Now! China - China Accelerates Market Opening with New Measures [Issue No.37]

China, with one of the world's largest populations, boasts a vast and diverse consumer market. Driven by a growing middle class, the demand for high-quality products and services is rapidly increasing, creating significant market potential and numerous investment opportunities.

The Organisation for Economic Cooperation and Development (“OECD”) released its economic outlook report on 4 December 2024, highlighting the global economy’s recovery, with an expected growth rate of 3.3% in 2025. The report further underscores that China will remain one of the most significant growth engines for the global economy in the coming years.

Commitment to Opening-Up

Opening-up remains a cornerstone of China’s national policy. Over the past decades, the country has consistently worked to optimise the foreign investment environment and enhance its attractiveness to global investors. These efforts have aimed at fostering a market-oriented, rules-based, and internationally competitive business environment, achieving mutual benefits and win-win outcomes.

According to the “World Openness Report 2024”, China’s openness index rose from 0.6789 to 0.7596 in 2023, an 11.89% increase, placing it among the highest globally. Data from the Chinese Ministry of Commerce further illustrates this trend: in the first 10 months of 2024, 46,893 new foreign-invested enterprises were established in mainland China, a year-on-year increase of 11.8%. Additionally, the 6th China International Import Expo held in November 2024 recorded an intended transaction volume of USD 78.41 billion, a 6.7% increase year-on-year. These figures highlight the strong confidence of foreign investors in the Chinese market and their optimism about its long-term development prospects.

2024 Measures to Expand Opening-Up

In 2024, Chinese authorities introduced a range of measures to further open up several key sectors to attract foreign investment. These initiatives aim to enhance China’s appeal as a premier destination for global business and innovation.

A More Open China in the Era of Globalisation

The increasing integration of China’s economy with the global economy signals a greater role for the country on the world stage. In this era of economic globalization, China’s commitment to further opening up its markets will continue to create valuable opportunities and long-term benefits for global investors and partners.

China Updates

Accounting and Taxation

• Announcement on Nationwide Implementation of Preferential Policies for Individual Income Tax on Private Pensions

Pursuant to the Notice of the Ministry of Human Resources and Social Security, the Ministry of Finance, the State Taxation Administration, the National Financial Regulatory Administration and the China Securities Regulatory Commission on Full Implementation of the Private Pension Scheme (Ren She Bu Fa [2024] No. 87), the private pension scheme shall be fully implemented with effect from 15 December 2024. The following preferential policies for individual income tax on private pensions are announced:

1. Implementation of Preferential Deferred Tax Policies: Effective 1 January 2024, preferential deferred tax policies for private pensions will be implemented nationwide. During the contribution stage, individual contributions to a private pension fund account shall be deducted from his/her consolidated income or business income up to a limit of 12,000 yuan per year. During the investment stage, the investment returns within the private pension fund account will temporarily be exempt from individual income tax. In the collection stage, the private pension received by an individual shall not be included in his/her consolidated income but shall be subject to individual income tax at a rate of 3%, separate from other income, and the tax paid shall be recorded under the item of "income from wages and salaries" category.
2. Pre-Tax Deduction for Contributions: When benefiting from the pre-tax deduction for contributions, an individual shall present the deduction certificate issued by the private pension information management service platform as proof. If the taxpayer receives income from wages or salaries, or income from remuneration for personal services subject to withholding and prepayment of individual income tax under the cumulative withholding method, contributions may be withheld in the current year or deducted within the limit at the time of final settlement in the following year. If opting to withhold in the current year, the taxpayer shall provide the withholding agent with the relevant vouchers in a timely manner. The withholding agent shall, as required by this Announcement, will process the pre-tax deduction as required. For other types of income such as remuneration for personal services, author's remuneration, royalties, or business income, contributions shall be deducted within the limit during the time of final settlement in the following year. When an individual collects private pension in accordance with the provisions, the commercial bank in the city where the private pension fund account is held will withhold the applicable individual income tax.
3. Information Exchange Mechanism: The Ministry of Human Resources and Social Security, along with the taxation authorities, shall establish an information exchange mechanism for sharing tax-related information on private pensions via the private pension information management service platform. The two authorities will cooperate in the relevant tax collection and administration processes.
4. Commercial Bank Reporting Requirements: Commercial banks will be responsible for timely reporting tax payment details of all taxpayers who have opened a private pension fund account at the bank. Banks must ensure that this information is authentic and accurate.
5. Cooperation Across Authorities: Financial, human resources and social security, taxation, and financial regulation authorities at all levels must collaborate closely to ensure smooth implementation. Any difficulties or issues encountered during implementation should be promptly reported to higher-level competent authorities.
6. Pilot Cities to Fully Implement New Policies: The 36 cities (regions) currently piloting the private pension scheme will adopt the provisions of this announcement as of its promulgation date.

Human Resources

• China Integrates Foreigners' Work Permits with Social Security Cards for Streamlined Services

On 27 October 2024, the Ministry of Human Resources and Social Security issued a notice on the integration of foreigners' work permits and social security cards. Starting from 1 December 2024, China will merge the foreigner work permit system with social security cards to simplify the process of working and living in China. This integration will allow foreigners work permit information to be embedded in their social security cards, both in physical and electronic formats, offering enhanced convenience.

To support this change, the talent bureaus and Exit and Entry Administration bureaus in several districts and counties in Shanghai have organised business training for enterprise managers. These sessions focus on policy guidance and the implementation of the new procedures. From 1 December 2024, foreigners will be able to apply, extend, modify, or cancel their work permits online via the Foreign Work Management Service System. There will no longer be a need to apply for a physical work permit once entering China. Foreigners who already hold a work permit will apply for extensions or changes according to the new integrated card process, following the "unchanged" principle.

Corporate Governance

• China Implements Administrative Measures for Beneficial Owner Information

To enhance market transparency, uphold financial order, and combat money laundering and terrorist financing activities, the People's Bank of China and the State Administration for Market Regulation jointly issued the Administrative Measures on Beneficial Owner Information, effective 1 November 2024.

The Measures outline the scope of market entities required to file beneficial owner information and the conditions under which this requirement may be waived. The following entities shall file beneficial owner information through the relevant registration system: (I) companies; (II) partnerships; (III) branches of foreign companies; and (IV) any other entities stipulated by the People's Bank of China and the State Administration for Market Regulation.

Entities formed by natural-person shareholders or partners with a registered capital of less than 10 million yuan (or the equivalent in foreign currency) may be exempted from this requirement after submitting a commitment confirming their eligibility.

Existing entities registered before the Measures' implementation must comply with the provisions and file their beneficial owner information no later than 1 November 2025.

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