In the news: NPC takeaways, investors warn of VC dangers, China adjusts taxes for foreign e-commerce sites and pharma firms get hit where it hurts

Top Chinese internet banker warns of “lawless” markets

An internet dealmaker has warned of the dangers of “lawless” venture capital (VC) and startup markets, urging regulators to curb irrational investment and asset bubbles. The head of China Renaissance Partners, which advised on the Didi-Kuaidi and Meituan-Dianping mergers, wrote in the Caixin magazine that individuals lured by promises of lucrative returns are flooding into the high-risk realm of VC. This is disrupting markets by inflating values, and raising the chances for them to get burned when the bubble bursts. He attributed the disorder to the renminbi-denominated market, where dollar-backed VC is dominated by professional investors and individuals face a tougher time obtaining foreign currency. Internet financing is an area torn between several regulators, which are “scrambling to come up with rules for what has become a free-for-all,” according to one analyst. This has led to no shortage of scams that promise innocent individuals exorbitant rates of return (take Ezubo, for instance, the largest Ponzi scheme in Chinese history that defrauded almost a million people out of $7.6 billion). An easy solution would be to clamp down on the issuers and fund managers. The CBRC, CSRC, CIRC and even the MIIT need to come up with a comprehensive legal framework, and law enforcement needs to crack down harder on those that exploit loopholes.

China relaxes tax rules on online purchases from foreign e-retailers

China has issued new rules for purchases by Chinese consumers on overseas e-commerce platforms. They take effect in April and provide an exemption of up to Rmb2,000 ($306) from import duties for goods bought on foreign retail sites. They add a sales tax of 11.9% that consumers don't currently pay, but it is still less than the 17% value-added tax they are slapped with when shopping in stores in China. The existing regulations allow consumers to import up to Rmb1,000 ($153) worth of products at a time for personal use, up to Rmb20,000 in a year. The goods are subject to import duty—which vary from 10% to 50% of the price—but the tax is waived if under Rmb50 ($7.65). The new policy eliminates this Rmb50 waiver and doubles the personal use purchase limit to Rmb2,000. The duties are 10% for food, 20% for apparel and electronics, and 50% for cosmetics and alcohol. The new rules will still apply to foreign companies that sell on Chinese marketplaces under the relaxed free trade zone (FTZ) e-commerce regulations that went into effect in January 2015. Taobao, Tmall, JD.com and Amazon.cn have created special sections on their sites to feature imported goods sold under these rules, which allow them to send the orders through an expedited customs process through the FTZs. The new tax rates will benefit sellers of products for which the duty is high, such as cosmetics, but other items with lower duties like children's products will be more expensive to purchase from foreign sites. Overall, however, the changes are unlikely to trigger dramatic changes in Chinese consumers' spending habits.

Pharma giants in China hit hard by drug price cuts

The world's largest pharmaceutical companies are facing a roadblock in China with a campaign to slash drug prices triggering a sales slowdown. State-run health insurance funds, which are struggling to keep up with an ageing population and surging cancer and diabetes rates, are grappling with tighter budgets and a slower economy. Many are capping reimbursements to patients and pushing local authorities to negotiate with companies to lower medicine costs. “Big Pharma” groups AstraZeneca, Merck and Pfizer saw their sales expansion nearly halve in 2015, while GSK, which filed the lowest sales among its peers and was already reporting contractions in 2014, saw a further 17% drop. Foreign and Chinese pharma firms alike have been hurt as they all have to compete in local bidding to sell their medicines at public hospitals, which treat about 90% of China's patients and sell 70% of the country's drugs. Many hospitals were said to have recently hit their caps and curbed prescriptions of more expensive multinational-branded products while also postponing costly surgeries and inpatient stays. Drugmakers are exploring ways to sell through other channels and to other patient groups, while working with regulators to accelerate new drug registration.

National People's Congress: key takeaways

The National People's Congress set forth three main economic targets for the next five years:achieve 6.5%-7% annual growth, maintain inflation around 3% and create 10 million urban jobs. Premier Li Keqiang pledged to relax restrictions in electricity, telecom, transport, petroleum, natural gas and public utilities. He also said that he would “remove hidden barriers” in order to increase private investment and participation in the reform of state-owned enterprises (SOEs). Private companies will get the same treatment as SOEs, in terms of verification, approval, financing, fiscal and tax policies and land availability. The remarks, despite lacking in specifics, sparked optimism among global investors. Billionaire George Soros said that although China will face challenges, a hard landing is unlikely to happen. The NDRC flagged the risks as well, warning against underestimating what it termed as mounting fiscal and financial threats. Premier Li's vow to lift restrictions could lead to greater transparency, and the encouragement of private investment in key traditional sectors will help trim bloated SOEs (although foreign involvement could still be hard to come by). What is ultimately important, however, is how these pledges are implemented. One must remember that the NPC is a feel-good event, not unlike a State of the Union address, and not everything that is said is immediately done.

Top Chinese internet banker warns of “lawless” markets

An internet dealmaker has warned of the dangers of “lawless” venture capital (VC) and startup markets, urging regulators to curb irrational investment and asset bubbles. The head of China Renaissance Partners, which advised on the Didi-Kuaidi and Meituan-Dianping mergers, wrote in the Caixin magazine that individuals lured by promises of lucrative returns are flooding into the high-risk realm of VC. This is disrupting markets by inflating values, and raising the chances for them to get burned when the bubble bursts. He attributed the disorder to the renminbi-denominated market, where dollar-backed VC is dominated by professional investors and individuals face a tougher time obtaining foreign currency. Internet financing is an area torn between several regulators, which are “scrambling to come up with rules for what has become a free-for-all,” according to one analyst. This has led to no shortage of scams that promise innocent individuals exorbitant rates of return (take Ezubo, for instance, the largest Ponzi scheme in Chinese history that defrauded almost a million people out of $7.6 billion). An easy solution would be to clamp down on the issuers and fund managers. The CBRC, CSRC, CIRC and even the MIIT need to come up with a comprehensive legal framework, and law enforcement needs to crack down harder on those that exploit loopholes.

China relaxes tax rules on online purchases from foreign e-retailers

China has issued new rules for purchases by Chinese consumers on overseas e-commerce platforms. They take effect in April and provide an exemption of up to Rmb2,000 ($306) from import duties for goods bought on foreign retail sites. They add a sales tax of 11.9% that consumers don't currently pay, but it is still less than the 17% value-added tax they are slapped with when shopping in stores in China. The existing regulations allow consumers to import up to Rmb1,000 ($153) worth of products at a time for personal use, up to Rmb20,000 in a year. The goods are subject to import duty—which vary from 10% to 50% of the price—but the tax is waived if under Rmb50 ($7.65). The new policy eliminates this Rmb50 waiver and doubles the personal use purchase limit to Rmb2,000. The duties are 10% for food, 20% for apparel and electronics, and 50% for cosmetics and alcohol. The new rules will still apply to foreign companies that sell on Chinese marketplaces under the relaxed free trade zone (FTZ) e-commerce regulations that went into effect in January 2015. Taobao, Tmall, JD.com and Amazon.cn have created special sections on their sites to feature imported goods sold under these rules, which allow them to send the orders through an expedited customs process through the FTZs. The new tax rates will benefit sellers of products for which the duty is high, such as cosmetics, but other items with lower duties like children's products will be more expensive to purchase from foreign sites. Overall, however, the changes are unlikely to trigger dramatic changes in Chinese consumers' spending habits.

Pharma giants in China hit hard by drug price cuts

The world's largest pharmaceutical companies are facing a roadblock in China with a campaign to slash drug prices triggering a sales slowdown. State-run health insurance funds, which are struggling to keep up with an ageing population and surging cancer and diabetes rates, are grappling with tighter budgets and a slower economy. Many are capping reimbursements to patients and pushing local authorities to negotiate with companies to lower medicine costs. “Big Pharma” groups AstraZeneca, Merck and Pfizer saw their sales expansion nearly halve in 2015, while GSK, which filed the lowest sales among its peers and was already reporting contractions in 2014, saw a further 17% drop. Foreign and Chinese pharma firms alike have been hurt as they all have to compete in local bidding to sell their medicines at public hospitals, which treat about 90% of China's patients and sell 70% of the country's drugs. Many hospitals were said to have recently hit their caps and curbed prescriptions of more expensive multinational-branded products while also postponing costly surgeries and inpatient stays. Drugmakers are exploring ways to sell through other channels and to other patient groups, while working with regulators to accelerate new drug registration.

In the news: NPC takeaways, investors warn of VC dangers, China adjusts taxes for foreign e-commerce sites and pharma firms get hit where it hurts

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