Subsidies for companies in China, 10 factors

Last week, our director Owen Wang from Cole & Wright Advisors, visited several manufacturing companies in South China. One of them was a Canadian plant, the General Manager and I stood there watching the operations and talked about talent management and policies for factories, and the factors that determine how the government assesses the value that these companies bring in, here are some of the most important:

1. Tax is of course one on the top. How much tax are you contributing to the local administration? What is the % you are exporting or selling domestically? How much tax refund do you get? Is there any Double Tax agreement between China and your country?

2. Employment, not only how much employment you are creating but also what type, what knowledge and expertise are young bringing to the area, is it high added value or low added value? What % is R&D, PhD, or Masters?

3. Industry, are you engaged in new materials or new services? High-tech? High-end equipment? New energy? Does industry imply or affect a key strategic sector that the government encourages? Does it involve pollution? Chemicals? Do you need special licenses?

4. Background, is your company a Fortune 500 or does it supply one of them? Is your company a strategic player in your industry, are you a key player in your sector supplying materials? Do you have an influence that drives other local suppliers or clients nearby?

5. Future growth, did your company just get a new big project? Will you add another line of production? Did you just sign a new contract? What is the plan for the next years? Are you currently hiring a workforce or reducing it?

6. Land, do you buy or you rent? Will you do construction on that site? Will you need industrial or commercial? What area in square metres will you need? Can it be multi-level or only one level?

7. Equipment, do you import your machinery from overseas or do you help the local economy produce for you? Does your machinery bring also knowledge and expertise from abroad? Does it involve Intellectual Property?

8. Assembly, what percentage do you import, assemble and export? Is the important and high-added value segment performed in China or only the easy assembly is done here? How easy is it to outsource to others?

9. Business model, what tasks are placed in this plant? R&D? Where is the design team? Where are the engineers? Is this a son company or a branch company? How is it related to the headquarter? Where are the suppliers and clients?

10. Amount of investment, how much does your company expect to invest in the next couple of years, and where will your capital go, into land, equipment, staff, tax, technology, and materials? What is your commitment to this project?

If you have a manufacturing company in China and would like to get benefits, subsidies, tax reductions, free rent, better prices for purchase, machinery, etc, all these factors will highly determine your prices and competitiveness in the market. For more information, feel free to contact us through admin@colewconsulting.com

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