China
ChinaCountry SnapshotSize of the country 9,561,000 sq. kms.Population1,330 million (Jul ‘08 est.)CapitalBeijingCurrencyRenminbi / Yuan (RMB)1 USD = RMB (Average) 6.92 (2008)Main macroeconomic indicators 1 :• GDP in PPP: USD 7,238 billion (2007 est.)• GDP per capita in PPP: USD 5,480 (2007 est.)• CPI: 6.7 percent (2007 est.)• Unemployment rate: 9.2 percent (2007 est.)• FDI stock per capita: USD 326 (2007 est.)Sources: www.eiu.com, www.cia.gov, Gocurrency.comPolitical Structure 1Chinaisasocialistrepublicruledbyasingle-party,theChineseCommunistParty(CCP).Thereare22provinces,andfourmunicipalitiesdirectlyundercentralgovernmentcontroland5autonomousregions.Theseelectlocalpeople'scongresses,andareadministeredbypeople'sgovernments.Investorclimatevariesdependingonthepoliciesofthelocalgovernment,whichusuallyoffersitsownsetoffiscalsubsidiesandtaxrefunds.Business and Investment ClimateForeign Direct Investment (FDI): FDIintoChinatouchedUSD82.66billionin2007 1 ,anincreaseof13.8percentover2006.Grossfixedinvestmentgrowthislikelytobelowerin2008-12,partlyowingtohigherrealinterestrates 1GDP growth: China'sGDPgrew11.9percentin2007;howeveraccordingtoEIUrealGDPgrowthmaymoderateto9.8percentin2008and8percentin2009,largelyowingtotheweakeroutlookfornetexports 1Inflation: China’sinflationisdeceleratingafterreachingan11-yearhighof8.8percentinFebruary2008 1 .EIUexpectsconsumerpriceinflationtoaverage6.7percentin2008.Averageinflationislikelytomoderateto3.8percentin2009-10,owingtolowfoodpriceinflation 1 .2008 (Rating/outlook)EIU’s Sovereign Risk RatingStandard & Poor’s ForeignCurrency Risk RatingEase of Doing Business Rank(2009)Rigidity of Employment Index(2009)BBB /StableA+/Stable/A-1+8327Sources: www.eiu.com, World Bank, Standard & Poor’sTianjinEmerging DestinationEstablished DestinationBeijingDalianXi’an JinanHefei NanjingChengduShanghaiWuhan HangzhouChangshaShenzhenIT-BPO Scenario in the countryItisestimatedthatthereareatleast8,000-10,000firms 2 operatingintheITsoftwareandservicessectorinChina.China’soffshoreoutsourcingrevenuegrewmorethan40percentin2007toreachUSD2.3billion 3 .TodevelopChina’scapabilitiesasanoutsourcingbaseforITsoftwareandservices,theMinistryofCommercehasimplementedthe‘Thousand-Hundred-TenProject’,withatotalfundinganticipatedtobeinexcessofUSD1billion 4 .Theprogramhasaheavyemphasisonprovidingtraininganddevelopmenttoitspersonnelforemploymentinservicesoutsourcingjobs.TheMinistryhaslaunchedaprojecttodevelop13citiesforservicesoutsourcingacrossthecountry.Thesecitiesare:Shanghai,Dalian,Xi’an,Shenzhen,Chengdu,Beijing,Tianjin,Nanjing,Wuhan,Jinan,Hangzhou,HefeiandChangsha.Government IncentivesTheChinesegovernmentprovidesinvestmentincentivesintheformoftaxbenefits,includingvalueaddedtax,customsandincometaxbenefits.Inthepast,foreign-investedenterprisesbenefitedfrompreferentialtaxratesandcouldobtainarebateof40percentontaxespaidonincomeifprofitswerereinvestedinChinafor5years 5 .Whereprofitsarereinvestedinhightechnologyorexport-orientedenterprises,aforeigninvestorcouldreceiveafulltaxrebate.However,inMarch2007,theNationalPeople'sCongresspassedanewCorporateIncomeTaxLaw,whicheliminatedmanyofthetaxadvantagesthathadbeenenjoyedbyforeigninvestors 5 .1 www.eiu.com, various pages, December 2008 4 www.chnsourcing.com/download/qbswp/China%20Outsource%20Strategy%201000%202 NASSCOM December 2008 100%2010%20Final.pdf, Temasys International Strategy Paper, 20073 China Software Industry Association and Chinasourcing Alliance Whitepaper, June 2008 5 US Department of State, 2008©2009<strong>KPMG</strong>InternationalisaSwisscooperative.Memberfirmsofthe<strong>KPMG</strong>networkofindependentfirmsareaffiliatedwith<strong>KPMG</strong>International.<strong>KPMG</strong>Internationalprovidesnoclientservices.Nomemberfirmhasanyauthoritytoobligateorbind<strong>KPMG</strong>Internationaloranyothermemberfirmvis-à-visthirdparties,nordoes<strong>KPMG</strong>Internationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.<strong>KPMG</strong>andthe<strong>KPMG</strong>logoareregisteredtrademarksof<strong>KPMG</strong>International.52