Where is China now? 2018 Update
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China provides so many great business opportunities, but being armed with the right information is key. An overview of the REAL one belt one road, greater bay area, and Hong Kong's importance
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Where is China now? 2018 Update
- 1. 1 Security Rule of Law Access to China Financing
- 2. 2 Contact Us By all means contact us for guidance and advice. Callan.anderson@hkcsgroup.com 44 Wyndham Street, Central, Hong Kong @HKCSGroup Hong Kong Corporate Services Group Assisting clients make sense of China Opportunities www.hongkongcorporateservices.com
- 5. What does CHINA Want? “rejuvenation” of a “humiliated” country Returning China to the predominance it enjoyed in Asia before the West intruded
- 6. 6 KEEPING THE MIDDLE CLASS HAPPY IS KEY TO THE PARTY The wealth of the country is with them. BUT… there is still $24 billion USD leaving China every month…
- 7. Hong Kong Update in a CHINA mindset Re-establishing control over the territories the Communist Party considers to be “greater China,” including not just Xinjiang and Tibet on the mainland, but Hong Kong and Taiwan; Recovering its historic sphere of influence along its borders and in the adjacent seas so that others give it the deference great nations have always demanded; Commanding the respect of other great powers in the councils of the world. AND…
- 8. Hong Kong Update in a CHINA mindset
- 9. There is a Slight Problem with this however…
- 10. 10 Same Bed.. Two Different Dreams..
- 11. 11
- 12. 12
- 13. 13 China did not become the second largest economy during a Mao Zedong era!
- 15. China’s Keep me awake list 1 “We have built everything we need” * 2 Our population is aging fast. 3 We have polluted the air and the land. 4 We have a vast uneducated population. 5 We don’t think we need foreigners (1/3 of GDP comes from Foreign firms in China)
- 16. 16
- 17. PAKISTAN
- 18. LAOS
- 19. CAMBODIA
- 20. MALAYSIA
- 21. INDONESIA
- 22. INDIA
- 23. EGYPT
- 24. ETHIOPIA
- 25. PHILIPPINES
- 26. NIGER
- 27. CANADA
- 28. Who has more to smile about?
- 31. China is Building Manufacturing Zones Across OBOR $142.3b Europe $93b United States $75.5b Australia $144.6b East Asia China is no longer a Stand-alone Single Market
- 32. Greater Bay Area a New Name for an Old idea?
- 33. 33 The Greater Bay Area accounts for less than 1% of China’s territory and 4% of its population.
- 34. 34 But it generates nearly 10% of the nation’s gross domestic product (GDP)
- 35. 35 THE GREATER BAY has a population of 66 million, which also means that it has more people than far larger countries such as Canada or Australia
- 36. 36 THE GREATER BAY has a population of 66 million, which also means that it has more people than far larger countries such as Canada or Australia
- 37. 37
- 38. 38
- 39. 39 Cooperation within the Pearl Delta area dates back as early as 2009, but the concept of an integrated Greater Bay Area didn’t begin appearing in central government documents until 2015 “Our biggest challenge that we face is that in the past these places were relatively separate and independent,” Li said. “There was no real cohesion, which is just something that’s just now taking shape.”
- 40. 40
- 41. 41
- 42. 42 CHINA IS NOT A DICTATORSHIP it is a Directorship TOP DOWN DIRECTION – Bottom-up Participation
- 43. 43 If you are a *Hong Kong resident who spends more than 183 days on Mainland China, you will be liable for tax on income earned in China AND ALL Global INCOME
- 44. 44 There is however some positives in the push for easier access to the Greater Bay Area
- 45. 45 Hong Kong – Mainland High Speed Rail 48 mins to Guangzhou
- 46. 46
- 47. 47 Hong Kong Zhuhai Macau Bridge 55km Long
- 48. 48
- 49. 49 49 13 million people The Pearl River Delta ZOOM IN on SHENZHEN THE SILICON DELTA (Silicon Valley 2.0)
- 50. 50 Shenzhen 1982
- 51. 51 Shenzhen 2017
- 52. 52
- 53. 53 Aunicorn company is a Start-up valued at USD$1billion or more SILICON VALLEY OF THE EAST In Shenzhen alone, in the last 7 months an eye- popping 18 companies being identified as Unicorns. The US had 13
- 54. 54
- 55. 55
- 56. 56
- 57. 57
- 58. 58 Shenzhen Clothing Manufacturer Clothing Sales on Live Internet Video-Feed Buyers ask questions about the item the host is wearing
- 59. 59 HONG KONG
- 60. 60 Beautiful Mount Everest (not in Hong Kong)
- 61. 61 Think of Hong Kong as your Base Camp for China and Asia
- 63. TENT - Setup a Hong Kong Company SAFETY ROPE - Common Rule of Law to PROTECTION FROM THE ELEMENTS - CEPA – Closer Economic Partnership Agreement BASECAMP - Use Hong Kong to hold contracts and flow money back from China. NEAR THE SUMMIT - Establish a WFOE (Wholly Foreign Owned Enterprise) in China, owned by your Hong Kong company SUCCESS - Repatriate profits back to Hong Kong at the lowest rate for any country (5% versus 10% to Canada)
- 65. START HERE I want to sell to China CASG Identify a client with Asia/China connection Call can be arranged between CASG, Client and HKCS to discuss. Develop proposal BASECAMP - Use Hong Kong to hold contracts and flow money back from China.
- 66. Always start with a Hong Kong Limited Company for security and for tax planning reasons. Saved by CASG and HKCS Group Don’t be scared of China
- 67. HKCS Group can establishe a WFOE (Wholly Foreign Owned Enterprise) in China that my Hong Kong Company owns when the timing is right
- 68. I am making money in China and repatriate profits back to my HK Company at 5% Withholding Tax
- 69. Profits in Hong Kong are taxed at 8.25 or 16.5% - no tax on Dividends – Profits could return to Canada under Tax Treaty FINISH!
- 70. 70
- 71. 71 Thank you!
Editor's Notes
- I am afraid that in most cases, China is focusing on its past, to identify its future
- “The Communist Party has faced a slow-burning threat to its legitimacy ever since it dumped Marx for the market.” Thus the party has evoked past humiliations at the hands of Japan and the West “to create a sense of unity that had been fracturing, and to define a Chinese identity fundamentally at odds with American modernity.”
- It used to be the students that China worried about – now its keeping the middle class happy – the deal that the communist party was “you let us focus on the State and defense and we will make you wealthy” Remmeber China has become very expensive to manufacture, and manufacturing is key to China’s wealth
- Chairman Mao fixed the Country Deng Xiao Ping fixed the Economy Xi Jing Ping is going to fix the Party Since the communists fought their way to power, they had called themselves the “vanguard of the people”, an elite class whose mandate to rule came from “serving the people” Without living by this higher code, the Party had no claim to legitimacy. Since Xi Jinping took control, his blunt message has been “don’t join the party if you want to make money”. The problem was and still is, that this is precicly why some of the Party’s 90 million members joined in the first place! So far 1.3m people have been arrested, charged and many of them imprisoned for corruption since Xi took power.
- China is not very concerned about how its neighbours feel – a bit if Trumpiasm here
- And in contrast to Gorbachev’s glasnost—openness to ideas—Xi has demanded ideological conformity, tightening control over political discourse. At the same time, Xi has moved to cement the party’s centrality in China’s governance. Deng sought to separate party from government, and strengthen China’s state bureaucracy vis-à-vis the party. Xi has flatly rejected that idea. Shortly after Xi took power, an op-ed in the state-run People’s Daily crystallized his position: “The key to running things well in China and realizing the China Dream lies in the party.”
- AS FOR HOW WE SEE CHINA IN THE WEST Xi talked about the “China Dream” as a unifying theme for the Chinese to achieve a great national revival.
- So the real test of Xi’s legitimacy will be if he can maintain and grow the economy
- China has a problem however
- There has been a very large push for infrastructure and economy building. They may have not built EVERYTHING they needed, but they did a pretty good attempt at it – 33 new airports in 18 years, a new skyscraper every 5 days…high speed rail networks Making money from Western firms manufacturing in China have been a great boon to China, yet with growth comes inflation, appreciation of the currency and in one big vicious circle, China faces a every increasing middle class that they need to keep happy – unhappy people in China can lead to unrest, and China does not want unrest. Manufacturing costs have increased Middle class need to be happy
- 47.67 Billion USD in investment and trade in Canadian Enegy
- He never smiles
- IF you look at this map, it shows the planned investment by China in key parts of the world – even if they are NOT part of the OBOR, there is still investment happening in areas such as green tech, port and railway infrastructure and more interestingly ENERGY with new power stations – the largest single investment in almost every country (20 of them) is energy production With China investing around 113b USD in the AIIB initially that supports much of the One Belt One Road Initiative Canada is not part of OBOR, but the firms and china companies within OBOR will utilise Canadian products (rain proof jackets) – the wealth China makes has a positive impact on spending and luckily Canada sells a lot of China.
- The greater bay is the new name for the Pearl River Delta – and although it was only mentioned by Xi Jingping in 2017, there was already a major re-development push by Hong Kong to build a bridge to Macau and Zhuhai, but also a highspeed rail connection to Guagzhou and the rest of China. I think the consensus is that the other key provinces have a great deal more to gain than HK, but HK will reap rewards based on the Greater bay area success – its focusing Western firm to look at south china again.
- One major change from the PRD to the GBA is Hong Kong’s active involvement. Previously, the PRD was seen as a separate region in which to do business, or even as an area that competed with Hong Kong’s. Hong Kong’s involvement in the GBA IS PLANNED to greatly accelerate business opportunities in the region, as it is currently the world’s fourth largest financial centre, and the host to seven Fortune 500 companies. I .
- HOWEVER – I would say that Hong Kong’s involvement in the GBA is still going to face some challenges – separate legal system and separate currency -
- HOWEVER – I would say that Hong Kong’s involvement in the GBA is still going to face some challenges – separate legal system and separate currency -
- The idea drew broader attention in 2017 when it was written into the annual government work report delivered by Premier Li Keqiang. A year ago the governments of Guangdong province, Hong Kong and Macau signed a framework agreement to develop the Greater Bay Area.
- And the Participants from each province have different expectations, economic directions , law and taxation – ONE KEY element that makes Hong Kong key to Western firms is the rule of law – and that is not going to change unless the Greater Bay Area decides to amend its law – which I doubt – YET one interesting thing is that China is looking at making the RMB fully convertible in the Bay Area.
- 3% on the first 36,000 RMB and 45% on anything up to 960k 520k HK people live in Guagdong – 15k of those are students AS OF LAST FRIDAY – as long as you don’t have a home there or your family, then no tax
- Its sinking
- The Pearl River Delta – PRD or Greater Bay Area GDP growth in the Greater Bay Area is expected to double until 2023 or 2027 - surpassing the United Kingdom to be the world’s fifth economy, experts on the area say.
- sinking
- Beijing has picked 17 tech hubs across the country to transform from a manufacturing-reliant economy to one led by tech and innovation
- A vast majority of economic activities are now generated by the market. According to official data, private firms contribute to over 60 per cent of the nation’s GDP and more than 80 per cent of urban employment.
- Pulled together, Baidu, Alibaba, Tencent and JD.com have a collective market capitalisation of US$950.35 billion, ahead of the aggregate valuation of US$665 billion for established global tech players, Intel, Cisco Systems, Oracle and IBM This is exactly what is happening in the Pearl River Delta. Inspired by Silicon Valley, Shenzhen has become a nexus of venture capitalists, accelerators and tech giant alumni, ready to build the next successful startup.
- When Tencent’s WeChat launched six years ago, it was a mere chat app. Now, WeChat offers social media, payments, dating, news and messaging, among other options, to more than 900 million active users. Think Snapchat, Whatsapp, Skype, Instagram, Paypal, Facebook Live, Yelp, Tinder and Apple Pay all rolled into one. By contrast, WeChat’s western counterparts give their users relatively limited experiences on a single platform
- When Tencent’s WeChat launched six years ago, it was a mere chat app. Now, WeChat offers social media, payments, dating, news and messaging, among other options, to more than 900 million active users. Think Snapchat, Whatsapp, Skype, Instagram, Paypal, Facebook Live, Yelp, Tinder and Apple Pay all rolled into one. By contrast, WeChat’s western counterparts give their users relatively limited experiences on a single platform
- Only ONE blouse and skirt was made. If they get more than 2,000 orders, they will then manufacture the garments in the factory behind her. (less than 2,000 and the item is “out of stock” They sell over USD$400,000 in each two-hour online video – The factory is one floor above
- SO we are going to talk about a place I have called home for 18 years, and Ken Deayton has for 42 years. There are many reasons people have chosen Hong Kong as their entry-point into Asia as opposed to e.g. Singapore – and I plan to cover why Hong Kong is probably the most important city regards doing business in Asia, but more importantly doing business in China. You don’t have to take my word for it, as Australian firms have also made the same assumption
- Hong Kong has been the gateway to China from the West for many years, and more recently it has become the gateway for China business to enter the West – purely and simply, Hong Kong is the Base Camp to China and all of Asia – it’s a safe, business friendly and fairly westernised mindset that eases you into the transition of dealing with China and other key Asia countries.
- How to work with The Hong Kong Corporate Services Group
- Its not always a pre-requiste that that those interested in trading with China need to have a China company from day one