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Welcome to JLJ's e-newsletter - China Focus. Here, we hope to share with you the latest regulatory updates and useful information relevant to China's business environment. This e-newsletter is brought to you, our valued network, as part of JLJ's value-added service.
Capital Injection Requirements in China
 The process of registering a business in China is considered complete only after capital injection and verification. Below are the two options of capital injection that companies can choose from:
1. Full injection within six months from the issuance of the business license.
2. Or 15% to 20% injection within 3 months from receiving the business license, and the remaining over 2 years.
Several types of assets are acceptable as part of the capital injection, including a minimum cash value equivalent to 30% of the registered capital, fixed assets, intellectual property such as copyrights, land-use rights and shares in another company or objects with monetary value.
In the case where the company fails to inject their registered capital within the time period stated in their chosen injection option, it would be considered a felony by law and the company's business license may be terminated. It is also important for companies to update the relevant bureaus and their business license after each injection. Before a company completes full capital injection, it will not be allowed to change its office location, setup branch offices or increase their registered capital. It is thus crucial for foreign companies to understand the capital injection requirements in order to protect their businesses as well as to comply with China's regulations.
For more information, please email to salina.leong@jljgroup.com.
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China Taxes for Headquarters and Branches
Enterprises with headquarters and branches in different provinces are now required to allocate their monthly or quarterly provisional taxes among the different entities, as well as file and pay their Corporate Income Tax (CIT) in their respective provinces. The collected taxes will then be distributed among the central government, local government as well as a temporary account in which the amount will subsequently be re-allocated to local governments. This new tax system serves to address the concerns that provinces hosting branch companies are losing their tax revenue to the provinces where the headquarters are based in. The Diagram below explains the calculation for the provisional CIT of each entity.
However, some establishments of an enterprise are not required to remit provisional CIT locally. These establishments include Third-tier branches, Second-tier branches that only provide internal support and are not BT or VAT taxpayers, overseas branches as well as branches of resident enterprises with low profitability in previous years.
For more information, please email to salina.leong@jljgroup.com.
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Tier 2 cities series: Shenzhen
Shenzhen is located in the Pearl River Delta in Guangdong province and was the first city in China to be designated as a Special Economic Zone. The city's superior geographical location is one of the reasons for its rapid economic development in the last decade. Besides being near the Pearl River, which facilitates domestic connectivity, Shenzhen is also bordering Hong Kong. It has a relatively mature business environment with good infrastructure and a young workforce that comes from all over China.
With a GDP per capita of about $10,628 in 2007, Shenzhen has become one of China's wealthiest cities. The city is also a popular destination for foreign investors, having attracted $3.6 billion worth of FDI in 2007. This presents about 4.8 % of the China total. The following table provides an overview of the key macroeconomic data.
Shenzhen is also home to China's second stock exchange and its rapid economic development has made it an important consumer market. Initially, much of this rapid growth was contributed by its role as a low-cost manufacturing center, where thousands of Hong Kong and Taiwan based manufacturers moved their production plants to. Consequently, Shenzhen became one of the most important mass production centers especially for textiles, toys and electronics in the 90's. Today, it is also one of China's top markets for automobiles and a rapidly growing retail center.
For more information about Shenzhen or any specific industry, please view JLJ's Industry Reports here or email to katja.friedrich@jljgroup.com.
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Recruiting? Be Effective...
 Companies use different resources to aid them with employee recruitment in order to fulfill positions that are needed within their organizations. Below are a few options commonly used by employers in China.
1. Engaging Professional Executive Search Firms
Due to the shortage of talent in China, employers often face difficulties in locating candidates with executive management experience or specialized skills. Therefore, many employers find it worthwhile to pay a higher fee to engage executive search firms so that they can effectively find the right person for the position, reach a wider pool of candidates through the search firm's network, including those who are not actively looking to change jobs and avoid costly hiring mistakes such as miscommunication about job expectations. Moreover, executive search firms can operate confidentially if companies do not wish to disclose the candidate search publicly for internal strategic motive or competitive reasons.
2. Online Job websites and Staffing Agencies
This is most suitable for positions such as customer service, call center representatives, receptionists and any positions that do not require specific high-level skills. Generally only a small fee is needed for companies to use online job boards. However, it takes a lot of patience to sift through the email responses from the loads of entry-level job seekers produced by China's universities. Companies can also choose to engage staffing agencies to assist them with this tedious process, for a smaller fee as compared to that paid to a professional executive search firm.
3. Internal Referral Program
To encourage employees to refer friends who are reliable to take up available positions, many companies have developed Internal Referral Program. Typically, the referee receives cash reward for the successful recruitment of the person they introduced.
For more information about JLJ's Executive Search and Staffing Services, please email to cherryli@huijiechina.com
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The JLJ Group
The JLJ Group provides solutions to foreign companies entering and growing in China. Our core services include Market Consulting, Corporate Formation, Human Resources, Tax & Accounting as well as Business Process Outsourcing.
Send us your business enquiry at info@jljgroup.com or find out more about our services at www.jljgroup.com. |
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