Council Activities

Beijing Discusses Foreign-Exchange Regulations, Customs Project

Representatives of over 60 member companies attended an October 7 meeting on China's recent moves to reassert control over foreign-exchange transactions. Lester Ross of Paul, Weiss, Rifkind, Wharton & Garrison and officials from the US and Foreign Commercial Service and the economic section of the US Embassy briefed attendees on regulations recently released by the PRC State Administration of Foreign Exchange (SAFE). Circular 27, effective September 1, threatens to raise the costs and risks of trading with PRC customers by changing procedures and cash collateral percentages for letters of credit. And Circular 50 prohibits foreign companies from converting renminbi to foreign currency to pay off foreign currency-denominated debt before it matures. US government officials agreed to inform SAFE that companies need clarification of the regulations and procedures as well as short-term relief for contracts signed before the new requirements were made public. These concerns will also be raised at the bilateral Joint Commission on Commerce and Trade meetings in December.

Member companies in Beijing also heard about the Asia Pacific Economic Cooperation (APEC) forum's newly established Chinese Customs Coalition Project at a meeting on September 1. Coalition members include US companies with significant business interests in the APEC economies and the governments of Shanghai, China, and the United States. Among the issues the coalition aims to tackle are corruption, intellectual property protection, and risk management. The coalition also hopes to set up an exchange program in which PRC Customs officials spend time at foreign companies' shipping offices. To fight corruption, companies recommended that the coalition address revenue-splitting between the central government and localities, among other issues.

Companies Tackle Year 2000 Problem, Tax Consolidation

A group of Council companies with manufacturing operations in Shanghai met on September 25 to discuss their approaches to the year 2000 (Y2K) problem. In addition to handling their own Y2K issues, companies are concerned about the pace at which local utilities are addressing this issue. Problems could conceivably occur with telecommunications services and water, power, and gas supplies. As a follow-up to this meeting, Council staff met with representatives of Shanghai's newly formed Year 2000 Committee. The committee, under the umbrella of the Shanghai National Economy & Society Informatization Leading Group, is charged with ensuring that the Y2K problem is resolved well before December 31, 1999. Shanghai Mayor Xu Kuangdi has made solving the Y2K problem a priority, assigning Executive Vice Mayor Chen Liangyu to oversee the committee.

In Hong Kong, Edward Shum of PricewaterhouseCoopers and Bonnie Chan of Skadden, Arps, Slate, Meagher & Flom, outlined opportunities for companies wishing to consolidate taxes in China at a September 28 Council meeting. Shum explained the various cases in which China permits consolidated reporting on income tax. Foreign-invested enterprises, for example, can file a consolidated income tax return for their branches. But in some localities, authorities, fearing revenue loss, have obstructed attempts at consolidated reporting. Chan shared her experiences negotiating consolidation rights for a major multinational corporation with an investment in a company limited by shares.

Last Updated: 27-Aug-98