The Chinese government announced that NATIONWIDE value-added tax reform will take effect from January 2009. It is expected that the measure will affect all industries, and the tax burden on companies will be reduced by more than 120 billion Yuan (US$17.6 billion) next year.

The purpose of the new tax laws is to cut the corporate tax burden and encourage technology upgrades. Under the system, the cost of buying equipment will be tax-deductible.

The new tax law also includes scrapped policies that exempted imported equipment from VAT, and removed foreign-funded companies from eligibility for tax rebates on domestic equipment purchases to put them on an equal footing with domestic companies.

The VAT rate for small businesses and the self-employed who fall into the small-scale taxpayers’ category was reduced to a universal 3 percent from 6 percent for industrial firms and to 4 percent for commercial companies, while the VAT rate for mineral products rose back to 17 percent from 13 percent.

China’s Health Ministry announced limits for the amount of melamine permitted in dairy products following the scandal of melamine-contaminated milk products that sickened more than 50,000 babies.

New rules limit that infant milk formula should contain no more than 1 part per million of melamine, while products not targeted at babies should contain no more than 2.5 parts per million. According to the standards of The World Health Organization, an adult weighing 50 kilograms can tolerate only 25 milligrams of melamine per day, while a maximum 2.5 milligrams per day is allowed for a baby weighing 5 kilograms. A senior researcher at the National Institute for Nutrition and Food Safety explained that a small amount of melamine was allowed in baby milk products because the chemical is widely used in packaging.

The revised Catalogue of Technologies Prohibited and Restricted from Export was jointly issued by the Ministry of Commerce and the Ministry of Science and Technology and it took effect on 1 November 2008.

The states prohibited and restricted technologies from export on the following grounds:

• to safeguard national security, societal interest or public morality;
• to protect human health or security, the life or health of animals and plants, or the environment;
• to implement certain measures relating to the import or export of gold or silver;
• in accordance with laws and administrative regulations;
• pursuant to the international treaties or agreements to which China is a contracting party or a participating party.

All technologies that do not fall into the prohibited and restricted categories belong to the non-restricted categories and may be freely exported.

Changsha - the capital of Hunan Province is encouraging service outsourcing. Under the new plan, service outsourcing enterprises with headquarters in Changsha will be awarded up to RMB 5 million in subsidies.
Service outsourcing is a company’s non-core services are contracted out to other companies. Changsha targets offshore outsourcing markets including the United States, Europe, Japan, South Korea and Hong Kong while attempt to attract domestic business in the Yangtze River Delta and Pearl River Delta areas. In addition, revision of Some Opinions Concerning the Development of Service Outsourcing is on the agenda.
The policy paper outlines that Changsha will elect and award the city's Top 10 Service Outsourcing Enterprises. Service outsourcing companies that set up headquarters or regional headquarters in Changsha will be awarded financial subsidies on a yearly basis. Those with a registered capital of over RMB100 million may receive RMB 5 million in subsidies.

Foreign-invested advertising enterprises applying to establish branches in China must have their registered capital fully paid up, and with a minimal annual turnover of RMB20 million.

Singapore and China have signed a bilateral Free Trade Agreement (FTA) that will help the two countries cushion the impact of the global financial crisis, the Ministry of Commerce said.

The FTA covers trade in goods, trade in services, rules of origin, trade remedies, sanitary measures, technical barriers to trade, customs procedures, economic cooperation and dispute settlement, among others.

The Ministry of Commerce said that China has agreed to eliminate tariffs on 97.1 percent of goods from Singapore form 2012, while Singapore will scrap taxes on all goods imported from China next year. In addition, the agreement allows China to open wholly owned hospitals in Singapore and also schools and training centres teaching Chinese language and medicine, while investors from Singapore can own up to 70 percent of ownership of individual hospitals in China.

Effective from 1 August 2008, VAT rebate rates for certain textiles and garments (including all items under HS codes 61 and 62) had been raised up from 11% to 13%.

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