From Chongqing Association of Enterprises with Foreign Investment
The recently-released Chongqing Foreign Investment Environment Evaluation Report 2018 includes a fundamental questionnaire, mainly covering the following five aspects: fundamental environment, market, policies and government services, living environment as well as corporate development. And the overall score of the environment is relatively high.
►Power supply
93% of respondents were satisfied with the power supply in Chongqing, and considered that Chongqing's power supply is adequate and has a moderate price. 41% of respondents chose “Excellent” (i.e., 10 score).
►Gas supply
93% of respondents were satisfied with the gas supply in Chongqing, and considered that Chongqing’s gas supply is adequate and has a moderate price. 43% of respondents chose “Excellent” (i.e., 10 score).
►Water supply
95% of respondents were satisfied with the water supply in Chongqing, and considered that Chongqing's water supply is adequate and has a moderate price. 43% of respondents chose “Excellent” (i.e., 10 score).
►In conclusion, the overall score of the energy environment is relatively high.
Few respondents indicated that:
The price of water, electricity and gas were relatively expensive (especially for industrial electricity consumption), and the price of laying a natural gas pipeline was much higher.
Temporary power failure and gas stops occurred occasionally in some non-core areas of Chongqing.
►Recommendations by EY
It’s suggested to improve the linkage mechanism of coal and electricity prices, to implement the policy on the adjustment of the electricity price for industrial and commercial sectors, and to reduce the cost of electricity consumption for enterprises. The government needs to implement and improve the dynamic adjustment mechanism of natural gas purchase price and terminal sales price, and to appropriately adjust the sales price of pipeline natural gas to industrial and commercial users by taking the fluctuation of upstream air sourcing price into consideration.
►Land supply
90% of respondents were satisfied with the land supply in Chongqing, and considered that Chongqing's land supply is
adequate and has a moderate price. 34% of respondents chose “Excellent” (i.e., 10 score).
►Plant supply
91% of respondents were satisfied with the plant supply in Chongqing, and considered that Chongqing's plant supply is
adequate and has a moderate price. 35% of respondents chose “Excellent” (i.e., 10 score).
►Office supply
91% of respondents were satisfied with the office supply in Chongqing, and considered that Chongqing's office supply is adequate and has a moderate price. 36% of respondents chose “Excellent” (i.e., 10 score).
►In conclusion, the overall score of the land environment is relatively high.
Few respondents indicated that:
The plant prices and plant rents are relatively expensive in some areas, and they grew rapidly.
The corresponding infrastructure and management services need to be improved.
►Recommendations by EY
To innovate the land supply mechanism and promote the optimal allocation of land resources, to achieve a virtuous cycle of land resource utilization. It’s also suggested to revitalize the stock of land, increase the supply of land and improve the re-use of inefficient industrial land in order to alleviate the contradiction between land supply and demand and reduce the cost of industrial land for companies.
To encourage and support the foreign investment to involve into the planning, consulting, investment and management of property such as industrial park facility and commercial office buildings, in order to improve the quality of the management services.
►Economic development level of Chongqing
92% of the respondents were satisfied with the economic development level of Chongqing. 19% of respondents chose
“Excellent” (i.e., 10 score).
►Market consumption capacity of Chongqing
89% of the respondents were satisfied with the market consumption capacity of Chongqing. 18% of respondents chose
“Excellent” (i.e., 10 score).
►Freedom degree of market competition of Chongqing
88% of the respondents were satisfied with the freedom degree of market competition of Chongqing. 19% of respondents chose “Excellent” (i.e., 10 score).
►Market radiating capacity of Chongqing for surrounding provinces and cities
88% of the respondents were satisfied with the market radiating capacity of Chongqing for surrounding provinces and cities. 19% of respondents chose “Excellent” (i.e., 10 score).
►Economic extroversion of Chongqing
88% of the respondents were satisfied with the economic extroversion of Chongqing. 19% of respondents chose “Excellent” (i.e., 10 score).
►In conclusion, the overall score of economic environment is relatively high, and most of the respondents considered that the economic environment in 2018 became better than that in 2017.
Few respondents indicated that compared with some coastal developed areas, Chongqing has a lower degree of openness, a higher external transportation cost and a lower industrial cluster effects. Some respondents felt that the local economy is affected by the recession of global economic environment and the overall market consumption is declining.
►Recommendations by EY
To encourage the innovation trial in Chongqing Pilot Free Trade Zone, deeply involve into the national initiative of “One Belt and One Road”, broaden the range of the inland area’s opening highland construction, implement China- Singapore (Chongqing) Demonstration Initiative on Strategic Connectivity with high standards, strengthen the construction of large channel, large platform and large custom clearance and consistently promote the foreign capital utilization level which is regarded as a significant measure of opening up.
To expand the open areas, optimize the industrial structure, innovate the management system, improve the service quality, enhance the IP protection, improve the communication channel between enterprise and government and build a better business environment.
►Completeness degree of financial services
90% of respondents were satisfied with the completeness degree of financial services of Chongqing. 20% of respondents chose “Excellent” (i.e., 10 score).
►Financing convenience
86% of respondents were satisfied with the financing convenience of Chongqing. 18% of respondents chose “Excellent” (i.e., 10 score).
►Financing cost
86% of respondents were satisfied with the financing cost of Chongqing. 18% of respondents chose “Excellent” (i.e., 10 score).
►In conclusion, the overall score of financial environment is relatively high.
In March 2018, the Chongqing Municipal People's Government issued Yufubanfa [2018] No. 25 which provides policy support to promote the economic and financial development of enterprises, to reduce corporate financing costs, to regulate financial service charges, and to further reduce the cost of corporate mortgage restructuring. The above policies also show Chongqing's positive attitude towards promoting supply-side structural reforms, reducing the cost of real economy enterprises effectively, and optimizing the development environment of enterprises.
Some respondents indicated that the overall level of financial service in Chongqing is relatively lower than that in China’s coastal developed areas, e.g. more complicated financial formalities and more time-consuming. Few indicated that it is difficult to conduct financing, especially for small and medium-sized enterprises, for example, banks set lots of restrictions for unsecured loans or long-term loans, which increased the cost of financing.
►Recommendations by EY
To guide the banking institutions to optimize the credit orientation by increasing the credit quota and providing interest discount. To increase the credit support for key industries and projects based on the principles of risk control and business sustainability. Through the improvement of the financial system, the transaction costs of financial institutions will be reduced and their operational efficiency will be enhanced.
To encourage the banking institutions to carry out business innovation, set reasonable loan term, innovate the repayment methods under the prerequisite of no systemic risk, in order to reduce the repayment pressure of small and micro enterprises and decrease their turnover cost of capital.
To treat equally to private economy, formulate and implement a unified credit policy.
►Concentration and completeness of the matching industries of Chongqing
90% of the respondents were satisfied with concentration and completeness of the matching industries of Chongqing.
20% of respondents chose “Excellent” (i.e., 10 score).
►Enterprise management quality level of the matching industries of Chongqing
89% of the respondents were satisfied with enterprise management quality level of the matching industries of Chongqing.
20% of respondents chose “Excellent” (i.e., 10 score).
►In conclusion, the overall score of the matching industry environment is relatively high.
Few respondents indicated that the degree of industrial concentration is relatively low and the city lacks supporting industries in some areas of Chongqing. Some respondents complained that their original industry has decayed due to some specific policies.
►Recommendations by EY
To insist on the investment attraction mode featuring “set up, supplement and enhance the industrial chain”, to
introduce high-end enterprises to invest in Chongqing.
To enhance the government services in factor supply, administrative examination and approval, operating guarantee and financing.
To provide the special funds to encourage the development of industry chain.
To promote the financial services to support the development of industry chain, such as financial leasing and
commercial factoring services.
►Scoring of labor quality of Chongqing
80% of the respondents were satisfied with labor quality of Chongqing. 15% of respondents chose “Excellent” (i.e., 10
score).
►Convenience of obtaining common labors
86% of the respondents were satisfied with convenience of obtaining common labors. 24% of respondents chose
“Excellent” (i.e., 10 score).
►Convenience of obtaining intermediate and senior labor
79% of the respondents were satisfied with convenience of obtaining intermediate and senior labor. 15% of
respondents chose “Excellent” (i.e., 10 score).
►Labor price
84% of the respondents were satisfied with labor price of Chongqing. 16% of respondents chose “Excellent” (i.e., 10
score).
►In conclusion, the overall score of human resources environment is relatively high.
Acquisition of labor force: some respondents indicated that Chongqing was short of intermediate and senior professionals and technical personnel compared with some coastal developed areas. The recruitment need of senior professionals are difficult to meet.
Labor price: some respondents indicated that there are still some improvement could be made for labor price. Some respondents considered that their labor cost is rising year by year due to the annual increase of social security calculating base in Chongqing.
Besides, some respondents considered that compared with some coastal developed areas, the overall quality of labor force in Chongqing is poor. The work efficiency of the labor force is relatively low and the work cooperation abilities is relatively poor. In addition, some respondents indicated that there is higher turnover rate for young employees.
►Recommendations by EY
To promulgate relevant policies to reduce the charge rate of social security.
To implement the national individual income tax reform and to encourage the implementation of various special deductions.
To set up a minimum wage adjustment mechanism which is in line with the level of economic development.
To build an efficient public employment service platform, support the specified recruitment projects, promote the mass
employment to reduce the hiring cost.
To provide training subsidies to employers / employees which organize / participate the skill trainings according to the relevant skills promotion subsidy policy.
To support the training related to high-level talents, promote the cooperation between enterprises and campuses, and encourage the technical colleges and vocational colleges to actively cooperate with the enterprises in industrial parks.
To improve the introduction policy of high-skilled and high-level professionals, and introduce the policy to attract talents to Chongqing, so as to provide high-quality talent for enterprises.
To formulate the localized incentive policy to attract talent. To appropriately lower the threshold of talent introduction policy so as to attract more talents to work and live in Chongqing.
►Completeness of logistics supporting system
92% of the respondents were satisfied with the completeness of logistics supporting system. 22% of respondents chose “Excellent” (i.e., 10 score).
►Logistics cost
84% of the respondents were satisfied with the logistics cost of Chongqing. 17% of respondents chose “Excellent” (i.e., 10 score).
►Infrastructure and convenience of urban transport
88% of the respondents were satisfied with the infrastructure and convenience of urban transport of Chongqing. 21% of respondents chose “Excellent” (i.e., 10 score).
►Infrastructure and convenience of railway transport
91% of the respondents were satisfied with the infrastructure and convenience of railway transport of Chongqing. 23% of respondents chose “Excellent” (i.e., 10 score).
►Infrastructure and convenience of air transport
92% of the respondents were satisfied with the infrastructure and convenience of air transport of Chongqing. 22% of respondents chose “Excellent” (i.e., 10 score).
►Infrastructure and convenience of port transport
91% of the respondents were satisfied with the infrastructure and convenience of port transport of Chongqing. 23% of respondents chose “Excellent” (i.e., 10 score).
►Infrastructure and convenience of highway transport
93% of the respondents were satisfied with the infrastructure and convenience of highway transport of Chongqing. 23% of respondents chose “Excellent” (i.e., 10 score).
►In conclusion, the overall score of the logistics environment is relatively high, and most of the respondents considered that the logistics environment in 2018 is better than that in 2017.
Few respondents indicated that:
The logistic cost is relatively high and time consuming, and logistics support is not very good.
The traffic congestion was very serious in downtown, and the transportation in some industrial parks is inconvenient.
Some regions’ urban road planning was not reasonable, and the planning proposals were not widely publicized in advance.
The municipal maintenance and repairs were conducted frequently and inadequately planned (such as road pipelines).
►Recommendations by EY
To promote the market-driven reform of transportation of airport and railway, standardize the agreed pricing behavior between transport operators and goods owners by negotiation or trading platform to reduce the freight service cost.
To support the constructions of logistics center, urban logistics distribution, cold chain logistics, cross-border e- commerce and logistics standardization system.
To set up the logistics public information platform and promote the informatization and intelligence level of logistics operation.
To develop urban rail transit, improve the urban road network system, promote the construction of three-dimensional parking lot and pedestrian system, enhance the transportation interchange and connection ability for industrial parks.
To support the foreign enterprises to invest, operate and provide consult services regarding the public transportation, so as to promote the modern level of traffic management.
►Environment issues to be improved
Based on the survey, regarding the environmental issues to be improved, 15% of the respondents considered that air quality shall be improved, 14% considered that waste-water treatment and water quality shall be enhanced, 14% considered that garbage disposal shall be strengthened, 13% considered that noise control shall be increased, 10% considered that the investment in environmental protection facilities shall be increased, 9% considered that more specific policies for promoting the energy conservation and environmental protection shall be formulated, 8% considered that the enforcement of environmental law shall be strengthened, and 8% considered that the administrative procedures for environmental protection of enterprises shall be simplified.
►In conclusion, the overall score of the environmental protection is relatively high, and most of the respondents considered that the environmental protection in 2018 is better than that in 2017.
However, some respondents indicated that the smog and haze problem and the river sewage treatment shall be improved urgently; the garbage sorting and garbage disposal processes are relatively weak; the public's awareness of environmental protection is relatively weak; and there is trend that noise pollution became worse.
►Recommendations by EY
To consistently enhance the comprehensive prevention and treatment of environmental pollution, including the air pollution, water pollution, noise pollution, garbage pollution and hazardous waste pollution. To implement the strict environmental protection monitoring administration in order to conduct the environmental protection supervision and administrative enforcement independently.
To support the foreign enterprises to invest, manage and provide consulting services regarding the areas related to distributed energy sources, comprehensive urban underground pipeline, urban household refuse, industrial garbage and hazardous waste treatment.
►Capacity for technological innovation, research and development (“R&D”) and transformation of Chongqing
89% of respondents were satisfied with the capacity for technological innovation, R&D and transformation of Chongqing.
17% of respondents chose “Excellent” (i.e., 10 score).
►Policy support for technological R&D of enterprises of Chongqing
92% of respondents were satisfied with the policy support for technological R&D of Chongqing. 23% of respondents
chose “Excellent” (i.e., 10 score).
►In conclusion, the overall score of the scientific and technological environment is relatively high, and most of the respondents considered that the scientific and technological environment in 2018 is better than that in 2017.
Few respondents indicated that it’s relatively time-consuming to obtain the government’s R&D subsidy.
►Recommendations by EY
To support enterprises to carry out a new round of technological transformation by providing interest-discounting loan and other support. To support enterprises engaging in R&D innovation by providing financial subsidy and setting up the risk compensation fund for technology business incubators.
To fully implement the incentive policies such as super-deduction of R&D expenses, simplify and optimize the relevant procedures. And to encourage companies to enjoy preferential policies completely.
To grant one-off financial reward to enterprises’ high-end talents based on certain proportion of their annual remunerations.
To optimize the evaluation standards of foreign talents and expand the admission scope.
To implement a strict intellectual property protection system in order to crack down on infringement of intellectual property rights by multi-department joint together.
►Maturity of laws and regulations
94% of respondents were satisfied with the maturity of laws and regulations in Chongqing. 25% of respondents chose “Excellent” (i.e., 10 score).
►Policy transparency
92% of respondents were satisfied with the policy transparency in Chongqing. 24% of respondents chose “Excellent” (i.e., 10 score).
►Channel for communication with the government
90% of respondents were satisfied with the channel of communication with the government. 22% of respondents chose “Excellent” (i.e., 10 score).
►Working efficiency of government sectors
90% of respondents were satisfied with the working efficiency of government sectors. 22% of respondents chose
“Excellent” (i.e., 10 score).
►Enforced power of discretion
88% of respondents considered that Chongqing had a moderate enforced power of discretion. 11% considered it as slightly powerful. 1% considered it as excessively powerful. Therefore, almost respondents considered that Chongqing had the reasonable enforced power of discretion.
In conclusion, the overall score of system factors are relatively high.
Compared with last year, the evaluation of this year is better. However, some respondents indicated that the communication channels between enterprises and government sectors are relatively inefficient. Respondents hope to strengthen communication with government departments and get more timely feedback. For some respondents, they hope that the government departments could improve the transparency of policies, so that enterprises can understand the latest policies in a timely and complete manner. They also hope that enterprises could enjoy equal treatment by government.
Few respondents indicated that the information collection request by government is an extra cost for enterprises. Because enterprises need to spend a lot of time and labor costs to fulfill the information collection requested by government. It is recommended that the government optimize the information content to be collected by using big data analysis, and try not bother enterprises to request unnecessary information.
►Recommendations by EY
To further simplify the approval procedures for enterprise reorganization and business reformation, establish the green channel for approval, and carry out the online parallel examination and approval.
To uniformly disclose the preparation materials in the approval process, and timely communicate with enterprises regarding their special needs.
To collect feedback from enterprises regularly, flexibly adjust the approval process according to specific needs, and increase the efficiency of government services for enterprises as much as possible.
►In conclusion, the overall score of government affairs service at district or county level is relatively high, and most enterprises considered that the service in 2018 is better than that in 2017.
Few respondents indicated that:
The attitude of few personnel who providing government affairs service at district and county level could be further improved.
Few governmental personnel had excessive power of discretion, for example, they may casually require the enterprises to submit additional information which are not required by the regulations / rules.
There is a big gap between the actual implementation of the policy and the propaganda.
►Recommendations by EY
To establish a supervisor mechanism for consistently supervising the investment environment for foreign-invested enterprises, and a scoring mechanism could be established to regularly publicize the evaluation of service personnel, so as to strengthen the service transparency and improve the administrative effectiveness.
To set up a special docking specialist to solve corporate complaints in order to improve government service level.
To setup a unified information collection system to collect information requested by governmental authorities from enterprises. To setup an enterprise big data system with one-submission-and-all-shared mechanism to improve the efficiency of information collection and reduce the cost of enterprise.
►Limitations on market and industry access
92% of the respondents considered that Chongqing had moderate limitations on market and industry access (that figure was 87% in the 2017 Evaluation Report).
►National treatment for foreign investment
86% of the respondents were satisfied with the national treatment for foreign investment in Chongqing (that figure was 81% in the 2017 Evaluation Report).
►Tax-levy burden
82% of the respondents considered that Chongqing had the reasonable tax-levy burden (that figure was 74% in the 2017 Evaluation Report).
►Freedom degree of financing
85% of the respondents were satisfied with the freedom degree of financing in Chongqing (that figure was 80% in the 2017 Evaluation Report).
►Convenience of cross-border fund transfer
83% of the respondents were satisfied with the convenience of the cross-border fund transfer in Chongqing (that figure was 80% in the 2017 Evaluation Report).
►Protection of intellectual property
87% of the respondents were satisfied with the protection of intellectual property in Chongqing (that figure was 83% in the 2017 Evaluation Report).
►Management mode of processing trade
89% of the respondents were satisfied with the management mode of processing trade in Chongqing (that figure was 85% in the 2017 Evaluation Report).
►Labor force policy
88% of the respondents were satisfied with the labor force policy of Chongqing (that figure was 84% in the 2017 Evaluation Report).
►Fair competition
89% of the respondents considered that Chongqing maintained a comparatively good performance in promoting fair competition (that figure was 84% in the 2017 Evaluation Report).
►Environmental protection
89% of the respondents were satisfied with the environmental protection in Chongqing (that figure was 83% in the 2017 Evaluation Report).
►Anti-monopoly control
87% of the respondents were satisfied with the anti-monopoly control in Chongqing (that figure was 83% in the 2017 Evaluation Report).
►Management on exit mechanism
87% of the respondents were satisfied with the management on exit mechanism in Chongqing (that figure was 83% in the 2017 Evaluation Report).
►In conclusion, the overall score of policy factors is relatively high. The score has increased compared with that of 2017.
Based on the survey, the respondents’ assessment of tax-levy burden and cross-border funds transfer were relatively lower comparing with other items.
From tax-levy burden perspective:
Compared with other policy factors, the respondents' satisfaction rate of the tax burden is only 82%, which is at the bottom. However, compared with last year's satisfaction rate (74%), this year has increased by 8% which thanks to tax cuts and fee reduction measures launched by governments recently. However, it should be noted that other reasons (such as variety types of tax collection, tax authorities may require prepayment of tax, inconsistent tax enforcement, and enterprises fail to improve their tax optimization capabilities and etc.) leads to the not-high score of evaluation. In recent years, the government has successively launched a series of taxes and levies reduction measures, and it’s expected that there would be more measures in future.
From cross-border funds transfer perspective:
Satisfaction ratio for convenience of cross-border funds transfers was only 3% higher than that of 2017. In recent years, the government has strengthened the management of cross-border transfer of funds due to the international financial environment and macro-control. The government classified 15 categories to restrict the cross-border funds transfer regarding the outbound investment. In practice, enterprises need to communicate with the foreign exchange bureau in advance regarding significant foreign exchange flows. Although such measures have effectively cracked down on illegal cross-border capital flows, such foreign exchange restrictions also have affected certain enterprises’ normal financial flows (there may be adverse impact on legitimate investment or trading activities to some extend).
In addition, certain respondents also indicated that there are some restrictions in financing. Additionally, there are certain defects in the labor management system which need to be improved.
►Recommendations by EY
To ensure the implementation of tax incentives, and encourage enterprises to enjoy the preferential policies.
To fund the patent applications, intensify the investigation of IP violations, protect the IP (like patent rights, trademark rights, and well-known brands) from illegal infringement, encourage the enterprises’ technology innovation (especially for high-tech enterprises).
To improve the complaint mechanism for foreign-invested enterprises, coordinate and resolve the concerns raised by foreign investors, and secure the foreign-invested enterprises to enjoy the post-establishment national treatment.
To set up a special docking window to enhance the efficient flow of legally and compliant funds entry and exit cross- border.
To actively promote "Internet + Government Services", so as to build an efficient and convenient post supervision and service system for foreign investment.
Local governments at all levels should strictly comply with their commitments made to foreign investors and foreign- invested enterprises, and earnestly perform the undertaking in the investment contracts signed during the foreign investment attracting activities (but such commitments and contracts shall be in accordance with the law).
To set up an enterprise cancellation and migration joint office window, improve the enterprise exit mechanism and protect the right of enterprises to recover their legal investment.
►Residential conditions (e.g., living facilities)
93% of respondents were satisfied with the residential conditions in Chongqing.
►Educational environment (e.g., international school)
86% of respondents were satisfied with the educational environment in Chongqing.
►Medical treatment and public healthcare (e.g., international hospital)
84% of respondents were satisfied with the medical treatment and public healthcare in Chongqing.
►Language environment
85% of respondents were satisfied with the language environment in Chongqing.
►Tourism
90% of respondents were satisfied with the tourism in Chongqing.
►Food
92% of respondents were satisfied with the food in Chongqing.
►Air environment
87% of respondents were satisfied with the air environment in Chongqing.
►Water environment
88% of respondents were satisfied with the water environment in Chongqing.
►Logistics
92% of respondents were satisfied with the logistics in Chongqing.
►Culture, art and sport
89% of respondents were satisfied with the culture, art and sport in Chongqing.
►Public transport
92% of respondents were satisfied with the public transport in Chongqing.
►City greening
92% of respondents were satisfied with the city greening in Chongqing.
►Public security
94% of respondents were satisfied with the public security in Chongqing.
►Commodity price level
88% of respondents were satisfied with the commodity price level in Chongqing.
►In conclusion, the overall score of the living environment is relatively high, and most enterprises considered that the living environment in 2018 is better than that in 2017.
Based on the survey, Chongqing still has potential to improve the medical treatment/public healthcare and language environment.
Few respondents indicated that:
The living facilities in Chongqing could be further improved. Chongqing has less international hospitals and the cost is relatively high.
Some Chongqing citizens do not speak Mandarin, which causes certain communication barriers.
The international schools in Chongqing are still insufficient, which makes foreign children’s education inconvenient.
Traffic congestion and poor infrastructure are also two big issues that need to be improved.
►Recommendations by EY
To use the experience of international standard as reference, to build and improve the public facilities, design the international leisure streets, communities, clubs and other supporting facilities. To attract foreign investment to establish the international schools and hospitals.
To build an international language environment. To standardize the translations regarding transportation and architecture marks, leisure and shopping labels, catering and tourism language. To encourage the production of multi- language TV and radio programs.
To use big data and other scientific means to divert traffic and increase the supply of public transportation.
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