Last month, China Law Blog’s own Steve Dickinson participated in a panel discussion on taxes in China and how they impact the Chinese economy and in turn, doing business in China. The discussion was ably moderated by Eric Chai, Executive Director for the Private Wealth Association in Singapore. In addition to Steve, the panelists included:
Grace Shi, Ecovis R&G Consulting Ltd., Beijing, China.
Kristina Koehler-Cluccia of the Koehler Group, Hong Kong.
Peter Wilson, Director of Global Tax, Simmons Gainsford Group, London, UK.
The highlights are almost too numerous to mention, but seeing as how it is important that I do so, I shall, with a particular emphasis on the discussions most relevant to foreign companies seeking to negotiate China’s tax system to thrive in doing business there. The full transcript can be found here, at taxlinked.net.
Steve started the discussion by talking about how so many foreign SMEs still do not realize that China is dead serious about collecting taxes from foreign companies:
STEVE: I can start with that from my experience. The issue we face with small and medium businesses is that in the old days — prior to 2008 — China did not tax foreign investors in China and China did not impose an income tax on any of its citizens. So many people who have spent a lot of time in China have the impression that either China does not have a tax system that applies to foreigners, or they mistakenly believe that the tax system is very low and that tax will be a trivial factor in their businesses in China.
Now all of this is not true. China is actually now a very high tax jurisdiction and China imposes many kinds of taxes on business transactions beyond just the normal income tax. And I find that in my inbound transactional work the companies doing the investment have virtually never done a sound tax analysis before they consider operating in China. They look at many other factors but they don’t look at tax, and this leads to many problems down the road.
So the first hurdle that we have to confront with our small and medium clients is in convincing them that tax even matters in China. Those of us who live here find that kind of an odd point of view, but when I bring foreigners in that’s the consistent position that people take and it can cause lots of trouble.
Kristina Koehler and Grace Shi concurred:
KRISTINA: Yeah, maybe I could just add on to that a little bit as a next stage. I think also a lot of—well, obviously a lot of foreign investors that come into the market, they’re not aware of how the tax administration works, what is decided upon in Beijing, how it then filters down into the various cities, and how then you might have various interpretations of the tax law and the tax regime. And in some cases you may even have different rates.
I think that all is then combined together with the fact that when you Google ‘what is tax in China’ or you search for different tax definitions or different tax rates, you find such a variety of information from what was historic and what is actual rates today.
And people in general, even if you are a CFO or a finance manager, you’ll just get such differing points of view and different information on your plate that you don’t even know how to digest it or interpret it. So it is also a situation in China where you really do need to have an expert on the ground to guide you and to help you create that tax analysis. But just as a funny point to add on to Steve, most of my small, medium-sized clients, let alone doing a tax analysis, creating a budget just in itself for the investment into China is sometimes pulling teeth as well.
GRACE: Yeah, also the fact that actually China from the tax perspective, from the legislation and the administrative regulation point of view, China is really in developing. But on the very positive side, yeah, we can also see China has been more actively participating on the cross-nation efforts to the new order of the international tax system. For example, for China, also during the BEPS since 2013 and now already achieved some good results in tracking tax evading.
And also China has also been trying to establish a tax system which is more sophisticated and also in the high end and international standard. So we can see for the corporate tax reforming, we can see China is also doing something and being very active to improve the situation and the regulations and make it more international. And having said that, actually I think China wants to reinforce in the taxing rise to get more fair share from the international taxation bond. This is my view.
Then all panelists agreed that China is looking much more carefully at companies seeking to enter China with companies from various tax havens, such as the Seychelles, Cayman Islans or BVI:
KRISTINA: Maybe I’ll take that first and then the others can also comment on it. I can only vouch from the experience that I’ve had with my clients. And I’ve had clients invest in China through Seychelles companies, Cayman Islands, BVI. From my experience, it’s not necessarily the tax field that is questioning. It’s more the administration of industry and commerce during the application process that would be suspicious and would wonder why you are utilizing those types of entities to make the investment into China. And I see this more and more today, or at least in the last 12 months, than I ever have before.
In terms of taxes, obviously when you’re repatriating funds from China, the biggest key issue, especially if there is a double taxation agreement is, is there commercial and economic substance in the holding company. And again, if you have an offshore entity that you’re using as the investor, that’s then where difficulties lie. But other than that, I have not in my experience seen in any real issues in terms of utilizing other jurisdictions for investing into China.
GRACE: I agree with Kristina’s point. Actually from our knowledge there’s no blacklist for such conduct issue, but in China nowadays it’s a trigger more about passing through rules. If a company is just using the offshore company as a tax evading purpose and then China may challenge for the tax preference or treatments. And then this can be invalid. So while utilizing the offshore companies in these regions like the Seychelles or Cayman and so on, the investor needs to be careful.
STEVE: In my experience, I tend to form companies outside of the big areas, not in Shanghai and not in Beijing. And there’s no blacklist but there’s a great suspicion in these other cities about any kind of entity that is doing the company formation that has obviously been created purely for tax purposes and it isn’t the primary operating company. And there’s a lot of pressure outside of Shanghai and Beijing to force companies to abandon these intermediate structures and to have the real operating company be the actual investor.
The way they do it in the second-tier cities is they don’t have a blacklist. They just simply don’t process the transaction. They just sit. And eventually they’ll make it clear why they’re sitting. And the way they do it is they make it impossible to prove the existence of a company. Proving the existence of a Seychelles company or Brunei company or a Naru company or a Guernsey company now is really, really difficult in the second-tier cities in China. And they’re really pushing hard to have direct investment from the actual operating company and to abandon this whole concept of intermediary BVI-type, Cayman-type holding companies.
But this is only my experience in what we call the second-tier cities. I don’t have too much experience lately of problems in Shanghai and Beijing. They just run it through in those cities.
The panelists then spoke about China WFOE formation issues stemming from the use of even Singapore and Hong Kong pass through entities:
KRISTINA: Steve, I mean I think maybe another question that would be quite relevant and has become relevant for us, and I’d be curious to know your experiences in the second-tier cities on that, we are even getting—again, this is more associated with repatriation of funds—a lot of issues with Hong Kong and Singapore entities that are purely used intermediaries, as holding structures, as pass through entities.
We don’t have issues with those structures obviously in terms of incorporating, but I’d be curious to hear what your experiences are with that in terms of having Hong Kong and Singapore where you know it’s just a holding, you know it’s just been recently set up. Or even Grace, what have your experiences been with that.
STEVE: That’s an excellent question. In second-tier cities, like, for example, just the city of Qingdao, we’ve been openly told, “This is obviously a pass-through and we won’t approve it. If you want to repatriate funds, plan repatriating them to the operating company. We won’t accept the whole concept of using an intermediary.” And there’s clearly no legal basis for that position, but they have the power and they can say whatever they want. And so I would say five years ago almost every company we formed in China used a Hong Kong or a BVI intermediary. Now, almost zero use it for the reason that we can’t get it through anywhere.
GRACE: Yeah, I agree with Steve’s comments. Actually in Beijing and also Shanghai, there’s no law space for such kind of handling, but the tax officials do have the right to see when a shareholder is from the BVI, from some other offshore companies, they have the right to challenge you, to ask you to provide the documentations when you are doing the business in China. So this is, I think, the same.
KRISTINA: We’ve had a lot of issues with Hong Kong holdings lately, in the last 12, 18 months, in terms of repatriating funds and things like that, yeah. The tax officers are really cracking down on wanting additional documentation to prove the substance and to see payroll lists and operational activity, et cetera, yeah.
STEVE: What they’ll tell us is they’ll—even in the formation stage, totally without any legal basis—they’ll require that the holding company be in existence for three years, for example. And there’s no legal basis for that, but I’ve had that requirement imposed a number of times recently which causes us to just abandon the concept for most of our clients. Most of our clients aren’t investing for tax purposes. They’re just normal everyday investors and they just want to make stuff and so they’re fine, actually, most of our people with abandoning Hong Kong and taking out that layer of complexity.
The panelists then had — what to me anyway — an fascinating discussion on the Renminbi and currency rates:
STEVE: I just spent a whole day on a currency project for a big manufacturer so I’ve been doing a lot of research over the past months to work with this client. Currencies are a wonderful thing because if we understood what was happening, we’d all be like George Soros and we’d be very wealthy and we wouldn’t be worrying about seminars and things. But the experts, and I’m not one of them, have divided into two camps in my experience. And everyone has their own experience.
Both camps agree that there will be a gradual decline in the value of the Renminbi over the next five years. One camp holds that that decline will be very, very gradual, that the central government, the BOC, will hold the line and keep that reduction in value to be very, very, very moderate but steady over the next five years. The idea is that now that they’re in the IMF basket, they don’t want a sudden change to sort of sully the image of the Renminbi.
There’s another school who is a big group that believe that in the next two years the Renminbi will decline in value by a substantial amount, maybe 30%. And I don’t know, except that both groups agree that it will decline in value over the next five years.
KRISTINA: Yeah, from my side, I feel there’s just a lot of speculation on the market right now in regards to that. I think what is probably more interesting from my side is what do my clients think about it. And I think when the Renminbi currency dropped, there was no impact. I mean my clients were absolutely—they were not panicking, they were not horrified. But again, my clients in China are small companies. They are not the size of the multinationals, meaning that they don’t have ten branches and they’re not cash pooling, they’re not worrying about all of these issues. So for them it hasn’t impacted them tremendously yet.
STEVE: Well, from a client, different issue, that if you work in contracts in China, if you do that kind of business in China, Chinese contracts are very, very strange because they don’t worry—Chinese companies don’t worry about things that companies in other parts of the world worry about. And one of the things that’s very odd about China over the past 10 years is Chinese companies don’t build into their contracts an exchange rate adjustment mechanism.
But this change in August really did shake up the Chinese exporters and importers from America. And the reason why I spent the entire day today is that people are now starting to add exchange rate adjustment mechanisms into their sales contracts. And that was never done in the past and that’s a big change. And people are starting to notice that there is no—like I said, if we knew what was going to happen we would get rich. We don’t know what’s going to happen. And so what people now are trying to do is what rational people all over the world do, is they try to set up a mechanism where neither side takes exchange rate risk.
In the old days, one side or the other was taking all the risk. But now we’re seeing people that are doing a more rational approach and either hedging the risk with forward contracts or just writing their contracts so that no side takes any risk at all. So it’s not that they’re panicked, but they’re seeing that the old days where everything is just sort of fixed in stone is no longer the case anymore.
The panelists then turned to the economy and how China’s slowdown is impacting both foreign companies that do business in China and foreign companies that do business with China, with everyone agreeing that it is actually mostly helping foreign companies that do their manufacturing in China:
ERIC: All right. As you guys are working very closely with the business and also the SMEs, what’s your sense of the root reason that there’s this slowdown in the economy and what do you think needs to happen to jumpstart it.
STEVE: You like to ask really simple questions, don’t you?
ERIC: It’s more of economist question, but I think because you guys are working so much with the business people, what’s your sense of what’s happening in the economy slow down?
KRISTINA: I think I can only associate it with my industry, so go ahead, Steve.
STEVE: With the people that I work with, the economy is slowing down and it’s going to continue to slow down. There’s no question about that. And it’s a dream to think it won’t. And I’ve lectured on that subject for the past 10 years and now what I’m saying is coming true. And, of course, now that’s coming true everybody says, “Well, we thought that all along,” when they told me I was crazy 10 years ago. But what we’re saying is people are rational, our clients are rational. They’re responding to this shift very rapidly in two ways, my people.
One is for outbound OEM-type manufacturing, the slowdown in the economy is good because it means their customers are much—their factories in China are much more flexible and much more willing to work with them. The rapid increases in wages and rents and other things that were pushing the price of OEM-type products being exported from China are abating so it’s a very good development for them.
And then for people that are coming in to the China, people are shifting away from wanting to sell into the retail market; consumer goods and luxury goods. And what we’re seeing now is people are more focusing on old-fashioned technology transfer where the Chinese factories and manufacturers are attempting to upgrade their system so that they’re more efficient in the face of this general economic slowdown.
And so we have actually an increase in business oddly enough during this downturn, but it’s clear that the clients had very clearly identified where things are going and they are focusing on the areas that have a fit with the current economic environment.
KRISTINA: From our perspective, what we’ve seen—and again it’s nice to hear that as well—I mean we ourselves don’t have a slowdown. We still see a lot of inbound investment into China. I think there’s a tremendous shift now where it’s a lot of service-oriented businesses that are going into the market in order to service people versus, like Steve said, versus selling goods, going into the retail market, et cetera.
What I’ve also seen is as the luxury brands are cutting back, meaning they are not opening as many shops as they used to, or they are cutting down in the quantity that they have now and are focusing more on e-commerce, it’s given a room and a space for the mid-market brands to come in and take some of that market. And as there is a slow downturn, I’ve seen also consumers focus more or focus less on the luxury brands and more on this mid-market sector. So that’s the shift that I’ve seen recently.
And to jumpstart it, I think that is a—how to jumpstart the economy again, I think having an economy still at 6% or at 7% is fantastic when you look at it on a global scale and you see all other jurisdictions in the world and where they are today. So I don’t know if we have to necessarily jumpstart it. I think China is doing pretty good as it is. But again, you know, my perspective.
GRACE: Yeah. I think right now China is in a transition period purposely more focusing for the manufacturing now, for the investment, for infrastructures, for the road, for some real estate. But now also the government also realizes that it’s not okay because we are doing something that is not great for the whole country and we need to change. For example, for the service industry, we need to encourage for the consumptions and so on. So for this slowdown I think it is only a short period problem. After the whole transforming is finished, I think this will go to the more stabilized economic growth.
Steve then talked extensively on one of his favorite topics, China e-commerce:
STEVE: There are two big issues related to e-commerce. China is moving to become dominated by e-commerce far more than any country in North America or Europe. And there are a lot of reasons for that that I won’t go into.
The first issue we talked about here. I have lots of friends in China and I have lots of friends who sell on Taobao and not one of them has ever paid a penny of tax to the Chinese government. I mean it’s never happened. That’s why they sell on Taobao because they don’t want to pay tax. And it’s not that they reduce their tax. They don’t pay a penny of tax.
Now what the Chinese government has said—I mean they did some policy papers recently—they’ve said that they want to go to the owners of the websites, in other words JD and Alibaba and Amazon, and force the owner of the website add the tax from the people who are on the site. Now what that means for Taobao and Tmall is that if they do that, the site will empty out and no one will be there anymore because people are there specifically to avoid paying tax. And that’s a big problem in China and no one has a solution for that.
The other problem, from my perspective, and maybe Kristina’s perspective in e-commerce, is that Alibaba is not a Chinese company and Tencent is not a Chinese company. Sina is not a Chinese company. Weibo is not a Chinese company. Even Amazon China is not a Chinese company. They’re all virtual variable interest entities. They’re foreign companies. And the fact is China excludes foreign companies from participating in e-commerce in China. And that is a big issue because that’s what all my clients want to do. They want to do e-commerce in China and they’re excluded.
There are two points of view in China on what to do about that. In recent reports from the government, from the central government, from the state council, they’ve talked about splitting the Internet into two pieces. One piece would be information; news and movies and things like that, but basically news, and have that remain under Chinese control. But that they would take e-commerce and make that a unique type of Internet activity and allow foreign participation into e-commerce. And the people who run the Shanghai Free Trade Zone have talked about doing this. But every time they start to do it, they stop. And I think the reason they stop is they get a phone call from Alibaba that says, “We’re in but we don’t want anybody else in so why don’t you just leave it closed.” And so there’s been no progress on that issue.
And then the third issue, which Kristina mentioned, is there has been progress on trying to extract tax from imported products that come in to Tmall and do the e-commerce structure. And Alibaba has actually participated in a very large pilot program that’s based in Hangzhou where Alibaba is located, and they claim that they’re working to solve the problem. But I haven’t personally seen any claims on resolving that, because once again that’s the whole reason people use e-commerce in those sectors is to avoid tax. And once the tax is imposed, then the great burgeoning development of Chinese e-commerce may follow a different path. I don’t know what that would be but it would be different.
The panelists then discussed foreign companies getting their money and their profits out of China, a question our China lawyers seem to get asked pretty much every week:
ERIC: All right. Since it’s always very interesting developments and nothing is as clear as crystal in China. So moving on to this topic, which is fairly interesting, is also that individuals and companies are going to China because of the opportunities. But when you are profitable, when you do make some money, how do you remit funds oversees? And what the tax implication is. As far as we’re concerned, I think the currency is totally controlled with restriction, but what are your experiences on remitting funds and tax implications?
GRACE: Now this is the really day-to-day service we are helping the client to do. Every day as a company, I want to remit my service, I want to remit the royalties, I want to remit the service fees. How can I do that? So this is really a hot topic. And actually in China there are several kinds of tax you need to pay before you remit the money out. So simply saying, for example, for the salaries and so on, you have to pay the individual income tax before you remit the money out. And for some services you need to pay some VATs and withholding tax before you pay the money out.
And also for some special things, like the dividends and some royalties for the withholding tax is also need to consider. So in China before you pay the money out, you need to pay the tax first and then you need to apply kind of tax certificates showing to the bank and then the money can be paid out. Otherwise it’s quite difficult for you to repatriate the money out of China.
KRISTINA: I think just to add on to what Grace said, lately from my own experience, as Grace mentioned, you have to pay the taxes first. And the issue at that point is what documents do you need to show the tax bureau in order to be able to repatriate. And that’s where a lot of issues have arisen in terms of showing proper contracts, making sure the contracts are in Chinese, having the right terminology in the contracts, having reasonable rates and calculations for licensing fees, royalty fees, marketing fees, management fees. And it’s always the belief of many foreign investors that, “Oh, this is such an obstacle. This sounds like so much work that needs to be involved in terms of paperwork, et cetera.”
Be assured it’s the tax advisors themselves who are doing the work and with their experience they have ways of negotiating with the tax officers to repatriate funds. But I will say this, whereas in 2003 really the tax officers were not looking at contracts and they were just putting their stamp of approval to make the repatriations, times have certainly changed whereas today they really do look at the documentation. They may ask for additional documentation than they ever did before.
They will answer back to you with more questions, particularly with dividend repatriation. They’re going to look at the commercial and economic substance of the holding company, et cetera. Just one final point to mention there. Always look at your double taxation agreement. Look at the rates that are applicable and what you can achieve when you want to repatriate funds.
STEVE: And it’s important to understand the background of the situation. There’s a two-step process. We tell our clients you can repatriate your profits as a dividend. And China has been very good. Unlike many other developing countries, China has not pulled the rug out from under people and changed the rules in midstream. They’ve been very consistent with the rule that you can repatriate your profits as a dividend. However, you can only repatriate your profits as a dividend, which means you have to have reported the profits to the government and paid the tax on the profits, which means you have to wait till your tax return is done before you can repatriate.
And I have had clients over time—this is very common—where they don’t want to wait till the end of the year and after their profits have been reported. They want to send money out now. And so what they do is they set up consulting contracts between the Chinese entity, the WFOE, and the parent in the United States. And they pay money to the parent as a service fee. This is where transfer pricing comes in but it also comes in to what’s becomes the big issue in China.
We represent—I’m sure a lot of you do—we represent a lot of service companies. We have service contracts in China and it’s an American company or European company providing service in China. It used to be they would just do the services and the Chinese company would pay the bill, end of story. Now, it’s just what Kristina and Grace described. It’s a long, complicated, very detailed, highly documented process that many people aren’t used to and rebel against. But when they rebel against it, it means they don’t get their money. Why?
A report just came out today. Over the past 10 years, US$ 1.7 trillion has been illegally sent from China overseas; $1.7 trillion. And the primary mechanism for doing that is fake contracts where a Chinese parent company has a subsidiary in Indonesia and they say, “Okay, Indonesian subsidiary explore the Indonesian waters for oil and we’ll pay you $100 million for that service.” And then they send $100 million to Indonesia. Well, where does that money go? It goes to Switzerland.
So fake contracts, our clients aren’t involved in fake contracts. Our clients are just normal people doing work. But they get caught up in the concern with these fake contracts and so they get inspected with a fine-tooth comb. That’s issue number one.
Issue number two is five years ago the Chinese authorities—I don’t know, Grace and Kristina, what your experience is—but five years ago the Chinese authorities did not impose VAT or business tax when foreign companies provided services in China. But now they consistently impose a kind of tax.
You never know. Sometimes it’s withholding, sometimes it’s VAT, sometimes it’s business tax; every jurisdiction is different. But they impose some kind of tax. And this is a big shock because people that were making $100 now are making $70 because 30% is getting chinked out for tax. And this is a huge issue and people that just get irritated and complain never get a resolution because this is just the way it is now.
And for us, for example, all our contracts have to be in Chinese now. And our invoices have to be in Chinese. And they have to be signed for a service contract. They have to be signed and chopped in Chinese. And you say, “Well, we never did that before,” “Fine. That means you don’t get your money.” So it’s been a big huge—this has been the biggest change maybe in my own personal practice is this area in services with the new taxes that have been imposed on. And they’re all completely justified. There’s nothing unjustified about the imposition of tax. They just didn’t used to do it. But now they do.
GRACE: Yeah, right. Actually, also because the Chinese tax office also pays more attention to the profit shifting because they realized the companies in China, they want to shift profit to overseas countries. That’s why they pay more attention, ask for more documentation, and so on. So I think it’s also what in the future I can foresee is we’ll be more and more strict managed by the tax bureaus.
KRISTINA: I also agree with Steve. We’ve seen a shift in our own practice in terms of European or US or even Australian clients coming to us and saying, “We don’t actually have an entity in China. We’re providing a service there, but could you do a review on a contract we’re about to sign and give us a tax analysis.” That’s becoming an increasing part of our business in regards to helping them. And it’s nice to see that companies are thinking ahead of time before actually signing or negotiating these contracts.
Steve then talked extensively how foreign companies fail to appreciate the need to engage in China tax planning, or to understand and, more importantly, pay their China taxes, especially the VAT tax:
STEVE: The issue that I have, I mean you may think, Kristina, which earlier she was being very frank and she said her big problem is getting her clients to even do a budget at all. And that sounds crazy but it’s actually true that we get people who come in and they say to me, “Steve, what’s the registered capital for this project?” I said, “I refuse to tell you.” “Tell me how much money you need to do the project.” “I don’t want to tell you what’s the registered capital numbers is. Tell me how much money you need.” And they’re dumbfounded. “Why do I have to tell you that? It’s irrelevant.” “Well, no it’s not irrelevant.”
And with respect to tax, here’s the issue I find, and Grace and Kristina can comment. What I find is that, Kristina and Grace, when I get the CFO involved, they almost adamantly refuse to consider the Chinese tax system. They look at their budget and then they make their decision on how much tax they’re going to pay based on the system in their home country. And they make two big mistakes. The first mistake they make is they assume the rate is low, and it’s not. It’s high.
The second mistake they make is they think they can do tax planning. They think they can work out a loophole and avoid paying tax. And my experience in China is China doesn’t do loopholes. There is the code and there’s how much you have to pay. The code is short compared to the US code, it’s short, and you get to pay that tax. And as soon as you talk to one of these local tax bureaus about tax planning and doing special techniques to reduce the tax burden, you just end up in trouble. Not in a good area, in a bad area. You have to expect to pay the tax and that means income tax, VAT tax, business tax, and exorbitant taxes on your employee.
VAT is 17%. I don’t have a single American client that understands what a 17% VAT tax means on their bottom line when they’re doing trading. And yet they say, “Oh, I don’t have to pay the 17%. Some guy that I met in the airport told me I can get out of that. I don’t have to pay it.” And that’s the problem, Kristina and Grace, with people talking to old China hands and telling stories. The story they get is the wrong story. “Oh, don’t worry, you won’t really have to pay that tax. We never pay it out in the countryside in Dongguan or in the suburbs of Qingdao or the suburbs of Jinan. We never actually pay that tax.” Well, the locals don’t pay it but the foreigners do. And if they don’t, they end up in a lot of trouble.
And then the final thing I want to mention that’s a shock to people is that the tax officer is in your face every month in China. There’s none of this do it and then at the end of the year submit some forms on a piece of paper. Individual human beings from the tax office are in your office or you’re in their office every single month and they only have one goal, not to help you out but to extract more money from you. And they’re the powerful people in the local…
Once your company is approved, the people that have power over you and that exercise power over you on a day-to-day basis is the tax office. And they do. And so this notion that we can just forget them and not worry about it is the biggest misconception that the people I bring into China have. And they’ve suffered mightily from having that misconception because their business goes from highly profitable to zero profit really fast once all the taxes. Perfectly legitimate authorized tax, no funny stuff. Perfectly standard taxation hits them from being highly profitable to negative very, very quickly.
And five years ago the locals, the country people, were just glad that you were there. That time is over. The locals are in there collecting tax. They’re not just happy to see you. They’re happy to see you to collect the tax. And you better be prepared to pay or forget it. Don’t come. It’s too much risk.
Again, for the full transcript of this discussion, including a long discussion on China real estate taxation, go here.