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Work in Germany: Getting a Work Permit

Category: Legal, Miscellaneous, June 16th, 2016

Do I need a visa to work in Germany? And what conditions apply to me? This is the first question you may ask yourself, if you are planning to work in Germany. In a nutshell, it depends on which country you come from and what qualifications you have.  If you are from countries outside of the EU/EFTA, Australia, Israel, Japan, Canada, the Republic of Korea, New Zealand or the USA, you will need at first a visa to enter Germany. Depending on the purpose of your stay, the visa will be changed into a corresponding residence permit (Aufenthaltstitel) at the local foreign nationals’ registration authority. 

Which work permit you should apply for depends on which type of resident permit you are holding. For different purposes of employment there are various residence permits. Before you start the applying procedure you should get it straight, which type of intended employment you are taking up in Germany.

In overall there are three residence permits for work purposes:

1. General Employment

If you have completed non/academic vocational training outside Germany and you are going to take up a general employment in Germany, that is, a job that does not require professional qualifications. Then you can take up employment on the basis of the qualification you have obtained abroad, provided there is a shortage of skilled workers in your profession.

For the application you need:

  • A vocational qualification
  • A concrete offer of a contract of Employment in Germany

Required documents:

  • Application form for a residence permit
  • Passport size color photos
  • Valid passport
  • Two copies of your vocational qualification
  • Letter of intent or contract offered to you by a company in Germany containing a detailed description of the employment

Ecovis can help you prepare these documents for the application.

2. Qualified Employment

Work permit for college graduates

If you are a foreign graduate coming from abroad holding a recognized university degree and sufficient financial funds to support you during your planned stay, you can apply for a six-month residence permit to look for work. You are not permitted, however, to undertake any work while you’re seeking for employment. If you find a job corresponding to your qualifications, you are on principle entitled to a “residence title for the purpose of taking up employment” if the Federal Employment Agency (Bundesagentur für Arbeit) has approved your employment.

If you are a foreign graduate from a German university and want to stay and look for work, you can apply to extend your existing residence permits for up to 18 months. You need simply furnish proof of your university degree, a medical health insurance and financial support. During this period, you can take any job as a means of supporting yourself. Once you found a job which is in line with your studies, you will receive the necessary residence permit from the foreign national´s registration authority which is responsible for you.

EU Blue Card (EU Blaue Karte)

With a recognized university degree comparable to German degree, and a job offer with annual gross earning of least 49,600 euros (2016), (the approval of the Federal Employment Agency is not required); Or for those with a background in mathematics, IT, the national sciences or technology as well as medical doctors with annual gross earning at least 38,688 euros (2016), you are qualified to apply for the EU Blue Card. In this case you need the approval of the Federal Employment Agency. This approval is not required if you earned your university degree in Germany.

Benefits of the EU Blue Card:

  • Residence for four years (or duration of employment contract)
  • Permanent residency after 33 months (21 months if you have achieved level B1 in German language proficiency).
  • You can stay outside Germany in non-EU countries for 12 months without the EU Blue card expiring, and move to another EU country (except the UK, Ireland and Denmark) for the purpose of highly qualified work after 18 months without the need for a visa.
  • Family members can come to Germany and work immediately without restriction or the need to prove German language skills, as well as receive all the other benefits.

 

Settlement Permit (Niederlassungserlaubnis)

Those who fit this category can apply for a settlement permit, which allows you to stay in Germany permanently. You need to meet the following general requirement:

  • You held a residence permit for five years.
  • You have the means to support yourself without public funds.
  • You have paid the compulsory or voluntary contributions to statutory pension insurance for at least 60 months.
  • You are entitled to exercise gainful employment and have the permits to do so.
  • You have a sufficient command of German and basic knowledge of the legal and social system and way of life in Germany.
  • You have sufficient living space for yourself and your family.

You don’t have to meet all the requirements above, if you fall into one of the following groups:

Graduates of a German higher education institute may be able to get a settlement permit after two years. This is on condition that after completing your studies you held a residence title for the purposes of employment or self-employment, or an EU Blue Card, for at least two years. Moreover, you need to have a job commensurate with your qualifications and to have paid the statutory pension insurance for 24 months.

Required documents:

  • A completed application form
  • A valid passport
  • Recent biometric photos
  • Proof of successful completion of studies at a German university
  • (If necessary) A valid contract of employment
  • (If necessary) Previous contract of employment, if the current one is less than 24 months
  • (If necessary) Proof of previous self-employment or freelance activities
  • Proof of pension contributions: proof of the payments of contributions to the statutory pension for at least 24 months; or proof of the payments of contributions to the private pension for at least 24 months
  • (If necessary) Occupational licensing for regulated professions (for example approbation or work permits)
  • (If necessary) Certificate of German language
  • Medical insurance
  • Rent contract
  • Current registration card

EU Blue Card holders can apply after working 33 months or just 21 months with a level B1 language certificate.

Required documents:

  • A completed application form
  • A valid passport
  • Recent biometric photos
  • A valid contract of employment with information on salaries
  • (If necessary) Previous contract of employment, if the current one is less than 21 or 33 months
  • Proof of pension contributions: proof of the payments of contributions to the statutory pension for the last 21 or 33 months; or proof of the payments of contributions to the private pension for the last 21 or 33 months
  • (If necessary) Certificate of German language
  • Medical insurance
  • Rent contract
  • Current registration card

Highly qualified people (such as researchers with special technical knowledge or teaching personnel or scientific personnel in prominent positions, or specialists and people in senior managerial positions) can apply for a settlement permit right after the arrival in Germany. The most important thing is that you need to have a concrete job offer and the approval from the Federal Employment Agency.

Required documents:

  • A completed application form
  • A valid passport
  • Recent biometric photos
  • (If necessary) A valid visa for entry for the purpose of employment
  • The existing diplomas, degrees
  • A Curriculum Vitae
  • (if necessary) A overview of published scientific papers
  • Proof of the assurance of the livelihoods: A concrete job-offer; Or a previous or current contract of employment with information on salaries
  • (if necessary) Occupational licensing for regulated professions (for example approbation or work permits)
  • An informal job description from the employer
  • Medical insurance
  • Rent contract
  • Current registration card

Self-employed people may be able to get a settlement permit after three years on conditions that at the time you apply you have a valid residence permit for a self-employed activity.

Required documents:

  • A completed application form
  • A valid passport
  • Recent biometric photos
  • Proof of the business activities:
  • Tax assessment notices for previous fiscal years and if necessary profit determination of the previous year with the confirmation of the tax consultant, provided that there is no income tax assessment notice yet.
  • Business assessment (Betriebswirtschaftliche Auswertung – BWA) or if necessary the confirmation of tax consultant for the current fiscal year
  • Proof of the existing business relationships
  • (If necessary) Proof of created employment
  • (If necessary) Proof of settlement of business salary (Nachweise über Abrechnung des Geschäftsgehalts)
  • Written description on the development of business activities with an outlook of the next three fiscal years
  • Statement of the local commercial authorities or the professional association or the chamber of commerce or chamber of handcrafts or if necessary the authorities responsible for the licensing of occupation (Normally these can be obtained by the responsible Foreigners’ Registration Office.)
  • (If necessary) the current statement from the trade register or the commercial register or current craftsman’s card.
  • Medical insurance
  • Rent contract
  • Current registration card

 

3. Self-employment

Self-employed (Gewerbetreibende)

Are you planning to set up a manual trade or retail business in Germany? You can apply for a residence permit for self-employed business purposes. The following requirements you need to satisfy:

  • There is commercial interest or regional demand for your products or services.
  • Your business activity is likely to benefit the country economically.
  • You have secured financing for your business by way of bank loan or your own capital.
  • You will have to provide a viable business plan, relevant experience, and show how your business will contribute to innovation and research in Germany.
  • You need to provide proof of adequate provision for old age if you are over 45 years old.

 

Freelancers (Freiberufler)

If you want to be self-employed in one of the liberal professions, you can apply for a residence permit for freelance work, if you can prove that you have the means to fund your project, to support yourself and a permit to exercise that profession. If you are over 45 years old, you must also provide proof that you have adequate provision for old age.

If your business idea is successful and you are able to make a living for yourself and your family, you can have your residence permit extended after three years. If you set up a manual trade or retail business, you can apply for a settlement permit after just three years.

Chinese Investors’ Interest in German’s Hidden Champions

Category: Investments, June 14th, 2016

It is long known that Chinese investors tend to have an appetite for Germany’s small and medium-sized companies. But the takeover of the Swabian concrete pump manufacturer  by construction giant Sany from Changsha (长沙) in 2012 brought a new investment strategy to the public eye, a switch-over from acquiring struggling enterprises to especially seeking very successful, established and specialised companies, the so called “hidden champions”. 

These often family-owned companies are almost exclusively small and medium sized enterprises and are categorised by their position in the top 3 on the global market, their revenue between $4 billion and a low level of public awareness. Within their niche markets they are sometimes a single product manufacturer who work closely together with their customers to find specific solutions. This customer interaction is the key driver of innovation and allows the hidden champions’ R&D to beat that of large companies by a factor of five. Consequently they earn their market share through performance and not price.

Now there are three reasons that make hidden champions an interesting investment opportunity for Chinese investors. First, according to the German Association of Chambers Commerce and Industry, the DIHK, an ageing population and an alternation of generation with no heirs or children who are unwilling to take over their parents’ business many of these companies are up for sale. Since owners of a family enterprises are often emotionally attached to the company, they are looking for an adequate investor, who holds comparable ideas about the enterprise’s future.

This is where Chinese investors become relevant, because they often see acquisitions in Germany as long term, strategic investments, which align with the hidden champions’ focus on long term growth instead of short term gains.

The third reason why hidden champions are interesting for investors from China is the opportunity to acquire know-how without the costs and time of development by buying a German high-tech enterprise and then being able to apply this knowledge to their own market at home.

The advantages are not only on the investor’s side, but also on the side of the German business because a Chinese investment allows the company to have access to a greater capital base and easier entry to the market in China. With China being a country of rapid development and high demand for services and technological know-how, it opens up possibilities of getting a foothold in a new market and consequently ensuring further long time growth.

It is not all positive, though, Foreign acquisition of companies that are strongly embedded in their environment is often met with scepticism and concern by the employees as well as the public. The fear that the enterprise’s identity and future is under threat is, as history shows, often unsubstantiated, because acquired businesses tend to retain their identity after a take-over.

The hardest part about the strategy of investing in hidden champions is in the name itself. The circumstance that they are hidden makes them hard to identify, especially for foreign investors, which require a trustful partner to help find the optimal investment opportunity. 

Even 4 years after the deal between Putzmeister and Sany, the topic is still highly relevant as individuals, companies and private equity firms compete for the famous German small and medium-sized enterprises. But it seems that Chinese – German cooperation is a general success. As the previous owner of Putzmeister Karl Schlecht stated: “What Sany is doing in China is something we can only dream of.”

A NEW MILESTONE FOR ECOVIS BEIJING: HANNOVER MESSE 2016

Category: Events, June 8th, 2016

Hannovermesse_4

After our first Hannover Messe (HM) has come to a successful end, we are looking back at one of the world’s most important industrial trade shows. The first HM, then still called “Export Messe 1947 Hannover” was organized in 1947 as a competitor to the Leipzig Trade Fair. This laid the cornerstone for the now biggest fair for investment goods worldwide.

Henceforth, the HM’s core themes were industrial automation, IT, energy and environmentally friendly technologies, as well as research & development. These topics attract nearly 200 000 visitors per year plus 5000 exhibitors from 75 different countries. Among the top 3 exhibitor nations, China, next to Germany and this year’s partner country, USA, was present with 650 exhibitors. Additionally, both the U.S. and China broke new records with regardto the numbers of visitors from each respective country. Both crossed the 5000 thresholds and occupied, after Germany, the 2nd and 3rd place. Thus, China solidified its position as the second-biggest visiting nation at the HM.

Hannovermesse_5.jpg

This year’s theme: „Integrated Industry – Discover Solutions“.

Since 2010, the HM has had changing partner countries. This year’s partner was the United States of America. Accordingly, on April 24th, 2016, the HM had the honor to welcome President Barack Obama and Chancellor Angela Merkel for the opening ceremony. The President’s objective: convince more companies to invest in the United States. After the HM was officially opened at 7:28pm, Obama and Merkel undertook a joint tour of the trade fair, starting with the booths of American companies and covering technologies, such as 3D printers or electric vehicles. The winner of the Hermes Award 2016, Hartin IT Software, was also honored by a visit.

Finally, Obama used the occasion to give a speech to over 500 students and faculty members at the Leibniz University of Hanover. Apart from numerous global issues, he emphasized the importance of a peaceful, united and liberal Europe for the future of the world.

Hannovermesse_6.jpg

ECOVIS Beijing was not only impressed by the high-profile opening ceremony, but by the HM’s atmosphere and opportunities in general. We launched our first HM with a motivated team in order to promote ECOVIS Beijing and especially our new Heidelberg office and to make new contacts. Our ECOVIS Beijing partner Richard Hoffmann came to lend a helping hand. The precise preparation and the open and friendly attitude of our team turned the HM 2016 into a resounding success. We want to thank everyone, who has visited our booth and are looking forward to the next Hannover Messe. 

ECOVIS Beijing can provide templates for both labor contract and staff manuals. For further information, please contact: richard.hoffmann@ecovis-beijing.com

New Plan for German-Sino-Hi-Tech-Park in Heidelberg

Category: Investments, May 5th, 2016

On May 2nd, 2016, representatives from the two municipalities; Heidelberg (Germany) and the Beijing District of Haidian (China) have established a cooperation agreement in order to intensify their mutual exchange in the areas of research and development. Haidian, home ground to Chinese IT-giants’ headquarters, such as Baidu or the video-platform Youku, is often considered to be the Silicon Valley of China. The agreement also includes the creation of a new technology park based in the Patton Barracks, a former US Army base, located in Heidelberg. In the future, this park will welcome Chinese high-technology firms.

This agreement marks an important step forward in the development of Sino-German cooperation as well as with regard to China’s strategic objective to increase its exports of R&D products to Europe. The complementary partnership allows both Germany and China to realize their respective industrial policies ‘Industry 4.0’ and ‘Made in China 2025’. Both policies include an integration of modern information and communication technologies with industrial production and thus constitute a solid foundation for further cooperation.

On the Chinese side, the delegation included representatives from Lenovo and ZTE. The concrete pump manufacturer Putzmeister, the project developer Euroscom, and the software company SAP App-House participated on the German side.

Ecovis Beijing provides a comprehensive portfolio of legal, tax and audit services for your investment in Germany. If you need further information or advice on investing in Germany, please feel free to contact us: richard.hoffmann@ecovis-beijing.com

New Tax Regulations for Cross-Border E-Commerce

Category: Tax policy, May 3rd, 2016

In March 2016, the Chinese government issued two new regulations, which have changed the taxation of imported products bought online from businesses abroad (B2C). Previously, cross-border online purchases for personal use were mainly treated as individual postal items and were normally subjected to a tax rate of 10% with taxes below 50 RMB being exempted.

According to two new regulations, the Announcement on the Tax Policy on Cross-Border E-commerce Retail (Cai Guan Shui (2016) 18) and the Notice on Relevant Issues Concerning the Adjustment of Import Duties on Imported Articles (Shuiweihui〔2016〕2), imported goods bought online will now be subjected to Customs Duties, VAT, and Consumption Tax. This brings the taxation of cross-border e-commerce closer to that of general trade.

This regulation affects all foreign companies, which are offering online transaction, payment and shipment services (mainly B2C). Companies or individuals, which are unable to provide these services (mainly C2C) do not fall under these regulations and will be, for the time being, treated according to existing regulations and taxed under the parcel tax.

Foreign business engaged in trans-border e-commerce have to register with the General Customs Administration (GAC) and provide information of the transaction to the Chinese cross-border e-commerce customs clearance service platform. The submission of information to the platform can also be done by online-platforms and courier services on behalf of the foreign business (GAC Announcement No. 26, 2016).

Tax reductions for trans-border retail e-commerce

The new policy also raises the value of duty free shipments from 1000 RMB to 2000 RMB. Now, single shipments worth less than 2000 RMB and orders having a cumulative value of less than 20 000 RMB annually are exempt from Customs Duty, but will be subjected to a reduced VAT and Consumption tax amounting to 70% of the normal tax amount. For products exceeding these limits usual custom duties apply and the entire value will be taxed. If goods are returned within 30 days to the customs supervision, customers can apply for a tax refund and import taxes will not be levied.

  value of single product less than 2000 RMB, and less than 20 000 RMB annualy value of more than 2000 RMB for single product and more than 20 000 RMB in the same year
Custom Duty 0% taxed like General Trade
Import VAT 70% of total tax
Consumption Tax

Which foreign articles can be sold online?

A List of Cross-Border E-commerce Retail Imported Articles[1] was issued on April 4th, 2014 by 11 ministries and includes 1142 articles, each marked with an 8-digit tax code (MOF Announcement No. 40, 2016).

Surprisingly, this list initially excluded some popular products, such as milk, which is high in demand among Chinese citizens due to the low level of trust into domestic brands. This caused some concern among foreign companies selling these goods and also raised questions with regard to goods stored in bonded areas and those already sold but not yet shipped.

Responding to the criticism, the Ministry of Finance published an updated version of the list on April 15th, which added another 151 products and now also includes milk (MOF Announcement No. 47, 2016). The list of the added goods can be found here[2].

Who has to transfer the tax?

In general, the main tax burden will fall upon the customer. Nonetheless, there are differences as to who will withhold the taxes.

Option 1: Transaction via E-Commerce-Platforms (e.g. JD Worldwide, Tmall Global)

If the transaction is carried out via E-commerce-platforms, the platform’s owner will usually withhold the taxes and transfer them directly to Chinese tax authorities. This is the most convenient method for both businesses and customers.

Option 2: Direct sale via your business website

If the good is purchased directly on a foreign company’s website, there are two possibilities:

 

  1. The customer pays the taxes in person. In this case the business only receives the payment for the product without the additional tax amount. The customer then has to pay the levied taxes directly to the Chinese customs authorities.

This, of course, is rather cumbersome for the buyer, since the purchased good might be retained by custom authorities until all taxes are paid.

  1. b) In most cases, however, the courier service (e.g. EMS, DHL) will withhold the tax for the customer.

 

Revised tax rates for other imported articles (excluding General Trade and E-Commerce)

Parallel to the new policy, tax rates for articles imported through other personal channels (Parcel Tax or 行邮税) were also adjusted (GAC Announcement No. 25, 2016). They will now fall under three categories, instead of the previous 4:

Tax Rate Product Types
15% Books and newspapers, publications, audio and video materials for educational use; computers, video cameras, digital cameras and other IT products; food and beverages; gold and silver; furniture; toys, gaming products, and festive and other recreational products
30% Sporting goods (excluding golf balls and clubs), fishing tools; textiles and their manufactured goods; TV cameras and other electrical appliances; bicycles; and other items not included in the other two categories
60% Alcohol and tobacco; valuable accessories, jewelry and gemstones; golf balls and clubs; luxury watches; cosmetics

 

The parcel tax, whose Chinese name xingyoushui is a combination of luggage (xingli) and postal (youjian) tax (shui), applies to all products, which are imported through personal or postal channels, and for which no e-commerce filling exist. The parcel tax is a composite tax which combines customs duty, import VAT, and consumption tax. The taxable amount includes all transaction costs (retail price, shipment, insurance, etc.). The principle of waiving taxes below 50 RMB remains intact.

For further information please feel free to contact us: manuela.reintgen@ecovis-beijing.com

Investment Opportunities in Industry 4.0 – Industrial Revolution “Made in Germany”

Category: Miscellaneous, April 26th, 2016

After the mechanization, the electrification and the digitalization of production,the latest industrial trend is made in Germany: Industry 4.0 – a keyword when it comes to the question how industries will look like tomorrow. But what does Industry 4.0 actually mean? What is the status quo? And what are the opportunities for foreign investors?

The Two Components of Industry 4.0

Industry 4.0 basically describes the fusion of IT and industrial production. In particular, it means that production machines are able to communicate with each other and also with the people who operate them. This makes the employees only supervisors in the factory of the future, or – how it is often called – the ‘Smart Factory’. The ‘Smart Factory’, which is described by connected production components and therefore an efficient and flexible production, is the final goal of Industry 4.0.

Industry 4.0 consists of two components –Information Technology and Engineering. While German engineering has a good reputation worldwide, the German IT industry still leads a shadow existence. Only afew large IT companies such as SAP and Telekom seem to be the leading forces in Industry 4.0. However, there is a large number of highly specialized “hidden champions” which contribute important innovations in fields like cyber security or cloud computing. Thefact that most of the German software companies do not focus on end users but rather on corporate customers makes the German software market the largest in Europe with stable growth rates of 5-6%. Nevertheless, the implementation of smart IT solutions requires the engineering side of Industry 4.0.

The Current Status

Tabelle1

Even though IT is the main driver in Industry 4.0, the highest efficiency gains are expected in other industries. Especiallythe traditionally strong German industries such as engineering and automotive are expected to achieve the highest economic gains from the transition towards a digitalized and smart production. Considering the investment requirements estimated at 18 bn. EUR annually, it would still be a profitable step for the German industry.

Grafik1

The willingness of German companies to invest does currently not meet the high expectations of many politicians. Despite the recentgrowth of Investments in Industry 4.0, it is still at a level as low as one billionEuro annually. The reason for this underinvestment isnot the absence of the technology required. In fact, most essential technologies for Industry 4.0 are already available. The most fundamental obstacle of the transition is the low capitalization and the risk aversion of many German companies. Especially the German “Mittelstand” (SMEs), which mainly consists of specialized family enterprises, avoids investments in the IT solutions. However, the German government actively encourages their vision of an entirely digitalized production until 2020 and a largely automated production as the next evolutionary step. Besides the education of skilled labour and the financial support of R&D in the relevant fields, the Platform Industrie 4.0 was founded. It is the largest platform of its kind and connects research institutes with companies of the engineering, the IT and the production industry.

 

Opportunities for Foreign Investors

Like mentioned above, the investments of German SMEs in Industry 4.0 are far too low. In many cases they lack the required financial capital and therefore foreign investors can compensate this issue by investing. One option for foreign investors is to invest in or to acquire a German company and to participate in the gains from the innovation. Another option is the collaboration between German and foreign companies. This can be implemented through outsourcing or through a joint venture with a foreign company. Joint ventures are a popular way to gain know-how about Industry 4.0 but many German companies avoid outbound outsourcing and joint ventures with foreign companies. This is due to their limited information and concerns about legal and data security matters.

Ecovis is an experienced partner in order to overcome these concerns. The provision of legal and tax information and the mediation between German companies and foreign investors is one of our key competences.

Ecovis Beijing provides a comprehensive portfolio of legal, tax and audit services for your investment in Germany. If you need further information or advice on investing in Germany, please feel free to contact us:  richard.hoffmann@ecovis-beijing.com.

Overview of the Chinese Work Visa for foreigners

Category: Legal, April 22nd, 2016

Foreigners, especially those that intend to work in China, often face the question of which visa type to apply for. Since the Chinese Central Government implemented new visa regulations in September 2013, the complexities of the application process have increased even further. The different visa categories should therefore be examined in detail.

Since 2013, the Administrative Regulations of the People’s Republic of China on Entry and Exit of Aliens (as of September 1st) as well as The Law of the People’s Republic of China on the Administration of Exit and Entry (as of July 1st) regulate the entry requirements for foreigners into China. There are now twelve different visa categories instead of the previous eight.

If overseas or domestic companies wish to hire foreign workers in China, the first organisational obstacle is to solve this visa issue. Therefore, particularly those visa categories, which are relevant for foreigners with the intention to work in China, are illustrated below (see Figure 1). At this point, the new M, R, and S Visa categories as well as the changes to the work visa (Z Visa) are most important.

 

Visa Type

Purpose

Required Documents

Z Visa

For foreigners working in China

Ministerial Invitation Letter,

Alien Employment License

M Visa (new)

For persons that are invited to China for commercial purposes or trade

Invitation Letter of the party in China, Business License of the company

R Visa (new)

For particularly skilled professionals and highly specialized experts whose qualifications are in urgent need in China

Conditions of the Chinese government set for these experts are to be met, approval of the respective authorities needs to be reached and the required documents need to be provided

S1 Visa (new)

For parents, spouses, children under 18 and parents-in-law of foreigners who work or study in China; for long-term visits (more than 180 days) of these relatives and for other personal affairs

Invitation Letter submitted by the relative living in China; Residence Permit, Passport Copy of the relative and Proof of Relationship

S2 Visa (new)

For family members of foreigners who work or study in China; for short-term visits (less than 180 days) of these relatives

Refer to S1 Visa

F Visa

For exchange visits, study, travel, or other (non commercial) activities

Invitation Letter from the person in China

Figure 1: Overview of Visa Types according to activity in China

 

As companies in China may employ foreigners with valid work visas only, the most reasonable long-term solution for sending staff from Europe to China is the Z Visa. Foreigners planning to work in China should enter the country only when holding a valid Z Visahowever, the application process for such a work visa is more complicated than, for example, that of a business visa (M Visa).

Before the actual start of the application process for a Z Visa, the foreign applicant must meet certain requirements (seeFigure 2): The employment agreement must already have been signed when applying for a Z Visa and the applicant must be able to prove the qualifications needed for the desired job in China. Furthermore, the minimum age of 18 years as well as good physical health are required and the applicant must present a clean criminal record to prove no previous charges.

 

Pic2

 

In some cases, a personal interview with the respective visa authorities may be necessary. This may be the case, for example, if you apply for a Permanent Residence Permit in China; if you need to verify personal information and the reason for your application; or if you have been previously denied the entry into or exit out of China. Therefore, we advise companies in China to factor in enough time for the visa application procedure of their employees.

Upon arrival of the employee in China, the Alien Employment Permit and a work-related Residence Permit have to be obtained first. These permits represent yet another step through Chinese bureaucracy that has to be taken by both employers and employees. Figure 3 provides an overview of the lengthy process to a successful start of work in China – including responsibilities and timelines for the respective steps.

 

Pic3

1st Alien Employment License
The prospective employer in China needs to provide certain documents in advance. Before hiring foreign employees, companies initially need to apply to the Beijing Administration of Foreign Expert Affairs for permission. The required documents for the application for an Alien Employment License are the following (see Figure 4): CVs of the foreigners to be employed, confirmation of the employment, explanation of the planned employment relationship, certificates that demonstrate the employees’ qualifications for the respective position the necessary medical certificates and the completed visa application form with a recent coloured passport photo. The processing time for this step is generally 15 working days.

 

Pic4

 

2nd Ministerial Invitation Letter

Besides the Employment License, the company must also provide an original copy and a photocopy of the ministerial Invitation Letter to the foreign employee. The Invitation Letter is issued in China within three working days by the Beijing Municipal Commission of Commerce.

 

3rd Work Visa

With the Employment License and the Invitation Letter, the actual application for the work visa can begin. This takes place in the Visa Centre of the respective Chinese embassy or Chinese consulate. In Germany this may be the China Visa Centre of the Chinese Consulate in Munich, the Chinese Consulate in Frankfurt, the Chinese Consulate in Hamburg or the Chinese Embassy in Berlin. The authorities estimate the processing time at 4 working days.

 

4th and 5thPhysical Examination and Employment Permit

The next stepis to obtain an Alien Employment Permit for the applicant in China within 15 days after entering China. Therefore, the employee has to submit the health check report in duplicate. In addition, a photocopy of the labour contract, a photocopy of the Business License of the company and one original copy and a photocopy of the Registration Form of Temporary Residence and of the valid passport are needed for the application of the Employment Permit. The processing time of the application for a work permit is 5 working days.

 

6thResidence Permit

Once the new employee has obtained his Employment Permit, the final step follows: The application for a Residence Permit. This must be concluded at the Beijing Municipal Public Security Bureau Exit-Entry Administration within 30 days after entering China. The necessary documents for this purpose are a valid passport and all documents relevant to the purpose of the application as well as a scan of fingerprints. The decision of the Public Security Bureau as to whether a residence permit is issued will be made within 15 working days. The validity of a work-related Residence Permit lasts one year, for legal representatives of a Chinese company (foreign invested company) a residence permit for the duration of two years can be granted.

 

According to Chinese law, foreigners contributing greatly to China’s economic and social growth or those that meet other conditions can apply for a Permanent Residence Permit. The Chinese Ministry of Social Security must recognize this application.

After completion of these steps,the foreign worker may begin the legal employment in China. Please contact our office for support during your application procedure.

Mutual dependence between China and Germany? Part 2

Category: Case Studies, April 20th, 2016

The government is striving to establish China in the highest parts of the global production chain, making use of a three-step plan. The first crucial step, supposed to be accomplished by 2025, is to (sneak) set foot into the range of high-end producing countries. The second step, to be reached by 2035, is to seesaw into the center of the high-end producing group. And finally, with celebrating the 100-year anniversary of China in 2049, the government seeks to occupy the frontline of production technology.

 

While this sounds like an ambitious (and somehow utopic) plan, the Chinese government has already proven it’s envisage various times in the past. Furthermore, this time it also approaches from a more widespread attempt in comparison to the last Hu-Wen plan. The previous plan did only focus on an innovation and technology upgrade solely, zeroing e.g. in setting distinct technological standards. However, this time the challenge is to encompass the entire manufacturing process. This also implicates setting is the overall framework and is also enabled to inject financial and fiscal means to guide the market perspective in certain way.

 

The ten priority sectors are:

 

  • high-end numerically controlled machine tools and robots,
  • aerospace e
  • new information technology,
  • quipment,
  • high-end rail transportation equipment,
  • energy-saving cars and new energy cars,
  • electrical equipment,
  • farming machines,
  • new materials, such as polymers,
  • bio-medicine and high-end medical equipment.

 

 

This innovation concept is not derived completely out of nothing, but has strong connections to the “Industrie 4.0” concept from German side. Intelligent manufacturing moves on becoming a poly-discussed topic, as part of the state-of-the-art trend in industrial engineering. “Industrie 4.0” stresses the use of production process technology, enabling them to automatically adapt to changing environments and varying process requirements. This evolution process for manufacturing various products with minimal supervision and assistance from operators is, for this blink of an eye at least, at its peak. During the past century, it has enhanced from the first idea of mass production within the economic reach for an average citizen by Henry Ford towards the capability of implementing artificial intelligence in manufacturing and production. However, the development is certainly not at its end now when taking a look at the Internet of Things (IoT). The IoT, a network of physical objects with chance to collect and exchange data among themselves, can generate aggregate large number of data from diverse locations, facilitating an indexing and processing of such data.

 

Therefore, the relationship between SMEs in global production can be relieved significantly, enabling them to connect more efficiently throughout long distances. Thus it benefits the mass production from an increase in efficiency and at the same time eases the production of customized products. It combines two actually reverse aspects, bringing them moving towards the same direction. We can definitely expect more from the method, also with regard to Sino-German cooperation affected by the fourth industrial revolution. The equal direction of China and Germany’s conceptual idea is definitely not out of thin air, and we can record: China and Germany will definitely not shift apart.

 

 

The future Chinese-German cooperation

 

While the past has shown that German companies have invested 30 times more in China than the other way around, the recent trend is proving a change vice versa. As matters now stand, Germany hosts about 900 Chinese investing companies. However, German companies enter the limelight of Chinese investors more and more. This disperses over several German “Hidden Champions”, such as Putzmeister, Kiekert and Solibro. What do they have in common? All of them are high-tech industries, and the list continues withnaming Schwing, Sellner or Sunways.

 

What we need to consider is that China and Germany, although having a longstanding and prospering relationship, do differ with regard to several aspects. This does not only refer to the language barrier, but moreover affects the cultural perception, economic situation and political understanding. Germany’s President Joachim Gauck also raised parts of these issues in his latest China visit – implementing talks with regard to civil right and environmental circumstances with President Xi Jinping and Prime Minister Li Keqiang. Besides from a vivid discussion about different point of views, it was more likely intended to deepen the ties between China and Germany, especially in the economic area.

 

Some reasons for this stable tie are not far to seek, obviously creating employment opportunities and additional value added for both parties. It results in a stronger connectivity between the two of the leading markets on the Eurasian continent, and helps to develop further distribution networks. One business segment moving on the frontline of development: e-commerce and its constant skyrocketing growth (Read more…). Just one example to simply underline their superior position: Alibaba had a turnover of RMB 91.2 Billion (or USD 14.3 Billion) on one day alone (Single’s Day, November 11th, 2015). For your reference, it has overtaken the online sales of Amazon on Christmas and Boxing Day combined. And this development will not end in the nearer future, and the turnover on Single’s Day has increased by 34% within one year.

 

Despite the positive foresight and glamorous opportunities, what most German companies keep at the back of their mind is the question, if there occur a transfer of knowledge. So do they have to fear this problem?

 

The Chinese investment provides an interesting opportunity for German companies. German companies trying to push a penetration into the Chinese market can be easily supported, as they have a protective Chinese parent company’s hand providing with financial aid and established distribution channels. Furthermore, the intention of Chinese companies is to establish a long-term foothold in the German market, rather than just exploiting the knowledge and leaving shards apart. This kind of investment is arguably with greater benefit than those short-term financial investments by other country’s companies. Those short-term financing can create an artificial illusion of support but turn out to be not conducive in the long run.

 

Summing up, we can say that the Outward Foreign Direct Investment (OFDI) of Chinese companies in Germany extracts the strengths of each market respectively and surges a positive synergy effect. Thus, the Sino-German is definitely subject to further remarkable headlines, proving to be an abutment for the next 40 years and ahead.

 

Mutual dependence between China and Germany? Part 1

Category: Case Studies, April 20th, 2016

Glory past, dusty future?

 

Starting from the Chinese economic reform under Deng Xiaoping in 1978, the Chinese economy has grown at an incredible pace. It established itself as a key economic driverand particularly in the wake of the global economic and financial crisis, becoming a patron for investors across the globe. The Sino-German bilateral trade relationship arose on the verge of this development. And in the course of the last 40 years, this became a pillar for both sides – the German innovation and the Chinese progression.

 

Coming all the way from the frosty liaison between Prussia and Qing Dynasty starting in 1861, the Sino-German bilateral trade now targets a record high volume of USD 160 Billion with no abrupt end in sight. A small comparison: the Sino-German trade volume doubles the Chinese-Russian one and outweighs the trade with the United Kingdom, France and Italy as a whole together. This co-efficient underlines the reciprocal importance firmly and strengthens the trade, investment and technological cooperation.

 

Germany embodies the biggest European investor in China, enabled by the 6,000 German companies represented in China. The German direct investment carries a 50 Billion Euro volume package, resulting in Germany mounting up to a comprehensive strategic partner. The Sino-German relationship now enters a strategic partnership in global responsibility.

 

However, despite China’s utopian ascent in the near past, it is not all roses anymore. The Chinese growth is slowing down, and after a decade of skyrocketing, the Chinese government is now aiming a persisting economic growth between 6.5% and 7% for the next year. But it is highly doubted, if the government can prove their clairvoyance and reach the target. China is now suffering from the glory days in the past, leaving behind several severe problems. This mainly refers to minor productivity, old and competitively unviable industries, enormous overcapacity and sketchy air pollution. This results in a decrease for German imports as well as a matter of fact.

 

Furthermore, the Chinese economy is shifting away from a production-based sector, focusing now on the service industries assisting domestic performance and private consumption in the future. This provides a long-term profit in the future, but on a short-term basis it is not beneficial. It also suffers from the rapidly aging population. While now already one out of six is over 60 years, the ratio will be of out of four by 2025. This measure will hit the German export industry certainly, which is dominated by capital good and the production.

 

 

Will China and Germany now move apart?

 

China is now planning to hit the growth target by heavily leaning towards both fiscal and monetary policy. It foresees a 13% growth of M2 (a gauge for money supply, serving as a key economic indicator used to forecast inflation). The monetary policy that granted a total lending of RMB 2.51 Trillion in January alone is loose already. Furthermore, this time a fiscal policy with the supply-side economics is taking over. The concept is to clear the path for private companies and refrain from pouring money into the state-company dominated infrastructure market.

 

This also explains China’s ongoing draft for the newest “Made in China 2025” project. First time mentioned in December 2014, the “Made in China 2025” project is an initiative to comprehensively upgrade the Chinese industry. As the efficiency and quality among Chinese producers is still uneven, it is planned to serve as an incubator for a new generation of technological standard. Five guiding principles give a framework for this project, which are:

 

  • innovation driven manufacturing,
  • emphasizing on quality over quantity,
  • achieving green environment,
  • nurturing human talent.

 

What is the answer to “Will China and Germany now move apart?” and how will be the future Chinese-German cooperation? All of these qestions you will get in our articel part two. You should not miss it to get yourself informed.

Chinese Foreign Direct Investments in the Heart of Europe

Category: Investments, April 6th, 2016

Chinese foreign investments expanded rapidly over the last decade. From 2005 on, Chinese foreign investments added up to almost 3,5 trillion US Dollar in 2015. This development is predicted to persist and even speed up over the next few years, making China one of the largest investors worldwide. Formerly, the major concern was to assure China´s resource requirements by investing in developing countries, but recently, the attention also shifted towards Europe.

Tabelle_in_englisc.png

The dominating type of Chinese foreign investments today are portfolio investments. However, foreign direct investments (FDIs) are outstripping portfolio investments in terms of invested capital. This might be a result of the fact thatFDIs, in contrast to portfolio investments, allow investors to influence company decisions abroad because more than 10% of a company´s voting shares are acquired. Since the major concern of Chinese investors shifted recently from exploiting natural resources in developing countries towards technology, brands and real estate in more developed countries, the possibility to influence the company´s strategy gained importance.

Playing a negligible role until 2010, Chinese FDIs gained importance as an investment vehicle in recent years. It is expected to become the major method of investing in foreign assets in the future. Until 2020, FDIs are predicted to account for more than 80% of Chinese foreign investments.

 Grafik1eng

Chinese Investments in Europe

Today, Chinese FDIs concentrate more and more on European companies. This trend arose due to two major reasons: first, Chinese companies want to shift up the value chain. Research and development, besides the core business of manufacturing, will play a key role in the operations of Chinese companies. That is why the acquisition of technology and knowledge in form of FDIs gained popularity in recent years. The second reason is the proximity to new markets. FDIs are a popular way of entering a market because it enables foreign investors tomake use of existing local networks. Especially since the customers are not only private consumers anymore but also other companies, it is necessary to be present at the place of sales in order to maintain good services and relations.

Grafik2eng

In the past, Chinese FDIs in Europe were concentrated in the UK, the Netherlands, Portugal and Luxemburg, but in relation to the countries´ GDPs, there were still few Chinese FDIs in Germany, Spain, France and Italy. However, this is likely to change in the next years because these countries are featured by a good infrastructure and political stability.

Grafik3eng.

Chinese Investments in Germany

In January 2016, the biggest Chinese investment in Germany took place. The German engineering company KraussMaffei Group was acquired by China National Chemical Corporation, a state owned enterprise, for more than 1 billion US Dollar. The acquisition did not cause much public attention, but it is a great example for the recent participation of Chinese investors in the German economy. Investments of this scale indicate that China´s foreign investment strategy now focuses on knowledge rather than physical resources. Germany is a leading nation in the fields of automotive and engineering and has gained an exceptional reputation for quality products and highly skilled professionals in these fields. Thus, these industries especially attract the attention of Chinese investors in order to prepare their portfolios for the future. This is in line with the prediction thathigh-end production assets are likely to play a key role in future global competitiveness.

ECOVIS regularly helps foreign companies to find suitable and respectable Chinese Investors. If you need further information about how we can assist you getting acquired and want to find Chinese investors, please contact us: richard.hoffmann@ecovis-beijing.com