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2006 China Online Game Research Report 2006 China Online Game Research Report(0)

Page4 1. Definition and classification
Page4 1.1. Definition and classification of e-Game
Page5 1.2. Definition and classification of Internet game
Page5 1.2.1 Role playing game
Page5 1.2.2. Casual / Casual game
Page8 1.2.3 Contrast of Different online games
Page9 2. Overview of global development of online game market in 2006
Page11 3. Overview of online game market development in China 2006
Page11 3.1. Market size of online game in China
Page11 3.1.1. Revenue size of online game operators in China
Page14 3.2. User size of online game Market in China
Page18 3.3. Share of online game market in China
Page18 3.3.1. Overall share of online game market in China
Page22 3.3.2. Differentiated share of online game market in China
Page28 4. Industry chain of online game market in China
Page28 4.1. Industry chain structure of online game market in China
Page29 4.2. Flow of business operation of online game in China
Page29 4.2.1 Discussion phase of product development or agency collaboration
Page31 4.2.2. Product test phase
Page31 4.2.3. Formal operational phase
Page32 4.2.4 All-the-way marketing activities
Page33 5. Features of online game market development in China 2006
Page33 5.1. Multiplicity of the products preliminarily appeared with the casualization getting more evident
Page33 5.2. Free operational mode of MMORPG getting increasingly mature
Page36 5.3. Advertising in online game became the hotspot again
Page37 5.4. Export heat continues to get higher
Page39 5.5. Marketing getting reinforced
Page40 5.6. Changes on policy will influence the market situation
Page41 5.7. Preliminary size formed for online game trading in China
Page42 6. Analysis on online trading between online gamers
Page42 6.1. Analysis on online trading between global online gamers
Page42 6.1. 1. Features on online trading between global online gamers
Page43 6.1. 2. Platform for online trading between global online gamers
Page45 6.1. 3. Size of online trading between global online gamers
Page46 6.1. 4. Size of online trading of major global online games
Page47 6.2. Analysis on online trading between the Chinese online gamers
Page47 6.2.1. Features on online trading between the Chinese online gamers
Page48 6.2.2. Platform for online trading between the Chinese online gamers
Page52 6.2.3. Size of online trading between major Chinese online gamers
Page53 6.3 Analysis on future development trend of online trading between the Chinese online gamers
Page54 7. Analysis on core operators of online game in China 2006
Page54 7.1. Analysis on comprehensive operators of online game in China 2006
Page54 7.1.1 Netease
Page56 7.1.2. Shanda
Page61 7.1.3. Ninetowns
Page64 7.1.4. 9you.com
Page67 7.1.5. Tencent
Page71 7.6 Comprehensive analysis on development of core operators
Page72 7.7. Analysis of operators in the Chinese differentiated market of online game
Page72 7.7.1 Analysis of MMORPG operators
Page76 7.7.2. Analysis on operators of casual game
Page79 7.8. Comprehensive analysis on competency of operators
Page81 8. Analysis on core game products
Page82 9. Analysis on online games used by the Chinese netizens
Page82 9.1 Situation of the Chinese netizens on using different types of online game platforms
Page82 9.1.1 Situation on using game information service websites
Page88 9.1.2 Situation on using game operational service websites
Page94 9.1.3. Using situation of netizens on casual games and platform service websites
Page95 9.2. Using situation of the Chinese netizens on different types of game software
Page95 9.4.1. Analysis on total monthly booting times of online game software and its total running time
Page98 9.4.2. Analysis on total monthly booting times of casual games and platforms and their total running time
Page101 9.4.3. Analysis on total monthly booting times of PC game software and its total running time
Page104 10. Analysis on online gamers in China
Page104 10.1. Online game types once used and most often used by the Chinese online gamers of different genders
Page105 10.2. Online game types once used and most often used by the Chinese online gamers in different ages
Page106 10.3. Online game types once used and most often used by the Chinese online gamers in different marriage status
Page107 10.4. Online game types once used and most often used by the Chinese online gamers in different employment status
Page108 10.5. Online game types once used and most often used by the Chinese online gamers with different monthly incomes
Page110 10.6. Online game types once used and most often used by the Chinese online gamers in different areas
Page111 10.7. Analysis on personal features of the Chinese users of online games in different types and differences in consuming behaviors
Page111 10.7.1. Differences in personal features of the Chinese users of online games in different types
Page113 10.7.2. Difference in purposes of using online games in different types in China
Page114 11. Analysis on consuming behavior of MMORPG users in China
Page114 11.1. Analysis on game props or items purchased by the Chinese gamer users
Page116 11.2. Analysis on rate of expenses used by the Chinese MMORPG users on buying props or items in total expenses for games
Page117 11.3. Analysis on payment ways of game most favored by pay online game users
Page118 11.4. Cognition and attitude of the Chinese MMORPG users toward Online Game Fatigue System
Page118 11.4.1. Cognition and attitude of the Chinese MMORPG users toward Online Game Fatigue System
Page119 11.4.2. Cognition and attitude toward OGFS of the Chinese MMORPG users in different game consuming levels
Page120 11.5. Analysis on channels for the Chinese online game users to acquire information
Page120 11.5.1. Main channels and the most influential channel of the Chinese online game users to acquire game information
Page122 11.5.2. Newspapers and magazines on games often browsed by the Chinese online game users
Page123 11.5. 3. Main websites for the Chinese online game users to acquire information
Page124 11.6. Most concerned factors in selection of games for the Chinese online game users
Page125 11.7. Main reasons for the Chinese online game users to quit a certain game
Page125 12. Analysis on preferences of the Chinese online gamers
Page125 12.1. Themes of game story most favored by the Chinese online game users
Page127 12.2. Screen style of game most favored by the Chinese online game users
Page127 12.3. Performance form of game screen most favored by the Chinese online game users
Page129 12.4. Music style of game most favored by the Chinese online game users

A Comparison of China & Indian Tax Incentives A Comparison of China & Indian Tax Incentives(0)

Broadly speaking, and taking into account recent reforms, from the January 1, 2008, China?s tax regime will be as follows:

Corporate Income Tax: 25%
Tax Incentives for hi-tech industries: 15%

India?s tax regime is still undergoing reform and further changes are likely. However, at present, in India?s new ?Special Economic Zones? (more later on this), India?s tax regime is as follows:
Corporate Income Tax: 40% plus 2.5% surcharge being applicable upon revenues exceeding USD250,000 per annum.

First five years of profitability: 0% tax
Second five years of profitability: 50% of tax rate
Third five years of profitability: 50% of tax rate for any invested dividends back into India.

As can be seen, India has introduced an aggressive tax regime to attract foreign direct investment, at rates that compare extremely well with China’s, even considering India’s higher corporate tax base rate.

Next :
Indian & Chinese Outbound Investment ? Where Is It Heading?


To know more, the whole issue is available (after a free subscription) on China Briefing website with others archives
For more information on China’s legal and tax issues or to ask for professional advices in related matters, please write to info@dezshira.com

2006 China B2B E-commerce Research Report 2006 China B2B E-commerce Research Report(0)

Page3 1. Definition & Categories of B2B E-commerce
Page3 1.1 Concept & Definition
Page5 1.2 Categories of B2B E-commerce Platforms
Page5 1.2.1 Dimension 1: Outside iSCM
Page6 1.2.2 Dimension 2: Within iSCM
Page7 2. Profile of Global B2B E-commerce Market
Page7 2.1 Global B2B E-commerce Transaction Scale
Page8 2.2 B2B E-commerce Transaction Scale in the US
Page9 2.3 China B2B E-commerce Transaction Scale
Page10 2.4 Comparison between China & US E-commerce
Page10 2.4.1 Beyond iSCM
Page12 2.4.2 Within iSCM
Page14 3. Analysis of Development Environment of B2B E-commerce in China
Page14 3.1 Development Stages of B2B E-commerce in China
Page16 3.2 Development Environment of B2B E-commerce in China
Page17 3.2.1 Positive Factors
Page19 3.2.2 Positive Factors
Page21 3.3 B2B E-commerce Application Situation in Chinese Enterprises
Page21 3.3.1 B2B E-commerce Platform Application Situation in Chinese Enterprises
Page22 3.3.2 Analysis of B2B E-commerce Demand by Chinese Small-to-medium Enterprises
Page24 4 B2B E-commerce Platforms in China
Page24 4.1 Commercial Models of Chinese B2B E-commerce Platforms
Page25 4.2 Service Modes of Chinese B2B E-commerce Platforms
Page28 4.3 Three Types of B2B E-commerce Platforms in China
Page29 4.4 Critical Competitiveness Indicators of Typical B2B E-commerce Platforms in China
Page31 5. Main Functions of Chinese B2B E-commerce Platforms
Page33 5.1 Comprehensive Industry B2B E-commerce Market Layout
Page34 5.1.1. Profile of Horizontal Platforms
Page35 5.1.2 Key Factors for Success of Horizontal Platforms
Page35 5.1.3 Dilemma of Horizontal Platforms
Page51 5.2 Industrial Vertical B2B E-Commerce
Page52 5.2.1 Summary of Vertical Platform
Page52 5.2.2 Profit Flow of Vertical Platform
Page52 5.2.3 Keys for Success of Vertical Platform
Page53 5.2.4 Dilemma of Vertical Platforms
Page54 5.2.5 Typical Enterprises for Specialized B2B E-Commerce Platforms within Industry
Page64 5.3 Comparison of Horizontal & Vertical E-commerce Markets
Page65 5.4 Market Structure of Foreign Trade B2B E-commerce
Page65 5.4.1 Typical Foreign Trade B2B E-commerce Platform Operators
Page75 6 Analysis of Investment Opportunity in China B2B E-commerce
Page75 6.1 Survey of Financing, M&A in China B2B E-commerce Sector
Page78 6.2 Future Development Trend of China B2B E-Commerce Platforms

Opening a branch in China Opening a branch in China(0)

Once your established WFOE is up and running, you may be in the position to open a branch office. To do this, several steps need to be completed. The WFOE first has to complete 100 percent injection of the registered capital already committed. Once that is done, the company can begin the process of establishing a branch office.

The procedure

The WFOE must first apply in the city where they are established to the local MOFCOM office for authorization and approval to set a branch office in another location. Once this has been done, the WFOE then must apply to the local MOFCOM in the city where they want to establish their branch office for an Approval Certificate and Business License. Once this has been done, the branch office can handle the post-establishment registrations (making chops, enterprise code registration, tax registration, statistics registration, opening bank accounts).

During the application process, the following documents are normally requested:

  • Board Resolution of the WFOE
  • Appointment Letter for the branch office manager or person in-charge
  • Resume and photo of the branch office manager or person in-charge
  • Lease agreement of the branch office
  • Latest capital verification report
  • Latest audit report
  • Copy of various legal certificates of the WFOE containing the WFOE chop


To know more, the whole issue is available (after a free subscription) on China Briefing website with others archives
For more information on China’s legal and tax issues or to ask for professional advices in related matters, please write to info@dezshira.com

Increasing registered capital Increasing registered capital(0)

An increase in capital is usually required by the government when an FIE is intending to expand its business scope. Increasing registered capital is also an important way to finance FIEs.

Registered capital, total investment, foreign debt, FIE financing

Below is a simple formula that may influence the financing of an FIE:

maximum amount of foreign debt ≤ total investment ? registered capital

The ratio between the registered capital and the total amount of investment shall conform to the relevant statutory ratio between the registered capital and total investment as showed in the form below.

If an FIE needs to borrow money from overseas (from the mother company or bank for example), the total amount of foreign debts should not exceed the gap between the total investment and the registered capital allowed by law.

In practice, when it is not possible for an FIE to get a bank loan from a Chinese bank, the increase of registered capital is the most straightforward way to gain financing from the mother company. If an FIE will need to seek a loan from abroad, either from the mother company or from a bank abroad, it may be limited by the gap between the registered capital and total investment. If the registered capital is increased, the FIE will be able to enjoy a larger margin to borrow in future.

Next :
Opening branch offices


To know more, the whole issue is available (after a free subscription) on China Briefing website with others archives
For more information on China’s legal and tax issues or to ask for professional advices in related matters, please write to info@dezshira.com

Upgrading your China entity Upgrading your China entity(0)

This might involve upgrading their existing China operations, merging them, or housing different entities under one controlling China venture in order to become more effective and efficient.

In this issue we look at a variety of different scenarios and how you can best merge or re-structure your business to suit the needs of your China operations in the years to come.

REPRESENTATIVE OFFICE TO MANUFACTURING WFOE

[By Richard Hoffmann, Dezan Shira & Associates Beijing office]

It may happen that due to the company?s development abroad or in the PRC, the representative office (RO) structure no longer suits the needs of the investor and must be altered accordingly.

If you wish to sell or import/export, you will need to set up a wholly foreign owned enterprise (WFOE) or joint venture (JV). You will need to consider whether to keep the RO going, or to close and replace it with a local branch of the WFOE or JV. You can’t just change the RO to a WFOE or JV: this is a common misunderstanding. If the RO doesn?t suit your needs anymore, close it. Closure of the RO can be implemented at the same time as the establishment of the new entity.

Here are a few examples of instances in which an RO may not suit your requirements any longer:

  • the holding company has closed down or changed business activities so you may want to wind down the RO activities
  • the RO has not been operating in compliance with its business scope or the local regulations and you may want to re-start on a ?clean sheet?
  • the current location needs upgrading (bigger/smaller office space) or you want to move location, effectively changing the government agency regulating your RO and closing the old office at the same time
  • you need a local RMB billing entity
  • the current RO business scope does not suit your requirements any longer
  • you need to upgrade your China structure/entity

Closing down a representative office

A closing audit must be performed by the tax bureau before an RO is allowed to complete the closing down procedures. As long as the RO has no overdue taxes or other issues to be reported to the authorities, then the de-registration procedure can begin.

The first step is to obtain an approval certificate from Customs together with a declaration on the reasons behind the decision to wind up operations in China (the same written explanations shall be given to all other bureaus involved in the closing procedures). This is required in order to clear up all records at Customs involving any office equipment, cars or samples imports.

Subsequently, applications need to be made at the tax bureaus (both local and national) with related papers and the RO closure resolution of the parent company, with director?s signature and the parent company?s chop. In most cases, the following documents need to be provided:

  • an audit report up to the current month
  • RO tax returns
  • ledgers and vouchers
  • tax registration certificates (original and copy with RO chops)
  • if the RO is not subject to taxation, then a tax exempt notice from the tax bureau confirming this status has to be presented

Next :
Increasing registered capital


To know more, the whole issue is available (after a free subscription) on China Briefing website with others archives
For more information on China’s legal and tax issues or to ask for professional advices in related matters, please write to info@dezshira.com

China’s unified corporate income tax China’s unified corporate income tax(0)

On March 16, 2007 Chinese lawmakers passed the much talked about corporate income tax law, unifying the tax rates for foreign and domestic enterprises. The new law, which passed 2,826 votes for and 37 against with 22 abstentions, will bring China?s tax laws more in line with international standards. It has unified the two existing tax codes; one for domestic enterprises, the other for foreign invested enterprises (FIEs), into one and represents a fundamental change in China?s tax policy. Many of the tax incentives and tax holidays that existed in the old code for foreign investors have been changed or eliminated.

Set to take effect January 1, 2008, the Enterprise Income Tax Law of the People?s Republic of China contains general provisions on the law as well as chapters on what constitutes taxable income, taxes payable, tax incentives, withholding tax at the source, special tax adjustments, administration of the levy and collection of taxes, as well as some supplementary provisions. As is common in China, the details of those provisions, as well as their interpretation and application will be left to further regulations and supplementary circulars. The law has been written, but it remains to be seen how it is to be fully implemented. Some clarifications concerning qualifying for preferential treatment and deadlines for implementation have still to be issued.

Tax unification

The income tax rate for all companies in China, both foreign and domestic, will be 25 percent. This means that most foreign invested companies in China will see their taxes increase, while most domestic enterprises will pay less to the tax authority. Both international and domestic companies will now compete based on only quality and service but not preferential income tax rate. Domestic companies in the past have been notorious for under-reporting their profits and the government will have to properly administer tax collection from domestic companies under the new system lest they be seen as deliberately collecting less money from domestic businesses to help their competitiveness. This could be used as a stick to beat China with concerning trade imbalances as being effectively a ?tax subsidy? for Chinese businesses should the collection base remain ineffective.

While the new unified rate of 25% is an increase from the preferential tax rates of the past for FIEs, the change will likely have more of an affect on small to medium enterprises at the low end that, being typically undercapitalized, may look elsewhere to invest. The new rate is also designed, in some part, to discourage foreign investors of such types to invest here on the grounds that they are not tax productive in any event. Additionally, in order to deal with the massive trade imbalance China possesses, and in particular with the US, an increase in tax affects a large portion of the process manufacturing trade that is responsible for much of this. China intends to further clamp down on such activities, and a migration of this type of business may take place, probably to India. Additionally, industries that are inefficient in terms of energy use, polluting, not adding value or are tax inefficient will all feel the impact of this measure.
To know more, the whole issue is available (after a free subscription) on China Briefing website with others archives
For more information on China’s legal and tax issues or to ask for professional advices in related matters, please write to info@dezshira.com

Sustainability of the Economy, Environment & Energy Sustainability of the Economy, Environment & Energy(0)

Under the 11th Five Year Plan, China specifically aims to reduce energy consumption per unit of GDP by 4 percent per annum, or a 20 percent reduction over five years. (see also China Briefing, Page 7, April 2006 issue at archives section on website at www.china-briefing.com). However, China?s strong growth during 2006 meant it failed to hit this target. Energy consumption though began to fall in the third quarter, but overall achieving a 1.23 percent reduction in the year over 2005.

According to the NDRC, China will increase efforts to better monitor its environmental performance this year, with more effective environmental legislation in the pipeline. The implementation of these policies will be more effectively policed. Departments such as the NDRC are studying new policies to cope with the more stringent demands on international communities on environmental protection and greenhouse gas emissions now the framework exists following the Kyoto Treaty. Indeed, the ministries concerned were all active in this area, again, with a unified approach. One of the officials at the Ministry of Commerce even setting a specific example; how in 2006 China exported 40 million tons of steel (China produced as much steel as the worlds top 15 global producers combined that year). The energy required for steel production in China was equivalent to 30 million tons of standard coal. If China had not processed and manufactured this amount of steel for export, and did not earn the income, then the energy consumption per unit of GDP last year would have dropped a further 1.26 percent. That would have provided a better attempt at reaching the stated environmental goals. The impression given now is that more and more senior officials in China are placing environmental protection ahead of GDP growth.

Next :
China’s unified corporate income tax


To know more, the whole issue is available (after a free subscription) on China Briefing website with others archives
For more information on China’s legal and tax issues or to ask for professional advices in related matters, please write to info@dezshira.com

Annual ministerial briefing Annual ministerial briefing(0)

One of the few foreign businessmen to be granted such privileges, these are then presented in an annual special issue of China Briefing. This report details his findings from his meeting this year, which took place just after the annual National People?s Congress. We also highlight further information concerning some of the regulatory changes that have recently been introduced that affect income tax, property, and labor laws.

Executive Summary

From the macro-economic position, China?s 11th Five Year Plan got off to a good start in 2006, against a positive background of high growth and low inflation that is expected to continue for some time. However, against this, the Chinese government is concerned about the imbalances in the economy, and in particular the huge trade surplus, which hit US$177.5 billion in 2006 and was US$39.6 billion in the first two months of this year. That is a 225 percent increase on last year?s figures. They are also concerned about the continuing expansion of China?s foreign currency reserves, which are now in excess of US$1 trillion and saw an increase of US$200 billion in 2006 alone.

A study led by the Ministry of Commerce is underway to explore methods to reduce the trade gap surplus by promoting imports. In the meantime, the Ministry of Finance, the State Administration of Tax and the General Administration of Customs are formulating new policies to further enhance this in respect of their own areas of responsibility. In fact I have never seen the government so focused on these issues, and the various ministries so well coordinated in my years of meeting with them. These may, I suspect, lead to future announcements of policies intended to increase China?s imports, some of which will be domestically driven. Indeed, getting consumers in China?s massive rural areas to buy imported products is a key area ? 70 percent of China?s population is in these regions. If China does not succeed in dealing with this issue then it will walk into serious conflicts over trade imbalances and RMB appreciation, leading to greater diplomatic, political and trade pressures. The U.S. Congress for example is already planning new trade sanctions against the PRC.

Next :
Sustainability of the Economy, Environment & Energy


To know more, the whole issue is available (after a free subscription) on China Briefing website with others archives
For more information on China’s legal and tax issues or to ask for professional advices in related matters, please write to info@dezshira.com

JV contracts and articles of association JV contracts and articles of association(0)

Both the JV Contract and Articles of Association are legally binding documents, meaning you may resort to the Contract to assert a right or claim damages against your partner, or your partner may make a claim against you. However, the legal binding effect of the JV Contract and Articles of Association is only between the partners who enter into this agreement, and the documents cannot serve as a defence against any third party or government authority. That is to say, if the agreement vested the compliance issue to one party in the JV, and non-compliance is detected later, both parties shall be jointly held legally liable. Nevertheless, it is arguable that the party who is specifically vested with the responsible for compliance issue should be liable for the whole responsibility.

Contractual JVs vs Equity JVs

There are two types of JVs in China, the Equity JV (EJV) and the Co-operative JV (CJV) (sometimes known as the Contractual JV). They may appear similar on the surface but have different implications for the structuring of your entity in China. Here we explore the differences, provide practical advice on structuring, tips on investment drawbacks, land use rights and profit distribution.

An EJV is a joint venture between Chinese and foreign partners where the profits and losses are distributed between the parties in proportion to their respective equity interests in the EJV, but the foreign partner shall hold more than 25% of the equity interest in the registered capital of the EJV. The company enjoys limited liability is a ?Chinese legal person?.

The CJV is a very flexible FIE where Chinese and foreign investors have more contractual freedom to structure cooperation. It is a joint venture between Chinese and foreign investors where the profits and losses are distributed between the parties in accordance with the specific provisions in the CJV contract, not necessarily in proportion to their respective equity interests in the CJV.

In the past, CJVs took one of two different forms – a true CJV which did not involve the creation of a legal person that was separate and distinct from the contracting parties; and a legal person CJV in which a separate business entity was established and the parties? liability was generally limited to their capital contributions.

In the case of a true CJV, each party was responsible for making its own contributions to the venture, paying its own taxes on profit derived from the venture and bearing its own liability for risks and losses. In contrast, a legal person CJV, the more prevalent form today, shares more of the characteristics of an EJV. The true CJV is rare today as few investors are willing to entertain the prospect of unlimited liability and the rest of this discussion only refers to legal person CJVs.
To know more, the whole issue is available (after a free subscription) on China Briefing website with others archives
For more information on China’s legal and tax issues or to ask for professional advices in related matters, please write to info@dezshira.com

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