Allison Miller, DSMR China Market Research

This article is written from a practical business and economic perspective, and provides comparisons of Hong Kong, Shanghai, Guangzhou, Shenzhen and Beijing to enable you to easily evaluate the costs and price differentials of re-locating to China. Note USD1.00 = RMB8.2 for exchange conversion rates.
Schooling
This is a major factor in any re-location decision, especially for those families with children, however there are a number of international schools now in all major cities with perfectly adequate facilities. These include:

Beijing
International School - 010 6437 4002
Western Academy - 010 8456 4155
Lycee Francais - 010 6532 3498
German School - 010 6532 2535
Shanghai
International School - 021 5899 0380
American School - 021 5837 6173
Yew Chung Int’l - 021 6242 3243

Guangzhou
American School - 020 3881 0001
Utahloy International - 020 8770 3919
Ecole Francais - 020 8337 4595
Shenzhen
International School - 0755 669 3669
QSI International - 0755 667 6031

Medical

In terms of medical care, all of the above cities possess first class international medical centres, staffed by international doctors and surgeons. In any event, Chinese hospitals are very efficient - as our Western Chairman would testify having been operated on in one ! (he’s now a big fan of Chinese State Health care).

Property Costs

Naturally there is some variance here, but we can assume the following mean averages for each of the cities as follows: (per square foot, per month)

Residential, 3 bed Apartment:
HongKong: USD3.77
Beijing: USD2.51
Shanghai: USD1.77
Guangzhou: USD0.63
Shenzhen: USD0.73

Commercial Office, Grade A:
HongKong: USD6.4
Beijing: USD3.08
Shanghai: USD2.5
Guangzhou: USD1.8
Shenzhen: USD1.5

Commercial, Industrial:
HongKong: USD1.04
Beijing: USD0.51
Shanghai: USD0.27
Guangzhou: USD0.26
Shenzhen: USD0.39

Local Salary Levels

These vary considerably and are a major cost factor in your business. Workers salaries in China vary between RMB1-2,000 pcm. For more office based staff, we’ll take a University graduate, with fluent English spoken and written skills, plus Mandarin, in addition to computer skills and three years work experience as the benchmark:

HongKong: English and Mandarin skills maybe poor. Cost: HK$15-30,000 pcm.
Beijing: English and Computer skills no problem. Limited Cantonese ability.
Cost: RMB7-8,000 pcm.

Shanghai: As Beijing.
Guangzhou & Shenzhen: Fluent English, Mandarin, & Cantonese plus computer skills.
Cost: RMB7-8,000 pcm.

An average wage for office staff in China would be about RMB5,000 pcm.

Business Tax
HongKong has an international advantage due to it’s low tax base of 16%. However, this is now under serious competition from Shenzhen & Zhuhai (as these are SEZ’s, the corporate tax rate is just 15%, nationally at 33%) whereas for Waigaixiao and Luijiazhui areas in Shanghai it is also at 15%. This can be further reduced if investing in operations in these areas - profits tax breaks for newly invested enterprises are a standard 100% break for first two years of profitability, and at 50% for the next three years.

This effectively means that in parts of Shanghai and South China your profits tax bill is only 7.5% a year for years 3,4 & 5 of profitable business, against HongKong’s 16% steady rate.

Individual Income Tax
How much are YOU liable for ? The China Tax Bureau have the following determinants over whether or not tax is due. They are:

1) Is the contract period in excess of six months ? (depending also upon whether the country of the national concerned enjoys double tax treaty status with China), if so then the foreign company employing the contractor is then deemed to have a “Permanent Enterprise” in China and as such the contractor is liable for IIT from day one of his employment in China.

2) If the contract duration is less than six months, the contractor need not file for IIT unless they return to China (on another contract) or stays in China for longer than 183 days in the year.

For more information on your individual income tax liabilities in China please have a look at the very useful “China Briefing” website at www.china-briefing.com - the August issue covers this topic in some detail.

Summary:
This is a very rough guide to price differentials between different cities but we hope will provide food for thought.

DSMR China Market Researchcan advise on matters of China market research and analysis, please view our extensive China website at www.dsmrchina.com or call them at Shanghai (+86) 21 6279 7288, or email to info@dsmrchina.com if in need of China market information.