Improving the environment for domestic and overseas businesses operating in the Mainland was one of the key points of the Two Sessions meetings in Beijing last month. These developments are welcome news for Hong Kong companies, and also suggest that we can anticipate the nation’s opening up process to continue in the future.
The discussions at the annual Two Sessions act as guides to the future development of the whole country, and China-watchers around the world play close attention. In particular, the Government Work Report delivered by Premier Li Keqiang acts as a blueprint for the upcoming year.
Amid slowing growth and with the trade war rumbling on, targeted measures were the watchword this year. Li noted that the Mainland authorities had decided not to adopt a “deluge of strong stimulus policies” in the face of these pressures. Instead, he announced a package of tax cuts for businesses worth a total of almost 2 trillion RMB.
The measures are targeted towards SMEs, but will deliver cost savings for many businesses operating in the Mainland. Manufacturing companies in particular will welcome the significant cut in VAT from 16% to 13%.
And for foreign companies, including those based in Hong Kong, there was good news with Li promising to further relax controls over market access. Concrete details in this area soon followed with the passing of the Foreign Investment Law on 15 March.
Forced technology transfer has long been one of the biggest complaints of overseas companies, and this practice has been banned by the new law. The law also introduces a negative list for the first time, which should open the country up to more sectors.
One complaint we have heard is that the new law is quite general, and more specific measures will be welcome in due course. However, it sends a strong message that the Mainland authorities have been paying attention to the concerns of foreign investors. These various measures also demonstrate that the reform process launched 40 years ago is continuing to develop.
For Hong Kong, the Greater Bay Area (GBA) is perhaps the most important of the Central Government initiatives. While the business community welcomes the many opportunities the GBA is creating, sticking points include the different tax and customs systems, and the barriers to the free flow of people, goods and capital.
In his Work Report, Li said that the GBA was aimed at “achieving compatibility between each region’s rules, and facilitating flows of factors of production and the movement of people.”
We hope that this means we will see some progress in these areas, and look forward to further policy guidance in the months to come.