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  1. #31
    Senior Member Valuegrowth's Avatar
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    Default

    http://www.dw.com/en/will-chinas-hig...sis/a-42976238

    Will China's high debt levels spark a financial crisis?

    https://www.cnbc.com/2018/03/12/bank-of-international-settlements-countries-at-risk-of-banking-crisis.html\

    China is at risk of a banking crisis, the Bank of International Settlements has found

  2. #32
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    Default Chinese Company Operating Rules

    Quote Originally Posted by robbo24 View Post
    So large institutions are banned from selling, "malicious shorters" are banned from selling, lending interest rates are cut, the omnipotent Chinese government is demanding their institutions buy stocks and they can't sell... These things don't make a difference overnight, give it a week or two and the China bubble may very well be back stronger than ever
    I think most here realise that China does not follow the 'free market rules' that some see as de riguer in investment markets. With so many NZ companies seeing their future fortunes tied up there, I think it is timely to review some of the 'investment rules' in what seems destined to become the world's largest economy.

    1/ The EIT law or Chinese Enterprise Income Tax Act sets income tax at 25% for Chinese companies. In addition earnings repatriated outside of China are subject to an additional 10% tax. Dividends are subject to a 20% withholding tax if shareholders are individuals. Dividends can only be paid from retained earnings.

    2/ An enterprise in China is required to set aside at least 10% of its after tax profits each year (after making up previous years accumulated losses). This money is to be set aside for certain reserve funds until it reaches a total of 50% of the company's registered capital.

    3/ Companies operating in China are required to participate in various government sponsored employee development plans. These include social insurance, housing funds and other welfare orientated payments. These funds are taken via a percentage of salaries bonuses and allowances. However these requirements have not been implemented consistently across the country. This means there is potential for any company operating in China to be required to pay 'late fees' and fines for underpayment.

    4/ All payments from China outside the country must be approved by both the 'People's Bank of China' (PBOC) and the 'State Administration of Foreign Exchange' (SAFE). Chinese exchange control regulations may restrict the ability to convert RMB to a foreign currency.

    5/ Loans to Chinese companies have statutory limits and must be registered to with a local counterpart of SAFE. Foreign sourced loan money can only be used as directed by the government.

    6/ The currency for doing business within China is the RMB (pr. Remimbee). The RMB is not free floating and exchange rates are set by the government. There is little opportunity for hedging the RMB within China, even to widely traded currencies like the USD.

    7/ The 'Big Four' accounting firms have a presence in China. But their ability to audit businesses operating within China is restricted. Permission to audit is required from the Chinese government and in the past there have been restrictions that have lead to questionable audits. The big four firms are currently operating under a moratorium that expires in February 2019. This stems from a case taken buy the USA based Securities and Exchange Commission (SEC) and an associated out of court settlement agreement that commenced in February 2015. If the big four firms do not follow suggested SEC procedures, then the SEC may impose penalties including suspensions, or commence new expedited administrative proceedings against any non compliant firm, or all four firms. Audits for US companies that do business in China must be in compliance with the 'US Exchange Act.' If compliance fails for US listed company reliant on that big four auditor, then then that company could be delisted from the New York Stock Exchange (NYSE).

    8/ The Chinese Legal System is a civil law based system based on written statements. Chinese administrative and court authorities have significant discretion in interpreting and implementing statutory and commercial contractual terms. The Chinese legal system is subject to government policy (i.e. is not independent of the law makers) and internal rules. These may have retroactive effect and may not be published in a timely manner. China does not have a treaty with the USA providing reciprocal recognition of court judgements.

    I have summarized to above information from the annual report of a US based company I hold shares in that operates largely in China.

    SNOOPY
    Last edited by Snoopy; 01-01-2019 at 07:26 AM.
    Management top tip: Share the responsibility. Change your name by deed-poll to "Someone Else"

  3. #33
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    "China’s economic growth slowed to 6.5% in the third quarter of the year, marking the slowest year-on-year expansion since the first quarter of 2009"
    'Slowing Growth' and 'Trade War' Define China's Economy and Finance in 2018Caixin Global·6 hours ago

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