Sincere wishes from the Scandic Family!
We appreciate that you have been supporting us all the time! Thank you very much!
We wish you all the best and a happy 2019!
Picture: Each citizen can apply for tax deductions with a downloaded phone app. For foreigners without a Chinese ID card number it requires a trip to the tax bureau. Per Linden, CEO of Scandic Sourcing was entitled for a CNY 5000 deduction per month due to 4 children and 2 elderly parents in Sweden (!).
For us that have worked long in China a changing regulatory environment is one of those things that we learn to live with and thrive on. This year there are, as usual, several quite substantial changes. We will point out just a few which we think will have far reaching consequences.
The economy in China goes through a transformation stage of lower growth and onset of maturity, and is at the same time under stress from increasing costs and the trade war with USA affecting many manufacturing companies.
Will Social Insurance premiums kill manufacturing?
The rule that will have the biggest impact on production in China is the tightening of Social insurance payments. From January 1, social insurance contributions will be paid to China’s tax bureau, instead of the HR bureau. The rule has always been that all compensations should both be taxed and form the basis of social insurance contribution, however, it has been a common practice due to lack of coordination between the agencies, to use different base for income tax and social insurance, by having a low basic salary on which social insurance was paid and avoid to pay on allowances and overtime. If implemented fully this new law will have a severe impact in the manufacturing industry in China where migrant workers often refuse to contribute to social insurance, as the system is not nationwide and they will not enjoy all the benefits. Scandic Sourcing help clients monitor their Chinese subcontractors for social compliance as part of the Scandic Supplier code of conduct Audit program and have audited hundreds of factories in China. “We often find that companies pay social insurance for their local resident workers but at the wrong level and for migrant workers it is fairly common that they don’t pay at all. There will be a substantial cost increase in labor intensive manufacturing companies”, says Fredrik Sundstrom, Operation manager at Scandic Sourcing in Shanghai. There are no news yet on when a unified national social insurance system will be introduced.
Will there be a lack of workers
To finance the social insurance system start to look like a tough challenges for China with an aging population. Now the awareness of that the population will peak in a few years and then rapidly decline start to worry. By 2050 it is also estimated that 30% of the population will be over 60 and the active workforce shrink with 300 million people from its peak. The one child policy was abolished in 2015, to be replaced with a recommendation, but still a restriction to have two children, and lately there has been discussions to abolish the system completely and to encourage 3 children. This is not so easy with high cost of living and especially real estate prices in the cities. Young people are focusing on their careers and having children later. Newly married people in some parts of the country now have to pay a deposit of about CNY 20,000 when they get married, which they can get back after they produce a baby (1 CNY= 6.9 USD)
Buildings are being repainted, flowers are planted, and traffic rules are being enforced along with the fines sharply increased prior of the China International Import Fair or CIIE as its popular acronym. Shanghai’s party secretary has urged its citizens and administrators to go all out in the effort of hosting the international expo.
“This reminds me of the preparation before the world fair in Shanghai 2010”, says Per Linden businessman in Shanghai since 15 years and founder of Scandic Sourcing.
The exhibition will be opened by President Xi Jing Ping himself, who has taken the initiative to organize the event, welcoming heads of states, dignitaries and business leaders from around the world. Chinese companies have been commanded to show up and has in many cases got assigned purchasing budgets.
The event has been labelled as Chinas effort to show the world and its own people that it is serious of raising imports. Behind this is the huge trade surplus of 2.87 trillion Yuan and Chinas long term plan to transform from a production and export oriented economy to an innovation and consumption led society.
Last year with exports and imports respectively registered at 15.33 trillion Yuan and 12.46 trillion Yuan, growing by 10.8 percent and 18.7 percent from the previous year, the numbers are already pointing in the right direction.
The expo will be held in Shanghai on November 5-10. There will be about 80 country pavilions, more than 2800 companies on 270,000 m2 of exhibition space used at the New National Convention Center in the Hong Qiao area in Shanghai.
The Area consists of two sections, trade in goods and services. The section of trade in goods includes 6 exhibition areas: High-end Intelligent Equipment; Consumer Electronics & Appliances; Automobile; Apparel, Accessories & Consumer Goods; Food & Agricultural Products; Medical Equipment & Medical Care Products with a total area of 180,000 m2 . The section of trade in services comprises Tourism, Emerging Technologies, Culture & Education, Creative Design and Service Outsourcing with a total area of 30,000 m2.
“It will be interesting to see the result of this from the top approach to increase import and how much can be achieved in only five days, but as the old Chinese proverb say a journey of a thousand miles start with a single step and this is a very distinctive and powerful first step” Says Per Linden.
Scandic Procurement Solution
Scandic Sourcing recently rolled out a new Procurement Service on a subscription basis. The benefits are many if you are regularly procuring and exporting parts out of China and wants to assure getting the right pricing and a stable and safe supply chain. For a monthly sum, your company gets a base package of services such as price requests, regular communication with your suppliers, order placement handling, export documentation controls, and and evaluation of your supplier base. Read more about the Scandic Procurement Solution.