China is moving towards a fully established market economy. The agreement between China and the ten-country Association of South-East Asian Nations (ASEAN) covers nearly 1.9 billion people. Besides that, China acceded to the World Trade Organization (WTO) on 11 December 2001. Its much-scrutinized accession agreement not only covers the agricultural and the industrial sector but also the services sector. This clear commitment towards participation in the global economy has brought about a renewed enthusiasm among foreign investors to invest in China for the long-term. China’s economy has averaged a staggering 9% growth per year over the last two decades. This coupled with the government’s economic reform initiatives and its increasingly welcoming stance towards foreigners. China has been the largest recipient of foreign direct investment among all developing countries. The Chinese central government has introduced tariff-free and VAT-exempted imports of capital equipment for projects. External trade is also expanding quickly in China. The export processing trade in particular has been thriving, China’s top trading partner are the US, Hong Kong, Japan, South Korea, Taiwan, Germany, Singapore, Malaysia, Russia and Netherlands. Political risk in China is relatively low compared with other emerging markets, but legal and regulatory transparency is a key risk for foreign companies in region. The political risk situation in China is interesting because while there is stability with one-party system, there is also very little transparency in rules and other aspects of doing business, which make it challenging for a foreign investor. Although China’s tax laws are less established than those of more developed nations, sufficient regulations and laws exist that, so long as a foreign investor is well advised with respect to various tax provisions, taxation issues can be managed effectively.
Fortuitously for the global economy,...