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A World of Investment

A World of Investment
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CPL Consulting discusses the global business model and capital investment budgeting in China.

Global Business Model
When establishing companies or increasing investment in China, many investors are often confronted with a choice: in the face of increasing changes in
the Chinese market, how much capital should be invested?
In the context of global economic integration and making decisions on investment in the Chinese market in the global industrial chain, correct capital budgeting should be able to meet and promote the development needs of the business.
The company’s stability and future success often depends on its capital investment strategy. We know that it is usually very difficult to recover the costs of bad investments. Therefore, investors should be able to weigh up the benefits and risks of investments in China.

Business Scope and Cycle Matching
The business scope of the company to be invested in and the global industrial chain are the most important issues affecting the investment budget in China. For example, new product R&D and production in the new company will undoubtedly require a great deal of capital investment.
Another concern is the speed of cash flow in the project investment. As investors have to take the time value of money into account due to exchange rates, as money can be worth more or less from day to day. Capital should be invested in installments according to the development needs of the corporate life cycle, and there is the possibility to make use of the profits made in China for re-investment.

Cash Flow
Both the company and its investors pay attention to corporate cash status; especially the fluctuation range of cash flow. Forecasting future cash flow is one of the most important tasks in decision-making on investments in China. It is necessary to budget for the registered capital, purchase of equipment, procurement of goods, bonds and other capital requirements.
Due to complex Chinese examination and approval procedures, it takes four to six months from initial investment to obtainment of a Chinese business license, and requires constant cash investments during this period.

Impacts of Taxes and Capital Costs
In addition, in terms of capital withdrawal, investors should think from the beginning of capital investment about tax planning related to asset disposal. Making decisions on capital structure, investors should also take capital costs into account. Corporate capital structure can be affected by China’s tax system in different ways, especially for companies with large taxable incomes or unstable business profits.

Budgeting for investments in China can also be affected by many external factors, such as changes in the RMB exchange rate, China’s foreign exchange control, and the costs of capital recovery in China.
CPL provides you with an in-depth understanding of your challenges in China and is capable of providing your Chinese companies with comprehensive multi-disciplinary solutions to maximise your investment efficiency, by virtue of our accumulated experience in tax, legal and financial fields.

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