State by State: China and New York State Trade
New York State is increasingly reliant on China as a consumer of services and manufactured goods. In 2014, New York exported approximately US$4 billion to China, making it the state’s sixth largest export market. The top five exports to China are transportation equipment, waste & scrap, machinery (except electrical), primary metal manufacturing and chemicals. Meanwhile, the imports from China, New York’s largest trading partner, reached US$23 billion last year.
Banking and Finance
New York City is a global leader in the banking and finance sectors. China has gradually removed restrictions on investment into its finance industry in recent years, and investors are now allowed to set up wholly foreign-owned banks. Investment into China’s commercial bank is also allowed, provided that each foreign financial institution owns less than 20 percent of the shares. Notably, only foreign banks (rather than other types of foreign companies) may invest in rural commercial banks.
Restrictions on investing in securities and insurance – two other leading industries in New York – have also been eased. In November last year, China officially launched the Shanghai-Hong Kong Stock Connect, aiming to link up the stock exchange of Hong Kong and Shanghai and create a new channel for foreign investors to buy large-cap stocks traded in Shanghai with no pre-approval required. In the latest move to open up its capital markets to foreign investment, China has approved HSBC, Morgan Stanley and 30 other foreign institutions to invest in its US$5.9 trillion domestic bond market.
Related Link IconRELATED: Shanghai-Hong Kong Stock Connect to Launch Nov. 17
One of the “Big Four” professional services firms, Deloitte, headquartered in New York City, has been in business in Shanghai since 1917. Back then, the services sector was largely protected from foreign participation. Along with the launch of the Catalogue for the Guidance of Foreign Investment Industries (2015) , restrictions on commercial service industries such as accounting and auditing, legal consulting and market survey have been significantly lifted. Especially in the accounting and auditing, foreign investors are now encouraged to set up firms in China. However, it is specified that foreign-invested accounting firms are required to have a Chinese national as their main partner.
Apart from this, foreigners are encouraged to provide intellectual property protection services, technology, environmental protection and international economy consulting services. While Chinese legal consulting is still prohibited from foreign investors, foreign firms are allowed to provide information relevant to China’s legal environment.
One of the biggest industries in New York City, the publishing industry, also represents a great investment opportunity in China. The publishing industry in China is valued at US$8 billion and is the second largest in the world after the United States. In 2013, Chinese publishers published 444,000 titles and 8.3 billion books.
That said, the media and publishing industries remain restricted in China. Foreign investors need to obtain a special license for setting up joint ventures and wholly foreign-owned enterprises to engage in the general distribution, wholesale and retail of publications. Foreign media companies are not allowed to engage in internet publishing and news agency operation in China. The New York Times launched a Chinese-language website in 2012 to gain new readership from China’s growing middle class, but the website was subsequently blocked later that year by the Chinese government.
Tax Treaty – U.S. Trade with China
The United States has signed a Double Tax Treaty with China. This can reduce tax burdens under certain circumstances in both trade and any China legal establishment. Please seek professional advice for specific China investment requirements. Treaty details can be found here.
Further Support from Dezan Shira & Associates
Dezan Shira & Associates can service New York-based companies that are looking to further develop their operation in China. The firm can help companies establish a direct office in the country and can guide them through the affiliated tax, legal and HR issues that come with doing so.