Global Financial Management

GLOBAL FINANCIAL MANAGEMENT

DOING BUSINESS IN CHINA

Following 20 years of negotiations , China officially joined the WTO on 11 December 2001 . China 's accession bears great significance for the country 's economy and the future of global trade . Many industries that were previously restricted only to domestic enterprises are now open to foreign investors . These industries range from banking telecommunications , distribution , construction , engineering , and insurance to professional services including legal , accounting , and architectural services . Furthermore , restrictions on domestic sales by foreign manufacturing companies will also be lifted . Most of the

prior requirements of foreign exchange balancing , local content and export performance will be eradicated in accordance with a WTO timetable Perhaps the most significant change involves the form of corporate structure . Foreign non-life insurers will be allowed a 51 equity ownership without geographical restrictions two years after WTO accession , and any foreign-invested fund management company or telecommunications company may own up to 49 of the enterprise by 2004 (E Y Report

Three primary sectors operate within the Chinese economy : state-owned collective and private . The state-owned and collective sectors are limited exclusively to domestic businesses . The private sector consists of individually owned Chinese businesses , as well as all foreign business entities . To promote economic development in certain areas the Chinese government has granted special status to 5 Free Economic Zones , and to 14 open coastal cities , as well as to several coastal open economic zones , high-technology development zones and free trade zones (Country Commercial Guide

As a socialist country , the government authorities closely monitor China 's economy . The government determines the country 's investment plans according to a five-year plan , with investment and production targets set annually based on the previous year 's performance . The Ministry of Commerce (MOC ) or its local delegates must approve foreign-investment projects , depending on their size . Once established foreign entities must report regularly to the local government agency in charge . Although all matters , including salary and wage rates , and pricing of products , raw materials and utilities supplies are subject to government oversight , centralized control is gradually being relaxed (Ambler , Witzel

Foreign trade . Foreign trade is subject to controls to protect the domestic market , limit the use of foreign exchange for imports and ensure that exports will not result in insufficiencies in the domestic market . Foreign trade is regulated primarily through import and export licensing and quotas . The MOC is the authority responsible for setting foreign trade policies and issuing import and export licenses . Foreign investment enterprises (FIEs ) that import and export products subject to controls must first obtain a relevant license from the MOC . Commodities subject to license and quota controls are determined by the MOC annually , according to domestic and foreign market conditions government policies and foreign trade laws

The government issues notices of goods that are prohibited from being imported into China and goods that are subject to licensing and quota control . FIEs , when importing capital investments and raw materials for production , must obtain the necessary licenses unless such items are used for export-oriented...