THE significance of the Belt Road initiative was once again highlighted at the recent 19th Party Congress held in China in October 2017. Here, the Chinese national government re-emphasized the critical nature of the Belt Road initiative and its aims to further advance China via new links running eastward and westward over both land and sea.
A key goal of the initiative is to build closer economic links with countries both inside and outside Asia and, as a result, many countries including Singapore, Australia, and Pakistan, have responded positively to the initiative. These countries are exploring new channels to benefit from the opportunities which arise as Chinese companies increasingly tap into overseas markets. In August, Reuters reported that China made 109 deals worth US$33 billion within Belt and Road countries, whilst just some of the industries which are expected to benefit from the Belt Road include technology, e-commerce, and real estate.
Chinese companies have also been proactively seeking their own opportunities abroad. There are many ways they can expand overseas, such as forming their own foreign registered entities, acquiring foreign assets or investing in publicly listed companies and financial platforms. However, there are equally many obstacles which Chinese companies and HNW families must overcome before they are able to connect with the overseas markets under BRI. For example, few companies know the preparation and impact of the roll out of the Common Reporting Standard (CRS), which supports global transparency and combats financial crime through exchanging information automatically across more than 50 jurisdictions.
According to a study commissioned by Jersey Finance on Chinese wealth flowing to the west, one of the biggest concerns for financial advisers advising PRC families around the Automatic Exchange of Information (AEOI) and CRS is that clients don’t reveal sufficient information.
There are also a number of technical areas which companies must consider when they go out to pursue the new opportunities from BRI:
- What are the best financial and corporate structures to set up for overseas investment vehicles?
- What are the political, regulatory, accounting, and taxation considerations companies should take when they evaluate different opportunities overseas?
- How can they develop robust financial planning to ensure its structure can weather economic challenges and ensure wealth can be preserved across different generations of company owners?
Chinese companies should pay attention to the following steps when considering setting up overseas vehicles:
- Leverage suitable IFCs that offer a tax neutral environment.
- Appoint accountants, bankers, lawyers and venture capitalists, who understand international law and tax regimes.
- Use world-renowned professional service providers and have a progressive attitude toward establishing corporate offices capable of supporting a multi-language and multi-cultural environment.