The Surge in Business Between Latin America and China- And Why It Matters
Initiatives implemented by China have boosted China-Latin America trade relations greatly over the past decade. And the forecast for the bilateral future in trade and development is looking bright.
Over the past two decades, China and Latin America have been seeing a steady increase in trade and development. Between 2000 and 2020, China-LatAm trade grew 26-fold from $12 billion to $315 billion. On the contrary, the United States’ domination as the largest trade partner with Latin America has taken the opposite route, steadily declining and slowly losing its ongoing trade war with China. How did this happen? Several reasons- the root of which begins with China’s geopolitical agenda.
What are China’s Origins and Interests in the Region?
China’s interests arguably began with diplomatic intentions, following the “South-South Cooperation” and 2001 Latin American tour and 2013 presidency of Chinese President Xi Jinping. The cooperation aimed to create a framework focusing on aid, investment, and trade, using “soft power” to help establish Beijing as a “political goodwill” and eligible political partner over the United States. Why Latin America? The great 2008 financial crisis was continuing to dampen the Americas region. President Jinping successfully signed on several diplomatic partnerships with many Latin American countries, finding allies in Argentina, Brazil, Chile, Ecuador, Mexico, Peru, and Venezuela. Soon after, China became a major source of foreign direct investment and lending in a variety of sectors: energy, infrastructure, space, military, food and agriculture, medicine, and technology. This began the $1 trillion transcontinental 2013 Belt and Road Initiative (BRI).
With the creation of the BRI, China invested heavily in the Latin American space sect, also going on to form a defense strategy with Latin America to gain stronger military ties, bolstering the trade of weapons, intellect, transportation, and other equipment. Because China’s independent financial growth skyrocketed during this period (2000-present) as well, that contributed to even more commodities flooding into Latin America. China has investments in energy and raw materials, such as building refineries and processing plants, predominantly for mining lithium. Renewable energy projects such as solar and wind facilities contribute to both energy and infrastructure efforts, in addition to construction projects such as building highways and airports.
China-Latin American Importance During COVID-19
A significant sect of the BRI was China’s contribution to Latin America’s health sect during the Covid-19 pandemic. This sect of contribution reinforced Beijing’s diplomatic and alliance efforts, distributing an extremely large array of medical equipment, billions in loans, and localized vaccine production facilities. Prior to its enactment, Latin America turned to China for medical assistance in 2018. This organized the meeting of the Community of Latin American and Caribbean States (CELAC)-China Forum in Chile from 2019-2021, coincidentally the same time Covid-19 emerged. As of June 2022, a dozen Latin American countries signed vaccine contracts with Beijing, some even including technology transfers and research cooperation with Sinovac, Chinese vaccine developer. More than 400 million Covid-19 vaccine doses had been donated to Latin America, making up about 70% of vaccine coverage in Chile, Argentina, Brazil, Mexico, and Peru.
China-Latin America Business Will Continue to be Successful- Here’s Why
According to the current trajectory projected by the World Economic Forum, China-LatAm trade is expected to exceed $700 billion by 2035, and could total to 25% of Latin America’s total trade (the U.S. currently holds a declining 28% total trade contribution). Note that these numbers are discrepant among the different Latin American-Caribbean countries due to varying political affiliations, however countries such as Brazil, Chile, and Peru may have 40% of their total trade made up by China. Contributing factors to bilateral growth are China’s drive to beat the United States in the trade war, rapid innovation, 4IR technologies, and China’s expansion to other parts of the world which creates a resourceful connection for its Latin American diplomatic allies. There are several other significant benefits doing business under the umbrella of the China-LatAm bilateral force:
- Market Access: Latin America gains access to one of the largest consumer markets in the world. China’s population and other allies offers immense potential for Latin American businesses to expand their reach and tap into new customer segments.
- Trade Opportunities: China’s robust manufacturing sector provides Latin American countries with opportunities for exporting raw materials, commodities, and agricultural products. This trade relationship can foster economic growth and diversify export markets for Latin American nations.
- Infrastructure Development: Chinese investments in Latin America’s infrastructure projects can fuel development and improve connectivity within the region. This can enhance transportation networks, power generation, telecommunications, and other critical areas, boosting economic productivity.
- Technology and Innovation: Trade and Development with China can facilitate knowledge exchange, technology transfer, and innovation. Chinese expertise in areas like telecommunications, e-commerce, renewable energy, and digital technologies can contribute to Latin America’s technological advancements and competitiveness.
- Investment and Financing: China’s financial resources and investment capabilities can provide Latin American countries with access to capital for infrastructure projects, industrial development, and economic diversification. Chinese investments can contribute to job creation and economic stability in the region.
- Cultural Exchange: Business partnerships between Latin America and China promote cultural understanding, exchange, and human-to-human connections. Such interactions can foster cross-cultural learning, strengthen diplomatic ties, and create a platform for future collaborations in various sectors.
However, it is essential for both regions to carefully consider potential challenges, such as differing business practices, cultural differences, and ensuring equitable partnerships that benefit all stakeholders involved. Additionally, Agriculture and Mining are among the industries most affected by China’s growth, so being aware of which industries are being shifted around will give Latin American businesses an advantageous scope of their competitive and financial outlook in terms of demand and supply.
Resources
Ellis, Dr. R. Evan. “Viewpoint Why Chinas Advance in Latin America Matters.” Www.nationaldefensemagazine.org, 27 Jan. 2021, www.nationaldefensemagazine.org/articles/2021/1/27/viewpoint-why-chinas-advance-in-latin-america-matters.
Kimer, James. “China-LAC Trade: Four Scenarios in 2035.” Atlantic Council, 12 May 2021, www.atlanticcouncil.org/in-depth-research-reports/china-lac-trade-four-scenarios-in-2035/#China-LAC-Today. Accessed 18 July 2023.
Nugent, Ciara, and Charlie Campbell. “The U.S. And China Are Battling for Influence in Latin America, and the Pandemic Has Raised the Stakes.” Time Magazine, 20 Dec. 2020, time.com/5936037/us-china-latin-america-influence/.
Roy, Diana. “China’s Growing Influence in Latin America.” Council on Foreign Relations, 15 June 2023, www.cfr.org/backgrounder/china-influence-latin-america-argentina-brazil-venezuela-security-energy-bri#chapter-title-0-4.
Sanborn, Cynthia. Latin America and China in Times of COVID-19. Oct. 2020.
Zhang, Pepe, and Tatiana Lacerda Prazeres. “China’s Trade with Latin America Is Bound to Keep Growing. Here’s Why That Matters.” World Economic Forum, 17 June 2021, www.weforum.org/agenda/2021/06/china-trade-latin-america-caribbean/.
Get ahead of your competitors by hosting your business’s website within China!
In order to host within China you’ll need to obtaining an Internet Content Provider License (ICP). Hosting your website in China has many benefits such as improved SEO ranking, faster load times and better accessibility for Chinese citizens due to bypassing the Chinese internet firewall.
Applications for an ICP license can be a long and complex process but here at Incorp China we work around the clock with our expertise team to get your application through in no time.
Things to remember before applying for an ICP license
Before beginning the application process, you must understand the difference between an ICP Filing and an ICP license.
- ICP Filing (for non-commercial websites): Companies, including JVs (Joint Ventures), 100% foreign-owned entities, and 100% Chinese-owned companies, are eligible to make an ICP Filing. This is only for websites offering informational content, and for websites that do not intend to sell products or conduct business.
- ICP license (for commercial websites): In addition to Chinese-owned business entities with a Chinese business license, JVs with a foreign investment of less than 50% can apply for an ICP license. The purpose is to exclude foreign companies that do not have Chinese joint ownership.
Chinese nationals are eligible to apply for an individual ICP filing. However, non-Chinese individuals must be physically present in China for a sufficient period to satisfy the basic registration requirements. These individuals may also need to fulfill the following criteria:
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- In many cases, having an Alipay account that connects to a Chinese bank account. Depending on the province, there could be different rules, and MIIT may call the applicant to verify the reason for the ICP license application.
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If all documents are in order, the entire ICP license application process takes between 20 days to a month. However, if you wish to apply for the ICP Commercial license, the process usually takes 60-90 days.
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Successful Authentication of Documents For Our Latest Client
Great news! Despite call the delays due to covid, we have successfully completed the notarization and authentication of documents for our US client in the e-logistics space. Would like to thank Robyn Evans our partner at CIBT visas for an excellent job during challenging times. Also proud of our Incorp China Shenzhen team members, Sharon Li, Matt Robb, Susan Dong, and Crystal Yang. Keep up the good work!
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A common topic among Western Businesses in China is shall I stay or shall I go?
At Incorpchina, we have been serving clients since 1983. We take a long term view of our business in China, and are here for you for the long haul. We are unwavering in our support of our clients, and now more than ever, we are here for you.
Today we have been on calls with our colleagues and business associates in Canada, USA, Australia and United Kingdom. In order to do intelligent contingency planning, companies need accurate information, not just knee jerk reactions. We are in constant contact with our teams Chinawide, and also with Trade Attaches from US and European Consulates.
We help companies based in China with trouble shooting and provide up to date information on the real situation on the ground within China.We believe that more communication, not less is critical during difficult times. The good news is that Shanghai is slowly opening up again. Other regions in China are open and functional. Our Shenzhen Office is busy with new WOFE set ups, as well as shut downs for clients. The shut downs were decided after carefull analysis and discussion.
Your company may be deciding “shall I stay or shall I go?” Let the experts help you in formulating your decision and be here to help you implement those decisions.
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What is China’s Entrepreneur Visa?
What type of Visa do I need to setup my business in China? What type of visa does someone need if they had just set up their company, and planning to stay in China for a long time to complete all the follow-up tasks, but cannot yet be employed by their own business so they can't get a working permit? How could this person legally stay in China during this period? They could apply for something called China Entrepreneur Visa. This visa is designated as a more flexible way to legally stay in China to make sure things are going in the right direction. What is an Entrepreneur Visa? The entrepreneur visa, also known as the Private Residence Permit entrepreneurship visa, was piloted by the Chinese government in 2018. The visa is aiming to attract expert and talented entrepreneurs to start their businesses in China. Foreigners are granted the access to legally stay in China to conduct business activities, e.g., setting up the office, conducting industry research, and other required jobs to set up a WFOE. Compared to the working permit, which could only be applied with sponsorship from an existing company, an entrepreneur visa allows foreigners to enter and stay in China before their company being set up. Once the company is being established, it could be used as a visa sponsor to apply for a working permit. Who could apply for the visa? A Chinese university graduate who is currently enrolled in one of Shanghai’s institutes of higher education and who has the stated intention to engage in part-time entrepreneurship applies with a business or innovation plan. This would usually require the student to have certain skills and have a plan related to government-designated science and technology parks. A recent graduate (within 2 years) from top universities in the world who have made outstanding achievements in innovation and entrepreneurship. An investor applies with an innovation plan or a business plan and shows their intent to invest in the plan. How to apply for an entrepreneur visa? The process of applying for an entrepreneur visa is similar to one of applying for other visas. Such as providing university diploma and passport information, undergoing a health check… Besides the essential documents, the applicant must also submit: The entrepreneur visa would definitely be a great fit for people who wished to start a company in China. Compared to the other types of working visas, an entrepreneur visa would be less costly and more viable. If you need more information about the visa or any related to registering a business in China, call 561-729-6508 or email robert@incorpchina.com for a free consultation.
Shenzhen Qianhai Area Extends the 15% CIT Rate Until the End of 2025 – V2
Corporate income tax (CIT) is a kind of income tax levied on the income from production and operation and other income gained by companies within the territory of China.
According to the new Income Tax Law of the People’s Republic of China, published in 2008, the general corporate income tax rate is 25%. The preferential corporate income tax policy of Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone in Shenzhen will be extended for another five years, and the corporate income tax will be levied at a reduced rate of 15%. Only qualified enterprises within the area can enjoy the preferential corporate income tax policy.
Shenzhen Qianhai Area Extends the 15% CIT Rate Until the End of 2025
Corporate income tax (CIT) is a kind of income tax levied on the income from production and operation and other income gained by companies within the territory of China.
According to the new Income Tax Law of the People’s Republic of China, published in 2008, the general corporate income tax rate is 25%. The preferential corporate income tax policy of Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone in Shenzhen will be extended for another five years, and the corporate income tax will be levied at a reduced rate of 15%. Only qualified enterprises within the area can enjoy the preferential corporate income tax policy.
Everything You Need to Know About Chinese Accounting Standards
Although the accounting regulation in China is based on the Generally Accepted Accounting Principles (GAAP), which is a system that shares 90% similarities to the IFRS (International Financial Reporting Standard), there could still be lots of differences and hard to handle. One of them would be the “Fapiao” system in China. Fapiao is basically the receipt that is handed to customers upon purchasing a product or service and is created by the government to show proof of tax payment. Companies are required to purchase the software and devices that are authorized to print fapiao to operate businesses.
China’s Fapiao Invoice System
Compared to invoice in other countries, China’s invoice (发票 or fapiao in Chinese) is different as it fulfills a different role in the Chinese invoice system. For foreign companies that want to register and start a business in China, they have to get familiar with fapiao to engage in business activities in China.
What is a Fapiao(发票)?
Update on the COVID-19 Situation in China
How has the pandemic impacted the Chinese economy?
The pandemic brought a negative impact to the Chinese economy, especially on the traditional service industry and some labor-intensive manufacturing industries. However, China’s outstanding disease prevention measures exceeded the international community’s expectations and China has recovered continuously since March 2020. The economic impact on the Chinese market is short-term and temporary. Nowadays, China’s economy is pushing the world economy.
Figures from the General Administration of Customs show that China’s exports and imports both grew by more than 25% from January to May 2021, compared with the same period last year. Even as much of the rest of the world continues to suffer from the epidemic, China’s orders for foreign trade products continue to grow. China continues to export goods abroad, and also introduces a large number of raw materials and products that meet the needs of the Chinese market. Imports of iron ore, oil, and soybeans were no less than in previous years, while imports of mechanical and electrical goods increased 21.8 percent. The demand power of the Chinese market is growing, which will help other economies recover and give a strong boost to the global economy.