One of the keys of this 2016 has been the arrival – at the end – of the Wanda Group business group to our country. The multinational Chinese conglomerate is one of the promoters and owners of the most important private property of today, and through Hoyts and Wanda Cinema, the company headed by Wang Jianlin is positioned as the largest cinemas in the world in the world.
Wanda acquired at the beginning of the previous year (January 2015) 20% of the capital of the Madrid Athletic Club, an investment that has behaved a prominence highlighted in the name of the new Stadium of the Club mattress: Wanda Metropolitano. This news, announced last week by the president of the entity, Enrique Cerezo, complements the acquisition – and subsequent sale for 272 million to Baraka – of the Spain building, another of the iconic pieces of Madrid.
Thus, this practical case shows the current and potential interest that exists between Chinese entrepreneurs and conglomerates – without importing the size of its capital – in our country. Therefore, it is a good time to turn this fact to analyze, in some key aspects, what factors could be taken into account to make the reverse path. Today we give five keys to consider for a possible investment in the Asian giant. Today we talk about China in its most metropolitan facet.
1. Macro data
The population data of China corresponding to 2015 is 1,373,490,000 inhabitants. With an extension of 9,562,911 km 2, it is the third largest country in the world and the largest in Asia. China works with yuan and is the second world economy in GDP matters, presenting a rate of 1.8% growth in the last quarter of this 2016. The annual variation rate of the CPI in November 2016 has been 2.3 %.
Regarding the Euro-Yuan change, so that we get an idea: the last rate (12/15/16) is 7,3499, which converts 100 euros into 734’99 yuan and 100 yuan in 13.61 euros.
With regard to its commercial balance, the Asian country won in 2015, registering a 534,473.2 million euros figure, 5.30% of its GDP, higher than the surplus reached in 2014, of 288,340,2 Millions of euros, that is, 3.63%. This fact is explained by the increase in its exports in 2015, specifically, 16.30% compared to the previous year. Foreign sales represent 20.35% of their GDP, and with a figure of 2,050,427.2 million euros, from Beijing, China stands as the largest world exporter.
2. The will to change is the only constant
China is the country that has economically changed from the world in the last 50 years. Although in the Asian giant it maintains a communist regime, a fact that could well be a certain immobility and not be very favorable for private investment, since the reforms of the year 1978, the country today chaired by Xi Jinping is one of the most weight It has been winning in terms of world economy, being currently one of the players main in that context.
In other words: the times of the peasantry are already a thing of the past. Reference companies and entrepreneurs, such as the aforementioned Wanda, in addition to Taobao, Sinopec -which starred in an agreement with Repsol in 2011- or the CNP (China National Petroleum) show the progress of the country, which It has a growth rate of almost 10% per year since the last 25 years.
The Chinese government, in addition to external movements through commercial visits, agreements and positions in world decision -making bodies, with regard to its internal jurisdiction, seeks to promote a positive impact so that it improves the standard of living of its inhabitants.
Therefore, it has also promoted different measures in regards to the improvement of wages, competitive conditions and benefits on employment, beginning to demand certain security control measures for multinationals that operate in the country, although undeniably, Western standards have not yet been reached.
3. Possibilities for multiplier activities
In general, the optimal commercial structure for business in China is through the WFOE (Wholly Foreign Owned Enterprise Business in China, distinguishing between trading and manufacturing or services. These types of societies differ from the classic Joint Venture Capital (JVC) in which a local partner is not needed. How could it be otherwise, the Holdings business also keep a prominent role.
In tax matters, the way in which the benefits are taxed is through the Corporation Tax (CIT) to 25% in general companies and at 20% for those of reduced dimension. As in our country, there are certain fiscal incentives for technological or innovation activities, in addition to another type of incentives depending on geographical areas. Transactions are subject to VAT (VAT) since 2013, the year in which the Business Tax (BT) was replaced. This fact – which was first implemented in Shangái and subsequently throughout the country – subtracts gravamen in this regard to business operations within the country.
With regard to movements from foreign locations, it is true that there are certain import tariffs and luxury goods, as well as different local taxes and surcharges (local surchards) that usually, usually, They are calculated as a fixed percentage on the VAT or the Bt.
We do not want, in this regard, to subtract importance from certain requirements, demands and difficulties, which as occurs in any foreign country in which it seeks to invest, now, under the pretext of “being favorable for the Chinese people” Exposed by the Government of China, we can glimpse that companies related to health, environment, ICT or energy efficiency, have those to win before those industries based on low labor or intensive costs in energy consumption.
For the matter we are dealing with, we cannot go into excess other social or political issues, but according to that premise of “something more sustainable” progress -the nuance is, we can say that adding to the concept of activity Low value added manufacturing of the early millennium is not a good idea. In commercial terms, this is explained because, or the sector is already cool, or the same conditions of yesteryear are no longer allowed. In ethical terms, it is not necessary to comment why. In any case, it is better like that.
4. An enclave that is key
Apart from the geographical issue, in which China is positioned as the connection between the Middle East and Asia, a territory in which it is the leader in many aspects, among which the commercial section, an attribute historically rooted and that It has evolved according to the country’s economic development.
Only by framing its maritime context -we remember that it is the 4th largest country in the world if its waters are counted -, the constant improvement in these last decades of all its maritime infrastructure -related companies, take note -is observed, being a Factor that impacts and explains, in a way, the strong commercial relations that it maintains with its neighboring countries, such as Hong Kong (73.4% of direct foreign investment figure), Singapore (5.5%), Taiwan (3.5 %), South Korea (3.2%) and Japan (2.5%). In other words: if you want to be in Asia, China connects you.
connection – by other channels outside navigation – that is also possible with the other “coconuts” of the world economy, such as the United States (which keeps with the Chinese an IED figure of 2%), Germany (1 , 2%) and France (almost 1%) in view of its direct presence in the Asian country.
With regard to activity sectors, there is no surprise with the leader, manufacturing (43.2% FDI), which is followed by the one that starred in this entry: the real estate (20.9%), services (services (services (services (services ( 6.2%), trade (5.7%) and transport, storage, telecommunications and postal services (2%).
5. International Legal Framework
Spain has two agreements to regulate investments with China. The first one is a Double imposition agreement, of the year 1992, that regulates tax matter and tax evasion, while http://www.boe.es/buscar /doc.php?id=boe-a-2012-5039 in 2011 another was developed for the special administrative region of Hong Kong.
The foreign investor can have cietac , the commission International Economic and Commercial Arbitration, in addition to the icsid, the International Center for Arrangement of Investment Differences. For its part, China is a signatory of the multilateral investment guarantee agency http://www.miga.org which helps both parties.
Verum, a multidisciplinary office
Although our main focus is on national investments, as you can see, we can contribute value in international consultations. Investing in China, as in other large countries and world economies, requires the development of a thorough business plan, in addition to the analysis of those key aspects that will influence its development. Our experience in business consulting, tax advice and investment management gives us a 360 vision on this type of issues, so the only thing you will have to worry about is to contact us through info@verumasesores.com .
Who knows, maybe you head the next metropolitan of China.
