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Reopening of Trade Route to Greatly Boost Trade Development Between China and India

On July 6th 2006, China and India will reopen border trade through the Nathu La Pass after 44 years of closure. In the early 1900’s, the pass accounted for 80 percent of the total border trade volume between China and India but was suspended after border conflicts. The reopening of the Nathu La Pass is expected to be a significant boost to the bilateral trade between two of the world’s fastest growing economies and the resulting synergies are likely to create many business opportunities for companies operating in the two nations.

The Nathu La Pass was closed in 1962 after war broke out between China and India over territorial disputes and prior to its reopening, China and India traded mostly by sea with trades that could have been conducted via the Nathu La Pass being rerouted by thousands of kilometers. The significant reductions in shipping costs and lead times will encourage a greater number of buyers in China and India to import products and as a result, the region can expect to see increases in the number of businesses to be actively engaged in trading and a wider range of products being exchanged as trading becomes economical.

The potential trade volumes between China and India are massive. In 2005, the two nations recorded US$18.73 billion in bilateral trade, which represented a 37.5 percent increase over the previous year. According to the Chinese Ministry of Commerce, the bilateral trade figure is expected to top US$20 billion in 2006. While China and India are considered to be the two most important rising economies in the world, it will be fascinating to observe the economic collaboration between these two nations that may be brought about by the reopening of the Nathu La Pass.

Even upon its reopening on July 6th, there is still tremendous potential for trading to be unlocked by the Nathu La Pass agreement thereafter. According to the Director-General of Foreign Trade in India, there are currently 29 products listed for export from India and 15 products listed for export from China by way of the Nathu La Pass. As it is common with many startup trade agreements, the number of products within these lists is expected to increase significantly over time and the pass’ reopening will benefit a greater number of industry sectors.

For businesses operating in China, the reopening of the Nathu La Pass will enable them to capture business that may flow from India and as economic collaboration increases and trade relations between China and India mature, there seems to be sound encouragement that China will continue to drive expansion through this channel. As a result, foreign businesses operating in China will not only be able to capitalize on China’s domestic market, but by utilizing China as a gateway to India, these businesses may also gain access to lucrative opportunities in India’s thriving economy.

Keep watching this space!
 

TRADE

Hong Kong

Hong Kong’s Competitiveness is Ahead of Shanghai

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Foreign Funded Firms Earn More than USD 200b in China since 1990s

According to Li Zhiqun, director of the Foreign Investment Department of the Ministry of Commerce, foreign-funded enterprises in China have earned more than USD200 billion in post-tax profits since the 1990s. Currently, China has approved the establishment of more than 500,000 foreign-funded enterprises importing over USD560 billion of goods annually. Read more...

Guangdong Remains the Most Favourable Investment Region for American Companies

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US To Ease Control on Exports of High-Tech Equipment to China

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Beijing Makes Initiative to Fight Against Counterfeit Goods

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AIMA To Launch Its Cayman Chapter

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Guernsey Eyes On Hong Kong and Shanghai

Representatives from Guernsey’s offshore financial services industry will pay visits to the Asian financial centres of Hong Kong and Shanghai, this year. Business opportunities in the Chinese region have attracted the Guernsey financial sector to build stronger connections with the region. Read more...

TAX

China

China To Lower Import Taxes on Cars and Auto Parts

According to the Chinese Ministry of Finance, effective on July 1, China will further lower import taxes on cars and auto parts in compliance with its commitments on tariff reduction upon its entry into the World Trade Organization (WTO) in 2001. Up to now, China has fully complied with its commitments on automobile related tariff reduction.
Read more...

China Considering a Unified Corporate Tax Rate by Early 2008

According to legal experts, a unified corporate tax rate of near 25%, is not expected to be effective until the year 2008. The Vice Minister of Commerce, Ma Xiuhong, has also pledged that a reasonable transitional period will be allowed to foreign-funded firms to adjust to the new tax system. A draft tax law for companies will be submitted to the Standing Committee of National People's Congress in August for preliminary examination. If the legislation is approved, a unified tax rate will apply to all companies in China.
Read more... | Related link

US to Ease Reporting Requirements for Corporations and Shareholders

The US Internal Revenue Service has reviewed a number of regulations and removed unnecessary filing requirements for corporations and shareholders. Businesses and shareholders will no longer be required to file excessive reporting documents while the IRS will still receive the information it needs for compliance. Read more...

US Launches Small Business Efficiency Act

The U.S. has introduced the Small Business Efficiency Act to update and clarify tax rules for small businesses that use external parties to pay wages and federal employment taxes. The Act would eliminate uncertainty about the ability of qualifying Professional Employer Organizations (PEOs) to assume liability for paying wages and collecting and remitting federal employment taxes. Read more...

US Introduced Modification to Tax Bill

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UK Backs Down On Trust Tax Treatment

The U.K. government has backed down from its position on trust tax treatment after the Society of Trust & Estate Practitioners (STEP) and other professional bodies made strong representations regarding the government’s position on spouse exemptions. Spouses from first marriages can be safeguarded by trust in wills without incurring a tax charge. Read more...

Guernsey To Launch Zero Corporate Tax Rate

Guernsey’s authorities have made an official proposal of a set of economic and taxation changes including the introduction of a zero rate of corporate tax. The package is welcomed by the island’s financial industry and is viewed as enhancing the business environment. Read more...