Establishing Abroad visited the event Doing Business in China, organized by Grant Thornton in Stockholm. After a traditional introduction at the event, we had the opportunity to listen to a young Chinese woman, Rose Zhou (the picture), who is a partner at Grant Thornton in Shanghai.
Rose gave us a very good presentation on taxation and management in China. During her speech, we observed similarities with our European countries. Just do it the right way from the start and you will be able to overcome many problems in the establishment process.
In China, there are different regions just like anywhere else. In these regions, the state tax is 50 percent of the total tax rate and the remaining 50 percent is up to the region to decide.
Here, companies have the opportunity to negotiate, so if you are planning to build a factory in China Rose recommended to travel to the different regions and negotiate with the various authorities.
If you start to build a factory before the negotiations are completed, the negotiating position will be worse, which will worsen the conditions for the establishment.
Rose said that the infrastructure in China still has many shortcomings. The people in China have a great imagination when it comes to resolving deficiencies in infrastructure by simple means. They try to find a way to solve the problem in the easiest way. It is encouraging that people take their own initiative, but the negative part is that the authority defend themselves by saying it still works.
The income tax in China is around 20 percent for most revenues. If you earn lots of money and pass the 100 000 SEK level, the income tax is 28 percent. The corporation tax is 5 percent.
All employers pay social security contributions for their employees at the amount of about 3000 SEK, regardless of income level and per month.
Discussions about corruption in China occurred. Of course it exists, as in virtually all countries in the world. Rose says that the authorities are very active in combating corruption. One step in this work is that a person working as the head of an authority that can be exposed to corruption will be employed for a maximum of three years only. Then a new person will be in charge.
Today, businesses establish operations in China mainly to reach out to this enormous market. China covers an area that is 20 times larger than Sweden and there are 140 times more inhabitants. The growth in China was + 8.7 percent in 2009 compared to Sweden where the figure was - 4.4 percent.
We also had the opportunity to listen to Helge Hareland who is head of NIP, Nordic Industrial Park, in Ningbo. This is an enormous park where Scandinavian companies establish operations.
Helge said that if you are about to establish operation in China and want to bring your own staff along, it is important to simply bring the most competent employees.
Helge has noticed the attitude that many companies choose to send the employers they do not really want to work with. This may result in that the establishment process takes longer and that there may be skills shortages.
Cecilia Helland