I will not put America in ranks with them, but I think that the biggest upside of China is that it has no such insanely convoluted tax system as in America.
It's not as convoluted, but it's just as expensive.
That said, it's their right. I get it. Their nation, their tax rules. If I don't like the rules, I'm free NOT to start a business in China. That I understand, but to intimate that it's somehow "better" than the US is just being a little disingenuous. When it's all said and done, you'll likely pay more to do business in China. (But there's more potential upside too, so you need to take all these things into account.)
China and especially Shenzen has special tax exemption for high tech companies. The leadership understands that the key to winning a the economic race between countries is high tech, while other countries are still protecting older industries.
I have a friend who runs his software consultancy company out of China. It's ridiculously cheap to run a company there. Whether it's better or not, I can't really say because I don't have good tools to measure the risk, but it's definitely a lot less money than the US. Having said that, there are a lot of tax havens in the world and I'm not sure that China is the best one to set up shop in unless you are actively using Chinese resources.
Again, we are talking about the TAX SYSTEMS, not the overall business environments. Yes, I can have an entire floor full of C# programmers in Ningbo for a fraction of the cost of a floor full of C# programmers in Lincoln, NE, or Springfield, IL, or Nashville, TN. (And I won't even mention how much a floor full of programmers would cost in Austin, or SF, or Boston.) But my effective tax rate will be higher. Especially if you count "fees" as taxes.
What your friend is likely taking advantage of is the fact that tax rates are only one of the costs of doing business. So s/he probably takes clients in the US, and collects money in the US, but has the work done in China. Why? Because that way s/he can potentially enjoy a host of US tax breaks made possible by the convoluted nature of the tax system here.
The only money that needs to go to China is money to fund operations there. So your friend's profit margin will likely be orders of magnitude larger than if s/he tried to pull off a consultancy with all the programmers in the US.
Again though, the thing is, we were only talking about the tax systems, which are no better in China than they are in the US. That was my point. (On top of straight taxes, your friend might have some issues getting his/her money out of China as well come to think of it.)
It's even more interesting than that. There are no operations in china at all other than tax preparation. He hires an agency to staff the main office, which does nothing other than shovelling money around.
> It's not as convoluted, but it's just as expensive.
No running away from that, but you can't also run away from the fact that it is not humanly possible to profitably run a mainstream consumer electronics company outside of China. China stole the market not because it was making stuff cheaper than others, but because it was making it better than others.
In the end, you end up with lower net cost of running business.
> That I understand, but to intimate that it's somehow "better" than the US is just being a little disingenuous.
It is better to run business in China today, and that is nothing disingenuous.
I myself been in and out of electronics industry since 2007, and I can tell that not a single city ever came close in those 12 years to take the crown from Shenzhen.
You can't compare USA and PRC apples to apples, but China has advantages that America has no analogues for, or just anything to compare. USA plainly can't compete with China for the overall state of business climate in any real world industry.
Saying that plainly, I feel the attitude in USA is like "industry - bad, business - good." American bourgeois class has a collective psychosis, a delusion that you can somehow run a productive economy solely on stuff like banking, lawyering, consulting, and random "creative industries" that don't create anything. American bourgeois class is heading into nowhere following that path.
China does have a better overall business environment. You're correct when you assert that cities in the US can't compete as far as raw abilities.
But the original comment was about China's tax system, and that's all I was talking about. I was comparing only the tax systems. To say that China's TAX SYSTEM is better than that of the US is disingenuous.
I personally know 20 or so people who had ran business in China, and been personally involved in more or less intimate financial dealings of companies in China. Good sides:
1. Tax documentation is that damn simple
2. Of all countries, it is China that understands that you don't slaughter a chicken that will be laying golden eggs. That will sound very surprising, but the overall tax policy is more or less positive towards business.
Most mom and pops shops are not demanded formal business registration, and even if they decide to legalise, many provinces have tax free or reduced tax grace periods from 2 to 5 years for small businesses! You simply don't hear taxmen making ruckus in the industry here. The worst thing about I heard personally was company's few thousand fapiao submission being subjected to review one by one for one year.
3. Smaller income tax, and in overall fever people having to pay it results in overall cheaper life for ordinary people, and cheaper workers. If you run an export business, you can see that "decoupling" effect the most. The economy is tuned to that lowest common denominator, not the abstract "middle class earner."
All of that tells that China has very different view on taxation. Plain income, corporate and individual - completely chill, but for anything like good/transactions/services/other "money in motion" taxation is merciless.
I will not put America in ranks with them, but I think that the biggest upside of China is that it has no such insanely convoluted tax system as in America.