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Focus China: News & Information for Investors, Entrepreneurs
and Businessmen from Tax Consultants, Accountants, and Lawyers

Work in Germany: Getting a German Work Permit

Category: Legal, Miscellaneous, June 16th, 2016

Do I need a visa to work in Germany? This article explains who and how you can apply for a German work permit
Read more…

Chinese Investors’ Interest in Germany’s Hidden Champions

Category: Investments, June 14th, 2016

It is no secret that Chinese investors tend to have an appetite for Germany’s small and medium-sized companies. We explain why Chinese companies are so interested in Germany’s Hidden Champions.
Read more…

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 was organized in 1947 as a competitor to the Leipzig Trade Fair. Back then it was still called “Export Messe 1947 Hannover”. 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.

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 official opening Obama and Merkel undertook a joint tour of the trade fair. They started with the booths of American companies. Another focus were 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.

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 Heidelberg and the Beijing District of Haidian have signed a mutual cooperation agreement.  The agreement covers areas of research and development and to set up a joint German-Sino-Hi-Tech-Park.

Read more…

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) via e-commerce platforms. Previously, cross-border online purchases for personal use were mainly treated as individual postal items and taxed as such.
Read more…

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. 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 a ‘Smart Factory’. The ‘Smart Factory’, which is described by connected production components and 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 a few 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 cybersecurity or cloud computing. The fact 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 of Industry 4.0

 

Key Industries Germnay

Even though IT is the main driver in Industry 4.0, the highest efficiency gains are expected in other industries. Especially, the 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 billion EUR annually, it would still be a profitable step for the German industry.

Investment Industry 4.0

The willingness of German companies to invest does currently not meet the high expectations of many politicians.

Despite the recent growth of investments in Industry 4.0, it still is at only 1 billion Euro a year. The reason for this underinvestment is not the absence of the technology required. In fact, most essential technologies for Industry 4.0 are already available. The most fundamental obstacle remains 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 supports the goal an entirely digitalized production until 2020. A completely automated production is the next evolutionary step. Besides the education of skilled labor and the financial support for 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 in Industry 4.0

 

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. Another option is a 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.

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 competencies.

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.

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 for work visas 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 recent changes with regard to the work visa (Z Visa) are most important (read here an analysis of the work visa new point system).

 

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

 

Why you need a work visa

 

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 Visa. However, 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 prove the qualifications needed for the desired job in China. Furthermore, the minimum age of 18 years and 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, expats need to obtain an Alien Employment Permit and a work-related Residence Permit first. These permits represent yet another step through Chinese bureaucracy. 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

 

How to apply for a work visa in China

 

 Alien Employment License

The prospective employer in China must 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

 

2. 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.

 

3. 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.

 

4. and 5. Physical Examination and Employment Permit

The next step is 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.

 

6. Residence Permit

Once the new employee has obtained his Employment Permit, the expat has to apply for a Residence Permit 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 Public Security Bureau will issue the residence permit within 15 working days. The validity of a work-related Residence Permit lasts for one year. For legal representatives a residence permit for the duration of two years is also possible. Recently, Chinese authorities have also started to issue permits with a longer validity.

Get Help with Your Work Visa Application

 

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. If you need help, please contact our office for support during your application procedure.

If you have further questions about work visa in China, please contact service@ecovis-beijing.com or visit the website of ECOVIS Beijing.

Mutual dependence between China and Germany? Part 2

Category: Case Studies, April 20th, 2016

In the first part of this article we explained the mutual dependence of China and Germany, it’s historic origins and recent challenges. Please click here to read part 1 of this article.

The Chinese government is striving to establish China in the highest parts of the global production chain, making use of a three-step plan. The first step, supposed to be accomplished by 2025, is to 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, 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.

 

Inspired by Germany’s “Industrie 4.0”

This innovation concept has strong connections to the German “Industrie 4.0” concept. 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. Such developments can enable 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

In the past, German companies have invested 30 times more in China than the other way around. The recent trend though 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, despite their longstanding relationship, differ in several aspects. This does not only refer to the language barrier. It also affects the cultural perception, economic situation and political understanding of both countries. Germany’s President Joachim Gauck also raised some of these issues in his latest China visit. He initiated talks with regards to civil rights and environmental circumstances with President Xi Jinping and Prime Minister Li Keqiang. Besides 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.

 

The role of e-commerce

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 connection between two of the leading markets on the Eurasian continent. It also helps to develop further distribution networks. One business segment moving on the frontline of development: e-commerce and its constant skyrocketing growth (Read more…). Alibaba for example had a turnover of RMB 91.2 Billion (USD 14.3 Billion) on one day alone (Single’s Day, November 11th, 2015). This is more than the online sales of Amazon on Christmas and Boxing Day combined. And this development will not end any time soon, as the turnover on Single’s Day increased by 34% year-on-year.

 

Outlook: from a German perspective

Despite the positive foresight and glamorous opportunities, German companies are still worried about a possible 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. They have a protective Chinese parent company’s hand providing them 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 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 relationship 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 driver and 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.

 

China’s slowing economic growth

 

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 at 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. It also aims to 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. The “Made in China 2025” project is an initiative to comprehensively upgrade the Chinese industry. It was first mentioned in December 2014. 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 questions are addressed in part two of our article. 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 direct 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. In the past China mostly assured its resource requirements by investing in developing countries. 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. FDIs, in contrast to portfolio investments, allow investors to influence company decisions abroad. This is because more than 10% of a company´s voting shares are acquired. The possibility to influence the company’s strategy gained importance for Chinese investors. This is a result of a shift in investment focus. In the past, Chinese investors mostly focused on exploiting natural resources in developing countries. Recently, this shifted towards technology, brands and real estate. 

Playing a negligible role until 2010, Chinese FDIs gained importance as an investment vehicle in recent years. Foreign Direct Investments are likely 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.

 Chinese FDIs in Europe 2010, 2015 and 2020

Chinese Foreign Direct 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. Foreign Directs Investments are a popular way of entering a market. FDIs enable foreign investors to make use of existing local networks. Customers are not only private consumers anymore but also other companies. It is therefore necessary to be present at the place of sales to maintain good services and relations.

In the past, Chinese FDIs in Europe focused on the UK, the Netherlands, Portugal and Luxemburg. 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. These aforementioned countries stand out for their good infrastructure and political stability.

Chinese Investments in the EU by country

Chinese Foreign Direct Investments in Germany

In January 2016, the biggest Chinese investment in Germany took place. China National Chemical Corporation, a state owned enterprise, acquired German engineering company KraussMaffei Group for more than 1 billion US$. The acquisition did not receive 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 considered a leading nation in the fields of automotive and engineering. It gained an exceptional reputation for its quality products and highly-skilled professionals. Thus, these industries especially attract the attention of Chinese investors in order to prepare their portfolios for the future. High-end production assets are predicted too 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