• Accueil
  • Notre cabinet
  • Nos Services
    • Administration d’entreprise
    • Gestion financière
    • Comptabilité et tenue de livres
  • Clientèle
  • Actualités
  • Contact
  • Global Connect Consultancy
  • zh
  • ru
  • nl
  • ja
  • en
  • de

Preventing Trademark Revocation in China

09 Aug 2022
Actual, China, IP

An increasing amount of overseas companies are registering their trademarks in China. While following the updated intellectual property (IP) regulations in China, solely registering the trademark is not sufficient. In certain cases, your trademark can be revoked or cancelled by the administrating Trademark Office. In this article, the reasons for trademark revocation, the consequences, and methods to prevent this revocation in China are addressed.

 

Introduction

Trademark revocation could happen to a successfully registered trademark. This happens most frequently when the owner of the trademark uses or administrates the trademark improperly. In the case that a trademark gets cancelled or revoked, the company suffers not only economic losses but also the corporate image, branding and marketing strategies can be negatively impacted. In combination with the revoking or cancellation of the trademark, the owner of the trademark also risks the permanent loss of the trademark. To avoid unnecessary hassle around trademark management, especially foreign investors should be acquainted with the everchanging regulations around (protecting) Intellectual Property.

The Trademark Law of China, emphasises that a registered trademark can be both cancelled or revoked by the Trademark Office for a multitude of reasons. Here are the four main reasons described:

 

  • The trademark registrant fails to renew the trademark in time.

After the date of registration, the registered trademark is valid for ten years. Within the 12 months before the expiry date of the trademark, the registrant is able and ought to renew the trademark. Whenever the registrant does not complete the formalities before this stipulated period, an extension of six months (grace period) can be possibly allowed. If the registration is not completed within this “grace period”, the trademark gets cancelled.

 

  • Trademark fail to use the trademark properly.

The Chinese trademark law argues that the trademark needs to be consistently used with the registered trademark. Changes to the registration data, such as inconsistencies in colour, font, logo, combination of elements, etc. are seen as the non-standard usage of the trademark. In this case, the trademark registrant is ordered to clarify these disputes by the local administration for market regulation (local AMR). Whenever the registrant does not follow this order, the Trademark Office will revoke the registered trademark.

 

  • The trademark registrant fails to practically and continuously use the registered trademark.

The Chinese trademark law obliges that the registered trademark needs to be continuously and actively used for the registered product/service. Further, the trademark should be used in the registered region (e.g. Beijing). If the trademark is unutilized for over three years consecutively, and there is no legal reasoning behind the lack of usage, any organisation or individual can apply to the Trademark Office for revocation of this particular trademark. In recent years, the lack of actual and continuous usage of the trademark is the most common cause of trademark revocation in China.

 

  • The trademark becomes a generic name of the approved commodity

In the case when a certain name can refer to a class of goods Chinese law emphasises that this name shall be recognized as a generic overarching name. China-Briefing mentions that the brand name Simmons (席梦思) has its origin as a trademark registered in the United States by Mr Zalmon G. Simmons.  The trademark “Simmons” was used for his mattress brand, however, it quickly became widely used in China to refer to “refined spring mattress”. As the name for a special good became applicable to the commodity of a spring mattress, the Trademark Office declined the registration of this trademark in 2015 due to becoming a generic name in Chinese society. In the Netherlands, this shift from good to commodity is comparable to the activity around the brand name “ty-rip”. Whereas this product launched in 1958 as a stand-alone product, the name “ty-rip” is now utilized for all products looking like or having a similar function as the original ty-rip.

Knowing that trademark revocation after three-year inactivity is the most common reasoning for trademark revocation, the underlying incentive to let the Trademark Office revoke another’s trademark is obvious. Living in the era of globalisation and developing technology, all market players can stay updated on others’ intellectual property. Applicants revoking another’s trademark can use this to take advantage. The business value attached to the trademark can be destroyed by revoking or cancelling the trademark.

However, this attached value can also be used to gain own profit by using this business value or by linking their own products to this trademark. Another case can be that their own trademark registration is blocked by the Trademark Office due to the similarities to this already existing trademark. All these reasonings can be a strategical approach to entering the (Chinese) market or to eradicate the competition.

 

Revoked or cancelled trademark

When the trademark gets revoked or cancelled, the trademark cannot be legally used on the registered goods/services. Trademark owners continuing to use their trademark, do not only act against the Chinese trademark law but can also infringe the other’s similar trademark which can lead to a lawsuit and economic compensation liabilities.

While losing the trademark can result in economic losses, disputes in the corporate image, and incoherent marketing strategies, the following year the revoked/cancelled trademark cannot be re-approved by the Trademark Office. This means that a similar trademark will also not be approved. In this case, the registrant needs to wait for minimally a year to re-apply for the trademark. After one year, the competitor is also able to simultaneously apply for their trademark. In China’s “first to file” approach, this can lead to the loss of your original trademark.

In the case that trademarks are applied to be revoked by others, the trademark owner receives a request from the Trademark Office to reply within two months to receive additional information. Included in this data are:

  • Defend that the trademark is not a generic name
  • Showcase evidence of actual use in the last three years of the trademark
  • State the reason for not using the trademark

This information can be provided in various document types (e.g. invoices, contracts, etc.) and is analysed by the Trademark Office. If the evidence is deemed effective, the Trademark Office will reject the other party’s request. However, if the information is insufficient the trademark will get revoked by the Trademark Office.

 

Conclusion

To conclude, registering your trademark in China is not sufficient. To prevent the cancellation or revoking of your trademark in China, assure to continuously utilize the trademark according to the Chinese trademark regulations. Lastly, be assured to take action and reply within the given period to prevent revocation as raised by another party.

 

Sources:

Trademark Revocation in China: A Practical Guide (china-briefing.com)

The “use” requirement in trademark revocation cases in China – HEFFELS SPIEGELER ADVOCATEN

Trade Marks Laws and Regulations Report 2022 China (iclg.com)

2022 Intellectual Property (CNIPA) regulations: What is New in Regards to the 2019 “New Trademark Act”?

14 Jun 2022
Actual, China, IP
Actual, China, IP, Regulations

 

The China National Intellectual Property Administration (CNIPA) has taken further regulations on trademark usage in China. From 2022 onwards, new rules have been into place that emphasise the detection of fraud and the infringement of laws related to illegal trademark acts in China. This is done to improve the security of private trademarks. The requirements and supervision of using trademarks have become increasingly strict. What do foreign manufacturers need to take into account?

 

The publication of the regulations at the end of December 2021 by the CNIPA aims to strengthen the protection of intellectual property (IP). This publication builds on the trademark laws which are in effect from December 1, 2019. The amendments of the latter relate to the usage of a trademark, claims for damage and opposition to illegal trademark applications. This “new trademark act” focuses on the following three aspects mainly anchored in the Chinese trademark law articles 4, 19 ,33, 63 and 68:

  • Trademarks must be registered and must be proven to not be used previously before registering.
  • Three months after registering the trademark, opposition to this application can be filed at the Chinese Trademark Office.
  • In serious infringements, the statutory damages are RMB 5 million (€711 thousand) and can equal up to five times the actual damage suffered. The counterfeit goods produced under this trademark can get destroyed by the People’s Courts without compensating the counterfeiter. This can only happen at the request of the original trademark.

Whereas these regulations already try to defend the IP of an original trademark or brand, the newly introduced rules improve the security and strictness of intellectual property (IP) in China. The brands themselves need to adhere to around ten new enforcement criteria to further diminish the stealing of IP in China. These regulations are all established according to the Chinese Trademark Law and can be found under the articles 6,10, 43, 49, and 52:

  1. Infringement by (not) using a registered trademark. Chinese Trademark Law acknowledges registered brands in European Trademark Law.
  2. Infringement by signs which may not be used as a trademark.
  3. The term “well-known mark” may not be used in commercial activities
  4. The trademark licensee is not allowed to fail to indicate its name and the origin of the goods
  5. Infringement is where the trademark applicant, in the course of using the registered trademark, changes the registered trademark, name, address or other registered particulars of the applicant on its own initiative.
  6. Infringement by using unregistered trademarks as registered trademarks
  7. Violation of provisions on the registration and administration of collective marks and certification marks, and failure to comply with obligations to administer collective marks and certification marks.
  8. Violation of the provisions for the administration of trademark printing and failure to fulfil the duties of trademark printing administration.
  9. Infringement through malicious application for trade mark registration.
  10. Other infringements of the trade mark administration order

 

Especially interesting for foreign manufacturers are articles 14 and 23 of the new regulation.

  • According to rule 23, using a trademark which is not registered in China but instead is registered somewhere else in the world (e.g. Europe), the owner gets seen as a trademark infringer in China.
  • If an unregistered trademark with multiple meanings is used, this may be considered a breach of the rules (Rule 14). This is the case whenever the Chinese public gets the impression that this particular sign cannot be used as a trademark according to Article 10 (6-8).
    • Signs referring to ethnically discriminatory persons.
    • Signs that can make the public misunderstand the product (e.g. quality, place of origin).
    • Signs that go against socialist morals and norms.

 

To conclude, the rules in China are becoming stricter in order to tackle the theft of intellectual property. However, while these rules are good for foreign investors, they still need to be careful to not use a European-registered trademark without registering it in China. Further, the signs and articles can be interpreted differently in a cultural context. We recommend interpreting these in the broadest sense and trying to avoid risk at all costs. Infringement in China can be expensive and troublesome.

 

Sources:

https://www.cnipa.gov.cn/art/2021/12/16/art_75_172237.html

http://www.gov.cn/zhengce/2019-10/22/content_5443183.htm

Business Opportunities in Shandong Province’s Hydrogen Industry

02 Nov 2021
China
energy, fuel cells, Global Connect Admin, Hydrogen, Industry, innovation, opportunities, Shandong

Hydrogen energy is the new priority in battling the pressing issues of climate change. China Hydrogen Energy Alliance predicts that this industrial development will result in a hydrogen energy market demand of 35 million tons by 2030 and that hydrogen energy will be 10% of the total energy supply in China by 2050. Shandong Province launched on June 18th 2020 the guidelines for the upcoming 10 years regarding the medium- and long-term development of the hydrogen industry. In this article we elaborate on the tactical choice for Shandong Province, discuss the goals of the development plan and look at the opportunities this upcoming industry can have for you.

 

 

Why Shandong?

Shandong Province (山东省) lies on the east coast of China. With a population of around 102 million and a coverage of 157 square kilometres of land, it is the 3rd largest economic powerhouse in China. Only the Jiangsu Province and the Guangdong Province trump the Shandong Province. Knowing the facts, there are three arguments that the Shandong Province published the hydrogen plan.

 

  • Shandong Province has a solid foundation for green hydrogen production. With the largest installed capacity of photovoltaic power, the 4th largest installed capacity of wind power in China, and 5.7 million kilowatts of nuclear power, Shandong has the foundation to produce green hydrogen in the future utilizing these new and green energy systems.

 

  • Shandong Province is one of the frontrunners in China in terms of chemical, metallurgical and energy industries. Originating from the rich petroleum and coal reserves, and decades of large-scale mining and investment in petro-and coal-chemical facilities, Shandong holds a unique advantage in producing hydrogen as a by-product of fossil-powered industries. This so-called grey hydrogen is produced around 2.6 million tons annually in the Shandong Province, resulting in an opportunity for large-scale utilization with comparably low costs and maintaining high quality.

 

  • Shandong has deep collaboration with research institutes and leading universities across the country. More than 50 enterprises and research institutes in Shandong have been involved in the hydrogen industry and combine powers to make significant progress in aspects such as key materials, core components of fuel cells (FCs), system integration, high-end and efficient energy storage and more.

 

 

Goals

The plan argues to establish Shandong in the leader position in hydrogen development. Aspects under this denominator are constructing hydrogen and Fuel Cells (FC) demonstration zones by strengthening innovation and research, accelerating hydrogen applications and demonstrations, improving the manufacturing on the equipment level, as well as building and maintaining the industrial chain and ecology. This plan consists out of three stages.

 

 

 

Opportunities

The Rijksdienst voor Ondernemend Nederlands (RVO)  argues that there are opportunities on this market for companies and research institutes who “have developed advanced technologies and/or products for the hydrogen industry”. To carry out a joint venture in Shandong, strong R&D and innovation capabilities can be helpful. While Shandong has the competitive advantages in the production of grey hydrogen from their industrial activities, large-scale mining and coal and petroleum reserves, the main flow of innovation and R&D, is found in external institutions outside the province and even outside the country. Resulting in heavy dependence on these institutes. However, and obvious from their reliance, Shandong is openly welcoming new international parties, starting fruitful cooperation’s, and welcoming hydrogen talents. Shandong Province will keep focussing on strengthening their relation, cooperation and exchange with international organisations such as International Hydrogen Energy Association and the International Hydrogen Energy Commission. Further, Shandong enterprises will be encouraged to set up R&D platforms and create joint ventures (JV’s) abroad to facilitate cooperation. To maintain Shandong’s position in the case of the hydrogen industry, Shandong proposes to formulate standards for the hydrogen industry chain with the assistance of thorough cooperation with foreign standard organisations.

 

RVO argues about the major technical bottlenecks in the hydrogen industry. Acting upon these can enhance the Shandong hydrogen chain/systems and guarantee your place in the industry. Examples are hydrogen storage and materials for fuel cell vehicles (FV’s), fuel cell (FC) oil-free air compressor and/or hydrogen pump, transportation equipment, high-efficient production & storage & transportation of liquid hydrogen and pipeline transportation. Recommended sectors to adhere to are FC technology and application to commercial vehicles and equipment, green hydrogen technology utilizing solar, wind and nuclear energy in Shandong. To read all the bottlenecks and recommended sectoral perspectives, we kindly request to visit RVO.nl

For more information about personal advice regarding international business advice, tax situations or consolidation (in China), Global Connect Admin B.V. can assist you with these challenges due to the rich experience and framework of connections.

 

Source

https://www.rvo.nl/sites/default/files/2020/08/Report-on-Shandong-Hydrogen-Industry.pdf

 

Intellectual Property Rights (IPR) in China and the 15-year Plan.

25 Oct 2021
China
Global Connect Admin

Are you planning to do business in China? One of the most important, but often forgotten, aspects is the protection of your intellectual property rights (IPR). Without this protection, others can copy your product or service and sell, import, or export these without your agreement. In this article, a real-life example is analysed, we discuss the need for IPR registration, recommend the best timeframe to register, and elaborate the 15-year IPR plan. All to prepare you for business in China.

 

Case study

In the China business week hosted by the Rijksdienst voor ondernemend Nederland (RVO), the commercial manager of Rymax Lubricants elaborates their relation with the Chinese property right system.

At the beginning of the establishment of the brand, the first step of business for Rymax Lubricants was not to expand to the Chinese market. However, they quickly were active on the Chinese market yet without their knowledge. Due to product previews and/or showcasing their products at events, Chinese fraudsters took immediate action. They registered the trademark of Rymax Lubricants with the Chinese government and duplicated everything: from the site and the logo to the complete mirroring of the advertisement video. The Chinese company behind the fake Rymax, sold their own oil while lifting on the European brand and success of Rymax.

After a long juridic battle, Rymax remained to have no power in China. Trying to take down the Chinese website or use their European intellectual property rights to tackle the stolen trademark also bore no success. After years of battling, Rymax changed their trademark, and thus the brand name, and immediately registered their intellectual property rights in China. Nowadays, Rymax Lubricants is active in the Chinese market and is having a fruitful business in China.

 

Should you register your intellectual property rights?

Registering for intellectual property rights is highly recommended when doing, or planning, to do business in China. In the case of registration, you can request websites with your products to go offline, request a court order, or cooperate with Chinese customs in the case of infringements.

According to the first-to-file system in China, your intellectual property is not protected if your property or patent is not registered to the official Chinese authorities. In the case of Rymax Lubricants, the lack of property rights in China shows the territorial nature of registration. Importantly, in China, the first to file is the owner of the intellectual property right, even while this is not the original owner or inventor of the service/ product. This is called a bad faith registration and happens because there are no user requirements to register for a trademark. Be aware to also register the following aspects of your company:

 

  • Production in China

When you are solely producing in China, it is recommended to register your trademark. Without trademark registration, there is an unnecessary risk and vulnerability that results in a higher probability of intellectual property infringement.

 

  • Copyrights

Registration of copyrights is theoretically unnecessary since they get automatically protected. However, to diminish challenges or disputes it is recommended to also register your copyrights.

 

  • Brand name

Besides registering your products, it is important to register your brand name. Here it is recommended to register your original brand name and the Chinese brand name of your product.

 

When to register?

To ensure that you are in charge of your intellectual property, you should register the aforementioned aspects before making your product or service public. This entails before advertisements, selling your products/ service, or fairs. When this is not done in time and thus not registered by yourself but by someone else, registering in China is not possible anymore.

 

Remarks when registering

When registering, be aware of the following tips to make the registration process as smooth as possible:

 

  • Be aware that there are other regulations regarding intellectual property rights in Hong Kong, Macau and Taiwan. They have differingjuridical systems than in mainland China. Meaning that different protocols are present and that different intellectual property rights registration are needed in these regions.

 

  • Foreign appliers for registration (e.g. trademark, brand name) without a juridical presence in China need to apply via a local patent agent to successfully submit the registration request.

 

 

China’s 15-year plan

On September 22, the Chinese government announced the 15-year plan (2021-2035) to assist the development of intellectual property rights (IPR). The plan entails that the IPR protection becomes stricter, which results in a higher level of public satisfaction in the business branch, and thus a greater market value of IPR by 2025 for the Chinese market. By 2035, the IPR competitiveness within China will develop and rank among the top in the world as elaborated in the plan. The emphasis in building this IPR protection system and supporting the world-class business environment, encouraging motivation by the operating system of IPR in the market, convenient and beneficial system for the public and boosting the participation in the global IPR governance.

 

Conclusion

With this article, we hope to have you sufficiently informed about the complete picture around the Chinese trademark registration and the Intellectual property rights . As previously emphasised, and as seen in the case study, we highly recommend to not take the risks for disputes or infringements (especially in a foreign country). For more information about  If interested in personal advice regarding international business advice, tax situations or consolidation (in China), Global Connect Admin B.V. can assist you with these challenges due to the rich experience and framework of connections.

 

 

Sources

China Business Week 2021 | Agenda (b2match.io)

China issues guideline for IPR development (www.gov.cn)

Intellectueel eigendom China | RVO.nl | Rijksdienst

From Beach Destination to Global Influential Trade Port: Hainan’s Masterplan

11 Oct 2021
China
China, Global Connect Admin, Hainan, Investment, Master Plan, Oppertunity, Regulations, SEZ

Hainan, the tropical destination on the south coast of China is more than a wedding island. Announced on June 1st this year, the Masterplan by the Chinese government is to transform the entire island province into China’s biggest special economic zone (SEZ). By 2025, this trade port is « basically » established and by 2035 this system will focus on the free and convenient flow of trade and investment. Whereas this results in global presence and influence, what does this Masterplan entail and what are the potentials for economic trade and welfare?

What is the Masterplan?

The Masterplan for the Hainan Free Trade Port (FTP) is aimed at the transformation of the southern island province into the flagship of trade ports. While already coined in 2017 as a concept, and approved by the province in 2018, the implementation of the FTP is currently ongoing. Moreover, one of the main aspects is that the FTP can easily cooperate and compete with the high-level ports of Hong Kong, Singapore and Dubai due to the international location. While the Hainan Free Trade Port is basically established in 2025, the maturing of the port will continue decades after the establishment. Here, the prospect is to establish a fully developed high-level free trade port including strong international influence around the year 2050. Bearing this in mind, there will be 4 major steps in the timeline for achieving different stages of development:

 

 

 

 

Hainan Free Trade Port policy highlights

For investors, the key policeis under the Masterplan yield the most importance weighting the opportunities that the Hainan FTP can provide. Therefore, a few policies will be highlighted to further explore the potentials Hainan can offer:

 

 

Taking the timeline and the benefits of the new Free Trade Port policies into account, the district of Hainan is an interesting development in the further globalisation of China. In the search for competitiveness among the high-level free trade ports such as Singapore and Hong Kong, the Masterplan for the Hainan Free Trade Port is aimed to be established in 2035 to fully realized these characteristics. The maturing of this FTP will continue until 2050, where Hainan should be established as a competing port with strong international influence. To optimize the potentials of the establishment of the Free Trade Zone (2025), and simultaneously the Free Trade Port (2035), we need to bear in mind that some industries have relatively more preferential support. According to RVO, the following industries will have these extra benefits in terms of taxation and restrictions within the Hainan Free Trade Port (see figure 2 points .2 & .3): Tourism – Modern service – New and High Tech – Retail (Duty-Free Consumer Goods) – Cruise and Yacht – Cultural and Sports – Education – Landscaping (Island loop Scenic Highway design) – Shipping – Air Transportation – Finance Lease – Offshore Trading – Modern Finance – ICT – Advanced Manufacturing – Medical Services and Pharmaceuticals – Oil, Gas and Chemicals – Deep Sea Technology – Modern Tropical Agriculture – Aerospace – Headquarter Economy.

 

Conclusion

Being aware of the potentials in the abovementioned sectors, the Hainan Free Trade Port can be seen as a good alternative to the Hong Kong, Singapore, and mainland China ports. With the international located position of the Hainan FTP, goods, people, and data can be easily transported to the mainland market due to the free flow in the first line and the efficient control at the second line. Whereas all the enterprises benefit from the full implementation of Zero-Tariffs on the entire island of Hainan and the increased duty-free shopping quota per person per year, the encouraged industries have competitive tax rates and exemption of duties when trading to mainland China in the case of Hainan processed goods having an added value of 30%. To conclude, the Hainan Free Trade Port is an interesting and encouraging development that should be followed closely to further evaluate the potential investing prospects.

Do you have any questions regarding the new Hainan Free Trade Port, or want other vital information to do business successfully? Feel free to send us any questions our way; we would love to assist you.

 

Sources

China-Briefing

RVO

 

 

Accounting in China: The differences between Chinese GAAP and IFRS

27 Sep 2021
China, Cross-border, Europe, GAAP, IFRS
Accounting, Amelkis, CAS, China, cross-border, Differences, GAAP, Global Connect Admin, Global Connect Consultancy, IFRS, Overview

With the opening of the Chinese economy to foreign investments in the past 40 years, China is transforming into a global economic hub. However, with the standardisation of business administration with the International Financial Reporting Standards (IFRS), foreign investors need to be cautious of the differences between the global IFRS and the local Chinese GAAP. In this article, these inconsistencies between IFRS and Chinese GAAP are getting analysed, as well as looking into the optimal preparation for this challenge.

 

To increase the foreign direct investment (FDI) into the Chinese economy, the Public Republic of China (PRC) implemented special economic zones (SEZs) to further develop towards the biggest global economy. Hence, on the business administration level, this inquires for own accounting rules referred to as the Chinese Accounting Standards (CAS) or the Chinese General Accepted Accounting Principles (Chinese GAAP). While the CAS is implemented to reduce financial fraud or to optimize China’s tax strategy, in an international context the function of IFRS is to streamline international accounting regulations and transparency. Meaning, that the IFRS should be applied on top of the CAS so that the company can both adhere to the international and the local rules. Nowadays, while China starts to converge more with the IFRS principles, the Chinese GAAP still differs from the well-known and familiarized IFRS trademarked by foreign investors.

 

Background

The organ of the Accounting Regulatory Department of the Ministry of Finance (MoF) is responsible for setting the accounting standards in China. As the previous regulations of the CAS were mainly concerned with sorting a balance sheet of the state-owned industry in the socialist era, the regulations in current years are aimed to reflect the financial status, analyse the operating results, and maintain transparency (for the state). The Chinese GAAP has two subordinate accounting policies:

In 2001, the GAAP initialy included the Accounting Standards for Business enterprises (ASBE01), however, the ASBE01 was in 2006 further transformed into the ASBE06. The ASBE06, which currently is still required for all publicly traded enterprises in China, is the main set of accounting measurements. Luckily, the Chinese GAAP (ASBE06), has key similarities with IFRS. For small-sized business cooperations, there is a special set of accounting measurements called the Accounting Standards for Small-Sized Business Enterprises (ASSBE). This standard can be seen as a merger between IFRS and ASBE06 and has the goal to make it easier for small enterprises to follow the tax regulations and accounting standards.

 

Differences Chinese Generally Accepted Accounting Principles (Chinese GAAP or CAS) and International Financial Reporting Standards (IFRS)

Knowing that the CAS and IFRS have similarities, it is evident that the foreign investor should be aware of the regulations that differ within these sets of accounting rules. Hereby the differences between the CAS (GAAP) and IFRS:

 

  • Valuating Fixed Assets

Whereas the IFRS has the choice to utilize the preferred method of valuating fixed assets, the CAS does not endorse this flexibility. In IFRS, one can opt for re-evaluating the assets or use the historical-cost valuation method. In CAS, only the latter is agreed upon to be used when valuating fixed assets.

 

  • Implementation Delays

Whenever IFRS updates/changes are released, these new IFRS rules are not immediately, and in some cases never, adopted in the CAS. In short, the Ministry of Finance (MoF) will review the latest release of the IFRS and see if it can be adopted into the China business framework. For foreign investors, this means that 1) the IFRS updates are delayed, 2) the IFRS might never be applied and thus results in 3) the IFRS regulations can be different than in other countries. This can lead to serious problems in companies with an overarching implementation of IFRS changes (e.g. software) in all of the subsidiary ventures.

 

  • Common Services in China

When handling cases of common service in China, the CAS has a more detailed description of the situation. For example, In the case of merging two companies with similar interests and under the control of one entity.  The CAS requires a restatement of the figure while IFRS has no specific rules for this situation.

 

  • Uncommon Services in China

Opposite to the previous point, uncommon situations in China are less detailed than the IFRS counterpart. The Italian-Chinese Chamber of Commerce exemplifies this difference by looking at employee benefit plans. The CAS has no specific rules for staff benefits offered by international firms besides payments in the firm’s stock. In the case of using benefits packages for its subsidiaries, the mother company can get into serious problems and should always have contact with the MoF to address and record such transactions accurately.

 

  • Fiscal Year

The fiscal year of the CAS starts from January 1st, while the start of the fiscal year can be decided by the company when applying IFRS. Regarding IFRS, the year must be 12 consecutive years.

 

How to successfully do business in China regarding the Chinese Accounting Standards?

To minimalize the potential risk of conflicts with the law, it is recommended for foreign investors to notice the differences between CAS and IFRS and apply both of the accounting standards in the right way. In this process of familiarizing with CAS, the differences should be known, and the contact between the firm and the Ministry of Finance should be optimal to resolve challenges and uncertainties. Moreover, be aware that the CAS can only be filed in the China language, and that short-cuts in the Chinese accounting world often result in serious delays and non-compliance: further complicating the international business. Thus, in the case of maintaining an overview of both CAS and IFRS, even while it is about 90-95% similar, it is recommended to have (specialized) agencies on your side. With experts on the topic, it is evident that the venture is assisted by experience. This way, the short straw will not be drawn when dealing in an unknown and new business environment.

 

For more assistance in the field of IFRS, the newest software by Amelkis can support enterprises to customize and analyse data while preserving an overview of the IFRS regulations.

If interested in personal advice regarding international business advice, tax situations or consolidation (in China), Global Connect Admin B.V. can assist you with these challenges due to the rich experience and framework of connections.

When intrigued by the personal IFRS-software solution, Global Connect Consultancy B.V. offers help with the installation, optimization, and customization of the Amelkis software Solution.

 

Source:

China-Italy Chamber of Commerce

Special Economic Zones (SEZs) in China: How can they benefit your company?

22 Sep 2021
China
Benefits, Special Economic Zone
Benefits | Special Economic Zone
Marking the 40th anniversary of China’s Special Economic Zones (SEZ), further scrutinization can start regarding the influence of the Special Economic Zones. Opposing the frequent usage of “SEZ” as a buzzword, what does it precisely entail and more importantly what advantages have these zones. How do the rules and incentives set these economic zones apart from Mainland China, and are these capitalistic hotspots beneficial for your organisations?  

What are Special Economic Zones?

Chinese Special Economic Zones are areas with different regulations and business policies than in  Mainland China. These zones can vary in function and scope but all adhere to the principle of supporting (specific) economic functions in globalising aspect. SEZs have been implemented since the late 1970s as part of the Chinese market reform in the conquest of realising the entrance to the international market. Remarkable is the placement of these SEZs: manifested in areas with a potential for high import and export volumes, being in the vicinity of airport and harbours, and / or being nearby natural sources. Resulting in the coverage of the east coast of China in the early stages of the SEZs to the establishment of SEZs in rural Xinjiang, to trade free zones (Shanghai), and regional zones that stimulate technology as seen in Dalian. Thus, in these 40 years of development, China opened coastal cities and created national and local high-tech zones to further attract investments. Nowadays, the fruitfulness of these experimental zones can be analysed:  SEZs contribute 22% of China’s GDP, 45% of total national foreign investment and 60% export, and created an estimate of 30 million jobs.  

The purpose of the Special Economic Zones

The purpose of the Chinese Special Economic zones, including the open coastal cities and the regional zones, is to attract foreign investments, innovation, and knowledge. These opportunities for China, and the fact that it is a cheap labour country, stimulates the build and development of infrastructure. Shenzhen in the Guangdong province, as one of the initial four SEZs, is the beneficiary of this Special Economic Zone: transformed from a fishing village to a nationwide, even worldwide, centre of innovation and development. Housing tech giants, telecommunication companies and even claiming to be the first to achieve “full coverage” of 5g within the tech hub of China’s Silicon Valley. As a reaction, the initial four SEZs transformed into 19 local development zones, 7 large-scaled SEZs, local and national free trade areas, and high-tech zones. As the purpose to foster globalisation in China becomes evident. However, how are SEZs applicable to your business?  

What are the benefits of China’s Special Economy Zones?

To ensure and stimulate foreign investors, the regulations in the SEZs (including open coastal and local zones) are made to attract. While exact policies or regulations can change over time (e.g. due to supply and demand of investors), the overarching advantages are as follows :
  • Tax incentives:
    • Reduced income tax: down to 15% (SEZ) versus 33% (Mainland)
    • Elimination of corporate tax under losses;
      • Being profitable after losses will result in reduced taxes for 5 years
    • Exemption of local taxes in certain industries
  • Special economic policies:
    • Duty-free export
    • Lowering import tariffs
  • Foreign companies are allowed to set up joint ventures
  • The local government has legislative authority
 
With all these benefits it is no wonder that SEZs attract a lot of foreign investments and thus benefit the flourishment of the Chinese economy. However, while SEZs are keeping the interests of investors high with the incentives, special economic policies and other benefits, China is slowly starting to applying these experimental policies as tested in the SEZs into the national policy. Furthermore, in line with the changes in Mainland China: the newest procedure is cutting the red tape to ameliorate the investment options in Mainland China.  

Conclusion

Currently, the incentives of the SEZs do not need to be causally related to the success of the high-tech and developed metropolises (e.g. Shenzhen). While the economic liberation is surely impactful for the growth of certain districts and businesses, not all of the 54 “special” zones have been successful. With constant development, creating new SEZs, changing regulations, the business-friendliness and the special tax programs for new entrants, the Special Economic Zones are even more convenient for new investors that are aiming to advance to the Chinese market. Knowing this, will your company be the next booming business in one of the Chinese Special Economy Zones? If interrested, we at Global Connect Admin provide administrative advice for European and cross-border businesses. Do you have any questions regarding the Special Economic Zones, or need other information to do business successfully? Feel free to send any questions our way: we would love to assist you.   Sources Experts hail pivotal role of special economic zones – Chinadaily.com.cn 经济特区:中国改革开放的伟大创举__凤凰网 (ifeng.com) Special Economic Zones in China (SEZs): Characteristics & Benefits – Intrepid Sourcing investing-in-africa-forum-chinas-special-economic-zone.pdf (worldbank.org)

The New Transatlantic Agenda: The Journey to a bright US-EU Future

24 Feb 2021
China, COVID-19, Cross-border, Current news, Europe, United States
2021, AmCham, climate change, COVID-19, difference US China, digitalisation, digitalization, Emissions Trading System, EU ETS, free trade agreements, FTA, future, Paris Agreement, societal systems, trade war, US China, US China Trade War, US-EU, VNO-NCW, WHO, World Health Organization

Just as the year before, 2021 is another year with many changes. The European Commission has published new documents on the New Transatlantic Agenda. We are entering a new era with the US re-joining the Paris Agreement and President Joe Biden supporting the World Health Organization (WHO). With the enrollment of European green energy projects and the COVID-19 vaccines, together with global cooperation, the future seems brighter. However, there is still a lot to do before the European Union and the United States can sit back and relax.

Challenge 1: COVID-19 pandemic

Perhaps the biggest challenge for both the US and the Netherlands is the COVID-19 pandemic. Luckily the USA has re-joined the WHO. At the same time, the WHO is making sure vaccines are distributed to the developed world. This distribution is in everyone’s interest because the economy cannot go back to normal until the pandemic is completely vanquished and the world economy is restored.

Challenge 2: Digitalization

Forced by the pandemic, the speed of digitalization has significantly increased. Hopefully, the next time emergencies happen, the world is better prepared and able to act more efficiently with strategic autonomy. Protectionism is not the answer; we need to invest in our strengths and those of other countries. The EU aspires to be the world leader in energy, defense, key technologies and raw materials. The US is an exciting partner for the EU, and vice versa.

Challenge 3: Free Trade Agreements

« America First » became « Build Back Better. » The US economy has to be sufficiently competitive, and there are still actions needed to combat trade issues, but establishing FTAs can support this. Former-president Donald Trump blocked the application for new WHO memberships, which created uncertainty for businesses. If there is one thing businesses do not enjoy, it is uncertainty. President Biden has lifted the application block, which helps rebuild the partnership between the US and the WHO.

Challenge 4: US-China Trade War

China continues to both assist and challenge the world. The US and China have opposite technology and societal systems. In the past years, trade wars occurred between the two nations, affecting the EU. It seems the EU has to choose one of the two eventually, which adds fuel to the fire. The US and the EU have familiar societal systems and dialogue on technology. However, China is the EU’s leading supplier of goods. What will happen in the future is something only time can tell.

Challenge 5: Climate change

Organizations need to align a common strategy to make the best out of online platforms and big tech. With a solid plan, the approach to critical technologist protection, global change program implementation, and continuing the EU-US technology trade council goes sufficiently smoother. A big topic right now is climate change, with the US immediately re-joining the Paris Agreement at the start of President Biden’s inauguration. To reach the 2030 and 2050 climate goals, an ETS system (Emissions Trading System) is necessary. In 2005 the EU established the first large greenhouse to combat climate change by reducing greenhouse gas emissions. The EU ETS is the first global greenhouse gas emission trading-scheme and still the largest. If two immense economic powers (hint: the US and the EU) were to share the same system, we can effectively combat global warming, bringing hope to future generations. Another future investment is hydrogen: the EU is busy setting up hydrogen projects. We have not reached our climate goals. However, with the US back in the Paris Agreement, the future seems promising.

 

Are you wondering how to establish or expand your business to China or the US? As an experienced global administration office, Global Connect Admin can assist you with all matters of financial management, company administration, accounting and bookkeeping, and much more. Feel free to talk to us.

Related GCA articles

Cross-Border Positions during the pandemic

The 2021 New Year Resolutions of China in Economy and Finance

The investment for the future: Hydrogen

US, China, EU, and the Trade War

The trade war between China and the United States – The consequences for Europe

Sources

AmCham – VNO-NCW

Cross-Border Positions during the pandemic

19 Feb 2021
Brexit, China, COVID-19, Cross-border, Europe, France, Germany, Japan, Netherlands, United Kingdom
advanced economies, banking, BIS, claims, cross-border, cross-border position, developed countries, developing countries, emerging market and developing economies, financial sector, global economy, liabilities, offshore centers, outstanding claims, outstanding liabilities

Image by slon_dot_pics

Cross-Border positions, also referred to as external positions, are most likely for any organization that goes global. Suppose your organization has its main office in, for example, the United States, with branches in Europe and/or Asia. In that case, you will have asset and liability positions of reporting banking offices outside the US. Cross-border financing helps with international trade by providing a source of funding, enabling businesses to compete globally and beyond their domestic borders. This sometimes requires the lender or provider to act as an agent between companies, suppliers, and end-customers. Examples are cross-border loans, letters of credit, repatriable income, or bankers acceptances (BA).

With the global pandemic forcing organizations to change strategies or even their core business, many have expanded globally or relocated to another country. We have taken a closer look at the changes in cross-border positions worldwide by viewing outstanding claims and liabilities of Q3 2020 in trillions of US dollars.

Developed countries

Between Q3 2019 and Q3 2020, cross-border claims on developed countries increased by 1.75 trillion USD, with the liabilities increasing by 1.46 trillion USD.

Claims in developed countries, otherwise called advanced economies, have declined. Intragroup positions partly drove the movements from one year earlier. The decline is centered on related offices, especially on those in the US, due to the unwinding of central bank dollar swap lines.

Non-bank financial institutions (NBFIs) were involved with the decline; claims on the UK, the Netherlands, Luxembourg, France and Italy declined, with most of them vis-à-vis NBFIs. Another partly offset influence was the increase in Japan and Germany’s claims, notably their NBFIs and resident banks.

During the pandemic, creditor banks in developed countries and offshore centers have reported a large contraction in their cross-border claims on emerging markets and developing economies (EMDE). During Q2 and Q3 of 2020, global cross-border shares on emerging markets and developing economies declined by 95 billion USD. Major developed countries and offshore creditors – such as UK, US, Hong Kong, Singapore and Japan banks –  reduced their lending to developing countries by 97 billion USD in these six months.

Offshore centers

The Q3 2020 claims have increased by 0.07 trillion USD in the offshore centers, with the Q2 2020 liabilities increasing by 0.15 trillion USD.

Compared to claims on developed countries, claims on offshore centers expanded by 41 billion USD. Especially Hong Kong SAR and the Cayman Islands have been doing well. More than half of Hong Kong’s increase was intragroup claims, with Singapore and Bermuda having the least growth.

Emerging market and developing economies

The Q3 2020 claims increased 0.03 trillion USD compared to Q3 2019. The Q3 2020 liabilities, compared to Q3 2019, have increased as well, with 0.13 trillion USD.

Cross-border claims on emerging markets and developing economies continued to fall, driven again by claims on Latin America and the Caribbean, with the year-on-year growth remaining negative. Just as one year earlier, these movements were partly driven by intragroup positions. Claims on non-financial corporations in major economic regions of Brazil, Mexico, Chile, Colombia and Argentina declined the most.

As mentioned earlier, creditors reported a large contraction in cross-border claims in developing countries. However, simultaneously, creditor banks within these countries reported a modest expansion. In contrast to the reduced lending of 95 billion USD, banks in EMDE booked a 26 billion USD increase in cross-border claims during Q2 and Q3 2020. The banks that led this expansion in emerging Asia-Pacific were mainly China and Chinese Taipei.

 

Before you expand or start abroad, it is helpful to know what parts of the world are convenient for your business. Having cross-border positions in countries such as the US, the Netherlands, France, Germany, and Japan can be rewarding; however, even though they work well together, each country and/or state has individual rules. Meanwhile, China and Russia have many business opportunities, but you must have high insider knowledge to use and find all the business possibilities. The UK has always played a big part in the global economy; however, much has changed due to Brexit. In case you want a professional to help you with this, feel free to send us a message. As the saying goes: a good beginning is half the work.

 

Related GCA articles:

The 2021 New Year Resolutions of China in Economy and Finance

The Brexit impact on Japan

Brexit: Some pointers for you and your company

More Global Transparency on Assets and Less Tax Havens on the List

Cooperation between China and Central-Eastern European Countries (CEEC) is to be deepened

 

Sources

BIS

Joyeux Nouvel An chinois!

12 Feb 2021
China, Current news

Votre équipe d’administration Global Connect vous souhaite un joyeux Nouvel An chinois!

Nous espérons que l’Année du Buffle vous apportera santé et prospérité.

Espérons que ce sera l’année où le coronavirus sera sous contrôle.

2020 a été une année difficile pour tout le monde; cependant, espérons que 2021 apportera chaleur et positivité.

Comme le disent les Chinois: 牛气 冲天 Fort comme un taureau!

  • 1
  • 2
AlternativerTweet   in 7 hours  T

Infos sur la société

Global Connect Admin B.V.
Ridderspoorweg 61
1032 LL Amsterdam
+31 (0)20 76 01 540
info@globalconnectadmin.com

CONTACTEZ-NOUS

Nous sommes un membre de la français-néerlandaise Chambre de Commerce

Nous sommes un membre de la français-néerlandaise Chambre de Commerce

Privacy Statement
Legal Notice

Visitez nos profils sociaux

LinkedIn

Twitter

WeChat account: globalconnectadmin

© 2015 Global Connect Admin B.V. - All Rights Reserved.