Council Activities

Operational Issues Top China Agendas

During the summer months, the Council's China offices hosted several meetings on various topics relating to enterprise operations in China. At a Council breakfast in Shanghai on June 12, Stanley Sherwood, a tax partner with Coopers & Lybrand, LLP (now PricewaterhouseCoopers), spoke about the timetable for the harmonization of China's dual tax structure for foreign-invested enterprises (FIEs) and Chinese companies. Sherwood commented that Beijing is unlikely to remove special tax incentives for FIEs. Instead, the central government is expected to increase efforts to curb localities from granting FIEs unauthorized tax breaks. The release of Circular 59 by the PRC State Taxation Administration in May was also a subject of discussion. The circular addresses transfer pricing and will affect how multinationals with operations in the PRC set intercompany prices on sales, licensing of technology, and the provision of a variety of services.

Members of the Council's Legal Committee in Hong Kong heard from David Liu of Coudert Brothers, Joseph Fu of Deloitte & Touche, LLP, and Cole Capener and Paul McKenzie, both of Baker & McKenzie, on June 22. The speakers discussed issues surrounding whether Chinese employees of FIEs can hold options for foreign stocks. China's legal framework does not clearly address this matter: the Securities Law contains no relevant provisions, and approval from the China Securities Regulatory Commission does not appear necessary, according to Liu. The speakers pointed out, however, that foreign stock options raise foreign exchange questions, and thus will interest China's State Administration of Foreign Exchange.

On July 20, Martin Ng of Coopers & Lybrand, LLP (now PricewaterhouseCoopers) and Willis Shen of Watson Wyatt Worldwide in Shanghai spoke to the Hong Kong group about China's social welfare reforms. Among the topics discussed were recent developments in China's pension funds and housing reforms, including the national and Shanghai pension fund models and government housing subsidies.

During a two-week trip to Asia in late July, James Harmon, president of the Export-Import Bank of the United States (Ex-Im Bank), addressed Council members in Hong Kong and Beijing on a range of issues. Harmon remarked that the Ex-Im Bank would like to increase its participation in the China market, particularly in the field of project finance.

Council Hosts Provincial, Municipal Delegations

At a June 5 briefing session in Washington, a five-person delegation from the Shanghai Waigaoqiao Free Trade Zone (FTZ) United Development Co. Ltd. introduced Council member company representatives to the FTZ's investment opportunities and described its newly opened branch office in New York City. The Council also hosted Sichuan Provincial Governor Song Baorui and his delegation on June 26. Song and Council member company representatives discussed both the overall PRC investment climate, and specific investment opportunities in Sichuan Province. And on August 14, Council staff met with a delegation from the Qingdao Economic and Technical Development Zone to identify opportunities for foreign investment in Qingdao, Shandong Province, and technical exchanges between US and Qingdao companies.

Last Updated: 27-Aug-98