China’s Digital Economy: The Shape of Things to Come

by Ana Cicenia

Recently, the city of Wuhan announced that they will be opening a police station run solely by artificial intelligence (AI) – no employees need apply. Although the station would be limited to vehicle and driver related administrative work, the government anticipates increasing AI use in many other areas of governance.

Automated government offices like these are just one way that new technologies are being integrated into the Chinese society. It also represents a larger trend in the Chinese economy: the growth of the digital economy. In 2016, China’s digital economy accounted for 30.3 percent of GDP, an 18.9 percent rise from 2015, according to a China Academy of Information and Communications Technology (CAICT) white paper.

The digital economy is part of the government’s vision of an economy driven by innovation – a key part of their goal of making domestic firms more competitive globally. In recent years, the Chinese government has pushed several national economic initiatives aimed at the development of the digital economy. These include the 13th Five Year Plan (March 2015), Made in China 2025 (May 2016), the Robotics Industry Development Plan (April 2016), and the Three-year Guidance for Internet Plus Artificial Intelligence Plan (May 2016).

China has shown that it has ambitious plans to upgrade its economy and industrial policy – and these efforts are accelerating going into 2018.

Plans for 2018

On October 11, 2017 the National Development and Reform Commission (NDRC) published the Notice on the Organization and Implementation of the Internet Plus Action, the Creation and Development of Artificial Intelligence and the Major Pilot Projects of Digital Economy in 2018 (“the Notice”).

The Notice clarifies what kinds of projects are eligible to be considered a “major pilot project” and can receive funding and other forms of government support and benefits. Although these areas are not completely distinct from each other and often overlap, they offer varying opportunities for foreign investors.

Internet Plus

Premier Li Keqiang first introduced Internet Plus in a speech in March 2015. The term refers to the use of the Internet and information technologies, such as big data, cloud computing, and the Internet of Things (IoT) in traditional industries. These technologies have the potential to revolutionize almost every sector of the economy and have already shown promise in manufacturing, finance, agriculture, and medicine.

Internet Plus manufacturing, for example, integrates IoT technology, where a network of devices and sensors can record and communicate data such as energy consumption, heat levels, and inventories. This increases efficiency at every stage of the factory line and can even continue to track data as the product moves through the supply chain, largely eliminating human made error.

There is space for foreign investment in Internet Plus sectors not subject to the Negative List and investors should also expect to see exciting opportunities within the newly transformed traditional industries.

Investments into the following project areas are eligible for incentives under the Notice:

  • Cloud computing (including next generation cloud computing operating systems), edge computing platforms and applications, and heterogeneous computing platforms and applications;
  • Internet of Things (IoT), including the location-based semiconductor industry, autonomous vehicles, drones, and robot sensors; and
  • “Internet+” customer service and customization platforms, flexible manufacturing and supply chain management platforms.

AI Initiative

AI refers to intelligence displayed by machines, the ability of computers and systems to think. Applications vary wide from facial recognition and voice recognition systems to machine learning, which enables computers to look at large data sets, search for patterns and make predictions.

As AI continues to improve, new industries and applications will be opened to the AI revolution. In the past few years, the government has prioritized and invested heavily into AI. As a result, China’s AI capability has raced ahead and is expected to surpass the US very soon.

Although, China’s internet sector has been historically off-limits to foreign investment leaving foreign investors with a significant disadvantage, opportunities for joint ventures can offer high rates of return.

Investments into the following project areas are eligible for incentives under the Notice:

  • Core technology and application of AI (including deep learning semiconductors), applications, and open-source platforms;
  • Public service and infrastructure platform projects (including facial-recognition systems and applications and voice-recognition systems and applications);
  • Intelligent unmanned system applications, including drones; and
  • Intelligent robotics development and application projects (including high-end service robots).

Digital Economy Initiative

Digital economy is an economy that utilizes digital computing technologies, or more generally, any industry that integrates the internet into their products or services. Major examples include e-commerce, e-business, and telecommunications.

China is already poised to be the world leader in this respect; e-commerce is booming with giants like Alibaba and Tencent. Additionally, more than half of e-commerce transactions in China are made on mobile devices, and companies with existing social media platforms – like WeChat – are leveraging their customer base to enter the e-commerce business.

Foreign investment is welcome in various forms, a subsidiary company, a joint venture and more recently WFOEs. Foreign investors can apply for an internet content provider (ICP) license to conduct e-commerce businesses in FTZs and pilot zone cities.

Investments into the following project areas are eligible for incentives under the Notice:

  • Government information consolidation and sharing application projects;
  • Big data applications in healthcare, transportation, education, finance, logistics, environmental protection, and location information;
  • Digital economy public infrastructure, including e-governance platforms and e-commerce credit systems;
  • China-ASEAN digital hub pilot projects;
  • OBOR digital cooperation projects.

Challenges for foreign investors

Although sectors like AI and e-commerce are open to foreign direct investment, foreign AI firms might face trouble with the required national security reviews as these technologies are either dual-use or have implications for Internet security.

Additionally, because the Chinese market is already populated with major players like Alibaba, JD, and Xiaomi that have a monopoly on the existing customer data, the most prudent route would be for foreign investors to seek out joint ventures.

Domestic and foreign investors alike should also pay close attention to China’s new Cybersecurity Law and its potential effects on investments in the Internet Plus, AI, and digital economy fields.

Announced in November 7, 2016, the Cybersecurity Law covers data protection and “cyberspace sovereignty”. Under the law which went into effect on June 1, 2017, “critical information infrastructure” businesses and firms with access to personal information are subject to data localization requirements.

Although the government gave companies a 19-month grace period to comply with parts of the law, the data localization requirements will significantly increase data processing costs for companies, especially for those firms that are leveraging big data.

The law also poses a strange contradiction to the government’s support for a growing role of the digital economy and its use of big data. With the advent of IoT and the various applications of AI, all of which require large collection of data, there’s a potential that the law could touch on a wider variety of products and services than anticipated.

Similarly, Chinese companies can expect some difficulty expanding abroad as several countries have formed their own cybersecurity regulations. For example, the EU’s General Data Protection Regulation (GDPR) establishes specific customer consent practices as well as data localization requirements by certain member countries.

In spite of these difficulties, China’s digital economy does not seem to be slowing down. E-commerce especially has exploded in the last several years, with China taking up 40 percent of the global e-commerce market, and the rapid growth of mobile payment systems has transformed the way people consume. If this trend continues, China watchers should expect continuing innovation and growth in this sector.

Foreign Investment in Guangdong: New Incentives Announced

By Alexander Chipman Koty and Zhou Qian

Guangdong province, China’s manufacturing heartland, has announced new measures to attract foreign investment.

On December 1, the Guangdong provincial government issued a report delineating 10 policies to expand the province’s openness to foreign investors and foreign capital.

The measures are in support of the State Council’s Measures to Expand Opening-up and Actively Utilize Foreign Investment (Guo Fa [2017] No. 5) and the Measures to Promote Foreign Capital Growth (Guo Fa [2017] No. 39). They include policies to improve Guangdong’s business environment, promote fair competition between foreign and domestic companies, expand market access, and offer investment incentives.

The 10 measures for relaxing foreign investment:

  1. Further expand market access, including relaxing ownership limits and/or operation scope in the following industries:
    • Special vehicle manufacturing;
    • New energy vehicle manufacturing;
    • Ship design;
    • Regional aircraft and general aircraft maintenance;
    • Human resources service agencies;
    • International maritime transport companies;
    • Railway passenger transport companies;
    • Construction and operation of gas stations;
    • Internet service and call centers;
    • Performance brokerages;
    • Brokerage, banking, securities, futures, and life insurance companies;
    • Law firms jointly owned by Hong Kong/Macau investors and domestic investors; and
    • Hong Kong/Macau airlines will be treated as special domestic airlines.
  2. Increase the use of financial incentives for foreign investment for the 2017-2022 period, including:
    • For new projects worth more than US$50 million, replenishment projects worth more than US$30 million, and for multinational or regional headquarters worth at least US$10 million, the provincial government will give financial bonuses worth no less than two percent of the year’s actual investment amount, capped at RMB 100 million (US$15.1 million).
    • For Fortune 500 companies and leading global companies with actual investments (new projects or replenishment projects) in manufacturing worth over US$100 million in one year, and newly established IAB (new generation of information, automatic equipment, and bio-pharmaceuticals) and NEM (new energy, new material) projects with actual investments of no less than US$30 million in one year, the provincial government will provide financial support on a case-by-case basis.
    • For multinational or regional headquarters that contribute over RMB 10 million (US$1.5 million) to provincial revenue, 30 percent of the contributions will be awarded to the company in a lump sum payment, capped at RMB 10 million (US$1.5 million).
    • Local governments can provide other financial incentives based on provincial incentive standards.
  3. Strengthen the use of land security, including land-use incentives for Fortune 500 companies, regional headquarters, and advanced factories.
  4. Support innovation and research & development (R&D), including financial support for foreign R&D institutions and encourage participation in the development of public service platforms.
  5. Increase financial support, particularly for Fortune 500 companies, global industry leaders, and cross-border mergers and acquisitions.
  6. Strengthen personnel support, including incentives and visa conveniences for high-level foreign talent.
  7. Strengthen the protection of intellectual property rights, including by accelerating the construction of the China (Guangdong) Intellectual Property Protection Center.
  8. Enhance the level of investment and trade facilitation, including the full implementation of the Negative List and access to national treatment.
  9. Optimize the environment for attracting foreign investment in key parks, including implementation of administrative streamlining in eligible development zones and other supportive policies.
  10. Improve the use of foreign investment guarantee mechanisms, including setting up a coordinated mechanism to coordinate and solve the key problems that prevent investment in Guangdong.

Pre-Investment, Market Entry Strategy Advisory Services from Dezan Shira & Associates

The measures represent a step forward in boosting Guangdong’s competitiveness in attracting foreign investment. Although Guangdong is China’s richest province by GDP, and already one of the most open to foreign investment, rising labor and land costs have seen many businesses relocate their manufacturing operations to lower cost alternatives, such as Western China, Vietnam, and India.

Some areas in Guangdong have been successful in upgrading their local economies beyond low-value manufacturing. Most notably, Shenzhen has emerged as a hub for innovation and high-tech startups, and also boasts a robust financial sector.

Guangzhou has also had success in moving up the value chain, by producing higher-end goods like automobiles and high-tech products, while surrounding cities like Foshanhave also benefited from regional integration and high-tech manufacturing.

The new measures reflect Guangdong’s continued desire to attract high quality capital-heavy investments; many of the policies specifically state a preference for Fortune 500 companies or recognizable industry leaders.

Stephen O’Regan, Senior International Business Advisory Associate at Dezan Shira & Associates in Guangzhou said, “These new regulations certainly show a more open approach by the Guangdong government towards foreign investment, particularly in trying to attract high level talent. However, many smaller companies still find it difficult to incorporate in China; the country is lowering entry barriers only for already strong enterprises.”

According to O’Regan, “The new policies show a step in the right direction, but overseas SMEs may still find it difficult to enter the south China market without more government support”. In this environment, local expertise proves valuable.

O’Regan noted that SMEs can still benefit from some of the new measures both directly and indirectly, as well as other regional incentives. He explained, “Many of Guangdong’s cities offer incentives and subsidies that foreign SMEs find attractive. The Guangdong government is ultimately paving the way for more foreign SME investment by making it easier to access incentives.”

Bitcoin Market Unfazed by China Ban

By Melissa Cyrill

Bitcoin trading recently bounced back to US$7,000, recovering after a historic dip in value following Beijing’s crackdown on cryptocurrencies in September. Bitcoin is both a digital currency and payment system that is managed by decentralized computer networks.

The ten-fold increase in bitcoin’s value over last year reflects a level of market optimism that is puzzling for independent observers. This has not gone unnoticed by the country’s regulators, which recently banned all initial coin offerings (ICOs), or fund raising activities, for new cryptocurrency ventures.

 

Bitcoin mining in China

Bitcoin was created in 2009 by Satoshi Nakamoto, whose identity remains disputed, as a form of electronic peer-to-peer cash system. Since then, the technology behind the cryptocurrency has become even more sophisticated and secure – its origins after the global recession of 2008 driving its innovation.

Cryptocurrencies, such as bitcoin, operate through blockchain technology: encrypted and linked transaction data that include time stamps. New bitcoins get released through a process called mining – where transactions are verified, and added to the public ledger, known as the blockchain.

To be profitable, cryptocurrency mining requires an advanced degree of computer processing power, making China an ideal base for such operations. China is the world’s leading electricity producer and provides important energy subsidies – bitcoin mining is an electricity-intensive operation.

Bitcoin mines are established through giant warehouses that host thousands of custom-designed computing machines to check transactions and release new bitcoin. This is why China has consistently accounted for over 75 percent of the world’s bitcoin trade, aside from the drop in September.

 RELATED: Establishing a Data Center in China

Bitcoin still popular despite ban

The digital and encrypted structure of bitcoin makes it secure and beyond currency manipulation. Its anonymity also brings it outside the purview of central banks, allowing it to exist independent of state control such as via audits or regulation. These characteristics make it popular among diverse groups of people, including speculators, investors, and entrepreneurs.

Traders, for one, look at returns that are much higher than from speculating on derivatives, commodities, or bonds. An increasing number of China-based investors also appreciate the security of bitcoin as alternative financial assets in a saturated Chinese market. Finally, entrepreneurs are keen on the industrial application of blockchain technology, which forms the basis of bitcoin – across sectors as diverse as logistics and banking to the Internet of Things.

It is no wonder, then, that as regulators made cryptocurrency exchange illegal on the mainland, these operations shifted offshore – to Hong Kong, Singapore, London, and Estonia. Many China-based bitcoin or other cryptocurrency exchanges refused to shut down, choosing instead to move their servers abroad.

Alternately, fund transfers are also taking place through local currency on peer-to-peer lending platforms. It remains to be seen how long these arrangements escape the state crackdown.

Motivation behind crackdown

The sudden ban on cryptocurrency trade and exchange comes as regulators clamp down on the larger malaise of money laundering and financial crimes: dubious loans, trusts, and lending to non-banking institutions, as well as tax evasion. This has led some to feel that bitcoin and its peers are merely the incidental victims of tightening financial regulation.

Nevertheless, as bitcoin has become popular, so have criminal activities begun to emerge around it. Authorities, for instance, point to a high-profile case in China where scammers collected US$1.82 billion through a pyramid scheme advertising a product they described as the next great cryptocurrency.

In addition to combating financing of illicit activities, the crackdown fits into Beijing’s wider goal of reducing structural financial market risks. Because cryptocurrencies function outside of state control, they could pose a risk to these efforts.

 RELATED: Business Advisory Services from Dezan Shira & Associates

Chinese government explores its own alternative, Japan legalizes cryptocurrency

Nevertheless, China’s central bank is equally keen on the secure and encrypted nature of blockchain technology, which fuels cryptocurrencies.

In a strategy similar to the Bank of England, and central banks in Sweden, Canada, Singapore, and India, China, too, is exploring the possibility of creating its own digital currency. To this end, the PBOC set up a Digital Currency Research Institute in May this year, and is looking to recruit experts in encryption, blockchain technology, and big data.

Meanwhile, elsewhere in the region, Japanese regulators have recognized cryptocurrencies as legitimate forms of payments. In September, Japan officially began to license bitcoin exchanges.

How tax optimization can maximize the returns on your investment property

George Kachmazov

 

If you’re not careful, taxes can eat away at the bulk of the income you should be earning on your foreign investment properties.

This fact alone sends chills down the spines of property investors everywhere. A recent survey conducted by Tranio.com revealed that 18% of property investors believe structuring purchases for maximum tax optimisation is the single most difficult part of acquiring real estate abroad.

To further complicate matters, more than 100 countries have committed to the Common Reporting Standard (CRS), an initiative developed by the Organization for Economic Co-operation and Development (OECD).

In accordance with the CRS, between 2017 and 2018 countries around the globe will launch the automatic exchange of financial account information, dispelling the opacity that previously enabled wealthy citizens to squirrel their money away into foreign bank accounts in order to dodge tax obligations in their home countries.

In light of the shifting realities of tax optimisation, I want to offer you some advice on how to acquire foreign properties with tax optimisation in mind. Please note that this is general advice. I strongly encourage you to consult a tax advisor who is familiar with the nuances of your situation before you purchase any property.

 

Pros and cons of purchasing a property as an individual vs. via a legal entity

 

If tax optimisation is a key priority, you would do well to begin by determining whether it would be wisest to purchase your property as an individual or via a legal entity.

Because tax rates and terms differ considerably between these two categories, your choice in this matter will have a key impact on your total tax obligations in connection with the property.

The table below outlines some of the basic differences:

 

 IndividualLegal entity

Advantages— No need to pay the costs associated with maintaining a company;

 

— Capital gains taxes can be lower for individuals than for legal entities (some countries provide capital gains tax exemptions after a few years of property ownership)

— If the property generates significant profits, tax rates may be lower for legal entities than for individuals;

 

—  The possibility of exemption from capital gains and dividend taxation if the rules of strategic participation apply;

—  In some countries, i.e. Germany and France, no inheritance tax applies to property acquisitions by a company;

—  Increased flexibility with respect to selling shares or the property itself;

—  Greater protection against the disclosure of information.

Disadvantages— Income tax can be higher for individuals than for legal entities;

 

— No flexibility with respect to withdrawing from the sale

— It is impossible to conceal the identity of the beneficiary.

— There are costs associated with running a company;

 

—  In some countries, i.e. the United Kingdom and France, specific property taxes apply to legal entities.

 

 

* Please note that the information contained in the table above is subject to variation depending on which country you’re purchasing property in and a wide range of other factors. It’s always important to consider your unique circumstances and consult with relevant professionals before making any purchase.

When our clients are considering purchasing a property valued at about EUR 1.25 million or less, we generally recommend that they make the purchase in their individual capacities. It is typically cheaper and easier to do so due to the additional expenses associated with opening and maintaining a company.

However, this isn’t universally true; in some countries, individuals are subject to higher income tax rates than legal entities, which can offset any advantage of purchasing as an individual. This tends to hold truer the higher the individual’s income.

If the property is worth upwards of about EUR 1.25 million, it is typically advantageous to make the purchase via a legal entity. In this case, lower income tax rates and greater opportunities for tax optimisation tend to offset the company-related costs.

This is largely attributable to the fact that a relatively expensive property would usher in relatively high income, which in many countries would expose an individual owner to higher tax rates than it would a legal entity.

Consider, for example, a property in Germany that generates rental income of more than EUR 50,000 per year. An individual owner would pay some 40% in taxes, while a company would pay a comparatively meager 15%.

Generally, such savings would fully offset the cost of launching and maintaining a company. However, this holds primarily true in cases where the company and its owner are both tax residents of the same country. Otherwise, dividend taxes would negate any tax benefits derived from purchasing a company as a legal entity.

What taxes do legal entities usually need to pay for properties?

 

If a legal entity owns income-generating real estate overseas, it will typically be subject to the following types of taxes:

  • Taxes on any income generated by the property (rental income, capital gains from the sale of the property or the sale of a portion of the legal entity or its shares)
  • Property tax (usually compensated by tenants)
  • Land tax
  • Inheritance tax, if applicable (exemptions often apply)
  • Tax on dividends (exemptions typically apply if the investor refrains from distributing dividends and instead reinvests the funds in the same country, for example into another property).

 

Tax rates for individuals and legal entities in the United KingdomGermany and France

Data: Tranio

 Income tax/profitCapital gains taxEstate taxProperty tax

United KingdomIndividuals20-45%

 

 

20-28% (not applicable to the sale of a primary place of residence)40% (this does not apply between spouses)Not applicable*

Legal entities20 %20 %Not applicableFrom GBP 3,500 for properties valued at more than GBP 500,000*

GermanyIndividuals14-47.47 %14–47,47 % (not applicable after 10 years of ownership )Up to 50 %Not applicable *

Legal entities15.825 %15,825% (not applicable if the owner invests in another German property within four years of the sale)

 

 

Not applicable under certain circumstances**Not applicable *

FranceIndividuals20-45%20-45 % (Not applicable after 22 years of ownership)5-60 % (this does not apply between spouses)Not applicable *

Legal entities33.33%33.33 % (not applicable after 22 years of ownership)Not applicable upon registration with a Société Civile Immobilière

 

(SCI)

3 %*

* There are property taxes, but it’s the tenants responsibility to pay them.

** The business must operate for a minimum period of seven years after the acquisition of the property, and total salary expenditures must exceed the original salary expenditures by more than eight times, or the number of employees must exceed 20.

  

Taxes on rental income

 

 Rental income tax is included in the corporate tax rate and is payable in the tax jurisdiction where the property is located. As a general rule, if a company is liable for taxes in a foreign jurisdiction, and a double taxation treaty applies between the company’s home jurisdiction and their foreign jurisdiction, the amount of taxes paid overseas is to be subtracted from the amount of taxes that is supposed to be paid home. The difference should be paid in the home jurisdiction. If the tax overseas is bigger, then there will be no taxes home.

In order to reduce your income tax base, you will need to scour the tax regulations for deductible expenses that apply to your purchase, ownership and maintenance of the property. Such deductions may include:

 

  • The cost of acquiring a founder loan;
  • The cost of acquiring a bank loan;
  • Building depreciation;
  • Leasehold improvements;
  • Transaction execution expenses;
  • Property tax;
  • Property management and maintenance expenses;
  • Other expenses during the ownership period.

Taken together, the aforementioned deductions can significantly reduce a property owner’s income tax base during the first decade of ownership. The table below outlines a typical German example.

Sample calculations for legal entities in Germany, Euro

Data: Tranio

 

 Standard tax scheme        Effective tax scheme

Tax base calculation

Property price500,000

Annual rental income30,000

Building depreciation deduction (2 %)10,00010,000

Deduction of mortgage interest
(LTV 50%, 2% per annum)–5,000

Deduction of founder loan interest (LTV 50%, 4%
per annum)*–10,000

Tax base20,0005,000

Tax calculation

Corporate tax (15 %)3,000750

Solidarity surcharge (0.825 %)165082.50

Total tax sum3,165832.50

Annual income after taxes26,83532,417.50

Percentage of annual rental income that taxes account for under both schemes10.552.5

* The interest rate on the founder’s loan can be increased, thus reducing the effective income tax rate to zero

 

A founder loan could enable you to save part of your income from dividend taxes.

Founder loan interest is subject to the investor’s personal tax obligations in the country of his or her tax residency. But the investor must also be ready to pay founder loan taxes in the country where that interest was generated.

 

Capital gains and asset transfer tax

 

Whether you will be obligated to pay capital gains tax or asset transfer tax depends on the ownership structure at the moment of the sale. This can occur either when you sell the property itself (asset deal), or when you sell the company that you purchased the company through (share deal).

In the case of an asset deal, capital gains tax is typically calculated as the difference between the sale price and the carrying amount of the property. The carrying amount is the cost of the property, less accumulated depreciation. While depreciation decreases the carrying amount, it increases the capital gains tax base.

Let’s say, for example, you purchased a property for EUR 1 million and sold it for EUR 1.1 million. You owned the property for three years, during which you had a 2% depreciation allowance, amounting to EUR 60,000 over the course of your ownership. Your carrying amount is thus EUR 940,000. Your capital gains tax base will amount to EUR 160,000 – the difference between the sale price and the carrying amount.

In the case of a share deal, the property’s carrying value is of no importance for tax purposes. In this case, profits from the sale of shares are taken into account to calculate asset transfer taxes.

Say, for example, you purchased a company in order to purchase a EUR 1 million property. You then sold the company for EUR 1.1 million. Thus the tax base for asset transfer tax is calculated by deleting the purchase price from the sale price, so in this case your tax base would be EUR 100,000.

In the context of the above examples, it would make more sense financially to purchase the property through a company; doing so would save you EUR 60,000. Investors who already have an exit strategy in mind when purchasing a property – such as those who plan to purchase a property, flip it, and sell it at a profit five years down the road – typically favor this model.

While it’s possible to structure real estate purchases in such a way as to ensure you’ll be exempt from capital gains tax, it’s not easy. Doing so requires extensive research of and familiarity with local legislation in the country that you’re planning to purchase in. It will also likely require corporate ownership and elaborate deal structuring, which is best left to seasoned professionals.

 

Double taxation laws

 

Another key issue that can have a considerable impact on capital gains tax is the existence of double taxation laws or relevant treaties between the county where the real estate is located and the country where you registered your company. Double taxation regulations can protect taxpayers from paying the same tax twice.

For some practical examples of this, we spoke to Dmitry Zapol, an international tax advisor at London-based tax practice IFS Consultants. Mr. Zapol explained that UK residents are required to pay income tax on foreign source rental income at their marginal rate. In other words, foreign rental income is added to the UK resident’s other types of income, and the total amount received during the tax year determines the applicable income tax rate.

However, UK law protects taxpayers from double taxation even in the absence of a double tax treaty.

“If foreign rental income suffers withholding tax [in the source country], it is credited towards UK tax liability in order to avoid double taxation. In order to calculate the tax credit, the taxpayer calculates the actual amount of tax paid abroad and sets it off against UK tax liability,” said Mr. Zapol. “In the end, this results either in having to pay the difference between the two amounts (if UK tax is higher) or brings no further tax liability (if UK tax is smaller), although in the latter case the difference will not be refunded. In calculating the tax liability, it is necessary to take into account the difference between UK and foreign tax years, which usually do not run concurrently.”

He added: “Normally, the relief is offered under a double taxation agreement concluded by the UK. However, unlike in some countries like Russia, the relief is also available in the absence of the agreement… Normally, the UK resident must submit proof that tax was withheld outside the UK to be able to credit it against his UK tax liability.”

Generally, the ways in which you can benefit from double taxation laws or agreements hinge on whether you purchased the property via a company or as an individual. In order to determine which taxes you’ll be on the hook for in your home country, you will need to familiarise yourself with the ins and outs of the relevant policies.

Mr. Zapol noted that the relevant UK laws are complex. “Broadly, if a UK tax payer buys a foreign company that receives foreign rental income, he must declare its income as if it were his own and pay tax on it or alternatively declare dividends and also suffer tax liability. Interestingly though, if he receives the same company as a true gift from someone else, there is no tax liability until a distribution is made. Also, if the person is domiciled outside the UK, he can claim the remittance basis and stay outside the scope of the transfer of assets abroad rules,” said Mr. Zapol.

Prior to any purchase, I recommend that you consult a tax specialist.  Should you have any questions, Tranio will always be happy to help. We can provide you with a comprehensive overview of the tax and legal issues that will apply to your purchase of any overseas property, and help you achieve the optimal transaction structure.

Funding China’s Civil Society – Tax Incentives, Donation Law, and the Role of Foreign Charities

By Samuel Wrest

2016 saw China pass two new laws that will play a major role in shaping its civil society sector. The Charity Law, already in effect, and the Overseas Non-Government Organization (NGO) Law, set for implementation in January, are closely intertwined, but while the former has been largely praised for incentivizing and making simpler charitable donations and funding, the latter has been widely condemned for restricting which charities can accept these donations and successfully operate in the Middle Kingdom.

China is a country that has traditionally struggled with funding its civil society. In 2012, charitable donations in the country totaled US$13.2 billion – four percent of those made in the US. 2961 philanthropic foundations were registered during the same year – three percent of the US – and only 1.5 percent of those foundations actually funded grassroots NGOs. On the Charities Aid Foundation’s World Giving Index for 2015, China ranked 144th out of 145 countries, with only Yemen ranking below it.

The Charity Law is seen as an attempt to address this imbalance. The law contains various tax incentives for both charitable donations and charitable organizations themselves, potentially increasing the amount of funding that they receive. When considered alongside the Overseas NGO Law, however, the Charity Law’s potential impact is tempered.  The NGO Law prohibits foreign charities from accepting donations in China, and looks set to further scale back their operations, significantly shrinking the pool of charitable organizations that the Charity Law could actually benefit.

Defining NGOs and charities in China

The Charity Law

Foreign and domestic charities are defined differently in China, with the new Charity and Overseas NGO Laws detailing what activities they must each respectively undertake and, more importantly, what they are unable to do.

The Charity Law has a specific list of activities that qualify as being charitable, carried out by either providing services or donating property. They include:

  • Aiding the poor and the needy;
  • Assisting the elderly, orphans, the ill, and the disabled;
  • Alleviating damages from natural disasters, accidents, public health incidents, and other emergencies;
  • Promoting the development of education, science, culture, health, sports, and other causes;
  • Preventing and controlling pollution and other public hazards, protecting and improving the ecological environment.

The law emphasizes that any organization carrying out charitable activities must abide by principles of being “lawful, voluntary, in good faith, and non-profit”, and cannot “violate social morality, or endanger national security or harm public interest or the lawful rights and interests of others.” A definition of the latter terms, however, is not provided.

The Overseas NGO Law

Article 2 of the Overseas NGO Law refers to foreign NGOs as “not-for-profit, non-governmental social organizations lawfully established outside mainland China, such as foundations, social groups, and think tank institutions.” Article 10 further clarifies that foreign organizations must have existed for two years prior to entering China.

Article 5 of the NGO Law is perhaps its most arbitrary, broadly stating that foreign NGOs must not “endanger China’s national unity, security, or ethnic unity; and must not harm China’s national interests, societal public interest and the lawful rights and interests of citizens, legal persons and other organizations.” The vagueness of the language used, combined with the law shifting who NGOs are reviewed by from the Ministry of Civil Affairs to the Public Security Bureau – widely seen as an attempt to further crack down on activism – is likely to have the biggest impact on their operations in China.

Tax incentives available to charities

Incentives for companies making donations

Businesses – including foreign businesses – that provide charitable donations to domestic charities are able to obtain tax credits, with corporate income tax (CIT) waived on donations accounting for up to 12 percent of their profits. This can be rolled out over a three-year period. If a company donates US$4 million and their profits are US$10 million, for example, they wouldn’t be able to deduct the entire US$4 million for a single year’s CIT, but would be able to do so incrementally over three years.

Additionally, overseas companies making donations are entitled to either a reduction or full exemption of China’s import duties and import VAT.

Incentives for charities and NGOs

Both the Charity Law and the Overseas NGO Law state that charitable organizations are eligible for tax incentives, but don’t specify what exactly these incentives are. This may be because the laws are new and still due for revision of specific policies, or, perhaps more likely, that they’re intentionally vague to allow for individual assessments rather than a blanket tax reduction.

Qualifying for the incentives

In order for a charity to qualify for these incentives, they must appoint a trustee, have them sign a “charitable trust document” (慈善信托文件), and file it with their local department of the Ministry of Civil Affairs. Failure to do so results in both the charity and companies making donations to that charity being ineligible for tax benefits. For donating companies, it is therefore advisable to check that the charity has gone through these procedures prior to making a donation.

Methods for funding foreign charities and future outlook

With foreign charities and NGOs prohibited from both receiving donations in China and conducting for-profit activities, the means of funding them is essentially limited to overseas payments. These payments can gain interest in Chinese bank accounts, but any other funding method runs the risk of seeing the charity closed.

The implementation of the Charity and Overseas NGO Laws will therefore see a clear line drawn between funding available to foreign and domestic charities. Because of its restrictions, the new source of funding that the donation tax incentive creates will be limited to domestic companies, weakening overseas charities’ competitiveness and ability to operate in the Chinese market.  The same can be said for domestic charities that collaborate with or receive funding from their foreign counterparts, with such charities often closely monitored for doing so.

The two new laws present a mixed bag for the future of China’s civil society sector. The Charity Law is almost certain to provide a well needed boost to domestic charities in the country, but, as indicated in its description of charitable activities, only to those engaged in certain areas, such as social service provision – a sector where civil society is well placed to fill the gap left by the state’s gradual withdrawal of funding. Engagement in other areas, such as political rights, labor rights and religion, would likely be seen as harming the “national security” and “public interest” specified in the Charity Law. Conversely, foreign charities – which are generally more willing to engage in some of the latter areas – will have even less space to work in the Middle Kingdom. In short, the implementation of the Charity and Overseas NGO Laws is further evidence that the Chinese government is crafting its own civil society. Foreign charities do not feature heavily in its plans.

Building, making and innovating in Shenzhen

Along our path of discovery in China (Eisenhower Fellowship), a group of friends visited a special economic zone which has become a global magnet for technological hardware manufacturing industries in China … Shenzhen. This southern city of China is home to hundreds of startup companies that specialize in prototyping hardware and electronic components.

The availability of a local testing market is one major factor, which makes the region a significant place for hardware manufacturing companies to establish their businesses.

In his book, Aerotropolis: The Way We’ll Live Next, Greg Lindsay remarked about Shenzhen, “It is a place where accelerators are eager to help you build, tests, refine and make a million of something all on the same day.”

Our corporate visit to Tencent covered a wide array of topics and a sneak peak at plans for their new HQ. HAX and Tianan Cyber Park offered us hands on introductions and chats with member entrepreneurs and their investors. Side trips included an awards festival for filmmakers, karaoke and shopping in tech production storefronts.

The city was a small fishing town with slightly over 20,000 people approximately 3 decades ago but today Shenzhen is a fast-prototyping hub for startup accelerators & incubators, hardware resellers and reputed hardware curators.

The city has a population of over 11 million residents enabling companies to find cheap labor for businesses.

The city is home to some of the many well-known firms such as Tencent, ZTE, Skyworth, TP-Link, Huawei, and Oneplus among hundreds of other tech companies that specialize in the production of hardware components including 3D printers, mobile phone, robotics, microcontroller devices, internet appliances and other electronic and consumer appliances.

Notable Startups in Shenzhen

DJI. This is the world’s leading manufacturer of civilian drones. The company was founded in 2006 and manufactures a variety of civilian drones such as aerial drones, flight controllers, civilian helicopters, multi-rotor aerial flight platforms, and drone accessories such as camera gimbals among other drone hardware.

Seed Studio. This is one of the first hackerspaces in the city. It is a community where computing experts meet to share ideas and discussions on innovative tech projects and techniques. Founded in 2006, the tech company has grown so huge in computing and has a variety of innovative tech products such as mobile devices, consoles, and PC games just to mention a few. In addition, there is another sprinter group, Chaihuo, which spawned from Seeed Studio when the number of experts became too large in 2011 . Chaihuo formed their own startup hackerspace in the same city.

Haxlr8r. Another awesome tech accelerator that has helped many people in brainstorming ideas for startups in the hardware industry is Haxlr8r. Many computing experts have graduated from this company, which too specializes in helping people incubate their own computing ideas. They too have a range of innovative tech products such as 3D printers and. microcontrollers, though they mainly specialize in mentoring and training people.

Other major accelerators include Tech Space, which was started by IBM engineers, Tech Space, Innovalley and Highway1 among others.

Latest News from Shenzhen

Apple Inc is set to launch an R&D center in China’s manufacturing town of Shenzhen. This move follows a similar plan to launch another R&D center in Beijing by Apple as it seeks to bounce back against Chinese local tech companies such as Huawei technologies, Vivo and OPPO who have been striving to take the market share of from its flagship iPhone.

“We are excited to be opening a new Research and Development center here next year so our engineering team can work even more closely and collaboratively with our manufacturing partners,” Cupertino-based Apple spokesman Josh Rosenstock said in emailed comments.

“The Shenzhen center, along with the Beijing center, is also aimed at strengthening relationships with local partners and universities as we work to support talent development across the country,” he said.

In another round of economic events in Shenzhen city, World Trade Organization in association with Shenzhen Municipal Council and Chinese Academy of International Trade and Economic Cooperation of MOFCOM as well as other strategic partners and institutional sponsors held the 2016 Global Value Chain Innovation Development Summit in Shenzhen.

The event held in October was meant to reinforce the dialogue between the business community, researchers and policy makers on the development of global value chains, with a specific objective to identify policies, at both national and international level, that will promote growth through globalized production, trade, investment, and innovation.

Headed to Hangzhou …

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Jack Bienko

2016 Eisenhower Fellow

jackbienko.com

Guangzhou startup scene 2016

As part of my Zhi-Xing Eisenhower Fellowship, I have been traveling in China to visit entrepreneurs, investors, and small business supporters. Guangzhou presents a unique environment for startups and while my brief stay was bound by a departing bullet train for Shenzhen, the following covers a little of what this area has to offer.

Successful entrepreneurs know that the location that you choose to start your business has a great and direct effect on the success of the business. This calls for a careful choice of the environment to establish a startup. Guangzhou, China is one of the most favorable places for establishing a startup in China. Guangzhou, is ranked among the fastest growing cities in the world. In addition, the city has a favorable cost of living; the average salary in Guangzhou is 3000 RMB, which is about $500 a month (after tax).

Another interesting fact about Guangzhou, which is the 3rd largest city in China, is the population of around 14 million residents of the city. This too makes the availability of labor readily available at a fair rate as well as a ready market for local consumer products and services.

Moreover, while you may consider mainland China as one unit, you’ll realize the potential of establishing a startup here. China is neighbored by other developing economies, which include India, Thailand, and Indonesia just to name a few. These economies have a huge population and a potential market for goods. Being a neighbor to these vibrant markets means that the costs of transporting goods are also considerably reduced and favorable. This makes it possible to establish a startup in places like Guangzhou with little capital.

Photo credit: wikimedia

I enjoyed a visit to WeChat HQ to talk shop, innovation and the rapid rise of this platform … something that engages a billion Chinese users from sunrise to all hours of the night. I encourage everyone to check out or download WeChat to learn more about the tool and understand why it has become so successful in China. Among the growing base of American users and advertisers, are corporations wishing to enhance their reach to Chinese consumers.

Indeed, there are many companies, which have established their presence in Guangzhou and have been thriving competitively and successfully over the past few years. Many enjoy the conducive technological environment of the location and take advantage of the fast growing rate of the region.

Notable Startups in Guangzhou

A study by the National Survey and Research Center at the Renmin University of China in 2015, revealed that Guangzhou ranked third in the number of startups businesses in China- specifically, the city has about 2107 startups per 100,000 residents of the city. This makes it one of the hottest startup hubs in China

The city too has its share of startup businesses, which are leading in disruptive technologies in various fields- biotech, robotics, consumer appliances, manufacturing etc. The most notable startups include:

Ehang Inc - This is one of the most successful startup found in this city. It was founded in April 2014 and has around 300 employees. The company specializes in the innovative manufacturing of smart drones. As a matter of facts, after launching a new drone, Ehang 184 early this years at the CES event in Las Vegas, the drone was cleared for testing, making it the world’s first passenger drone. This clearly depicts the level of innovativeness exhibited by Ehang.

iFLYTEK - This is another tech company which is enjoying massive success in this city. The company is dedicated to the research of artificial intelligence, speech recognition, and language technologies. It has already developed some innovative software and chip products, which are used to enhance the provision of speech services and for integration with online web systems to enhance the accessibility of web materials across all regions of the globe.

Risong Intelligence - In late 2015, China announced the need to incorporate the use robots in their manufacturing industries. Several Chinese companies have entered into deals with companies in the west for the manufacture of robots. Risong Intelligence, however, is a startup based in Guangzhou that specializes in the manufacture of robotics for other auto manufacturing companies in the city.

Medprin - This is another startup which specializes in 3D printing and visualization to manufacture implantable medical devices. The company was an immediate hit, attracting huge amount of funding and establishing its presence in various countries in the west.

Other notable startup companies in Guangzhou include Nexwise, Gizwit and many others.

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More soon … Jack Bienko, 2016 Eisenhower Fellow

Startup community in Beijing

As part of my Zhi-Xing Eisenhower Fellowship, I had the opportunity to visit Beijing for two weeks of official briefings and personal visits with startups, investors, incubators, social innovators and old friends.

My deepest appreciation for the wonderful representatives at China Education Association for International Exchange, Perfect World Co., Renmin University of China, Tsinghua University, US Embassy, Ministry of Foreign Affairs, Ministry of Science and Technology, Great Wall Club, Garage Cafe, TusHoldings/TusStar, and US-China Business Council. Each of the officials/host organizations were more than generous with their time and provided valuable insight. We often host foreign delegations in Washington DC and I hope to serve others as well as I was treated upon my arrival to China.

The following provides a brief overview of the startup scene in Beijing. As with cities across the globe, there are multiple aspects of the business community, comings and goings, thought leaders to consult and gatherings to attend … this thumbnail sketch is just that.

Startups, acquisitions, and mergers have been mushrooming in Beijing, China. This new revolution can be attributed to Beijing’s sustainable location for entrepreneurship, recovery of economic downturns, and impressive government support in China, which have permeated the rapid technological innovations. Moreover being the capital of one of the most technological nations in the world, Beijing has been home to some of the top technological companies in the world- Lenovo, Baidu, and Alibaba just to name a few. This has earned Beijing the name- China’s Silicon Valley.

Another major attribute, which has seen the continual establishment of businesses in the region, pertains to the enormous population of the city. Beijing’s population of around 21.7 million people makes it one of the best cities to find the best business deals and good leads for startups. The massive population provides startups with a unique opportunity to address a variety of business segments effectively as well as an opportunity to address various needs of customers. It also creates massive potential for startups to scale up and achieve reasonable growth and sustainability within a short period.

Notable Startups in the Business Community

The ecosystem of startups in the city owes a lot to the mature investment and competitive innovations among businesses to produce quality and authentic products and services. In addition, the robust support from the government, which offers massive deals of tax holidays as well as subsidies and R&D (Research and Development) incentives for startups, which promote technology and innovation is also a contributing factor to the rapid growth of startup businesses in the region.. There are several companies, which are shaping the tech industry in Beijing. They include:

Baidu > Baidu is a contemporary Google of China. The search engine is not only popular in China but, has been striving to ensure that it adds unique experiences to the lifestyles of users. This has seen Baidu branching out to offer other innovative services apart from internet services such as the Baidu Wallet which enables e-payments, food delivery services throughout the China’s mainland and also has a big stake in the investment of Artificial Intelligence.

Baidu is one of the tech companies in Beijing, which has employed hundreds of engineers and innovators and continues to expand beyond China to other parts of Asia as well.

Alibaba > This Beijing-based company came into limelight when it publicly traded its shares in 2014, which had one of the best IPO frenzies in history. Alibaba boasts as the largest e-commerce platform in the world. Its platform offers B2C, C2C and B2B opportunities, hence preferred by many distributors and drop shippers. The company has branched out in other services apart from e-commerce, which includes e-payment through Alipay and B2B cloud computing through Aliyun.

The Alibaba Research team hosted us for a dinner discussion which also featured SBA alumni Dr. Ying Lawrey. We met brilliant team members, shared laughs, and committed to joint studies on entrepreneurship and innovation.

Didi Chuxing > This is China’s version of Uber. As a matter of fact, in August this year, after a long struggle with Didi, Uber agreed to a partnership agreement that keeps their brand alive in China.

Didi, which was founded in 2012, is offer ride hailing services across China’s mainland. The company has gone beyond being a taxi app service company and has started other services such as carpooling and ride sharing in conjunction with local cab drivers.

Xiaomi > This tech startup is currently the world most valuable startup in the field of technology. The Beijing-based company is a renowned maker of electronic goods and appliances, smartphones, laptops, and mobile apps.

Founded in 2010, the company has enjoyed enormous success especially in the manufacture of smartphones and has a huge client community of over 180 million users worldwide and over 10 million beta testers

JD.com > This startup is the Amazon version of China. This reputed company is revered for offering authentic products and for their same-day delivery services. The company uses innovative technology to ensure that it offers cutting-edge services to its clients by using unique business models to offer enhanced lifestyle experiences to its clients

DeepGlint > This is another startup, which has been growing rapidly in the home capital of China. DeepGlint is a manufacturer of innovative and high-quality security and surveillance cameras (CCTV). However, what sets it apart in the fact that their technology specializes in 3D visualization and machine learning technologies for their products.

Other major startups include Meittuan-Dianping, Ninebot, Turing Robot, just to mention a few.

Recent Economic News in Beijing

In a move to avoid a ‘protectionist backlash’ as warned by a top European business lobby, the China’s State Council on 1st October this year said it was committed to improving the access of foreign investments in China. The meeting, which was chaired by Premier Li Keqiang, said that the government of China was committed to promoting a competitive business environment for both local and foreign companies seeking investment in the country. These comments come at a time when the government of China has been criticized by the foreign business community of providing unbalanced access to foreign investment as opposed to local investments.

In other recent news, 10 Canadian startups will get an opportunity to experience the China business community as they seek an international market for investment in Beijing China. The 10 companies will be attending the China Angles Mentorship Program (CAMO) in Beijing later this year. They include:

Cyclica, Stack Fintech, Mosaic manufacturing, Law Scout, Cryptiv, Sage Senses, Suncayr Inc, Direct Communication Systems, TritonWear, and Industry Corporation.

The business community of startups in Beijing is expected to continue flourishing, but other cities such as Shenzhen and Shanghai might have more growth in future than this capital of China.

Next up is Guangzhou … overview coming shortly.

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Investors optimistic over Japanese governance changes

By Garnet Roach

But BNY Mellon survey finds Japanese codes have had no impact on investing approach for many investors

North American and European investors hold largely positive views of the impact of Japan’s Stewardship Code, introduced two years ago, and the country’s Corporate Governance Code, introduced in June 2015, according to research from BNY Mellon.

For the 20 investors at 19 large and small investment firms surveyed, which have aggregated equity assets under management of $679 bn – of which $49 bn is invested in Japanese equities – the most important components of the codes are the independence of board directors at 65 percent and return-focused capital policy at 60 percent. 

Almost all respondents (19 out of 20) point to some improvement in issuer behavior since the introduction of the codes (adherence to which is voluntary), though many (45 percent) indicate that their approach to investing in Japan has not changed. 

‘Concerns were voiced that many issuers will approach implementation of the codes with a ‘box-ticking’ mentality, and fulfill only the minimum requirements at the surface level or provide vague explanations for non-compliance in the absence of truly embracing the spirit of the codes,’ write the authors of BNY Mellon’s Investor sentiment on Japanese reforms study. 

‘For example, some participants point out that a majority of issuers in Japan have demonstrated progress by appointing one or two independent directors: more important, however, will be the degree of their independence, their qualifications and their influence on decision-making, which will ultimately determine how the codes’ principles are applied in practice.’

So while 65 percent of respondents see the independence of board directors as one of the most important components of the codes, when asked what key measures will serve as evidence the codes are actually working, only 30 percent of investors cite the number of independent directors. Instead, shareholder returns top the list at 65 percent, followed by return on equity at 45 percent, profitability at 40 percent and balance sheet efficiency at 35 percent. 

Offering advice on how Japanese firms could better attract international investment, BNY Mellon says companies ‘should be outlining their views on optimal capital structure, setting clear return-on-equity and return-on-invested-capital targets, and delivering on these objectives and returning excess capital to shareholders,’ write the authors. 

‘While some respondents acknowledge they have seen some Japanese companies showing a greater willingness to discuss balance sheet efficiency, they agree that they have not seen sweeping changes in the Japan investment landscape and, more importantly, they are waiting to see execution over a longer period.’

In terms of investor relations, ‘investors agree’ that Japanese issuers could encourage greater buy-side interest by increasing access to senior management and maintaining visibility through global conferences, company events and regular non-deal roadshows. 

A quarter of investors say Japanese companies ‘generally promote themselves less than their developed market peers’. Yet ‘it is important for Japanese management and IR teams to prepare a coherent and compelling equity story that clearly outlines the company’s mid to long-term strategy, global competitive advantages, growth potential and strategy to counter current domestic macro trends.’

Some respondents even point to examples of Japanese companies with strong fundamentals that are misunderstood or under-appreciated simply because of ‘a lack of management visibility, ineffective articulation of their investment cases and insufficient information flow (especially English-language materials), all of which are challenges Japanese companies can address,’ notes BNY Mellon.

As one US fund manager with $33.4 bn in equity assets under management notes in the research: ‘We like to see that a company really has the belief to focus on the bottom line and make a presentation that it is focused on operating profit and return to shareholders. IR in Japan has actually improved quite a bit, but it is a mixed bag. If a company can sit down and discuss what it wants to be, talk about how it wants to get there, and show how it cares about shareholders, that is most of the battle.’

China sees growing roadshow interest

July 18, 2016 | By Liana Cafolla

Hong Kong and Singapore remain favorite roadshow destinations in Asia

While mainland China’s appeal as a roadshow destination is growing, Hong Kong and Singapore retain their positions as firm favorites for roadshows in Asia. That’s according to Lily Xiong, head of corporate access for Asia-Pacific at investment bank Jefferies.

‘Hong Kong is still the top choice for Asia; Singapore is number two,’ says Xiong, who has worked at Jefferies for a year and in the industry in China for more than 12 years.

The whole of Asia has become more attractive to US and European investors in the last two to three years, Xiong continues, as companies from both continents have cast their sights further afield in the search for investors. This year has seen some contraction, however, as many companies have cut their budgets for overseas travel because of the more difficult economic environment.

Even so, global interest in China as a roadshow destination is heating up and the country’s recent slowdown has not dampened investor interest due to the size of the market and the long-term potential.

‘The interest is still very high,’ Xiong says. ‘Mainland China is becoming increasingly attractive because there are more firms based in China that can invest overseas. China still has a lot of money [looking for a home]. There are still lots of opportunities there.’

With the increasing number of millionaires in the country, private wealth management is a particular growth area, she adds.

Top cities for investment roadshows in China are Beijing and Shanghai, but Hong Kong remains the main hub for both Chinese companies and investors. The city has been actively marketing itself for several years as the top destination choice for Chinese firms that want to attract international investment, and leading China funds have based their overseas investment teams in the city.

What makes Hong Kong the top choice for international companies holding a roadshow in Asia? According to Xiong, the city offers a higher number of Asian head offices and a wider variety of company types than Singapore.

Other investment hubs in Asia have also seen more interest from European and US companies. In the last three to four years, large sovereign wealth funds and national security funds have helped Tokyo, Taiwan, Kuala Lumpur and Seoul attract more interest as roadshow destinations. Retirement funds in Malaysia, meanwhile, have seen double-digit increases in size for the last three years, notes Xiong.

Over the same period, more Asia-based companies from these countries have also shown interest in investing overseas. ‘A lot of domestic companies in these countries have been trying to attract a higher proportion of overseas investment,’ Xiong says, citing as an example a Tokyo-based company that has increased its share of overseas investment from about 10 percent to around 30 percent in the past couple of years.