State by State: China and Illinois Trade

Being the 5th most populous state in the U.S, Illinois has been the economic engine of the Midwest region and a national hub for global commerce. The state owns the third largest intermodal port in the world, after Hong Kong and Singapore. As the state of innovation, Illinois is home to 32 Fortune 500 companies, involved in everything from agribusiness to life sciences, aerospace and financial services. 

In 2013, the GDP of Illinois was US$720.7 billion and ranked 5th in the U.S. Advanced manufacturing is the largest industry in Illinois, due to the state’s highly trained workforce and superior logistics and infrastructure. Other major industries include financial services, agribusiness, coal technology, energy & recycling, life sciences, logistics and information technology. 

Trade and Exports

Exports form a significant portion of Illinois’ economy, and totaled over US$68.18 billion in 2014. The state’s exports have grown faster than the rest of the nation. In 1974, Illinois became the first state to open a trade office in China, and China is now the state’s third largest export market. Last year, Illinois exports to China totaled US$4.7 billion, a small decrease over 2013. The top five exports are agriculture and related products, transportation equipment, machinery (excluding electrical), waste and scrap and computer and electronic products. In 2014, imports from China reached US$29.5 billion, making China the state’s second largest trade partner.

Investment Opportunities 

E-commerce/ Cloud Computing

China is currently experiencing huge growth in e-commerce. It is estimated that e-commerce in China will be worth US$540 billion by 2015, and by 2020 worth more than e-commerce in the U.S., the UK, Japan, Germany and France combined. China has recently opened up its e-commerce and cloud computing industry – all equity restrictions on e-commerce enterprises have been lifted, which means that foreign entities are allowed to invest in and set up enterprises that engage in e-commerce. China announced earlier this year that foreign investors are now allowed to set up wholly foreign-owned e-commerce companies in the Shanghai Free Trade Zone to provide online data processing and transaction processing services. This includes cloud computing. 

Illinois is an information technology leader, home to well-known e-commerce company Groupon and innovative companies such as Grubhub, a Chicago-based online food ordering company. Illinois is also the birth place of the world’s first cellphone, remote control, LED and Web browser. 

RELATED: Foreign IT Giants Rush to Tap China’s Cloud Computing Market

Advanced Manufacturing

China is already the second largest air travel market in the world, leading to considerable opportunities for foreign investment in the country’s aerospace and aviation industry. Foreign investors are more likely to find opportunities in China’s aerospace and aviation industry through component systems (engines, hydraulics and electronics) and services (design engineering, precision machining and training), which will be worth at least US$8 billion over the next five to ten years, or more than US$32 billion over the next 20 years. 

Tax Treaty – US Trade with China    

The United States has signed a Double Tax Treaty with China. This can reduce tax burdens under certain circumstances in both trade and any China legal establishment. Please seek professional advice for specific China investment requirements. Treaty details can be found here.

Further Support from Dezan Shira & Associates

Dezan Shira & Associates can service Illinois-based companies that are looking to further develop their operation in China. The firm can help companies establish a direct office in the country and can guide them through the affiliated tax, legal and HR issues that come with doing so. To arrange a free consultation, please contact our U.S. office at usa@dezshira.com.

For further Illinois-Asia trade data, please see our articles on trade with India, ASEAN and Vietnam.

Using China’s Free Trade & Double Tax Agreements
In this issue of China Briefing, we examine the role of Free Trade Agreements and the various regional blocs that China is either a member of or considering becoming so, as well as how these can be of significance to your China business. We also examine the role of Double Tax Treaties, provide a list of active agreements, and explain how to obtain the tax minimization benefits on offer.

Revisiting the Shanghai Free Trade Zone: A Year of Reforms
In this issue of China Briefing, we revisit the Shanghai FTZ and its preferential environment for foreign investment. In the first three articles, we highlight the many changes that have been introduced in the Zone’s first year of operations, including the 2014 Revised Negative List, as well as new measures relating to alternative dispute resolution, cash pooling, and logistics. Lastly, we include a case study of a foreign company successfully utilizing the Shanghai FTZ to access the Outbound Tourism Industry.

Using China WFOEs in the Service and Manufacturing Industries
In this issue of China Briefing Magazine, we provide a detailed overview of the WFOE establishment procedures as well as outline the typical costs associated with running these entities in China. We hope that this information will give foreign investors contemplating entry into the Chinese market a better understanding of the time and costs involved.

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