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Foxconn Not A High-tech Enterprise Under China's New Standard?

With the cancellation of Shenzhen's local standards and the adoption of China's new national standard regarding high-tech enterprises, companies like Foxconn may no longer meet China's definition for being high-tech, which could greatly affect their tax payments.

Foxconn's company introduction says that "Foxconn group is a high-tech enterprise, invested at mainland China by Hon Hai Precision Industry Co., Taiwan, professionally dealing with R&D and production in mainland China". This introduction seems to not allow the company the privilege of enjoying China's preferential policies for high-tech companies, for according to China's new rule, high-tech companies must be those that register in the Chinese mainland; own self-owned intellectual property rights for their main products or services through more than five years' exclusive permission or three years' self-development, donation or acquisition; and whose products belongs to a special category.

In addition, according to China's national rule, 30% of staff at high-tech companies must have a college diploma and technical staff with technology-related diplomas must account for more than 10% of the company's total staff. Their R&D expenditure in Chinese mainland should also be no less than 60% of their global R&D expenditure. The income from high-tech products or services must account for more than 60% of the company's total income. Interestingly, Shenzhen's local standard says that high tech companies should have 3% of their technical staff with technology-related diplomas, and their annual R&D expenditure should account for 3% of their annual sale income.

According to local media, Foxconn has more than 600,000 employees across the world, including 370,000 in Shenzhen. Among its employees, 90% are labor-intensive workers and the company's investment in R&D still accounts very little part of its annual sale income of USD45 billion. All this means that Foxconn may no longer be a high-tech enterprise under China's new definition unless it takes some measures to upgrade itself.

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