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News from China
Smart policies help mitigate effects of the pandemic
3rd April 2020

 During this historic time, COVID-19 has become a truly global scourge.

 
Prior to the pandemic, the global economy faced various challenges with many businesses already experiencing economic hardships.
 
The pandemic now poses much greater threats to the global economy and most of the people on Earth.
 
While recovery will eventually take hold, the current uncertainty and panic surrounding COVID-19 have led to economic turbulence and stock market roller-coasters.
 
Countries affected by COVID-19 have little choice but to lock down their economies, while businesses face an unexpected disruption with steep declines in capital investments. 
 
Key industries have been economically compromised, and the ensuing effect coupled with disrupted supply chains portend an economic downturn that some economists suggest could result in an economic depression.
 
Supply Chain Management Review, reports that “most industrial companies only have 30-60 days of parts and raw materials on hand, in transit, or obtainable on short notice. After these supplies run out, companies would start to see shortages of finished products as well as parts needed to produce other goods.”
 
The United Nations Conference on Trade and Development forecasts “a slowdown in global growth to below 2.5 percent and a US$1 trillion cost to the global economy” due to the COVID-19 shock.
 
A glance at global measures
 
To help markets, central banks have pledged to relieve financial stress around the globe. Strategies include coordinated monetary policies such as emergency rate cuts. Meanwhile, international organizations and major economies have also issued multiple economic stimulus packages designed to mitigate financial losses and prop up economies around the world.
 
The World Bank announced “an increased US$14-billion package of financing will support a fast, flexible response to COVID-19,” aiming to help companies, strengthen health-care systems and improve disease surveillance.
 
G7 leaders pledged to work with countries around the world to mobilize a full range of instruments, including monetary and fiscal measures, as well as targeted actions offering immediate support to workers, companies and sectors most affected by the pandemic.
 
The CARES ACT (The Coronavirus Aid, Relief, and Economic Security Act) has been signed into law in the United States on March 27. The US$2 trillion legislative package aims to keep workers paid, enhance health-care system and eventually to stabilize the economy.   
 
The European Council enacted a range of measures to support its member states as part of a group of coordinated responses to protect EU economies.
 
In Asia-Pacific, the New Zealand government released its "NZD12.1b Business Continuity Package," while the Philippines has closed financial markets. The Australian Taxation Office released a series of support protocols for large businesses whose tax-reporting obligations have been disrupted.
 
A closer look at China
 
As a major economy still battling COVID-19 but gradually moving forward on the road to recovery, China has enacted several economic-stimulus measures to help businesses navigate through this challenging time.
 
A series of finance and tax policies at both central and local levels should help mitigate economic damage.
 
Five ministries jointly issued 30 measures proposing to:
 
• Remove the cap on foreign debt and facilitate online foreign-debt registration;
 
• Expand lending to key industries, such as manufacturing, private enterprises and small businesses with thin profit margins;
 
• Defer or reduce rents and interest on financial-leasing companies;
 
• Fast track foreign-exchange verification, cancellation and settlement processes to support cross-border financing and companies involved in contagion prevention and control.
 
Meanwhile, the Ministry of Finance published fiscal-support policies, including subsidies on loan interest and fee reductions.
 
The People’s Bank of China has injected a total of more than 1.7 trillion yuan (US$242 billion) step by step on reverse repos through open market operations while cutting the one-year lending facility rate by 0.1 percent and slashing the one-year and five-year prime rates by 0.1 percent and 0.05 percent, respectively, as well as lower the bar for bank reserves.
 
The government will also reduce or exempt business contributions to social-insurance programs and allow businesses to defer housing-fund payments.
 
In addition, business have received tax reductions, including direct and indirect tax cuts, extra donation deductions and tax-filing deadline extensions. For example, taxpayer income from medical-supply transportation services, delivering daily essentials, serving public transportation and other livelihood services is exempt from VAT and local tax or surcharges.
 
To cope with the pandemic, many medical, protective-supplies and logistics companies (key supply companies or KSMs) are trying to keep up with the exponential growth of market demand. In addition to a manpower shortage, these KSMs need more capital investment to increase capacity.
 
To support additional production capacity, the Chinese government allows equipment purchased (no cap on unit value) by KSMs to be treated as one-off tax-deductible items, while full refunds are granted to recoup incremental-input VAT credits accrued. Such incentives help reduce cash-flow issues.
 
COVID-19 has had a much greater effect on traditional service businesses, including transportation, tourism, hotels, and restaurants, than digital companies, because these industries employ more people.
 
Responding to these challenges, local governments have also established a batch of short-term hardship relief programs, including:
 
• Real-estate-tax (RET) and urban-land-utilization-tax (ULUT) exemptions for small and medium-size companies;
 
• Landlords offering reductions or exemptions on office rent for self-employed industrial and commercial households will be allowed to claim RET and ULUT exemption;
 
• Some local governments, such as Chongqing, Fujian, Guangdong, Hebei and Shanghai, are evaluating short-term tax relief for qualifying self-employed workers and small businesses.
 
Look into the future
 
We remain confident that China’s economy will gradually recover while the pandemic's impact diminishes. However, global economic growth will certainly suffer — and take time to recover.
 
Smart government policies should help companies bounce back. Businesses should review the criteria of specific policies and related administrative requirements. For example, applications for deferred housing payments should be submitted by the end of June.
 
More details about the application process will be available on https://www.shine.cn/. 
 
With the contagion in China gradually under control, strong recovery measures not only support businesses, they also boost market confidence. 
 
(Jane Hui is partner of EY International Tax and Transaction Services and EY China Tax Technical Center Leader. Shirley Yong is executive director of EY China Tax Policy & EY China Tax Technical Center. The authors would like to thank Eileen Zhao and Lucia Lu from EY China for their contributions to this article. The views reflected in this article are the views of the authors and do not necessarily reflect the views of the global EY organization or its members
Source: Shanghai Daily, April 3, 2020
Watchdog cuts red tape on electronic seals, licenses
2nd April 2020

 Shanghai's market watchdog cut red tape for enterprises in the city on Wednesday by introducing the synchronous issuance of electronic operating licenses and seals amid the coronavirus pandemic.

 
"The e-versions of licenses and seals have the same legal power as physical licenses and seals," said Chen Xuejun, director of the Shanghai Administration for Market Regulation.
 
Previously, companies were allowed to apply for electronic seals only after they received physical licenses and seals, which are mandatory in order to operate a business.
 
Applicants were also required to present original paper licenses, as well as copies, before they could get an e-version of their seal, said Chen.
 
"Now, electronic licenses and seals are automatically generated when a company's business operation is approved, and they can receive both at the same time via mobile phone," said Chen.
 
The electronic versions can be downloaded via WeChat, Alipay or Suishenban Citizen Cloud, an app for Shanghai's one-stop platform for government affairs, according to the administration.
 
"Enterprises can sign contracts and conduct business operations online with their electronic licenses and seals," said Chen.
 
They are also allowed to apply for registration, publicize their annual reports, handle tax affairs and social insurance affairs online with the e-licenses and seals, the administration said.
 
"The new measure is a reform and breakthrough in the business environment system, and improves government affairs services," said Chen. "It is another step forward toward paperless business."
 
Three Shanghai companies were the first to receive the e-licenses and seals in the city on Wednesday morning.
 
"It's very convenient with simple clicks online," said Chen Jin, with Yanxin Gardening Decoration Co Ltd.
 
"The whole process is done online, which is particularly good amid the coronavirus epidemic," he said.
 
Chen Jin has already registered three companies.
 
"When I applied for a business operating license for one of my companies in 2012, I needed to visit different government authorities in Songjiang District to apply for tax affairs, a seal and a license," he said. "It involved at least seven to eight visits and sometimes I needed to visit again due to insufficient materials."
 
"It took me more than 10 working days to have everything arranged," he added.
 
He said he will still apply for a physical seal, but for now his company can operate with an e-version, which he says can be recognized by 80 to 90 percent of his clients.
Source: Shanghai Daily, April 2, 2020
China moves to ensure quality of medical supply exports
1st April 2020

 China has taken new measures to ensure the quality of medical supplies exports amid the global fight against the novel coronavirus disease, authorities said.

 
Starting Wednesday, exporters of medical products including COVID-19 testing kits, medical face masks, medical protective suits, ventilators and infrared thermometers need to provide extra documentation when they go through customs clearance, according to the commerce ministry.
 
The document, in either print or digital form, should contain a declaration that the products have been officially registered in China and meet the quality-control standards of respective export destinations, the commerce ministry said in a notice on its website.
 
The customs will release the exports based on certificates of registration approved by medical product administrations, according to the notice jointly issued with the General Administration of Customs and the National Medical Products Administration.
 
The notice urges exporters to ensure the quality of their products to help the international community fight the epidemic.
Source: Shanghai Daily, April 1, 2020
China's manufacturing PMI rebounds in March
31st March 2020

 The purchasing managers' index for China's manufacturing sector firmed up to 52 in March from 35.7 in February, the National Bureau of Statistics said on Tuesday.

 
A reading above 50 indicates expansion, while a reading below reflects contraction.
 
The rebound came as the country's arduous efforts in coordinating epidemic control and economic and social development have generally filtered through, NBS senior statistician Zhao Qinghe said.
 
With positive changes taking place in domestic epidemic control and prevention, 96.6 percent of China's large and medium-sized enterprises have resumed production, up 17.7 percentage points from one month ago, NBS survey showed.
 
A sub-index for production, rallied 26.3 points from one month earlier to 54.1, hinting at reviving production activities.
 
However, Zhao said the single-month rise does not necessarily mean the production has been back to pre-outbreak levels, noting that more data should be observed.
 
The upturn of economy, Zhao said, only comes when the PMI moves up for at least three consecutive months.
 
Tuesday's data also indicated a remarkable improvement in market demand, as the sub-reading for new orders stood at 52 in March, higher from 29.3 in February.
 
Meanwhile, the PMI for high-tech manufacturing, equipment manufacturing and consumer goods all stood in expansion zone, signaling quickened restoration in the sectors, according to Zhao.
 
China's March composite PMI rose significantly to 53, up 24.1 points from February.
Source: Shanghai Daily, March 31, 2020

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