China's Fifth Anniversary As A Member of the WTO

11 December 2006 marked China's fifth anniversary as a member of the World Trade Organization, and the end of the grace period. On 11 November 2001, at the ministerial meeting held in Qatar, almost all trade ministers from 142 member countries voted unanimously in favor of China's entry to the WTO, concluding a decade and a half of negotiations.
 
The move added 1.3 billion people to the global marketplace, and had acted as a catalyst in pushing China towards a market economy.
 
At the time of joining, China was the world's seventh largest trader. Today China is the world's third largest trading nation, behind only US and Germany, with total foreign trade in 2005 reaching USD1.4 trillion, a 3-fold increase over its year 2000 figure. Exports for 2005 reached USD762 billion, up from USD249.2 billion in 2000. In 2006, China also surpassed Britain as the world's fourth largest economy by output.
 
Its rapid growth has been a major driving force in the booming world economy. The country's GDP had reached USD2.2 trillion in 2005, a phenomenal 70% increase since its accession to the WTO, while its imports in the five-year period reached USD2.2 trillion, with an annual growth of 28 percent. According to World Bank, China has been contributing 13 percent to global economic growth every year for the past 5 years, and moreover, China's share in global trade jumped from 3.9 percent to 7.7 percent.
 
Prior to China joining the WTO, the Chinese worried that domestic industries, such as steel making, car manufacturing, telecommunications and banking would lose out to international rivals. Needless to say, that not only had these industries not suffered any blows, to the contrary, they have attracted foreign investors from all parts of the world. In fact, export of auto-parts, telecommunications equipment, software and ships are estimated to increase by between 30% to 40% a year up to 2010. Furthermore, with the banking sector now opened to international competition, foreign banks are queuing up be in China.
 
Competition has been healthy. It has helped the Chinese to be more innovative, quality aware and market-orientated in their approach, resulting in high quality products at lower costs for the global marketplace.
 
No doubt, China's accession to the WTO is a win-win situation for all. Moreover, as both its growth rate and potential indicate, it is not too late to enter China.
 
Keep watching this space and Merry Christmas to all!

Visit our website www.icstrust.com

Visit our website for more information on:
offshore jurisdictions,
China business structuring,
doing business in Hong Kong and
investment opportunities.

Recent Articles

Offshore Financial Services Guide 2006-07 Edition - by The Standard
Plan offshore for China opportunities

Hong Kong Lawyer -
Offshore Series - Anguilla

HKETO - Washington DC
Bank on Hong Kong for Financial Certainty

TRADE

Hong Kong

Hong Kong Woos French Business

More than 2000 senior executives from 1500 French companies attended the “Hong Kong and Guangdong Business Conference in Paris” recently which was hosted by the governments of the HKSAR and Guangdong Province. The overwhelming response indicates the particularly strong interest in the Greater Pearl River Delta (GPRD) region, the fastest growing area in China. Hong Kong Chief Executive Donald Tsang emphasized Hong Kong's unique position as a starting point, the know-how, contacts and experience to offer French companies a head start in China. European companies can take advantage of CEPA by setting up in Hong Kong or partnering with Hong Kong companies to access China ahead of WTO obligations. Read more...

Hong Kong Enjoyed Strong Growth in Q3

Acting Government Economist Helen Chan announced that Hong Kong's economy gathered further momentum in the third quarter, with real GDP expanding at 6.8%. Both merchandise exports and exports of services enjoyed growth of 8.9 and 8.6 percent respectively. The fast pace of growth in China together with its surging trade flows is expected to continue to be the main driving force behind Hong Kong's trade growth. Chan also predicted further growth in external trade in the fourth quarter due to the weakening of the US dollar to which the Hong Kong dollar is pegged. Read more...

Hong Kong Hosts First ITU Telecom World Outside of Geneva

International Telecommunications Union (ITU) Telecom World 2006 was held in Hong Kong this year, the first time ever for the event to be held outside of its home in Geneva. Speaking at the opening ceremony, Hong Kong Chief Executive Donald Tsang said that holding the event in Hong Kong reinforces its position as a global hub for information and communications technology (ICT), as well as a capital for international events and a leading digital city. Read more...

Hong Kong And Canada Renew Telecom MOU

The governments of the HKSAR and Canada renewed their telecom memorandum of understanding (MoU) to enhance cooperation in telecom technologies for the second time, which will extend until 2012. The renewal signifies the strong connections in the sector of information and communication technologies (ICT) between the two regions. Some major forms of cooperation include mutual visits, exchange forums, trade facilitation, business partnerships and student exchange programs. Read more...

Hong Kong, A Regional Hub For UK Medical Device Developer

The world’s leader in blood pressure monitoring products and technology, SunTech Medical Inc., announced the opening of its Hong Kong office on 13 November. Commenting on the choice of Hong Kong as its regional hub, Mr. Nixon, the Regional Director, said that SunTech firmly believe Hong Kong is the epicenter for Asian market development. China’s rise as a major consumer and manufacturer further prompted their company to operate via Hong Kong in this booming market. He also praised Hong Kong’s business-friendly environment and ease of setting up and operating a business.
Read more...

EU-Mainland China: Trade strategy to have impact on Traders

On 24 October, the European Commission published its communication on a trade strategy with Mainland China. The communication reflected the need for Europe to respond effectively to China’s new strength, with a focus for the EU to bridge with the Mainland, maintain openness of trade and ensure conditions for fair competition. The document also addressed concerns, such as intellectual property rights and dumping. A second communication was issued on 26 October with Hong Kong and Macao on possibilities for cooperation between 2007-2013. Read more...

China's GDP Grow By 10.5 Percent This Year

China's gross domestic product (GDP) is estimated to exceed 2.56 trillion U.S. dollars this year, up 10.5 percent over 2005, according to Ma Kai, Minister of the State Development and Reform Commission (SDRC). China's economy has developed fast in 2006 with improved efficiency and low inflation. Job opportunities from SDRC projects is also expected to surpass the planned 9million figure. Meanwhile, the government plans to continue to rein in fixed asset investment and boost consumption, which was pledged at the 2006 Central Economic Work conference. Read more...

Strategic Change To Boost Foreign Investments Over Next 5 Years

According to the Ministry of Commerce (MOFCOM), major adjustments will be made to the strategies of utilizing foreign investment during the 11th Five-Year program period. Major changes include a shift from attracting sheer volume of investment, to focus on key growth and development indicators such as the creation of employment opportunities; the introduction of technology and management skills; and FIEs in the form of Joint Ventures with local enterprises. Read more...

IP Cooperation Enhanced Between Austria and China

The Director of the Chinese State Intellectual Property Office and the Director of the Patent Bureau of Austria signed the Summary of Bilateral Cooperation Talks between China and Austria for 2007. According to the Summary, both parties will implement the exchange plan for patent examiners, enhance mutual visits of senior personnel and expand areas of cooperation in order to further develop Sino-Austrian exchange and cooperation on intellectual property. Read more...

Eurozone Raises Interest Rate To 3.5%

The European Central Bank (EBC) has raised the interest rates by another quarter point due to worries over the prospect of rising prices as the eurozone economy expands at its fastest rate in 6 years. The increase is the sixth in 12 months, and is expected to move higher to 3.75 percent, in early 2007. Politicians worry that higher interest rates will put additional upward pressure on the euro, making eurozone exports less competitive.
Read more...

Growth In U.S. Manufacturing Sector Slows Down

The Institute of Supply Management in the U.S. said its manufacturing index registered 51.2 in October, lagging behind September's reading of 52.9 and was the index's lowest level since June 2003. The decline was blamed on the persistently high raw material prices and a decline in new orders. Global Insight industrial economist Tom Runiewicz predicted that the manufacturing sector would likely experience much slower growth in 2007, estimated at 2.5 percent on an annualized basis. Read more...

TAX

Hong Kong

Hong Kong Drops GST

The consultation period for the unpopular Goods and Services Tax came to an abrupt end four months earlier than its originally proposed nine-month frame. On 6 December, Henry Tang, Hong Kong's Financial Secretary gave the surprise announcement, stating that there was insufficient public support, and the domestic conditions were not right for introducing the GST at this time. However, the government will continue to consult the public on other options to widen the tax base. Read more...

China

Guangdong Announces New Tax Incentives For Innovation

The government of Guangdong province has announced a package of 15 preferential tax policies and tax service measures to encourage innovation by enterprises. Concessions include a 150 percent deduction allowed for R&D expenses actually incurred from taxable income and use of the accelerated depreciation method for instruments and equipment used in R&D. Approved research institutions that have ultimately been transformed into enterprises will also enjoy various tax exemptions for up to seven years. Read more...

North America / Europe

UK's Pre-budget Report Disappoints Private Equity Sector

The Pre-Budget Report delivered by UK Chancellor Gordon Brown in early December, came as a disappointment to the UK's private equity sector as it failed to redress the unfair retrospective legislation which will attack their fund returns from April 2007. Consequently, funds will be hit by a significant increase in tax costs, a condition that could not have been predicted at the time of investment. Uncertainties remain in other areas, such as whether withholding tax needs to operate on interest paid on many international structures, and whether future receipts are taxed on a current or deferred basis. Read more...

US Expats Hit By Tax Changes At Home

According to a survey conducted by the American Chamber of Commerce in Singapore, the change in the US income tax law signed in May this year, will cause US expats in Singapore to return home to avoid additional tax obligations. Changes include a lowered tax-free threshold from USD82,400 to USD80,000 under which income is now likely to be taxed at higher tax rates. High housing costs which were excluded from the computation of US tax, will now be treated as a taxable benefit, at 30 to 35 percent, making many individuals worse off. Read more...

Canadian Government Urged To Rethink Proposal To Cut GST

A 2 percent cut in GST was a key electoral pledge of the Conservative Party in late 2005. The government has so far cut the rate by 1 percent to 6 percent and aims to reduce another percentage point over the next five years. However, the parliamentary committee objects to the cut, saying that it would be too costly in terms of revenue loss, and that the cut would unduly restrict other decisions that could be taken by the federal government. Read more...

Offshore

Bahamas To Introduce New Private Trust Companies Legislation