On Saturday, 3 August, the State Council, China’s highest administrative governing body, issued a wide range of suggested consumption-boosting steps to all levels of government. The steps (available in Chinese here) aim to address China’s ongoing struggle with poor consumer demand, which is proving to be a drag on GDP growth.

Some of the key consumption-boosting measures included:

Catering: The government aims to boost the catering sector through food culture (e.g., food festivals, unearthing and developing local foods, tying tourist locations such as villages to signature dishes) and encouraging international catering brands to establish operations in China.

Accommodation: The tourism sector has been doing well in recent months, and the government hopes to build on this success by better integrating accommodation with tourist sites, improving the foreign-related services provided by hotels (a key complaint for some foreign visitors to China, as we wrote earlier this year) and revitalising idle rural houses to be used as rural hotels and homestay inns.

Tourism & Entertainment:

• Encouraging the development of new leisure tourism areas including cruise ships, yachting, and outdoor sports.
• Strengthening regional culture and increasing the supply of cultural performances and films.
• Improving the quality of online literature, online performances, online games, radio and television, and online audiovisual content.
• Accelerating the development of ultra-high-definition television and encouraging the development of new formats such as immersive experiences, role-playing games, digital art, and online performances.

New Types of Consumption: Companies will be encouraged to cultivate unmanned retail stores and self-pickup lockers. The government will also offer support for the development of esports and livestreaming e-commerce (the latter is already worth trillions of RMB).

One of the ways the above goals will be achieved is by enhancing financing support for eligible small and micro enterprises in the service industry. The government has also proposed implementing additional personal income tax deductions to offset the cost of caring for infants and children under three, as well as expenses related to education and support for the elderly to boost the so-called ‘silver economy’.

These proposed measures came just days after the government announced a $42 billion stimulus package aimed at renewing large-scale equipment and replacing outdated consumer goods with new ones.

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The foundation for China’s sustained economic recovery and growth is not solid enough,” stated Premier Li Qiang in the government’s work report published on 5 March.

The report is the central part of China’s “Two Sessions” meetings. Delivered by the premier, it outlines government achievements from the past year and sets goals and directions for the coming year. It is also usually when the country’s GDP growth target for the year is announced.

Over the last year, China’s GDP grew 5.2%, achieving the target, with urban unemployment dropping from 5.6% to 5.2%. Although the data shows the economy recovering, China is still facing challenges, including a sluggish real estate market and a lack of domestic consumer demand. Even the “new three” products of solar cells, lithium-ion batteries and electric vehicles, which were the highlight of 2023’s growth, may come under pressure from the EU’s carbon border tax.

With China now in the last two years of the current Five Year Plan period (2021-25), it faces increasing pressure to balance economic growth with emission-reduction targets. Against this backdrop, four key areas emerged from the government work report: improving carbon emissions accounting and trading; betting on cutting-edge tech to drive economic development; driving renewable energy growth; and consolidating achievements in combatting air pollution.

Green transition: Carbon disclosure is key

This year’s government work report heavily emphasised green transformation and low-carbon development, highlighting “improving carbon accounting and verification capacities” and “developing a carbon footprint management system” as top priorities.

Data is crucial. With the EU levelling the playing field on emissions-intensive products by introducing measures like its carbon border tax and a directive on “empowering consumers for the green transition”, there’s a growing push for Chinese enterprises to adopt greener supply chains and enhance their emissions data disclosure.

Furthermore, countries are preparing to submit their new climate action plans under the Paris Agreement in 2025.

The focus in the work report on emission data also reflects the need to expand the national carbon market to cover sectors beyond power. Operational since July 2021, China’s emissions trading scheme includes 2,257 enterprises in the power sector. Experts note the market’s low liquidity and trading volume.

Ma Jun, director of the Institute of Public & Environmental Affairs, told China Dialogue that one of the reasons China’s carbon market has not expanded beyond power as quickly as expected is that emission data accounting is more complex in steel and petrochemicals than in electricity.

“By improving the carbon emission accounting and verification mechanism, we can accelerate the expansion of the carbon market and help China’s related industries better respond to changes in international trade rules,” said Ma. “At the same time, to fully exploit the potential of the carbon market, we need to ensure that the carbon price reflects its true cost and encourage enterprises to slash their emissions. We still have a lot of work to do in these areas.”

Betting on new tech: ‘New productive forces’

The concept of “new productive forces” was a new entry in this year’s government work report. It reflects China’s attempt to transform economic stimulation, from relying on infrastructure, real estate and heavy industry, to encouraging enterprises to develop breakthrough technologies.

The scope of new productive forces was clarified at the Central Economic Work Conference last December. Some of the sectors mentioned included digital economy, artificial intelligence, bio-manufacturing, commercial aerospace, quantum computing and life sciences.

Although the Two Sessions proposed to “scale up the supply of government-subsidised housing”, it does not mean China will return to the old development path, according to Wang Yao, dean of the International Institute of Green Finance at the Central University of Finance and Economics in Beijing. “The Chinese government is regulating the overcapacity problem in industries such as steel and cement. Companies are becoming more rational and will not blindly launch new projects or expand capacity,” Wang Yao said.

“China has begun to downplay the goal of economic growth rate, shifting its focus towards the quality of growth and trying to balance both in the growth process,” Chen Ying, a researcher at the Institute of Ecological Civilisation of the Chinese Academy of Social Sciences, tells China Dialogue.

“New productive forces” encompass more than just tech products or breakthroughs, it also implies worker upskilling and “complementary policy support”, Chen Ying said.

Low-carbon tech is the major focus. In February, the Ministry of Ecology and Environment (MEE) jointly issued the “National Key Low-Carbon Technology Collection and Promotion Implementation Plan,” aiming to promote low-carbon tech nationwide by 2025.

According to Wang Yao, “the introduction of ‘new productive forces’ will inspire all kinds of enterprises to enhance innovation-driven development, pursue low-carbon operations and transformation, to achieve high-quality sustainable development.”

Carbon peaking: Energy intensity in focus

The government work report emphasises the need to carry out the “Ten Actions to Peak Carbon”. These feature in the Peak Carbon by 2030 Action Plan issued by the State Council in 2021. That plan specifies three 2025 targets related to energy and emissions: the proportion of non-fossil energy consumption will reach about 20%; energy intensity will decrease by 13.5% compared to 2020; and carbon intensity will decrease by 18% compared to 2020. The three targets can be seen as yardsticks of China’s progress toward carbon peaking.

This year’s target for energy intensity was included in the government work report – a reduction of about 2.5%.

Lauri Myllyvirta, a senior fellow at the Asia Society Policy Institute, believes that a 2.5% decline is not enough to achieve the targeted 13.5% drop in energy intensity by 2025.

“To achieve the 2025 energy-intensity-reduction target means that at least a 4.5% decline is needed in each of this and next year,” Myllyvirta told China Dialogue. “And significantly more to hit the 18% carbon-intensity target.”

Carbon intensity can be reduced either by reducing the amount of energy used per unit of economic output or by reducing CO2 emissions per unit of energy use.

China’s energy intensity and carbon intensity barely fell last year, according to the latest National Bureau of Statistics (NBS) data. This was due to a number of reasons. Last year was the first of China’s post-pandemic recovery and witnessed an explosion of production and travel demand. There were also frequent weather extremes, with high temperatures in the summer and cold snaps in the winter, leading to more energy consumption. China’s coal power and crude oil consumption grew by 5.6% and 9.1%, respectively, the data stated.

“Natural gas has lower carbon emissions than coal,” said Chen Ying of the Institute of Ecological Civilisation. “Western countries are transitioning by first replacing coal with natural gas and then developing renewable energy. However, we have insufficient natural gas resources and cannot follow the Western path. Instead, we must vigorously develop renewable energy. At the same time, to ensure the safety and stability of the power system, many new coal power projects have started construction. This is a temporary transition pain and will not shake the general trend of green and low-carbon energy.”

Ma Jun believes the Chinese government has always been cautious about setting targets. Although the 2.5% energy-intensity-reduction target is conservative, its appearance in the government work report will bring pressure and a sense of urgency. Even if reaching the 14th Five Year Plan energy-intensity target is very difficult, China is going to push hard to achieve it anyway.

With the increasing share of non-fossil energy in the energy mix, China has shifted its path on achieving peak carbon. Previously, it encouraged “dual controls” – on energy intensity and total energy consumption. Now, it promotes reductions in carbon intensity and emissions.

However, in this transformation process, there has been a tendency to ignore the need to reduce energy intensity and consumption, Ma Jun explains. The energy intensity of energy-hungry industries such as steel has increased instead of declining, resulting in a year-on-year increase in coal consumption. Some regions have launched energy-hungry projects such as petrochemicals and coal chemicals. This, coupled with the decline in GDP growth, has resulted in a lax control of energy intensity and carbon emissions. At the end of 2023, provinces such as Hubei, Shaanxi, Gansu, Qinghai, Zhejiang, Anhui, Guangdong and Chongqing were criticised by the National Development and Reform Commission (NDRC) for failing to achieve energy intensity and total energy consumption targets.

In February of this year, the NDRC, the National Bureau of Statistics, and the National Energy Administration jointly issued a document clarifying that non-fossil energy will not be included in the regulation of total energy consumption and intensity.

Myllyvirta told China Dialogue: “If the energy-intensity reduction target only looks at the total consumption of fossil energy in the calculation, then a 9% reduction in energy intensity by 2025 will be sufficient, rather than 13.5%.”

The biggest highlight in terms of China’s decarbonisation progress in 2023 is reflected in the accelerated development of new energy and related industries. In June 2023, China’s total installed capacity of wind, solar and hydropower exceeded 1.3 billion kilowatts, historically exceeding the installed capacity of coal power. By the end of 2023, more than half of the world’s electric vehicles were being driven in China, with the total number reaching 20 million.

“This year’s government work report especially emphasises the energy revolution, aiming to achieve a green transformation of growth patterns through vigorous development of renewable energy and new-energy-related industries,” Ma Jun said. “While transforming the energy structure and making energy cleaner, we must also strengthen energy conservation in traditional industries. Only by addressing both can we accelerate the process of industrial decarbonisation and improve the efficiency of [emission peaking and reduction] actions.”

Air quality: Consolidating a decade of achievement

Attention on “air quality” has appeared again in the government work report, after last year’s only briefly mentioned it in terms of governance achievements.

The inclusion may be related to the rebound in air pollution in China last year. Average PM2.5 levels rose year-on-year for the first time after a decade of improvements. PM2.5 increased in 26 provincial capital cities, including Beijing, and 40% of cities across the country had PM2.5 exceeding the national standard of 35 micrograms per cubic metre.

Ma Jun attributed this rebound to a combination of unfavourable factors. Last year, China experienced a shift from La Niña to El Niño natural climate phenomena, with pollution spreading unfavourably due to weather conditions, a once-in-a-decade sandstorm, and economic recovery after the pandemic leading to an increase in emissions from energy, industry and transportation.

Even so, China’s air quality trends show significant improvement compared to before the pandemic. China’s PM2.5 in 2023 was 6 micrograms per cubic metre lower than in 2019, an improvement of 16.7 %, said Huang Runqiu, Minister of Ecology and Environment, at a Two Sessions press conference.

“Under all the unfavourable conditions, China has stuck to its bottom line of [improving] environmental quality and consolidated the 10-year achievement in environment governance,” Ma Jun said.

Although there are no quantitative targets for air-quality improvement in the government work report, the policies and measures mentioned in it contain specific targets. For example, the Action Plan for Continuous Improvement of Air Quality sets 2025 targets for lowering PM2.5 concentration, number of polluted days, and total pollutant emissions.

This article was originally published on China Dialogue with the title “Two Sessions: What it Means for China’s Climate Policy in 2024” and has been reproduced under the Creative Commons BY NC ND licence.

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On 14 August, China’s State Council released Opinions on Further Optimising the Foreign Investment Environment and Increasing Efforts to Attract Foreign Investment (‘24 Point Guidelines’). The announcement has been both welcomed and met with cautious optimism by British businesses.

The “24 Point Guidelines” appear to address some of the fundamental areas of concern and friction within the business environment amongst our members. Therefore, this announcement has been viewed by the China-Britain Business Council (CBBC) as a positive step towards boosting the perception among British industry in China that this market maintains viable prospects for continued investment, expansion, and growth – and that state-level policymakers are willing to facilitate the necessary changes to attract foreign capital.

While on the surface, China faces well-documented and widely reported economic challenges, the new normal projected GDP growth of between 4% and 5.5% is still exceptional in a global context. Since the reopening of China’s borders for business in March, the lifting of pandemic restrictions and the resumption of international travel, China has been proactive in seeking to resume business as usual and showcase why multinationals and SMEs alike should continue to trust in both the potential and proven track record of the Chinese market – both re-engaging internationally and introducing stimulus measures in the business environment.

In a recent survey with a group of leading British multinationals from across a wide range of industries – including advanced manufacturing, the built environment, financial and professional services, and hospitality sectors – 73% of companies cited that they faced a form of both direct and indirect market access restriction.

Thus, the “24 Point Guidelines” clearly demonstrate that China’s policymakers see intervention as necessary to restore confidence from foreign investors across a number of key areas.

It is encouraging that China will open opportunities for international businesses to establish R&D centres, undertake major scientific research projects, ensure fairness and equal treatment of foreign and domestic companies in government procurement and continue to sustain efforts to enable a secure management mechanism for cross-border data flows – a concern that has factored high on the agenda for our members and the wider international business community alike. We await with interest the introduction of relevant policies and regulations.

Nevertheless, to demonstrate that these guidelines go beyond paying “lip service” to foreign multinationals and to further strengthen trust between industry and the market, we hope that these guidelines are implemented consistently across China’s jurisdictions and that further clarity is given in a timely manner as to how this will be done.

For example, it is positive to see the document make a specific point simplifying relocation to China in terms of entry, exit and residence for foreign executives, technical personnel and their families. The further four-year extension of China’s policy of non-taxable allowances for foreign employees on certain expenses, including children’s education, housing and language training, which will now remain implemented until 31 December 2027, has also been highly welcomed.

The “24 Point Guidelines” clearly demonstrate that China’s policymakers see intervention as necessary to restore confidence from foreign investors across a number of key areas.

With the pandemic significantly reducing the international talent pool throughout China, this will help to curb outflows of qualified international talent and, in time, attract talent from overseas back to China, creating an international professional environment and offering HR departments in multinationals greater control over talent deployment. It also gives reassurance to professionals and families that are committed to their lives and careers in China.

We also view the mutual recognition of professional qualifications, development of market access within the vocational education sector, operational clarity within China’s cyberspace environment, fair access for public procurement and clarity on financial incentives and the recruitment/retention of foreign talent as fundamental points to maintain dialogue on with China’s policymakers and regulators.

It is reassuring for CBBC members to see China continue to build on the achievements made to safeguard the protection of the rights and interests of foreign companies and provide them with stronger fiscal support and tax incentives.

It is encouraging to see China pledging to create and optimise a market-oriented, law-based and first-class international business environment, leverage the advantages of the country’s vast market, and step up proactive and strategic efforts to attract and use foreign investment more effectively. We are eager to see what these points will yield in practice for British businesses, who stand ready to support and thrive commercially in China’s next stage of economic development and transition to innovative high-end manufacturing-based industries.

This article was originally published by Caixin with the title “Opinion: How British Businesses View China’s Latest 24-Point Guidelines to Attract Foreign Investment”

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There is no kitchen waste at Li Yan’s restaurant: everything gets eaten, reused or composted.

There is no fixed menu, either. The 40-year-old chef buys seasonal local produce fresh from market vendors every day, carrying a bamboo basket on his back. Most elements in the dishes are made from scratch, whether it’s curry paste or bread. Li and his team also make bars of soap using recycled cooking oil.

Li is the co-founder of Bistro & Bowl in Dali, Yunnan province, one of China’s first restaurants to promote a philosophy of sustainable and climate-friendly food.

Although not a strictly vegetarian restaurant, one of its main draws is its variety of plant-based dishes, which usually make up more than three-quarters of the daily menu. Recent hits have included a salad with local goat’s cheese and broccoli and rice steamed with potato wrapped in lotus leaves. Meat dishes such as beef bourguignon have also featured, but Li only sources free-range meat from local farms.

Li says he wants to use his skills to guide people to eat more healthily and sustainably for the benefit of the Earth. “If I did not do this, I would feel guilty for many, many years,” he tells China Dialogue.

According to a study published in Nature Food, more than one-third of the world’s human-caused greenhouse gas emissions comes from the food system, meaning all steps related to farming, processing, transporting, consuming and disposing of food.

Yet, most governments are overlooking the potential emissions savings that could be realised by transforming this system.

China is home to the world’s largest food system, which was responsible for roughly 13.5% of its greenhouse gas emissions in 2019. The current priority, however, is ensuring food security: in its first document released in 2023, the central government called for “enhanced efforts to stabilise production and ensure the supply of grain and other important agricultural products”. Meanwhile, President Xi Jinping has stressed the significance of food security and increased self-sufficiency – “holding the bowl safely in one’s own hand” – while also “developing ecological and low-carbon agriculture”.

Balancing this food security drive with the country’s emissions reductions goals will be a delicate task – one which experts suggest sits heavily on the plate of government and producers, and the policies and changes they choose to serve up. But consumers also have a seat at the table, and bottom-up action, such as Li’s efforts, could be transformational.

The power of the chef

Li came to understand the impact of the food system on biodiversity and climate during a cooking competition he took part in – and won – in 2020. The event was organised by Good Food Fund, a Chinese non-profit promoting the sustainable transformation of food systems.

Li, who had been a chef for nearly 20 years by then, was shocked to learn about the implications of industrialised farming and animal rearing for the planet. He also learned about how sustainable farming, cooking and dining could improve global ecology, tackle climate change and enable people to live more healthily.

“I had never thought that chefs could have so much power,” Li says. “I suddenly realised that I should do what I could to contribute to a better future for the Earth. I felt a sense of responsibility.”

In May 2021, Li and his business partner opened Bistro & Bowl in the popular tourist town of Dali. In one of the most biodiverse regions in China, the restaurant duly looks to follow the sustainability principles outlined in the Good Food Fund’s Good Food Pledge, an initiative that promotes a low-carbon lifestyle, healthy eating, seasonal produce and reductions in food waste.

Li grows more than 10 types of herbs in-house, including oregano and mint, fertilised using a liquid created with fermented food waste from the kitchen. The restaurant is also a certified participant of “Meatless Monday” through the Good Food Fund, which itself is the official Chinese partner of the global movement encouraging people to practise a plant-based diet one day a week, so as to improve personal health and the environment.

The actions taken at Bistro & Bowl are also real-life reflections of policies and documents released by the Chinese government, including an anti-food waste law introduced in 2021 and the latest dietary guidelines published in 2022 by the Chinese Nutrition Society, a national non-profit, under the guidance of the National Health Commission.

Although none of these directives were published with the direct aim of reducing carbon emissions and tackling climate change, their combined results could bring climate-positive impacts, various experts have told China Dialogue.

Curbing food waste

Elizabeth Robinson is a professor and director of the Grantham Research Institute on Climate Change and the Environment at the London School of Economics. She tells China Dialogue that only 40% of emissions from China’s food system come from actual production, with the remaining 60% relating to processes and actions before and after this stage.

“There are opportunities to reduce emissions along the whole chain,” Robinson says. “In pre-production, fertilisers are an obvious example because you generally make them out of fossil fuels.” Nitrogen fertilisers, for example, are made by mixing nitrogen from the air with hydrogen from natural gas. “As for post-production,” Robinson adds, “one of the big problems is food waste.”

Wasting food is a global problem that has serious climate implications. A 2021 report by the United Nations Environment Programme (UNEP) estimated that roughly 17% of global food production may be wasted, including 11% in households, 5% in catering and 2% in retail (figures are rounded).

If food loss and waste were a country, it would be the third biggest source of greenhouse gas – Inger Andersen, executive director of UNEP

In China, more than 35 million tonnes of food are lost while being stored, transported and processed each year, according to statistics quoted by China Youth Daily. At restaurants, 11.7% of food is wasted by customers, averaging 93 grams per person per meal, the newspaper reports.

China has taken a series of actions to tackle food waste over the past two years to safeguard food security and promote sustainable economic and social development, among other goals.

In August 2020, Xi ordered the country to “resolutely put an end to wasting food”. The following April, the anti-food waste law was introduced, instructing all levels of government to “enhance leadership”, “determine targets and tasks” and “establish a work mechanism” to tackle food waste.

Robinson calls this “a really important policy” and notes that reducing waste can help cut emissions in two ways.

First, food production generates greenhouse gas emissions, such as those associated with fertilisers, mechanisation, rice paddies and even cows’ burping. “Producing that food just to throw it away has a big emissions implication,” she explains.

Second, if food waste ends up in landfills and is broken down by bacteria via anaerobic digestion, methane is emitted.

By simply reducing food waste, Robinson says, “there is a tremendous opportunity to reduce emissions without even changing how we farm or how we eat.”

‘Poultry-multiplying plan’

The Chinese government has also been guiding its citizens to adopt more balanced and diverse diets, though largely for health reasons.

In April last year, the country updated its dietary guidelines, mentioned above, which encourage citizens to consume “plenty of vegetables, fruits, dairy, whole grains and soybeans”, to eat “appropriate amounts of fish, poultry, eggs and lean meat” and to “limit intake of salt, oil, sugar and alcohol”.

Late last year, Xi called on the country to establish a “big food concept”, which aims to promote food diversity on both the production and consumer sides, in a key government report.

Meat consumption in China is expected to continue increasing. Amid this growth, various Chinese reports and research have been encouraging citizens to eat more poultry, instead of pork, beef or lamb, for health, to save animal feed and to protect the environment – while still meeting demand.

For example, in an article explaining the “big food concept”, Globe, a magazine affiliated to state media outlet Xinhua, underscored the importance of choosing white meat over red meat, a major driver of obesity in China.

A flagship report on the agricultural industry’s development, published by the Chinese Academy of Agricultural Sciences (CAAS), also highlighted the benefits of such a swap, as Beijing News reported. It also proposed a “poultry-multiplying plan”.

Mei Xurong, vice-president of CAAS, was quoted saying that poultry was healthier and more efficient in terms of animal feed and emissions than pork (which is the most consumed meat in the country). Mei said modelling showed that nearly 28 million tonnes of feed and over 7 million tonnes of carbon emissions would be saved if the country doubles its poultry production and uses this to replace pork, keeping overall meat production the same.

Alternatively, Mei continued, if the country maintains current beef and lamb production levels and uses additional poultry output to satisfy growing meat demand – as well as replacing some pork production – it would, according to modelling, save over 30 million tonnes of carbon emissions and nearly 15 million tonnes of feed in the year 2030.

A 2018 study published in Science magazine estimated that the greenhouse gas emissions per 100 grams of protein for pork production can be as low as one-seventh of those from beef. Emissions from poultry production, meanwhile, were estimated to be even lower, at about three-quarters those of pork per 100 grams of protein.

Globally, red meat production is the largest driver of greenhouse gas emissions from food. However, concern has also been raised over any global chicken-for-beef shift. A surging poultry industry would itself impact the environment, through air and water pollution, degradation of arable land, habitat destruction and other damages.

Haseeb Bakhtary is a senior consultant at Climate Focus, a thinktank headquartered in Amsterdam. He says it is hard to set a universal rule for people’s eating behaviours for health or environmental reasons because diets are “culturally and geographically specific”.

“What we need to reduce in Europe is meat consumption. We also need to stop wasting food at the household level, buy less and eat less [food] and replace the unhealthy components in our diets with healthy foods,” he tells China Dialogue.

“But there are many other countries in the world where people don’t have access to enough animal-based protein, for example. There, there may need to be balance to increase their meat consumption to a healthy level.”

Top-down vs bottom-up

So far, emissions reduction efforts in China’s food system have largely been driven by government policies on the production side. However, some experts believe consumers have an equally important role.

“In terms of reducing emissions and tackling climate change, many people think these are matters for the government and, therefore, require government policies and technological improvement to push forward the agenda,” Hou Bing, executive director of the Good Food Fund, tells China Dialogue.

But Hou points out that “past practices” and the findings of the latest report from the Intergovernmental Panel on Climate Change – which highlighted the insufficient global pace and scale of climate action plans – show that “emissions-reduction targets cannot be realised solely by top-down policies from the government and technological improvement”.

“To lead to changes, it also needs bottom-up [actions] and joint efforts and participation from multiple parties, such as the government, commercial and social organisations, as well as the general public,” Hou explains.

“Not only the formulation of policies needs to be based on public opinion: their promotion and final implementation will also need to depend on the levels of public understanding and acceptance.”

Hou points to the anti-food-waste campaign promoted in recent years as “an exemplary practice to showcase the joint power of policy and public opinion”.

Patty Fong, programme director of Climate and Health & Wellbeing at the Global Alliance for the Future of Food, tells China Dialogue that food systems, especially those linked to global value chains, are “locked into a system” that affects both production practices and consumption patterns. “We must look at them together holistically,” she says.

Fong thinks consumers do have a role. However, their “food environment” must be factored in, meaning, for example, what types of food are affordable or cheap, and what is being advertised to them.

“There is a role for marketers or retailers. There’s also a role for caterers – whether it’s chefs and restaurants, or healthcare, hospitals and schools,” Fong notes.

Bakhtary points out the importance of public policy: “I am usually hesitant to shift the responsibility of transforming the food system onto consumers… behaviour change takes a long time.” He says that public policy and regulation will have “a larger and more significant effect and impact” than consumer-led efforts. Ideally, grassroots initiatives and public policy should work hand-in-hand to help the food system transform from different angles, he adds.

Robinson describes three main types of environmental policies that governments can use: rules and regulations, taxes and subsidies, and nudges. “Generally,” she adds, “a combination of all three works best.”

The professor says the whole food system is often not set up for consumers to “actually be empowered to make the right choices”, and that the right policies are essential to enable people to “make good choices that are aligned with healthy eating, healthy environments and animal welfare”. As China and countries around the world strive to improve their food systems and meet climate goals, government policy is therefore “very important”: regulation, Robinson adds, can level the playing field.

This article was originally published on China Dialogue under the Creative Commons BY NC ND licence.

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In American political circles, China is seen as both a disease and a cure. As President Biden leads the Democrats to the polls for the mid-term elections in November, detente with China could stave off inflation, which analysts expect to be the number one issue among voters. However, a China-dominated world would also be “darker and harsher for American families, and it’s one [the US] needs to stand against,” according to US Secretary of State Antony Blinken.  Meanwhile, among Democrats and Republicans alike, polling suggests that voters believe that limiting China’s power and influence is a top priority and that they feel ‘cold’ towards China, despite also considering climate change to be the number one national security threat and only solvable through compromising with China. 

It is an equally complex picture on the other side of the Pacific. Despite the increasing frequency of rhetoric coming out of Beijing signalling that China feels comfortable pitting itself against the US in Asia-Pacific affairs (eg, the Taiwan Strait does not constitute international waters) Beijing is discovering that it is going to need to work with Washington if it is to make the region more agreeable to China’s rise. Very tellingly, Chinese foreign minister Wang Yi recently failed to persuade 10 countries in the Pacific to sign a regional agreement on trade and security, demonstrating that Beijing’s neighbours are not about to turn their backs on the US and accept China’s worldview. What is more, as in the US, there is also the issue that domestic political concerns demand boosting trade and investment between the pair – the zero Covid strategy isn’t going to pay for itself. 

Finally, both countries’ respective business communities have made it clear that they would value relations easing to a more predictable and manageable level. US companies in the country’s technology sector, in particular, have lost billions of dollars’ worth of business due to the Trump administration’s decision to put Chinese technology companies with ties to the military on a ‘black list.’ Meanwhile, Chinese firms are continuing to look overseas for investment opportunities that are more stable than those on offer at home, and see the US as a key growth market, assuming the geo-political climate improves.

Background

For all the headlines trumpeting the prospects of a second Cold War and the tweets by American and Chinese politicians and thought leaders alike seeking to stir up their respective bases to distrust and demonise the other, US-China relations fundamentally appear to be easing. Circumstances change, and the current circumstances in which the US and China find themselves warrant both sides taking time to reflect on their respective priorities. 

This de-escalation comes from a high starting point, make no mistake, and will not result in US-China relations returning to a level of amicability similar to that which was maintained by both sides during the Obama administration. It’s unlikely that President Biden will be received by President Xi any time soon as a guest of honour at the Forbidden City (as was President Trump) nor will he want to be seen as accommodating China by offering a bow to his Chinese hosts (American media lambasted President Obama over this in 2012). Furthermore, hostility over topics such as Taiwan, Xinjiang and Hong Kong, as well as fair trade practices, will probably remain – but both sides appear to recognise the need to bring the rhetoric down a notch.

A little more conversation, a little less action, please 

Recently, both sides have become far more vocal on an apparent shared desire for more talks. Presidents Xi and Biden last spoke in March, and another call is reportedly in the works for as soon as July. The pair also spoke in November 2021, while their call in September of that year was the first in seven months, indicating that both sides see value in increasing the frequency with which they speak. And it’s not just at the president-to-president level: other senior officials, such as US Defence Secretary Lloyd Austin, Chinese Minister of National Defence Wei Fenghe, US Trade Representative Katherine Tai, US Treasury Secretary Janet Yellen, and China’s economic tsar, Vice-Premier Liu He, have all increased the frequency with which they engage with one another, too. 

That said, just because American and Chinese leaders are engaging more does not necessarily mean they agree on more. Indeed, the recent meeting at the Shangri-La Dialogue between Lloyd Austin and Wei Fenghe demonstrates this well, for the pair presented duelling narratives at the annual gathering of the great and good of Asia-Pacific defence and security. What’s more, the US is not always speaking to the right person, particularly on the subject of Taiwan. For example, while Wei Fenghe is nominally Lloyd Austin’s direct counterpart, Austin reports directly to President Biden, whereas Wei answers to China’s Central Military Commission, the vice-chair of which, Xu Qiliang, is seen as having the ear of President Xi.

Agree to disagree 

While both sides seem to place increasing value on engagement, there are issues where the two sides will continue to disagree vehemently – international free trade and Xinjiang are two prime examples. The US and China might have come to recognise the constraints of their interdependence, but that does not mean that they will not move to advance their respective agendas in matters which fall outside the fundamental areas in which they cooperate, such as the environment and growing non-sensitive bilateral trade and investment. 

US companies will still need to tread carefully around China, even if both countries’ officials are starting slowly to accommodate each other more at the highest levels of government. The US’ Uyghur Forced Labour Prevention Act (UFLPA) which came into effect on Tuesday 21 June, for example, requires companies that import goods from China’s Xinjiang region to provide “clear and convincing evidence” that no component was produced with slave labour; this is likely to be very difficult to do given the complexity of US firms’ supply chains. 

The UFLPA is a piece of legislation that, when viewed in isolation, suggests the Biden administration is continuing to take a hard line on China. Read it alongside President Biden’s recently announced plan to cut some tariffs placed on Chinese imports by the Trump administration, however, and it becomes clear that President Biden is signalling that trade with China remains important to the US, but within increasingly tightly defined parameters.

While the two will continue to disagree with one another on issues such as Taiwan and international free trade, both countries’ governments appear to have realised that there is room for greater pragmatism in areas such as the environment 

Tariffs 

One could argue that this is a more nuanced and pragmatic approach by the US towards its trade relationship with China, especially when compared with the Trump administration’s modus operandi of placing Chinese firms on sweeping blacklists imitating the various market access lists maintained by China. 

The US is standing up to China where their values do not align and compromising where it is in America’s interests to do so. This is further evidenced by the Biden administration’s plans to change its approach towards China over free trade, which up to this point has been to punish Beijing with tariffs. 

Lifting some of the tariffs on $370 billion worth of imported Chinese goods could alleviate inflation by as much as 1% over the next six months; with inflation in the US currently running at 8.5% on the year, that could be tempting.  

US Treasury Secretary Janet Yellen has said that some of the tariffs currently placed on Chinese imports serve “no strategic purpose,” while US Trade Representative Katherine Tai has indicated that the tariffs predominantly serve as a way of maintaining leverage over the Chinese in negotiations surrounding levelling the playing field for US firms in China and third markets. Removing some of the tariffs is in America’s interests as it will push down consumer prices and ease inflation; keeping others in place reminds China that the world’s most powerful economy takes issue with how it trades.

The CBBC view 

Though it may be hard to see, US-China relations appear to be thawing. While the two will continue to disagree with one another on issues such as Taiwan, international free trade, and human rights, both countries’ governments appear to have realised that there is room for greater pragmatism in areas such as the environment and bilateral trade and investment. Furthermore, even on those topics where they do not see eye to eye, the realisation that a conflict would not be in either country’s interests appears to be sinking in, leading to increased engagement on these sticking points. 

US companies will need to continue to tread carefully in and around China, and vice-versa, and their government affairs teams will have to pay even closer attention to the signals coming out of Beijing and Washington, such is the sensitivity of the relationship – but the US and China appear to have realised the constraint that is their interdependence, which is no small thing. 

It’s good news for UK plc in China, too. With the US government adopting a far more clearly defined approach towards China, British companies dealing with both the US and China should anticipate the regulatory uncertainty that has significantly impacted companies trading between the two to ease significantly.

Entering China is a key decision for businesses of all sizes. Call +44 (0)20 7802 2000 or email enquiries@cbbc.org now to find out how CBBC can provide you with the platform to unlock your potential.

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The People’s Bank of China (PBOC) recently released its Fintech Development Plan for 2022-2025, which seeks to further develop China’s fintech sector and drive the digital transformation of finance in the country over the next four years. The new plan emphasises ‘building momentum’ on the basis of  ‘accumulation’ to boost the sector’s progress by 2025. The new fintech development plan is based on China’s 14th Five Year Plan, a roadmap for China’s social and economic development in the period between 2021 and 2025.

The term fintech includes a variety of technology-enabled financial activities, such as mobile payments, digital banking and online insurance. Moreover, fintech also includes the development and use of cryptocurrency, although this aspect of fintech is banned in China.

This article reviews the development of fintech in China, outlines the country’s strategies and main tasks for the fintech sector in 2022-2025, and takes a closer look at the key points of the new fintech development plan.

The history of fintech in China

In China, the development of fintech can be divided into three stages:

• Finance computerising stage (1993—2004): The PBOC and other financial institutions began to digitise their back offices and services. Typical applications include ATM, POS, bank’s core transaction system, credit system, clearing system, etc.
• Internet finance stage (2004—2016): Financial institutions or Internet companies started to build online platforms, gather users, and use mobile internet technology to transform traditional financial services. The asset end, transaction end, payment end, and capital end of finance are connected by technology into the same network. During this stage, some fintech elements such as online securities account opening, online banking systems, P2P lending, and mobile payments were expanded rapidly.
• Fintech stage (2016—present): Unlike the Internet finance stage, fintech is broader in scope. In addition to Internet technology, more emerging technologies, such as big data, cloud computing, artificial intelligence and blockchain are merged into the field of financial business to change or create new financial products or services, lower transaction costs, and improve operational efficiency. Representative applications include big data credit investigation, intelligent investment, and supply chain finance.

Today, fintech is a major part of public life in China. According to the Ernst & Young Fintech Adoption Index, the adoption rate of consumer fintech in China reached 87% in 2019, meaning that 87% of China’s digitally active population use at least one fintech service in their daily life. For anyone who has spent time in China and experienced the ubiquity of WeChat/Alipay, this will come as no surprise. The adoption rate is expected to grow as fintech becomes more accessible to rural populations.

What are the goals of the Fintech Development Plan?

China wants to have a ‘digitalised, intelligent, green and fair’ fintech sector that can give strong support to the implementation of strategies such as innovation-driven development, digital economy, rural revitalisation and carbon peak and carbon neutrality.

As with all Chinese government plans, it is worth reading beyond the jargon to find out what the plan actually means.

Enhancing regulatory supervision

After a long period of being hands-off in their regulatory approach, the Chinese government is now paying close attention to the balance between fintech innovation and regulation. It still wants the fintech market to grow but in a regulated way instead of unchecked expansion.

In 2020, China started to scrutinise the internet finance industry, suspending Ant Group’s US$37 billion IPO. In 2021, China launched a broader anti-monopoly campaign against tech giants and intensified supervision of data collection as well as privacy protection in the fintech domain. The country’s leading fintech players, including Ant Group, Tencent and Didi, were all hit by fines and increased regulatory scrutiny.

Privacy and data protection

Privacy and data protection – which dominated China’s regulatory landscape in 2021 – is also highlighted in the Fintech Development Plan for 2022-2025. The plan indicates that China will make a series of supporting regulations and policies to implement relevant provisions of the Cybersecurity Law, the Data Security Law (DSL) and the Personal Information Protection Law (PIPL) in the fintech area.

Low carbon and green fintech

In September 2020, President Xi Jinping pledged that China would hit its carbon emission peak before 2030 and become carbon neutral before 2060. To achieve this goal, no industry can just stand by, including the fintech sector.

In addition to the integration of fintech and green financing, the plan proposes to build green data centres and systems based on advanced technologies, putting forward clear goals for the power usage effectiveness (PUE) values of data centres. PUE is the ratio of the total amount of power used by a data centre to the amount of power delivered to computing equipment. It describes how efficiently a data centre uses energy — an ideal PUE is 1.0. The plan aims for PUEs of 1.3-1.5; the PUE values of most data centres in China are currently above 2.2.

Fair and inclusive

One of the main challenges faced by China’s fintech sector is unbalanced growth among different regions and groups. The Fintech Development Plan for 2022-2025 tries to address this issue by making the fintech sector fairer and more inclusive.

In the field of rural finance, with the help of technologies such as the Internet of Things, satellite remote sensing and electronic enclosures, the plan aims to achieve automatic data collection and improve traceability for agriculture, while also increasing the penetration rate of fintech in rural areas.

For special groups, including older adults, those with disabilities and minority groups, the plan proposes the application of accessible financial products and services, such as large-character versions, voice versions and minority language translations.

Despite the ongoing crackdown on tech giants and greater regulatory scrutiny of the fintech sector, the Fintech Development Plan 2025 indicates that fintech is a prioritised area for development in China. Through the second iteration of the Fintech Development Plan, China wants to build momentum to achieve significant improvement in the sector’s core competitiveness by 2025. To translate this into plain language, the fintech domain is still encouraged in China and supported by the government, but China wants the sector to develop in a regulated, more balanced, and high-quality way.

A version of this article was first published by China Briefing, which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world. 

The post What’s in China’s Fintech Development Plan for 2022-2025 appeared first on Focus - China Britain Business Council.

From 8-10 December, Chinese leaders convened their annual Central Economic Work Conference (CEWC). The read-out of the conference stresses the urgent need to address ‘three pressures’: shrinking demand, supply shocks, and a weakening economic outlook.

The Chinese government’s answers to these issues are not really surprising. Stable macro-economic policy – i.e. prudent monetary and conservative fiscal policy – remains the paramount guiding principle for 2022. At the micro-level, supply-side reform and tax incentives are still the government’s weapon of choice. Other familiar policies, such as reform and opening-up, scientific and technological development, the fight against regional inequalities and the maintenance of stable employment and social service provision are all listed among the seven major priorities.

Some new targets involve pronatalist measures to increase the population and the promotion of social housing. Other important goals, such as the prevention of financial risk and China’s much-discussed peak coal and net zero targets, are mentioned but not prioritised. Xi Jinping’s new Common Prosperity policy is described as a long-term challenge with the promotion of the so-called ‘tertiary redistribution’ as the only near-term goal.

Overall, this CEWC indicates that Chinese policies in 2022 might look very much like those in 2021, as Chinese leaders grapple with the challenges of a more affluent, more educated but increasingly older population.

Background

The Chinese economy ended 2021 on a rather sombre note. After 2020’s pandemic-defying 2.3% growth – the only increase of any major economy – last year witnessed several hiccups, with more storms already gathering. Although the country will probably surpass its self-set goal of 6% GDP growth, the Chinese government is facing mounting headwinds.

First, surging factory production outpaced energy production, leading to power cuts and shutdowns. At its height, 20 out of China’s 31 mainland provinces had to impose power rationing. Even though the problem was mostly transitory, rising energy prices and input costs left a chilling effect on businesses. In September, China’s industrial production grew only 3.1%, the lowest increase since the beginning of the pandemic.

Second, the slowdown isn’t just confined to the manufacturing sector. Retail, too, slowed down markedly in the second half of 2021, with November recording its lowest growth (3.9%) outside of the pandemic. Although consumer price inflation, which also picked up last month, might explain some of the lower spending, it’s probably China’s strict zero-Covid policy that remains the main reason for lower sales. During Golden Week in October – a bellwether for Chinese consumer sentiment – tourism revenue dropped 4.7% year-on-year and was at less than 60% of the 2019 level.

Although consumer price inflation, which also picked up last month, might explain some of the lower spending, it’s probably China’s strict zero-Covid policy that remains the main reason for lower sales.

Finally, China’s vast real estate sector — accounting for about 29% of China’s GDP — has come under visible pressure. Several property developers, including the highly indebted Evergrande, failed to make bond payments and entered technical defaults. More worryingly, house prices have begun to drop in many Chinese cities. In November 2021, average prices for new residential properties dropped 0.33% month-on-month, the third straight month experiencing a decline.

Comparison of CEWC priorities in 2021 and 2022

Stability trumps everything

Confronted with these challenges, this year’s CEWC focused on basic economics rather than long-term strategies. For example, last year’s top priority – scientific and strategic development – is now only the fourth most important item on 2022’s priority list. Other long-term issues, like the reform of China’s agricultural sector and the reduction of carbon emissions, are mentioned as secondary goals but are not referred to as primary concerns anymore. Instead, stable macroeconomic policies and supply-side oriented microeconomic reforms are at the top of the government’s agenda.

Even though most of the items on the 2022 list are hardly new, there are three policy areas that merit closer attention in the coming year.

• Housing: Now subsumed under the general objective of a smooth circulation of the national economy, affordable urban housing will remain a primary concern in the coming year. The CEWC mentions two sub-goals for this issue: 1) the development of a rental housing market; and 2) construction of affordable housing. Recent policy proposals have mainly focused on price controls but more long-term strategies – such as rent-to-buy schemes or a Singapore-style public housing programme – are needed. 2022 will probably see new reform proposals in this direction.
• Pronatalism: The sudden ban on online tutoring and the abolition of China’s birth control policy have underscored how serious Beijing is about reversing China’s demographic decline. It also indicates that the latest census numbers, published earlier this year, might not show the whole story. But increasing birth rates is tricky especially as Chinese women have become more confident and vocal about gender discrimination in the workplace and beyond. Expect more action – whether effective or not – in the coming year.
• Common Prosperity: Common Prosperity has been one of the buzzwords of 2021. But its exact meaning remains contested. So far, pressure on private businesses to share more of their wealth and stiff penalties for tax evaders have been the most visible expression of this new policy. The CEWR points to a similar direction by stressing the importance of so-called tertiary distribution. China’s traditional workfare approach (i.e., job creation rather than welfare), combined with more investment in education, remains the dominant approach for now. However, the planned national basic endowment might offer some new clues about a more comprehensive reform in the future.

As for foreign trade and investment, the CEWR reinforces Beijing’s commitment to openness and support for foreign investment. This is undoubtedly good news. But whether this will be enough to reassure foreign businesses and investors having to deal with China’s increasingly complex domestic regulatory framework and ad-hoc policymaking, is something we can only hope for.

The CBBC view

The key message from this year’s CEWR is that China is in the midst of transition. Beijing recognises that the economy is facing daunting challenges that require new ideas and policy approaches. But Chinese leaders have yet to reach a consensus on how these should look, and – in their absence – resort to the traditional playbook of stable macroeconomic policy and supply-side oriented tools. Tellingly, last year’s hint at ‘demand side’ reforms has vanished from this year’s conference read-out.

Despite the insistence on stability – especially ahead of next year’s 20th National Party Congress – 2022 will probably be seen as a chance for more regulatory action and policy experimentation. Not all measures will be constructive, and foreign businesses are well advised to expect further disruptions and ad-hoc changes.

Nonetheless, Chinese leaders have proven once again that they are capable of reform. Businesses should pay particular attention to regional pilot projects. This applies particularly to Zhejiang province, which serves as China’s first Common Prosperity pilot zone. Regional development plans, such as the Greater Bay Area, the Yangtze River Delta, the Chengdu-Chongqing region, as well the Jing-Jin-Ji capital region will probably lead the way in policy approaches.

In the coming year, CBBC will continue to keep a close eye on China’s evolving policy landscape and keep Members informed of new regulatory developments at both the national and regional level.

The post China’s economic outlook for 2022 appeared first on Focus - China Britain Business Council.

1. Negative Lists for Foreign Investment Access

The National Development and Reform Commission and the Ministry of Commerce released the Special Administrative Measures (Negative List) for Foreign Investment Access (2021 Edition) and the Special Administrative Measures (Negative List) for Foreign Investment in Pilot Free Trade Zones (2021 Edition) on 27 December 2021.

Why it matters: It’s all about market access. These two negative lists detail the industries where foreign investment will either be prohibited or restricted. All foreign investment needs to follow the special administrative measures, such as the cap on the share ratio of foreign investment, set in the corresponding negative lists. The 2021 National Negative List and the 2021 FTZ Negative List were shortened to 31 and 27 items, respectively. Both lists further widened the opening of the automobile manufacturing and the radio and TV device manufacturing sectors.

The FTZ Negative List removed all the entries relating to the manufacturing sector and proposed exploring the possibility of relaxing foreign investment access to the services sector, including market research and social surveys.

2. The 2022 Tariff Adjustment Plan

On 13 December 2021, the Customs Tariff Commission of the State Council released the 2022 Tariff Adjustment Plan to adjust the import and export tariffs of selected goods from 1 January 2022.

Why it matters: It’s all about how much tariff you will need to pay in 2022 if you are engaging in relevant import-export businesses.

From 1 January 2022, China will impose interim import tax rates on 954 commodities, which were previously subject to the default most favoured nation (MFN) tariffs – which are higher. These commodities include anti-cancer drugs and medical products, aquatic products and sports equipment, oil paintings and antique artwork, high-efficiency auto parts, materials for environmental restoration, manufacturing components and raw materials, and mineral resources.

To promote the high-quality opening of markets, China will apply agreed tax rates on selected goods originating in 29 countries and regions for 2022 in accordance with China’s free trade agreements (FTA), including the Regional Comprehensive Economic Partnership (RCEP) and the China-Cambodia FTA, both of which will come into effect on 1 January 2022.

China will raise import and export duties on some commodities to balance domestic demand and supply as well as upgrade its industries, including re-imposing MFN tariffs on some amino acids, lead-acid battery parts, gelatin, and pork.

3. New Guidelines for Trademark Examination

On 16 November 2021, China’s National Intellectual Property Administration released the Guideline for Trademark Examination and Trial, to be implemented from 1 January 2022.

Why it matters: The guideline provides detailed and updated rules about trademark registration in China, with new chapters added regarding the examination of Madrid trademarks and bad faith trademark applications, as well as detailed rules for trademark examination.

The Guideline has two parts. Part I relates to formal examination and routine work, setting out standardised terms and expressions involved in trademark examination and trial. Part II clarifies the examination and trial of “malicious trademark registration,” “signs that shall not be used as trademarks” and the “lack of distinctive features of trademarks”, among other factors.

4. The Evaluation and Repair of Taxpayer Credit

The State Taxation Administration recently released the Announcement on Matters Relating to the Evaluation and Repair of Taxpayer Credit, to be implemented from 1 January 2022.

Why it matters: The taxpayer credit rating is becoming increasingly important for foreign companies operating in China. A good tax credit rating means a company can access more favourable treatment when obtaining tax incentives, applying for loans and obtaining business qualifications, while a poor rating can lead to more stringent scrutiny in a wide range of tax-related matters.

This new announcement details the circumstances under which a taxpayer may apply to restore its taxpayer credit after it corrects dishonest behaviour, performs tax legal liability, is waived from the release of its major tax violating information and records no dishonest tax-pay behaviour for six or 12 months.

5. New Measures for Import/Export Food Safety

On 12 April 2021, the General Administration of Customs (GAC) released the Measures for the Safety Administration of Imported and Exported Food (GAC Decree No.249) and the Provisions on the Administrative Provisions on Registration of Overseas Manufacturers of Imported Food (GAC Decree No.248).

Why it matters: GAC Decree No.249 covers a broad range of requirements on food exports to China, including the registration of overseas facilities, record filing by importers and exporters, quarantine and inspection, and product labelling.

In comparison with the measures currently in effect, among other things, GAC Decree No.249 emphasises that producers and operators are accountable for the safety of the food products they produce and handle and requires food importers to establish a system for the review of their suppliers, including overseas exporters and production facilities.

GAC Decree No.248 changes in registration and application methods and imposes new packing and labelling requirements.

6. Cosmetics Manufacturing and Operations

On 2 August 2021, the State Administration for Market Regulation (SAMR) released the Measures for Supervision of Cosmetics Production and Operation (SAMR Decree No.46) to be implemented from 1 January 2022.

Why it matters: SAMR Decree No.46 provides more detailed rules on the management of cosmetics production licenses and the production and sales of cosmetic products.

Among other regulations, the SAMR Decree No.46 will:

• Implement a notification and commitment system for the renewal of cosmetics production licenses, strengthen regulatory measures, and revoke the licenses of the unqualified producers and operators.
• Require the registrants and entrusted manufacturers of cosmetics to establish a sound production quality management system and implement the quality and safety responsibility system.
• Require trading markets and exhibition organisers to examine, inspect and report unlawful activities, and step up regulatory measures and responsibilities.

7. New regulations for Children’s Cosmetics

To strengthen the supervision and administration of children’s cosmetics and ensure the safe use of children’s cosmetics, on 8 October 2021, the National Medical Products Administration (NMPA) released the Provisions on the Supervision and Administration of Children’s Cosmetics (NMPA Announcement [2021] No.123).

Why it matters: The regulation specifies that children’s cosmetics should be specifically labelled. “Attention” or “Warning” should be used as guiding wording for children’s cosmetics, and warning words, such as “should be used under adult supervision”, should be clearly marked on the packaging.

Furthermore, the regulation stipulates that children’s cosmetics must not be labelled with wording that indicates it is made with food-grade or edible materials or labelled with food pictures.

8. Amended Trade Union Law

On 24 December 2021, the 32nd session of the Standing Committee of the 13th National People’s Congress adopted the Decision on Amending the Trade Union Law of the People’s Republic of China.

Why it matters: The Decision decided to expand the coverage of grassroots trade union organisations. It states that people working in enterprises, public institutions, government organs and social organisations in China, regardless of their nationality, race, gender, occupation, religious belief and educational level, all have the legal right to join and organise trade unions. No organisation or individual may obstruct or restrict their rights.

9. A New National Standard for Service in Senior Care Organisations

On 27 December 2019, the State Administration for Market Regulation (SAMR) and the Standardisation Administration of China (SAC) approved and released the Basic Specification of Service Safety for Senior Care Organisations (GB38600-2019), which came into force on 1 January 2022.

Why it matters: This is the first mandatory national standard in the field of elderly care services in China, clarifying a “bottom line” of service safety in elderly care institutions. It aims to help prevent, investigate and rectify potential safety hazards in elderly care institutions.

The basic requirements state that institutions for the elderly should comply with mandatory provisions for fire protection, sanitation and health, environmental protection, food and medicine, construction, and facilities and equipment standards. At the same time, service safety risk assessments should be carried out before the elderly are admitted to nursing homes, and the scope of service safety risk assessment should include choking, accidental ingestion of food and drugs, pressure ulcers, falls, and accidents in recreational activities, among others.

A version of this article was first published by China Briefing, which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world. 

The post 9 New Laws in China That May Affect Your Business in 2022 appeared first on Focus - China Britain Business Council.

As China endeavours to shift from a low-end mass manufacturer to a high-end producer, the government has doubled down on encouraging targeted investments in R&D and technological innovation. The ongoing technology confrontation with the US is another factor at play, impacting a wide range of segments from access to chips and other key input technologies and products. This has resulted in increased government support for the technology sector as a strategic one and for which government support has increased.

This article summarises the major tax incentives to encourage technology innovation currently available in China and how they can help UK businesses.

High and new technology enterprises (HNTEs)

HNTE treatment, which reduces a qualified taxpayer’s applicable corporate income tax (CIT) rate from the standard 25% to 15%, is one of the core tax incentives encouraging innovation in China.

In addition to the lower CIT rate, starting from 1 January 2018 for qualified HTNEs, losses that occur five years prior to the year in which they become qualified and have not been made up can be carried forward to subsequent years to be made up. The maximum carry-forward period has also been increased to 10 years (usually only five years).

To qualify for HNTE status, a company must meet a range of criteria, including owning the intellectual property rights for the core technology of its main product or service, and having more than 10% of its total staff engaging in R&D.

Starting in 2021, certain companies in Beijing can qualify for HTNE status with lower qualifications or via simplified procedures. To be eligible, a company must be a production and research enterprise engaging in integrated circuits, artificial intelligence, biopharmaceuticals, or key materials, with a reported annual revenue of over RMB 20 million; be registered in Beijing and be in operation for over a year; and spend at least 50% of total R&D expenses within China.

Qualified companies are required to provide far fewer materials than usual to apply for HNTE status, which can be submitted online. The National HNTE Leading Team Office will approve the application soon after the it has undergone expert assessment and review by the HNTE accreditation authority. The public comment procedure is also exempted, meaning overall turnaround time is much shorter.

Technology-based small and medium-sized enterprises (TSMEs)

TSMEs fall under the scope of SMEs that conduct technology-based activities and have scientific and technological personnel who are involved in R&D activities and obtain IP for creating high-tech products or services.

Unlike HNTEs, TSME status has special requirements on an enterprise’s number of total employees (no more than 500), annual sales revenue, and total assets (no more than RMB 200 million). On the other hand, while becoming an HNTE requires that the core technology of a company’s key products or services is specially encouraged by the state and the ratio of income from high-tech related operations against total income is not lower than 60% in the current period, TSMEs have no such requirements. In general, it is easier to apply for TSME status for smaller businesses.

Advanced technology service enterprises (ATSEs)

ATSE status is another core innovation tax policy to encourage the provision of information technology outsourcing (ITO), business process outsourcing (BPO), or knowledge process outsourcing (KPO) services to overseas entities. To be qualified as an ATSE, an enterprise must fulfil a range of requirements, including more than 50% of its staff holding a college degree or above.

Originally launched in the Suzhou Industrial Park in 2016, the ATSE incentive was rolled out nationwide in 2017, reducing the corporate income tax rate for a qualified ATSE from the standard 25% to 15%, similar to HNTEs.

In addition, ATSEs are subject to zero VAT for the provision of certain offshore services, which means they can be exempted where a simple tax computation method is applicable, or they can use the tax exemption, credit, and refund method where a VAT general tax computation method is applicable.

Summary

Beyond the major innovation tax policies introduced above, there are other preferential policies designed to encourage the development of the tech sector, such as the tax incentives for the integrated circuit and software sector and faster refund of VAT incremental credit balance for advanced manufacturing taxpayers.

Businesses in China may find documentation requirements and application procedures tough going if they are not familiar with the established tax system and eligibility criteria for accessing supportive measures. It is recommended that potentially qualified enterprises carefully study the application requirements for each incentive and choose one or more best suited to their own situation. For example, ATSE status is more suitable for an enterprise that doesn’t own the local IP rights of the key technologies of its core products or services, since HNTE status has local IP requirements.

A version of this article was first published by China Briefing, which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world. Readers may write to info@dezshira.com for more support.

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The prognostications of most China analysts turned out to be right, and speculation over whether President Xi Jinping had the base to pass what is only the third ‘Resolution on History’ of the CCP’s existence was unfounded. Still, those putting forward such analyses were correct to draw attention to the fact that this week’s meeting presented the last chance for political horse-trading among senior CCP officials before next year’s Congress, even though the headline result was only ever going to go one way: the Party’s is in full support of President Xi.

As the communiqué explains (read the full text in English here), the Party needed to review its history because it is about to embark on a new journey: what it calls the Beginning of a New Phase to Achieve the Second Centenary Goal, which is the Great Rejuvenation of China. It is important to note that the communiqué, which acts as a kind of executive summary to the Resolution (which FOCUS will explore in more detail in a future post), does not put forward a revisionist history of the Party, differentiating it from its predecessors.

Mao and Deng’s ‘Historical Resolutions’ both applied a historiographical lens to the events that afforded the Party’s coming to power and criticised previous Party leaders – making alterations to the CPP’s records where needed – but President Xi’s Resolution appears solely focused on substantiating China’s current position. By proving that the Party has achieved its first centenary goal of building a ‘moderately prosperous society’ that each previous leader contributed to by fulfilling their ‘mission’ while in office and that “Marxism has been fully tested as a scientific truth,” the communiqué is teeing up a resolution rooted in ideology rather than consideration of the past.

The Plenary Session also offered a chance to reflect. Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era  – not yet foreshortened to ‘Xi Jinping Thought’, suggesting that the Party being on the verge of a ‘New Era’ is of paramount importance – makes multiple appearances, as does President Xi himself: 17 of him and seven of his Thought, compared to seven of Mao and five of Mao Zedong Thought; five of Deng Xiaoping and four of Deng Xiaoping Theory, and just one apiece of Hu Jintao and Jiang Zemin, plus four mentions of their ideologies.

Furthermore, President Xi is newly presented as an ideologue, his eponymous ideology acclaimed as nothing less than “Contemporary Chinese Marxism… 21st Century Marxism… and the essence of Chinese culture and… spirit.” But putting all that to one side, perhaps the most significant development is that during the press conference of the central committee of the CPC, a senior party official named President Xi the ‘Helmsman’ to China’s ship on its journey to rejuvenation; a term previously reserved for Mao.

After the publication of the Resolution, analysts anticipate further clarity on several crucial areas where the communiqué is conspicuously light, including Hong Kong and Taiwan, what the Party’s exact goals are for this ‘New Era,’ and how it will carry out initiatives such as Common Prosperity.

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