

2. China Extends Preferential Tax Policies

This article has deliberated the extension of China’s preferential tax policy for foreigners from 31 December 2021 to 31 December in 2023. Expatriate employees in the past were able to claim a portion of their salary as tax-exempt allowances to lower their overall tax burden, an initiative to attract foreign talent to participate in the market.

Some of the tax-free fringe benefits includes a reduction in housing rental and support with children’s education expense.

This announcement highlights the additional 2 years of tax reduction policies that expatriates working in China are able to enjoy. Without this extension, foreign tax residents would not be entitled to benefits from any preferential tax policies, which would have been replaced by itemized deductions.

With the preferential tax policies set to come to an end in December of 2023, employers need to be mindful of how the end of the policy can affect their employees and how they can restructure payment packages in the future.

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3. Re-assessing Your Business Strategy in China

This article underscores the myriad of challenges that businesses and investors are facing in China, most notably, supply chain disruptions, currency volatility and unforeseen policy changes.

Additionally, economic recovery in China following the onset of the pandemic has been negatively affected by the country’s dynamic zero-COVID policy. Marked by rising inflation and energy supply uncertainties, the global economic outlook also remains concerning for businesses.

During such volatile and unpredictable periods, many businesses have experienced a number of challenges, however other businesses have found ways to remain agile and were able to maintain operations and achieve levels of success.

In this article we drew attention to 4 different approaches that businesses can utilize to weather the storm or achieve success. These approaches included restructuring their entity, opting for company liquidation, applying for dormancy and planning for growth.

The approaches mentioned above that businesses can consider when re-assessing their China strategy contributes valuable insight in formulating an optimal long-term plan for their business while ensuring compliance.

4.Decoupling from China: Are More Companies Considering It?

This article touched upon the mounting challenges of doing business in China for foreign invested enterprises amidst regulatory changes, the property market crisis, ongoing COVID-19 restrictions and more.

The economic environment in China had undoubtedly been impacted, and despite periodic growth at the early stages of pandemic, looked to become a tough market to operate in.

The main question to be answered was whether foreign companies were considering decoupling from their Chinese entity as they experienced major challenges and downfalls.

Besides concern for the country’s regulatory environment, supply chain over-reliance and, the impact of covid, many foreign companies have stated challenges with the lack of overall transparency to be a major factor for wanting to decouple from their Chinese entity.

Challenges around a sustainable and stable supply chain that aligns with an emphasis on Environmental, Social and Governance framework also influenced the decision to decouple. It is important to highlight that despite potential challenges, businesses are able to leverage available knowledge and skills to drive forth the most optimal performance of their business.

Check out the results of our 2022 Sino Benelux Business Survey to find out how some European businesses had performed over the past year.

5. China Data Privacy Laws

The final article included in our top 5 list discusses the 2 new security and data privacy laws that were introduced to regulate how companies handle, store and transfer personal information in China.

The new Data Security Law (DSL) framework categorizes the collection and storage of data in the country based on its potential security and economic impact.

The Personal Information Protection Law (PIPL) however, regulates personal information obtained by organizations operating in China. The new implementation of these laws is mainly geared towards protecting the privacy rights of individuals and provide a limitation on the power and scope of personal data control from companies.

Foreign businesses operating in China are required to comply with local regulatory requirements enforced by both the DSL and PIPL laws.

It is paramount that both current and prospective companies operating in China are aware of and understand China’s data privacy laws, to ensure that their business remains compliant and avoids potential issues.

Your Place in China

If you do business in China or are considering doing business here, having a partner who understands your needs and the challenges you may face, can be the driver of your success.

MSA has helped businesses in China with all of their accounting and corporate set-up needs for over a decade. We are able to provide assistance to ensure your business remains compliant with local regulatory laws and on track to achieving your goals. Get in touch with us for more details on our services.