Human rights organization accuses German companies of forced labor
Regulations on prices for private tutoring
Beijing pledges further opening of its capital markets
NATO voices concern about missile silos
Liu He reassures support for private sector
Fan culture to be brought under control
The People’s Republic to be included in EU Indo-Pacific strategy
Tools: The importance of the social credit system for taxes
Executive Moves: Beijing’s new stock market chief Xu Ming
Dear reader,
The unexpected death of German Ambassador Jan Hecker has caused deep consternation in both Berlin and Beijing. Angela Merkel’s chief foreign policy advisor had taken up his post in the Chinese capital only a few weeks ago. Great hopes rested on his commitment. Now there is great sadness on all sides. We take a look at Merkel’s man in China: How did the Kiel native come to join the chancellor’s small circle of advisors? His death also impacts relations between both nations. It was not without reason that Merkel sent Hecker to China shortly before the end of her term in office. This makes the void he leaves behind all the greater.
Xinjiang is one of the world’s most fertile regions for the growth of cotton. More than 80 percent of the cotton produced in China comes from the northwestern province of China – about one-fifth of the global production. However, for years, non-governmental organizations have feared that forced labor could occur en masse in Xinjiang. Now, human rights organization ECCHR has filed criminal charges against several German textile brands and retailers. The complaint is directed against the discounters Lidl, Aldi Nord and Aldi Süd, as well as C&A and Hugo Boss. The lawsuit is a harbinger of mounting pressure on companies doing business in China, analyzes Felix Lee.
I hope our latest issue will provide you with many new insights,
Early Monday morning, the flags at the German Embassy in Beijing are set at half-mast. The shocking news is now a certainty: Jan Hecker is dead, Germany’s newly appointed ambassador to China. Hecker passed away at the age of 54, completely unexpectedly and too soon.
On Friday evening, Hecker still hosted a cultural event in honor of Joseph Beuys at the premises of the German Embassy in Beijing’s Chaoyang district. He is said to have presented himself to guests like always: As open, keen, and always listening with interest in conversations. This Tuesday, he wanted to meet with the Beijing correspondent of China.Table for lunch.
But on Monday, the shocking news arrived. “It is with deep sadness and dismay that we learned of the sudden death of the German ambassador to China, Prof. Dr. Jan Hecker,” the German Federal Foreign Office announced. “At this time, our thoughts are with his family and those who were close to him.”
Only a few days in office
Hecker had only arrived in China on August 1st with his wife and three children. After the mandatory Covid quarantine, the Chinese Foreign Ministry had approved Hecker’s diplomatic agrément on 24 August, enabling him to officially take up his office as ambassador (China.Table reported). There was great joy on all sides over the Kiel-born German’s appointment as Germany’s representative in China. In addition to his sharp mind and quick grasp, Hecker’s interlocutors praised his ability to listen in personal exchanges.
Foreign Minister Heiko Maas praised Hecker as someone who had achieved a lot and never sought the limelight. He could hardly believe that a person with whom he had recently been sitting together and working on important issues had been torn from his life so abruptly.
Angela Merkel was also deeply affected: “I am deeply shocked by Jan Hecker’s death. I mourn the loss of a highly esteemed advisor of many years who was deeply human and had outstanding expertise. I think back with gratitude to our cooperation and am glad to have been so closely associated with him over the years. My deepest sympathies go out to his wife, children and other relatives in their immeasurable grief.”
The Chinese Foreign Ministry was also shocked at the news of the sudden death of the German ambassador. A high-ranking official called it “sad and shocking news.” Hecker had immediately begun to actively support bilateral relations during his first few days in Beijing. Chinese authorities had assured all assistance to Hecker’s family, as well as to the German embassy.
The exact circumstances of his death have not yet been disclosed. On Monday, Maas told German press agency dpa: “Based on the circumstances of the death, we have no indication that Jan Hecker’s death is in any way connected with his official function as German ambassador to Beijing.” All further speculation is forbidden at this point because the family of a diplomat also has a right to privacy – and above all to peaceful mourning.
“The best man for the job”
Hecker was no career diplomat. Born in Kiel in 1967, he earned his doctorate at the University of Göttingen at the age of just 30. He then worked as a lawyer for international law company Freshfields, among others, before moving to the Federal Ministry of the Interior in 1999. At the same time, he habilitated at the European University Viadrina in Frankfurt an der Oder, where he was appointed an associate professor in 2010. Hecker then went to the Federal Administrative Court in Leipzig, where he served as a judge – until 2015 when then Chancellery Minister Peter Altmaier recruitedhim for Angela Merkel’s advisory staff. “His sense of duty, his human and professional competence and deep education were outstanding,” Altmaier wrote on Twitter on Monday.
There, Hecker became head of the then newly created refugee policy coordination staff – and was thus instrumental in ensuring that Merkel’s well-known promise “We can do this” was put into practice. Two years later, Hecker became Merkel’s chief foreign policy adviser – one of the most important foreign policy posts in Berlin.
Hecker’s rise to the head of the pivotal Department II in the Chancellor’s Office was surprising for two reasons: Firstly, with Hecker, Department II was not entrusted to a trained diplomat for the first time in 50 years. Secondly, Hecker was originally a political opponent of Merkel, namely as a member of the German SPD Party from 1995 to 2002. But what Merkel once said about the election of a different adviser seemed to apply to Hecker as well: It was not about political buttock topography, but about the “best man for the job”.
For dialogue and cooperation
The best man for the difficult position in an emerging China – Merkel apparently had nothing less in mind when she appointed Hecker as Germany’s highest representative in China. Her plan: after the federal elections, which also marked the end of her chancellorship, Hecker was to ensure continuity in the difficult relationship with the new superpower. Representatives of the Chinese Foreign Ministry are said to have expressly welcomed Hecker’s appointment, referring in particular to his close ties to the chancellor. After all, Merkel is the one taking a rather cautious line in Europe’s increasing tensions with China. In the current election campaign, all candidates for the Office of the Federal Chancellor are promoting a tougher course against the People’s Republic.
In an article published on the website of the German Embassy a few days ago, Hecker promoted dialogue and cooperation between China and Germany in line with his mission. He said that both nations shared a common responsibility in matters of global range. But nothing else was to follow. For the time being, envoy Frank Rückert will take over as head of the embassy in Beijing.
Angela Merkel
Diplomacy
Geopolitics
Jan Hecker
Boss, Lidl and C&A reject allegations of forced labour by Uyghurs
The accusation weighed too heavily to ignore. The human rights organization European Center for Constitutional and Human Rights (ECCHR) had filed criminal charges against several German textile brands and retailers with the Federal Prosecutor General in Karlsruhe last week. The complaint is directed against the discounters Lidl, Aldi Nord and Aldi Süd, as well as C&A and Hugo Boss. The human rights organization accuses the companies of “directly or indirectly profiting from forced labor of Uyghurs” in the Chinese region of Xinjiang. Thus, the companies could be involved in crimes against humanity, the accusation reads.
Now some of the affected companies reacted. The fashion label Hugo Boss stated that it assumes that “there are no legal violations in the production of the goods”, as reported by the magazine Textilwirtschaft. Hugo Boss said it had “asked suppliers to inform us and confirm that the manufacturing of our goods in our supply chain is carried out in accordance with our values and standards.” It said particular attention was paid to human rights. A key Chinese partner, the Esquel Group, had “provided assurances” that it complied with all standards. Unfortunately, however, important providers of independent controls had withdrawn from the region, including TÜV.
C&A has also already taken a stand. According to Textilwirtschaft, the company stated that it does not buy “any clothing from manufacturers based in the province of Xinjiang”. However, the statement only refers to the present. ECCHR’s complaint referred to the supply relationship with a supplier that C&A worked with until a year ago. Since human rights problems in Xinjiang had already been reported since 2017, this was too late, the organisation insinuated. Lidl informed the ECCHR that it has not been working with two companies in Xinjiang, which allegedly employed former inmates of the re-education camps, for “more than a year”.
Most important cultivation area for cotton
The ECCHR’slawsuit against the German companies has it all. For years, non-governmental organizations have been pointing out the risk of forced labor in the cotton and textile sector in the northwestern Chinese province of Xinjiang. The region is home to the Muslim minority of the Uyghurs, who are systematically oppressed by the Chinese authorities. Hundreds of thousands of Uighurs have reportedly been temporarily confined to so-called re-education camps in recent years. The Chinese government officially denies this, but Chinese state media have themselves mentioned these camps on several occasions.
At the same time, Xinjiang is one of the world’s most productive cotton growing regions. More than 80 percent of the cotton produced in China comes from the region, which corresponds to around one fifth of global production. Much of it is still picked by hand. According to human rights organizations such as Amnesty International and Human Rights Watch, Uyghur workers are often used for this purpose. The Chinese government forces Uyghurs to work in the textile industry, among other things, according to the nearly 100-page complaint. The lists of suppliers of the companies reported prove that they either currently or until recently produced in Xinjiang.
Companies reject the accusations
Other international fashion companies are also under pressure. When the US and EU imposed sanctions on Chinese government officials in the spring because of ongoing human rights abuses in the region, Nike and H& M, among others, declared their renunciation of cotton from Xinjiang. In response, however, these brands were pilloried in China. On social media, the influential Communist Youth League, among others, called for a boycott of these Western brands. Boss had first assured that it would not buy any goods from direct suppliers from the Xinjiang region. However, when it came under fire on Chinese social media, the company assured on the Chinese platform Weibo that it would continue to source cotton from Xinjiang.
This is not the first complaint of this kind filed by ECCHR. The human rights lawyers have caused a stir with similar proceedings before. In 2015, they filed a lawsuit against the German textile discounter KIK. Due to a lack of fire protection, a factory building in Pakistan belonging to KIK’s suppliers had burned down nine years ago. 259 employees lost their lives. However, the civil suit was dismissed due to the statute of limitations. This reason will not apply in the case of Xinjiang.
ECCHR calls on the Attorney General’s Office to “investigate the alleged forced labor and the possible legal responsibility of the companies”. The head of ECCHR’s Business and Human Rights Programme, Miriam Saage-Maaß, stated that it is “unacceptable that European governments criticize China for human rights violations while companies may be profiting from the exploitation” of the Uyghur population. In fact, companies are required to comply with international criminal law standards even when they have business relationships in repressive countries. If the suspicion of forced labour is confirmed, Saage-Maaß said, it is “high time that those responsible in the companies are held accountable”.
The charge is based on the existing International Criminal Code, which makes human rights violations abroad punishable. It has been in force since 2002. Human rights lawyers expect that a European supply chain law would provide lawyers with even more robust grounds for suing large companies that source goods in the Far East(China.Table reported). Such a supply chain law is expected to be finally formulated and adopted in the coming years.
Forced Labor
Xinjiang
News
China regulates tutoring costs
China’s top planning authority NDRC plans to regulate prices for private tutoring. The NDRC announced on Monday that in the future it will take a closer look at the price range for private tutoring and the operating costs of the providers, as well as at salaries of employed teachers. According to the statement issued by the NDRC, the commission wants to set a reference framework for fee standards to ensure tutoring prices become more affordable for parents. The NDRC also wants to ensure that the salaries of tutors no longer exceed those of public schools, for example.
For weeks, Beijing has been cracking down on the once-booming Chinese tutoring industry, claiming that the sector is “eaten up by capital”(China.Table reported). In July, a shockwave went through the education sector when authorities required all institutions offering curriculum-related tutoring to register as non-profit organizations.
On Monday, China’s Ministry of Education announced in a separate statement plans to step up scrutiny of learning materials issued by tutoring institutes. For example, employees “must take a firm political stance, implement the Communist Party’s education policy and display good morals”. niw
Children
Chinese Communist Party
Education
NDRC
Society
Beijing pledges to further open its capital markets
Following Beijing’s recent crackdown on its tech companies, education and real estate sectors (China.Table reported), Yi Huiman, head of the China Securities Regulatory Commission (CSRC) has now promised a further opening of capital markets to foreign investors.
“Opening-up and cooperation is the inevitable trend in the integrated development of global capital markets,”, Yi said at a conference organized by the World Federation of Exchanges, Reuters reported. Pragmatic cross-border cooperation is also being sought to regulate Chinese companies listed overseas.
Yi’s words come against the backdrop of China’s regulators surprisingly postponing the IPO of financial services firm Ant and other IPOs. Just over the weekend, his deputy at the CSRC had also announced improvements in listing rules for foreign companies in China, as well as for Chinese companies abroad. niw
CSRC
Finance
IPO
Stock Exchange
NATO chief warns of new missile silos
NATO Secretary-General Jens Stoltenberg has expressed concern about the construction of new missile silos in China. The People’s Republic could significantly increase itsnuclear capabilities as a result, Stoltenberg said at an annual arms control conference on Monday, news agency AP reported. China is rapidly expanding its nuclear weapons arsenal with more warheads and a greater number of sophisticated delivery systems, the NATO chief said.
All of this is done in an unrestricted and completely non-transparent manner, Stoltenberg said, according to the report. “As a global power, China has responsibilities in arms control,” Stoltenberg added, addressing the Chinese government. Beijing would also benefit from mutual limitations, more transparency and predictability.
China must also join international efforts to limit the spread of nuclear weapons, Stoltenberg stressed. So far, Beijing has largely refused talks on this issue. The construction of new missile silos was reported by the Federation of American Scientists (FAS) at the end of July (China.Table reported). With the help of satellite images, the experts discovered a large area with nuclear missile silos under construction near Hami (Kumul) in the northwestern region of Xinjiang. ari
Geopolitics
Jens Stoltenberg
Nato
Vice President reassures support for private sector
China’s Vice President Liu He has pledged the government’s support for the private sector. The growth of the private sector will continue to be vigorously supported as it plays an important role in stabilizing employment, adjusting the economic structure and promoting innovation, Liu He said on Monday at the opening ceremony of the China 2021 International Digital Economy Exhibition.
“There are no changes in the principles and policies for supporting the development of the private economy,” said He, who is also a chief economic adviser to President Xi Jinping. Liu clarified on Monday that Beijing is well aware of the importance of private enterprises. “The private economy has contributed more than 50 percent of total tax revenue, more than 60 percent of gross domestic product, more than 70 percent of China’s technological innovation”, Liu said in a video speech.
Liu’s remarks come at a time when the Beijing government is cracking down heavily on private companies – be it tech companies, tutoring providers, or even the music and entertainment industries (China Table reported). rad
“Literature and art is an important battlefield of thought and ideology and thus an extremely important work for the party,” said Jiang Yu of the Research Center for Development under the State Council. Yu sharply criticized the business practices of stars. Yu accused them of manipulating their fans and called immediate and sharper control.
Critics see the authorities’ actions as a sign that the influence of state and party leader Xi Jinping is continuing to grow. Xi had recently spoken out in favor of the “great renewal of the Chinese nation”. Since then, the rules of conduct for the entertainment industry have included bans on make-up, earrings and tattoos for men who look too androgynous.
Agencies of stars and their respective internet platforms are now to be more strictly controlled by the authorities. In the future, fan groups on social networks have to be authorized by agents, who will also be responsible for the subversion of these groups. Rumors and attacks with which rival fan communities verbally attack each other are to be strictly forbidden. Another new rule mandates that followers of influencers are no longer to be asked to send “virtual gifts” to their idols. Next to advertising revenue, such gifts are the biggest source of income for influencers.
The power of followers through new technology frightens the party, reports news agency dpa. Fan clubs are compared to a “cult”. “Fans think they are simply joining organizations to better support their idols,” comments Chinese newspaper Global Times. The paper warns that pop fans could mutate into enemies of the state. “But not only can’t they see the profit-seeking capital that craves to manipulate their souls with carefully crafted images of their stars, but also dangerous organizations waiting for the opportunity to use them to divide Chinese society.” niw
Censorship
Culture
Society
EU Indo-Pacific Strategy not a provocation to China
The European Union’s broader strategy on the Indo-Pacific region is not meant to isolate China, according to a senior Brussels official. The EU’s approach will be inclusive, Enrique Mora, deputy secretary-general of the European External Action Service (EEAS), stressed on Monday at an online event hosted by the think tank European Council on Foreign Relations (ECFR) and the Asia-Pacific Committee of German Business (APA). This inclusive approach will also see to not exclude China, Mora said. Brussels sees the Indo-Pacific strategy and China policy as two separate issues.
Mora stressed that the region must have its own approach that strengthens cooperation independently of China. The fact that the EU wants to intensify cooperation with the Indo-Pacific is not a provocation towards Beijing. It was primarily a matter of diversifying relations in various areas, such as the issue of supply chains.
Mora will present the joint concept by the EEAS and the EU Commission on the Indo-Pacific region next Tuesday. In particular, specific details on the implementation of strategy are to be expected. On Wednesday next week, the region and the EU’s involvement there will also play a prominent role in the State of the Union address by EU Commission President Ursula von der Leyen.
For its strategy, the EU also urgently needs to understand what interests the US is pursuing in the region, stressed APA Chairman Joe Kaeser. He advocated close coordination with Washington. But Brussels must also take the lead on this issue, he said. In Kaeser’s view, an in-depth EU strategy for the Indo-Pacific region is long overdue in the light of a strengthening China. ari
ECFR
EEAS
EU
Geopolitics
Indo-Pacific
Joe Kaeser
Tools
China’s Taxpayer Credit Rating System: An Explainer
By Zoey Zhang, Dezan Shira
A good social credit rating has several advantages for enterprises as taxpayers., for example, when
obtaining tax incentives
making bids,
applying for loans,
obtaining business qualifications, etc.
while a poor rating can lead to more stringent scrutiny in a wide range of tax-related matters. In this article, we will walk you through China’s tax credit management system to help you maintain a good tax credit rating.
How does China’s taxpayer credit management system work?
China established its taxpayer credit management system in 2014 with the roll-out of the Administrative Measures on Taxpayer Credit (Trial Implementation) (STA Announcement [2014] No.40). Since then, it’s been constantly perfecting this system and integrating it with the larger corporate social credit supervision mechanism.
Under the system, Chinese tax authorities collect and evaluate the taxpaying information of corporate taxpayers in each tax year (from January 1 to December 31) and confirm the taxpayer credit evaluation findings the following April.
After determining the credit ratings for taxpayers by way of annual evaluation benchmark scores or direct rating, the tax authorities implement corresponding administrative measures, including incentive and punitive measures, for taxpayers of different grades.
What is the scope of application?
The tax credit rating system applies to all corporate taxpayers that (a) have completed tax registration, (b) are engaging in manufacturing and business activities, and (c) subject to tax collection based on their accounts, pursuant to the STA Announcement [2014] No.40.
The scope of application was expanded by the SAT Announcement on Matters Related to Evaluation of Taxpayer Credit (STA Announcement [2018] No.8) in 2018 to cover:
Newly established enterprises, that is, enterprises that have been operating for less than a calendar year.
Enterprises without business income in a calendar year.
Enterprises whose corporate income tax (CIT) returns are filed on a deemed income basis.
In 2020, the STA Announcement about Issues Related to Credit Management on Tax Payment (STA Announcement [2020] No.15) added that a “non-independent accounting branch” (branches established by corporate taxpayers whose registration information has been confirmed with the tax authorities and who accounting method is non-independent accounting) can voluntarily choose to join the credit evaluation after application.
How are taxpaying credit ratings calculated?
So far, there are five credit ratings for corporate taxpayers – A, B, M, C, and D:
Rating A >= 90 points
Rating B >= 70, <90 points
Rating M – newly established enterprises with no production and operation income in the tax year and with a tax credit score of more than 70 points
Rating C >= 40, <70 points
Rating D <40 points.
Type A taxpayers own the best tax credit rating with a score of 90 points and above, while Type D taxpayers have the poorest rating. Type D taxpayers have either scored less than 40 or were graded directly as Type D (direct grading applies to taxpayers who have committed serious dishonest acts).
Among them, the special Type M was newly added in 2018, which refers to newly established enterprises with no production and operation income in the tax year and with a tax credit score of more than 70 points.
The credit scores (usually with a starting score of 100 or 90, which we will explain in the next section) adopt the demerit method – taxpayers’ scores are deducted when they fail to meet taxpaying credit evaluation indicators.
What are the taxpaying credit evaluation indicators?
The taxpaying credit evaluation indicators consist of the taxpayer’s historic information, internal taxpaying information, and external taxpaying information, according to the STA Announcement on the Promulgation of Taxpaying Credit Evaluation Indicators and Methods (for Trial Implementation) (STA Announcement [2014] No.48). You may refer to the following table to have a rough idea about the respective evaluation indicators.
The internal taxpaying information contains “recurrent indicators” and “non-recurrent indicators”. The recurrent indicator refers to indicator information frequently generated by taxpayers during the year of evaluation, such as tax-related declaration information, tax payment information, invoices and tax control equipment information, registration, and accounts books information. The non-recurrent indicator refers to indicator information not frequently generated by taxpayers, such as the tax bureau’s record of tax assessment, tax audit, anti-tax avoidance investigation, or tax inspection information.
According to the STA Announcement [2020] No.15, if there is non-recurring indicator information in the past three evaluation years, the starting score of the taxpayer can be 100. In the absence of non-recurring indicator information in the past three evaluation years, the starting score is 90.
What are the incentive and punitive measures for taxpayers in China?
After determining the taxpayer credit rating, the tax authorities will implement administrative measures, including incentive and punitive measures, accordingly. Contrary to Type A taxpayers who will be entitled to favorable treatment like streamlined administrative procedures and fast-tracked approvals, Type D taxpayers could face increased frequency of supervision and inspection and stricter scrutiny on a wide range of tax-related matters, such as application for invoice issuance and value-added tax (VAT) refunds on exported goods and monitoring business compliance.
Furthermore, the State Taxation Administration (STA) has actively been participating in the construction of China’s social credit system and the exploration of cooperation on credit sharing.
In 2015, the STA and the China Banking and Insurance Regulatory Commission (CBIRC) set up the “Bank-Tax Cooperation” mechanism. Tax authorities committed to forwarding part of the taxpayer’s tax credit information to banks under the premise of legal compliance and enterprise authorization. Banks will be able to use this information to optimize their credit model and provide credit loans for trustworthy small and micro firms. Since November 2019, the scope of beneficiaries has been expanded from Type A and Type B taxpayers to include Type M taxpayers (newly-established ones).
Inter-agency collaborative agreements are an increasingly prominent feature of the Chinese regulatory landscape.
In July 2016, 29 Chinese regulatory authorities, including SAT, NDRC, People’s Bank of China (PBOC), etc., jointly signed a cooperation memorandum to grant 41 incentives to taxpayers with Class-A tax credit rating. In October 2016, 40 Chinese regulatory authorities jointly signed a Cooperation Memorandum to Grant Joint Incentives for Customs’ Advanced Certified Enterprises.
The STA has signed a Cooperation Framework on Credit Sharing and Application with the State Development and Reform Commission (NDRC) in 2017 and dozens of Memoranda of Joint Actions on Rewarding Honesty and Punishing Dishonesty with related government departments to further develop mechanisms in credit sharing, mutual rating recognition, and cooperation in reward and punishment with respect to credit rating results.
Does China provide taxpaying credit restoration measures?
To encourage corporate taxpayers to proactively fix their tax incompliance record, China also incorporates tax credit restoration measures into the taxpayer credit management system. This grants taxpayers a chance to repair their credit rating.
Pursuant to the Announcement on Matters Related to Tax Credit Restoration (SAT Announcement [2019] No.37), beginning January 1, 2020, corporate taxpayers included in China’s tax credit management system can apply for tax credit restoration by correcting tax irregularities and making credit commitments.
Eligible corporate taxpayers applying for tax credit restoration must satisfy one of the following three conditions:
Condition I: The enterprise has now completed all tax declarations, tax payments, and data filing, after previously failing to do so, within the statutory time limit;
Condition II: The enterprise that previously failed to pay or pay in full the taxes owed, late fees, and fines and was categorized as a Type D taxpayer (not due to a crime), has now paid or made up the payment within 60 days upon the statutory payment deadline; or
Condition III: The enterprise has fulfilled all corresponding legal obligations, and thereby the tax authority has lifted its ‘abnormal’ status.
The taxpayer can apply to the relevant tax bureau and make a commitment that the irregularities have been corrected and the tax bureau will then, within 15 workdays, complete the audit and inform the applicant of the result. After the completion of the tax credit repair, the taxpayer will be subject to the corresponding tax policies and administrative measures based on the recovered tax credit rating.
China has been putting great effort into optimizing its corporate credit system to improve the efficiency of tax and credit governance. Corporates are highly advised to keep track of their tax credit ratings and the reasons for their poor rating (if any), refer to the respective announcements from tax and regulatory bodies and seek professional advice to make up for the credit loss.
This article first appeared in Asia Briefing, published by Dezan Shira Associates. The firm advises international investors in Asia and has offices in China, Hong Kong, Indonesia, Singapore, Russia and Vietnam.
Finance
Trade
Executive Moves
Xu Ming is Chairman and General Manager of the newly established National Equities Exchange and Quotations (NEEQ) in Beijing. Xu previously worked at the Shanghai Stock Exchange for seven years and is now to help small and medium-sized companies, in particular, to find new financing opportunities, while building up the stock market on China’s “third stock exchange”. Following the trading venues in Shanghai and Shenzhen, which have existed since 1990, the Star Market in Shanghai has also existed for two years for domestic tech start-ups.
Xu Lei, the head of JD’s retail arm, will take the newly created role of president and be responsible for the daily operations of the company as well as the development of the various business units of JD.com, the NASDAQ-listed company said Monday. Richard Liu, founder of e-commerce platform JD.com made a surprise announcement yesterday that he would step back from the day-to-day operations of his company to focus on longer-term strategies and coach young managers at the company.
Zhou Zixue is stepping down from his post as chairman of Semiconductor Manufacturing International Corp. due to health reasons. (SMIC). Zhou will remain executive director of the chipmaker. Gao Yonggang replaces Zhou on the board, according to SMIC.
Dessert
Even in preschool, the dribbling of a basketball has to be spot on. The sports curriculum is also being adopted across China because in the future the sports grade will play a greater role in admissions to better schools. The fact that jumping rope, dribbling a ball, or practicing kung fu could now help kids to move up the social ladder is prompting more and more parents in the cities to enroll their children in soccer or swimming classes instead of just math tutoring. But the fact that the pressure to perform should actually be taken off the shoulders of youngsters is often forgotten.
Human rights organization accuses German companies of forced labor
Regulations on prices for private tutoring
Beijing pledges further opening of its capital markets
NATO voices concern about missile silos
Liu He reassures support for private sector
Fan culture to be brought under control
The People’s Republic to be included in EU Indo-Pacific strategy
Tools: The importance of the social credit system for taxes
Executive Moves: Beijing’s new stock market chief Xu Ming
Dear reader,
The unexpected death of German Ambassador Jan Hecker has caused deep consternation in both Berlin and Beijing. Angela Merkel’s chief foreign policy advisor had taken up his post in the Chinese capital only a few weeks ago. Great hopes rested on his commitment. Now there is great sadness on all sides. We take a look at Merkel’s man in China: How did the Kiel native come to join the chancellor’s small circle of advisors? His death also impacts relations between both nations. It was not without reason that Merkel sent Hecker to China shortly before the end of her term in office. This makes the void he leaves behind all the greater.
Xinjiang is one of the world’s most fertile regions for the growth of cotton. More than 80 percent of the cotton produced in China comes from the northwestern province of China – about one-fifth of the global production. However, for years, non-governmental organizations have feared that forced labor could occur en masse in Xinjiang. Now, human rights organization ECCHR has filed criminal charges against several German textile brands and retailers. The complaint is directed against the discounters Lidl, Aldi Nord and Aldi Süd, as well as C&A and Hugo Boss. The lawsuit is a harbinger of mounting pressure on companies doing business in China, analyzes Felix Lee.
I hope our latest issue will provide you with many new insights,
Early Monday morning, the flags at the German Embassy in Beijing are set at half-mast. The shocking news is now a certainty: Jan Hecker is dead, Germany’s newly appointed ambassador to China. Hecker passed away at the age of 54, completely unexpectedly and too soon.
On Friday evening, Hecker still hosted a cultural event in honor of Joseph Beuys at the premises of the German Embassy in Beijing’s Chaoyang district. He is said to have presented himself to guests like always: As open, keen, and always listening with interest in conversations. This Tuesday, he wanted to meet with the Beijing correspondent of China.Table for lunch.
But on Monday, the shocking news arrived. “It is with deep sadness and dismay that we learned of the sudden death of the German ambassador to China, Prof. Dr. Jan Hecker,” the German Federal Foreign Office announced. “At this time, our thoughts are with his family and those who were close to him.”
Only a few days in office
Hecker had only arrived in China on August 1st with his wife and three children. After the mandatory Covid quarantine, the Chinese Foreign Ministry had approved Hecker’s diplomatic agrément on 24 August, enabling him to officially take up his office as ambassador (China.Table reported). There was great joy on all sides over the Kiel-born German’s appointment as Germany’s representative in China. In addition to his sharp mind and quick grasp, Hecker’s interlocutors praised his ability to listen in personal exchanges.
Foreign Minister Heiko Maas praised Hecker as someone who had achieved a lot and never sought the limelight. He could hardly believe that a person with whom he had recently been sitting together and working on important issues had been torn from his life so abruptly.
Angela Merkel was also deeply affected: “I am deeply shocked by Jan Hecker’s death. I mourn the loss of a highly esteemed advisor of many years who was deeply human and had outstanding expertise. I think back with gratitude to our cooperation and am glad to have been so closely associated with him over the years. My deepest sympathies go out to his wife, children and other relatives in their immeasurable grief.”
The Chinese Foreign Ministry was also shocked at the news of the sudden death of the German ambassador. A high-ranking official called it “sad and shocking news.” Hecker had immediately begun to actively support bilateral relations during his first few days in Beijing. Chinese authorities had assured all assistance to Hecker’s family, as well as to the German embassy.
The exact circumstances of his death have not yet been disclosed. On Monday, Maas told German press agency dpa: “Based on the circumstances of the death, we have no indication that Jan Hecker’s death is in any way connected with his official function as German ambassador to Beijing.” All further speculation is forbidden at this point because the family of a diplomat also has a right to privacy – and above all to peaceful mourning.
“The best man for the job”
Hecker was no career diplomat. Born in Kiel in 1967, he earned his doctorate at the University of Göttingen at the age of just 30. He then worked as a lawyer for international law company Freshfields, among others, before moving to the Federal Ministry of the Interior in 1999. At the same time, he habilitated at the European University Viadrina in Frankfurt an der Oder, where he was appointed an associate professor in 2010. Hecker then went to the Federal Administrative Court in Leipzig, where he served as a judge – until 2015 when then Chancellery Minister Peter Altmaier recruitedhim for Angela Merkel’s advisory staff. “His sense of duty, his human and professional competence and deep education were outstanding,” Altmaier wrote on Twitter on Monday.
There, Hecker became head of the then newly created refugee policy coordination staff – and was thus instrumental in ensuring that Merkel’s well-known promise “We can do this” was put into practice. Two years later, Hecker became Merkel’s chief foreign policy adviser – one of the most important foreign policy posts in Berlin.
Hecker’s rise to the head of the pivotal Department II in the Chancellor’s Office was surprising for two reasons: Firstly, with Hecker, Department II was not entrusted to a trained diplomat for the first time in 50 years. Secondly, Hecker was originally a political opponent of Merkel, namely as a member of the German SPD Party from 1995 to 2002. But what Merkel once said about the election of a different adviser seemed to apply to Hecker as well: It was not about political buttock topography, but about the “best man for the job”.
For dialogue and cooperation
The best man for the difficult position in an emerging China – Merkel apparently had nothing less in mind when she appointed Hecker as Germany’s highest representative in China. Her plan: after the federal elections, which also marked the end of her chancellorship, Hecker was to ensure continuity in the difficult relationship with the new superpower. Representatives of the Chinese Foreign Ministry are said to have expressly welcomed Hecker’s appointment, referring in particular to his close ties to the chancellor. After all, Merkel is the one taking a rather cautious line in Europe’s increasing tensions with China. In the current election campaign, all candidates for the Office of the Federal Chancellor are promoting a tougher course against the People’s Republic.
In an article published on the website of the German Embassy a few days ago, Hecker promoted dialogue and cooperation between China and Germany in line with his mission. He said that both nations shared a common responsibility in matters of global range. But nothing else was to follow. For the time being, envoy Frank Rückert will take over as head of the embassy in Beijing.
Angela Merkel
Diplomacy
Geopolitics
Jan Hecker
Boss, Lidl and C&A reject allegations of forced labour by Uyghurs
The accusation weighed too heavily to ignore. The human rights organization European Center for Constitutional and Human Rights (ECCHR) had filed criminal charges against several German textile brands and retailers with the Federal Prosecutor General in Karlsruhe last week. The complaint is directed against the discounters Lidl, Aldi Nord and Aldi Süd, as well as C&A and Hugo Boss. The human rights organization accuses the companies of “directly or indirectly profiting from forced labor of Uyghurs” in the Chinese region of Xinjiang. Thus, the companies could be involved in crimes against humanity, the accusation reads.
Now some of the affected companies reacted. The fashion label Hugo Boss stated that it assumes that “there are no legal violations in the production of the goods”, as reported by the magazine Textilwirtschaft. Hugo Boss said it had “asked suppliers to inform us and confirm that the manufacturing of our goods in our supply chain is carried out in accordance with our values and standards.” It said particular attention was paid to human rights. A key Chinese partner, the Esquel Group, had “provided assurances” that it complied with all standards. Unfortunately, however, important providers of independent controls had withdrawn from the region, including TÜV.
C&A has also already taken a stand. According to Textilwirtschaft, the company stated that it does not buy “any clothing from manufacturers based in the province of Xinjiang”. However, the statement only refers to the present. ECCHR’s complaint referred to the supply relationship with a supplier that C&A worked with until a year ago. Since human rights problems in Xinjiang had already been reported since 2017, this was too late, the organisation insinuated. Lidl informed the ECCHR that it has not been working with two companies in Xinjiang, which allegedly employed former inmates of the re-education camps, for “more than a year”.
Most important cultivation area for cotton
The ECCHR’slawsuit against the German companies has it all. For years, non-governmental organizations have been pointing out the risk of forced labor in the cotton and textile sector in the northwestern Chinese province of Xinjiang. The region is home to the Muslim minority of the Uyghurs, who are systematically oppressed by the Chinese authorities. Hundreds of thousands of Uighurs have reportedly been temporarily confined to so-called re-education camps in recent years. The Chinese government officially denies this, but Chinese state media have themselves mentioned these camps on several occasions.
At the same time, Xinjiang is one of the world’s most productive cotton growing regions. More than 80 percent of the cotton produced in China comes from the region, which corresponds to around one fifth of global production. Much of it is still picked by hand. According to human rights organizations such as Amnesty International and Human Rights Watch, Uyghur workers are often used for this purpose. The Chinese government forces Uyghurs to work in the textile industry, among other things, according to the nearly 100-page complaint. The lists of suppliers of the companies reported prove that they either currently or until recently produced in Xinjiang.
Companies reject the accusations
Other international fashion companies are also under pressure. When the US and EU imposed sanctions on Chinese government officials in the spring because of ongoing human rights abuses in the region, Nike and H& M, among others, declared their renunciation of cotton from Xinjiang. In response, however, these brands were pilloried in China. On social media, the influential Communist Youth League, among others, called for a boycott of these Western brands. Boss had first assured that it would not buy any goods from direct suppliers from the Xinjiang region. However, when it came under fire on Chinese social media, the company assured on the Chinese platform Weibo that it would continue to source cotton from Xinjiang.
This is not the first complaint of this kind filed by ECCHR. The human rights lawyers have caused a stir with similar proceedings before. In 2015, they filed a lawsuit against the German textile discounter KIK. Due to a lack of fire protection, a factory building in Pakistan belonging to KIK’s suppliers had burned down nine years ago. 259 employees lost their lives. However, the civil suit was dismissed due to the statute of limitations. This reason will not apply in the case of Xinjiang.
ECCHR calls on the Attorney General’s Office to “investigate the alleged forced labor and the possible legal responsibility of the companies”. The head of ECCHR’s Business and Human Rights Programme, Miriam Saage-Maaß, stated that it is “unacceptable that European governments criticize China for human rights violations while companies may be profiting from the exploitation” of the Uyghur population. In fact, companies are required to comply with international criminal law standards even when they have business relationships in repressive countries. If the suspicion of forced labour is confirmed, Saage-Maaß said, it is “high time that those responsible in the companies are held accountable”.
The charge is based on the existing International Criminal Code, which makes human rights violations abroad punishable. It has been in force since 2002. Human rights lawyers expect that a European supply chain law would provide lawyers with even more robust grounds for suing large companies that source goods in the Far East(China.Table reported). Such a supply chain law is expected to be finally formulated and adopted in the coming years.
Forced Labor
Xinjiang
News
China regulates tutoring costs
China’s top planning authority NDRC plans to regulate prices for private tutoring. The NDRC announced on Monday that in the future it will take a closer look at the price range for private tutoring and the operating costs of the providers, as well as at salaries of employed teachers. According to the statement issued by the NDRC, the commission wants to set a reference framework for fee standards to ensure tutoring prices become more affordable for parents. The NDRC also wants to ensure that the salaries of tutors no longer exceed those of public schools, for example.
For weeks, Beijing has been cracking down on the once-booming Chinese tutoring industry, claiming that the sector is “eaten up by capital”(China.Table reported). In July, a shockwave went through the education sector when authorities required all institutions offering curriculum-related tutoring to register as non-profit organizations.
On Monday, China’s Ministry of Education announced in a separate statement plans to step up scrutiny of learning materials issued by tutoring institutes. For example, employees “must take a firm political stance, implement the Communist Party’s education policy and display good morals”. niw
Children
Chinese Communist Party
Education
NDRC
Society
Beijing pledges to further open its capital markets
Following Beijing’s recent crackdown on its tech companies, education and real estate sectors (China.Table reported), Yi Huiman, head of the China Securities Regulatory Commission (CSRC) has now promised a further opening of capital markets to foreign investors.
“Opening-up and cooperation is the inevitable trend in the integrated development of global capital markets,”, Yi said at a conference organized by the World Federation of Exchanges, Reuters reported. Pragmatic cross-border cooperation is also being sought to regulate Chinese companies listed overseas.
Yi’s words come against the backdrop of China’s regulators surprisingly postponing the IPO of financial services firm Ant and other IPOs. Just over the weekend, his deputy at the CSRC had also announced improvements in listing rules for foreign companies in China, as well as for Chinese companies abroad. niw
CSRC
Finance
IPO
Stock Exchange
NATO chief warns of new missile silos
NATO Secretary-General Jens Stoltenberg has expressed concern about the construction of new missile silos in China. The People’s Republic could significantly increase itsnuclear capabilities as a result, Stoltenberg said at an annual arms control conference on Monday, news agency AP reported. China is rapidly expanding its nuclear weapons arsenal with more warheads and a greater number of sophisticated delivery systems, the NATO chief said.
All of this is done in an unrestricted and completely non-transparent manner, Stoltenberg said, according to the report. “As a global power, China has responsibilities in arms control,” Stoltenberg added, addressing the Chinese government. Beijing would also benefit from mutual limitations, more transparency and predictability.
China must also join international efforts to limit the spread of nuclear weapons, Stoltenberg stressed. So far, Beijing has largely refused talks on this issue. The construction of new missile silos was reported by the Federation of American Scientists (FAS) at the end of July (China.Table reported). With the help of satellite images, the experts discovered a large area with nuclear missile silos under construction near Hami (Kumul) in the northwestern region of Xinjiang. ari
Geopolitics
Jens Stoltenberg
Nato
Vice President reassures support for private sector
China’s Vice President Liu He has pledged the government’s support for the private sector. The growth of the private sector will continue to be vigorously supported as it plays an important role in stabilizing employment, adjusting the economic structure and promoting innovation, Liu He said on Monday at the opening ceremony of the China 2021 International Digital Economy Exhibition.
“There are no changes in the principles and policies for supporting the development of the private economy,” said He, who is also a chief economic adviser to President Xi Jinping. Liu clarified on Monday that Beijing is well aware of the importance of private enterprises. “The private economy has contributed more than 50 percent of total tax revenue, more than 60 percent of gross domestic product, more than 70 percent of China’s technological innovation”, Liu said in a video speech.
Liu’s remarks come at a time when the Beijing government is cracking down heavily on private companies – be it tech companies, tutoring providers, or even the music and entertainment industries (China Table reported). rad
“Literature and art is an important battlefield of thought and ideology and thus an extremely important work for the party,” said Jiang Yu of the Research Center for Development under the State Council. Yu sharply criticized the business practices of stars. Yu accused them of manipulating their fans and called immediate and sharper control.
Critics see the authorities’ actions as a sign that the influence of state and party leader Xi Jinping is continuing to grow. Xi had recently spoken out in favor of the “great renewal of the Chinese nation”. Since then, the rules of conduct for the entertainment industry have included bans on make-up, earrings and tattoos for men who look too androgynous.
Agencies of stars and their respective internet platforms are now to be more strictly controlled by the authorities. In the future, fan groups on social networks have to be authorized by agents, who will also be responsible for the subversion of these groups. Rumors and attacks with which rival fan communities verbally attack each other are to be strictly forbidden. Another new rule mandates that followers of influencers are no longer to be asked to send “virtual gifts” to their idols. Next to advertising revenue, such gifts are the biggest source of income for influencers.
The power of followers through new technology frightens the party, reports news agency dpa. Fan clubs are compared to a “cult”. “Fans think they are simply joining organizations to better support their idols,” comments Chinese newspaper Global Times. The paper warns that pop fans could mutate into enemies of the state. “But not only can’t they see the profit-seeking capital that craves to manipulate their souls with carefully crafted images of their stars, but also dangerous organizations waiting for the opportunity to use them to divide Chinese society.” niw
Censorship
Culture
Society
EU Indo-Pacific Strategy not a provocation to China
The European Union’s broader strategy on the Indo-Pacific region is not meant to isolate China, according to a senior Brussels official. The EU’s approach will be inclusive, Enrique Mora, deputy secretary-general of the European External Action Service (EEAS), stressed on Monday at an online event hosted by the think tank European Council on Foreign Relations (ECFR) and the Asia-Pacific Committee of German Business (APA). This inclusive approach will also see to not exclude China, Mora said. Brussels sees the Indo-Pacific strategy and China policy as two separate issues.
Mora stressed that the region must have its own approach that strengthens cooperation independently of China. The fact that the EU wants to intensify cooperation with the Indo-Pacific is not a provocation towards Beijing. It was primarily a matter of diversifying relations in various areas, such as the issue of supply chains.
Mora will present the joint concept by the EEAS and the EU Commission on the Indo-Pacific region next Tuesday. In particular, specific details on the implementation of strategy are to be expected. On Wednesday next week, the region and the EU’s involvement there will also play a prominent role in the State of the Union address by EU Commission President Ursula von der Leyen.
For its strategy, the EU also urgently needs to understand what interests the US is pursuing in the region, stressed APA Chairman Joe Kaeser. He advocated close coordination with Washington. But Brussels must also take the lead on this issue, he said. In Kaeser’s view, an in-depth EU strategy for the Indo-Pacific region is long overdue in the light of a strengthening China. ari
ECFR
EEAS
EU
Geopolitics
Indo-Pacific
Joe Kaeser
Tools
China’s Taxpayer Credit Rating System: An Explainer
By Zoey Zhang, Dezan Shira
A good social credit rating has several advantages for enterprises as taxpayers., for example, when
obtaining tax incentives
making bids,
applying for loans,
obtaining business qualifications, etc.
while a poor rating can lead to more stringent scrutiny in a wide range of tax-related matters. In this article, we will walk you through China’s tax credit management system to help you maintain a good tax credit rating.
How does China’s taxpayer credit management system work?
China established its taxpayer credit management system in 2014 with the roll-out of the Administrative Measures on Taxpayer Credit (Trial Implementation) (STA Announcement [2014] No.40). Since then, it’s been constantly perfecting this system and integrating it with the larger corporate social credit supervision mechanism.
Under the system, Chinese tax authorities collect and evaluate the taxpaying information of corporate taxpayers in each tax year (from January 1 to December 31) and confirm the taxpayer credit evaluation findings the following April.
After determining the credit ratings for taxpayers by way of annual evaluation benchmark scores or direct rating, the tax authorities implement corresponding administrative measures, including incentive and punitive measures, for taxpayers of different grades.
What is the scope of application?
The tax credit rating system applies to all corporate taxpayers that (a) have completed tax registration, (b) are engaging in manufacturing and business activities, and (c) subject to tax collection based on their accounts, pursuant to the STA Announcement [2014] No.40.
The scope of application was expanded by the SAT Announcement on Matters Related to Evaluation of Taxpayer Credit (STA Announcement [2018] No.8) in 2018 to cover:
Newly established enterprises, that is, enterprises that have been operating for less than a calendar year.
Enterprises without business income in a calendar year.
Enterprises whose corporate income tax (CIT) returns are filed on a deemed income basis.
In 2020, the STA Announcement about Issues Related to Credit Management on Tax Payment (STA Announcement [2020] No.15) added that a “non-independent accounting branch” (branches established by corporate taxpayers whose registration information has been confirmed with the tax authorities and who accounting method is non-independent accounting) can voluntarily choose to join the credit evaluation after application.
How are taxpaying credit ratings calculated?
So far, there are five credit ratings for corporate taxpayers – A, B, M, C, and D:
Rating A >= 90 points
Rating B >= 70, <90 points
Rating M – newly established enterprises with no production and operation income in the tax year and with a tax credit score of more than 70 points
Rating C >= 40, <70 points
Rating D <40 points.
Type A taxpayers own the best tax credit rating with a score of 90 points and above, while Type D taxpayers have the poorest rating. Type D taxpayers have either scored less than 40 or were graded directly as Type D (direct grading applies to taxpayers who have committed serious dishonest acts).
Among them, the special Type M was newly added in 2018, which refers to newly established enterprises with no production and operation income in the tax year and with a tax credit score of more than 70 points.
The credit scores (usually with a starting score of 100 or 90, which we will explain in the next section) adopt the demerit method – taxpayers’ scores are deducted when they fail to meet taxpaying credit evaluation indicators.
What are the taxpaying credit evaluation indicators?
The taxpaying credit evaluation indicators consist of the taxpayer’s historic information, internal taxpaying information, and external taxpaying information, according to the STA Announcement on the Promulgation of Taxpaying Credit Evaluation Indicators and Methods (for Trial Implementation) (STA Announcement [2014] No.48). You may refer to the following table to have a rough idea about the respective evaluation indicators.
The internal taxpaying information contains “recurrent indicators” and “non-recurrent indicators”. The recurrent indicator refers to indicator information frequently generated by taxpayers during the year of evaluation, such as tax-related declaration information, tax payment information, invoices and tax control equipment information, registration, and accounts books information. The non-recurrent indicator refers to indicator information not frequently generated by taxpayers, such as the tax bureau’s record of tax assessment, tax audit, anti-tax avoidance investigation, or tax inspection information.
According to the STA Announcement [2020] No.15, if there is non-recurring indicator information in the past three evaluation years, the starting score of the taxpayer can be 100. In the absence of non-recurring indicator information in the past three evaluation years, the starting score is 90.
What are the incentive and punitive measures for taxpayers in China?
After determining the taxpayer credit rating, the tax authorities will implement administrative measures, including incentive and punitive measures, accordingly. Contrary to Type A taxpayers who will be entitled to favorable treatment like streamlined administrative procedures and fast-tracked approvals, Type D taxpayers could face increased frequency of supervision and inspection and stricter scrutiny on a wide range of tax-related matters, such as application for invoice issuance and value-added tax (VAT) refunds on exported goods and monitoring business compliance.
Furthermore, the State Taxation Administration (STA) has actively been participating in the construction of China’s social credit system and the exploration of cooperation on credit sharing.
In 2015, the STA and the China Banking and Insurance Regulatory Commission (CBIRC) set up the “Bank-Tax Cooperation” mechanism. Tax authorities committed to forwarding part of the taxpayer’s tax credit information to banks under the premise of legal compliance and enterprise authorization. Banks will be able to use this information to optimize their credit model and provide credit loans for trustworthy small and micro firms. Since November 2019, the scope of beneficiaries has been expanded from Type A and Type B taxpayers to include Type M taxpayers (newly-established ones).
Inter-agency collaborative agreements are an increasingly prominent feature of the Chinese regulatory landscape.
In July 2016, 29 Chinese regulatory authorities, including SAT, NDRC, People’s Bank of China (PBOC), etc., jointly signed a cooperation memorandum to grant 41 incentives to taxpayers with Class-A tax credit rating. In October 2016, 40 Chinese regulatory authorities jointly signed a Cooperation Memorandum to Grant Joint Incentives for Customs’ Advanced Certified Enterprises.
The STA has signed a Cooperation Framework on Credit Sharing and Application with the State Development and Reform Commission (NDRC) in 2017 and dozens of Memoranda of Joint Actions on Rewarding Honesty and Punishing Dishonesty with related government departments to further develop mechanisms in credit sharing, mutual rating recognition, and cooperation in reward and punishment with respect to credit rating results.
Does China provide taxpaying credit restoration measures?
To encourage corporate taxpayers to proactively fix their tax incompliance record, China also incorporates tax credit restoration measures into the taxpayer credit management system. This grants taxpayers a chance to repair their credit rating.
Pursuant to the Announcement on Matters Related to Tax Credit Restoration (SAT Announcement [2019] No.37), beginning January 1, 2020, corporate taxpayers included in China’s tax credit management system can apply for tax credit restoration by correcting tax irregularities and making credit commitments.
Eligible corporate taxpayers applying for tax credit restoration must satisfy one of the following three conditions:
Condition I: The enterprise has now completed all tax declarations, tax payments, and data filing, after previously failing to do so, within the statutory time limit;
Condition II: The enterprise that previously failed to pay or pay in full the taxes owed, late fees, and fines and was categorized as a Type D taxpayer (not due to a crime), has now paid or made up the payment within 60 days upon the statutory payment deadline; or
Condition III: The enterprise has fulfilled all corresponding legal obligations, and thereby the tax authority has lifted its ‘abnormal’ status.
The taxpayer can apply to the relevant tax bureau and make a commitment that the irregularities have been corrected and the tax bureau will then, within 15 workdays, complete the audit and inform the applicant of the result. After the completion of the tax credit repair, the taxpayer will be subject to the corresponding tax policies and administrative measures based on the recovered tax credit rating.
China has been putting great effort into optimizing its corporate credit system to improve the efficiency of tax and credit governance. Corporates are highly advised to keep track of their tax credit ratings and the reasons for their poor rating (if any), refer to the respective announcements from tax and regulatory bodies and seek professional advice to make up for the credit loss.
This article first appeared in Asia Briefing, published by Dezan Shira Associates. The firm advises international investors in Asia and has offices in China, Hong Kong, Indonesia, Singapore, Russia and Vietnam.
Finance
Trade
Executive Moves
Xu Ming is Chairman and General Manager of the newly established National Equities Exchange and Quotations (NEEQ) in Beijing. Xu previously worked at the Shanghai Stock Exchange for seven years and is now to help small and medium-sized companies, in particular, to find new financing opportunities, while building up the stock market on China’s “third stock exchange”. Following the trading venues in Shanghai and Shenzhen, which have existed since 1990, the Star Market in Shanghai has also existed for two years for domestic tech start-ups.
Xu Lei, the head of JD’s retail arm, will take the newly created role of president and be responsible for the daily operations of the company as well as the development of the various business units of JD.com, the NASDAQ-listed company said Monday. Richard Liu, founder of e-commerce platform JD.com made a surprise announcement yesterday that he would step back from the day-to-day operations of his company to focus on longer-term strategies and coach young managers at the company.
Zhou Zixue is stepping down from his post as chairman of Semiconductor Manufacturing International Corp. due to health reasons. (SMIC). Zhou will remain executive director of the chipmaker. Gao Yonggang replaces Zhou on the board, according to SMIC.
Dessert
Even in preschool, the dribbling of a basketball has to be spot on. The sports curriculum is also being adopted across China because in the future the sports grade will play a greater role in admissions to better schools. The fact that jumping rope, dribbling a ball, or practicing kung fu could now help kids to move up the social ladder is prompting more and more parents in the cities to enroll their children in soccer or swimming classes instead of just math tutoring. But the fact that the pressure to perform should actually be taken off the shoulders of youngsters is often forgotten.
