China: Corporate Investment

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- China: Foreign Investment Regime
- China: Incentive Regimes
- China: Availability of Skilled Workers and Business Infrastructure

China: Foreign Investment Regime

Prior to 2004, foreign investment into China, although welcomed, was restricted in various ways, both in terms of structure and in terms of sector. Then, partly in response to a perceived need to be more encouraging, and partly in order to gain admission to the World Trade Organization, China gradually began to loosen up. By now, most sectors are fully open, and there are few remaining restrictions.

China made concessions in a number of areas in order to gain access to the WTO:

Until 2008, there were quite substantial tax incentive programs aimed at encouraging foreign investment, particularly in high technology sectors. Foreign investors were treated more leniently than equivalent domestic firms, from a fiscal perspective. But the Unified Enterprise Taxation regime brought into effect in that year largely removed the differences.

Before 2008 (see below), foreign investment enterprises (“FIEs”) of a production nature that expected to operate in China for more than ten years could apply for an exemption from income tax for two years, beginning from the first profit-making year, and a 50% tax reduction in the following three years. Starting from January 1, 2002, income derived from projects funded by additional capital injection was entitled to receive a tax holiday similar to a newly formed FIE if the projects fell within the “Encouraged” category of the new Industry Catalogue and the additional capital injection amount reached either of the following.

A range of other reductions and exemptions was available, subject to certain criteria. A reduced income tax rate of 15% was possible for production FIEs in the Economic and Technological Development Zones and for enterprises engaged in production or business operations in the Special Economic Zones. A tax rate of 24% was possible for production FIEs located in the different economic open zones, depending on the location of the project.

The Chinese authorities established special preferences for projects involving high-tech and export-oriented investments. Priority sectors included transportation, communications, energy, metallurgy, construction materials, machinery, chemicals, pharmaceuticals, medical equipment, environmental protection and electronics.

Foreign investors sometimes had to negotiate incentives and benefits directly with the relevant government authorities; some incentives and benefits were not conferred automatically. The incentives available included significant reductions in national and local income taxes, land fees, import and export duties, and priority treatment in obtaining basic infrastructure services.

Foreign enterprises transferring technology inside China were exempted from business tax; if the technology is advanced and with preferential conditions, the enterprise income tax was exempted with the approval of the taxation department under the State Council. Income obtained by foreign-invested enterprises (including research and development centres set up with foreign investment) through technological transfer was exempted from business tax.

China encouraged reinvestment of profits. A foreign investor could obtain a refund of 40 percent of taxes paid on its share of income, if the profit was reinvested in China for at least five years. Where profits were reinvested in high-technology or export-oriented enterprises, the foreign investor might receive a full refund.

In 2008, China unified the income tax treatment of domestic and foreign enterprises with the new Enterprise Income Tax Law (the “New Law”). The New Law, effective from January 1st 2008, provides for a 25% statutory rate that applies to both domestic and foreign-funded enterprises and, subject to transition relief, enterprises that have enjoyed preferential treatment. Many foreign-funded enterprises will face higher rates due to the new unified rate and the loss of tax holidays and certain other incentives, but new and high-technology enterprises may still benefit from a 15% rate.

The cabinet said that the new law would be phased in over five years. Companies that paid income tax of 15% will pay 18% in 2008, 20% in 2009, 22% in 2010, 24% in 2011 and 25% from 2012.

Companies that are exempt from taxes or have concessional rates will retain their preferences until the original expiration date.

Companies can make a one-time choice of the tax system that will be most beneficial.

The cabinet said the transitional steps targeted companies registered with industry and commerce administrations before March 16, 2007.

Companies in the western part of the country aren't affected by the new law but will continue to enjoy preferential rates under regulations jointly issued by the Ministry of Finance, the State Administration of Taxation and China's Customs authority.

Also, the country will offer incentives for key high-tech companies registered in special economic zones, including Shenzhen, Zhuhai, Shantou, Xiamen and Hainan, as well as in Shanghai Pudong New Area, on and after January 1st, 2008.

These companies must have proprietary technology and must comply with a range of requirements to be classified as high-tech enterprises.

For earnings collected within their district of registration, such companies would be exempted from corporate income tax for the first two tax years and pay income tax of just 12.5% from the third to the fifth tax years. Gains from outside these areas must be calculated separately.

Also included in the New Law are international taxation concepts wholly or partly new to China: the determination of residence under the “managed or controlled” concept; controlled foreign corporations; cost-sharing agreements; thin capitalisation; and deemed paid foreign tax credits. The New Law also strengthens transfer-pricing administration. The New Law only provides a framework of general tax provisions. Important details on the definition of numerous terms are left to the detailed implementation regulations and supplementary tax circulars.

In addition to the loss of tax holiday and reduced rate benefits, some withholding tax rates also increased under the New Law.

Hong Kong is the largest “foreign” investor in Mainland China, but with China’s WTO entry making the operating environment more transparent and predictable, firms increasingly are investing directly in the Mainland. As part of this trend, Shanghai is emerging as a major alternative to Hong Kong as a regional headquarters for foreign investors in China, although China’s limitations on currency convertibility continue to present problems for many investors, regardless of investment form, destination within China or origin.

China attempts to guide new foreign investment towards "encouraged" industries and regions. Over the past seven years, China has implemented new policies introducing incentives for investments in high-tech industries and in the central and western parts of the country in order to stimulate development in those less developed areas. A Catalogue of Foreign Investment took effect January 5, 2005, replacing the April 2002 Catalogue. The catalogue designates sectors in which foreign investment are encouraged, restricted or prohibited. Unlisted sectors are permitted.

According to an accompanying regulation to the catalogue, projects in “encouraged” sectors benefit from duty-free import of capital equipment and value-added tax rebates on inputs. The same regulation states that approval authority for “restricted” investments rests with the relevant central government ministry and may not be delegated to the local level. For a number of restricted industries, a Chinese controlling or majority stake is required. Industries in which foreign investment is prohibited include national defense, firearms manufacturing, most media content sectors, and biotechnology seed production.

China's WTO membership has certainly made for fundamental changes in the country's degree of engagement with other parts of the world. China has frequently resorted to the WTO's dispute mechanism, as have its trading partners, often with an outcome not in China's favour. In December, 2009, for instance, the WTO's Appellate Body confirmed that China's restrictions on the importation and distribution of certain copyright-intensive products, including films for theatrical release, DVDs, music, books and journals, are inconsistent with China's WTO obligations.

The ruling was the result of a dispute procedure initiated by the United States in April 2007, in which Washington sought to address three significant market access concerns.

First, the US accused China of prohibiting foreign enterprises and individuals from importing reading materials, audiovisual home entertainment products such as DVDs, music and other sound recordings, and films for theatrical release. The WTO panel report found that China's key importation restrictions on these products were inconsistent with its obligations under its WTO Accession Protocol. The panel also found that China's restrictions were not justified by the exception in the General Agreement on Tariffs and Trade (GATT) 1994 related to the protection of public morals.

Secondly, China prohibits foreign enterprises from distributing certain reading materials and from distributing music electronically. The US also believed that China imposes discriminatory operating requirements on foreign-invested distributors of reading materials and DVDs. The WTO panel report found that these prohibitions and discriminatory operating requirements were inconsistent with China's obligations under the General Agreement on Trade in Services.

Thirdly, the US complained that certain imported products face more burdensome requirements before they may be distributed in China than domestic products. The panel found that because of these requirements, China discriminates against imported reading materials in several significant ways in breach of the national treatment obligation in the GATT 1994.

"Today America got a big win," commented US Trade Representative Ron Kirk. "We are very pleased that the WTO has found against China's import and distribution restrictions on US movies, music, DVDs and publications."

"The Appellate Body's findings are key to ensuring full market access in China for legitimate, high-quality entertainment products and the exporters and distributors of those products," Kirk continued. "US companies and workers are at the cutting edge of these industries, and they deserve a full chance to compete under agreed WTO rules. We expect China to respond promptly to these findings and bring its measures into compliance."

The Appellate Body report, published December 21, called on China to eliminate the discriminatory treatment that US distributors of certain products face – such as discriminatory operating term and capital requirements – as well as to allow US companies to partner with Chinese enterprises in joint ventures to distribute music and other sound recordings over the internet.

"This case is also an important part of our efforts to combat intellectual property piracy," Kirk noted. "The panel and Appellate Body findings ensure that legitimate American products are granted market access so that they can get to market and beat out the pirates. This finding helps to ensure that America's creative ingenuity and innovation are protected abroad."

Chinese news agency Xinhua reported that China's Ministry of Commerce "expressed regret" over the loss of the appeal against the WTO ruling. According to the report, ministry spokesman Yao Jian said in an online statement that the characteristics of cultural products determined that they should be managed differently to other imports.

It is not always true, though, that legal pressure is necessary to compel China to open itself to international trade. In April, 2010, Western firms were able to welcome a decision by Beijing to ease procurement rules that effectively prevent foreign firms from supplying the Chinese government with computers and other technological equipment.

The procurement rules, known as China's 'indigenous innovation' policy, were drawn up in 2009, and required companies to obtain patents, trademarks and other intellectual property in China before any other country. However, in a draft of the new rules released for public comment on April 12, the Chinese government appeared to have relaxed these requirements so that companies which have legal rights over the intellectual property of the products may qualify to take part in the procurement process.

The European Chamber of Commerce in China said that the rule change represents "an important sign that policymakers in China recognize the role that fair competition plays in developing and enhancing China's high-tech capabilities," although it remains to be seen how the new rules work in practice.

Concerns remain over China's general stance towards the rest of the world, and in July, 2010, Chinese Premier Wen Jiabao reassured foreign investors of the stability of the country’s investment climate, countering fears that China’s economic environment is worsening.

Wen issued the reassurance at a meeting with Germany’s Chancellor Angela Merkel and a group of business leaders from China and Germany and added that his country would not block the export of rare metals needed in the manufacture of computers and mobile phones.

Wen countered an allegation that China’s investment environment had deteriorated by saying “I think it is untrue”. Senior executives from some of Germany’s biggest companies were present at the meeting, including Siemens and BASF, the chemical giant.

The business leaders called on the Chinese government to handle foreign investment with fairness and equity, though the value of trade deals between China and Germany already exceeds USD100bn, with foreign investments up by USD12.5bn in the last year.

Speaking to reassure foreign investors, the Premier said: “Those that have entered China all enjoy national treatment, as do Chinese companies, whether they are a foreign-funded company, a joint venture or a joint stock company”.

The meeting was seen as important as China is the world’s biggest exporter of rare earth minerals and is the EU’s largest trading partner.

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China: Incentive Schemes

NB: Some of the incentive regimes described in this section have been cut back or abandoned under the new Unified Enterprise Income Tax Law introduced in 2008. It is difficult to generalize: municipalities plough their own furrow to a great extent, although perhaps less so now than formerly, so it is always worth enquiring in a particular region what may be on offer.

The Special Economic Zones of Shenzhen, Shantou, Zhuhai, Xiamen and Hainan, 14 coastal cities, dozens of development zones and designated inland cities all promote investment with unique packages of tax incentives. The Pudong area in Shanghai is particularly noteworthy as a location for Chinese experiments in liberalization, which are then extended nationwide. In recent years, Chinese authorities have also established a number of free ports and bonded zones.

Various types of tax abatement have been available to foreign investment enterprises and foreign enterprises with establishments in China located in Special Economic Zones (SEZs), which are Shenzhen (including Shekou), Zhuhai, Shantou in Guangdong Province, Xiamen in Fujian Province and Hainan Province. Newly-established entities in such zones are usually free of tax for the first few years; and a reduced rate of 15% applies to foreign investment enterprises engaged in production or manufacturing activities located within the Pudong Development Zone in Shanghai and within the Economic and Technology Development Zones of the 14 Open Cities, which are Beihai, Dalian, Fuzhou, Guangzhou, Lianyungang, Nantong, Ningbo, Qingdao, Qinhuangdao, Shanghai, Tianjin, Wenzhou, Yantai and Zhanjiang.

Foreign investment enterprises engaged in production and manufacturing activities located within the Coastal Open Economic Regions (Liaodong Peninsula, Shandong Peninsula, Changjiang and Pearl River Deltas, and Southern Fujian, including Zhangzhou and Quanzhou Delta Areas) and within the 14 Open Cities, Provincial Capitals and Changjiang Cities are taxed at a reduced rate of 24%.

Foreign investment enterprises engaged in production and manufacturing activities in Beijing and Chongqing are also taxed at a reduced rate.

Tax holidays and significant reductions in the tax rate are available to the following:

In late 2003, China and Hong Kong signed six documents that set out the implementation details of the CEPA (Closer Economic Partnership Agreement) which came into force from January 2004.

The main feature of the agreement was the initial elimination of tariffs on 273 classes of goods imported from Hong Kong in the initial stage of the deal with further tariffs erased in 2006. The documents also finally set out the definition of Hong Kong service suppliers.

"We believe that the zero import tariff preference will make it more attractive to undertake in Hong Kong manufacturing of brand name products, or manufacturing processes with high value-added content or substantial intellectual property input," commented Henry Tang. A rush of multinational companies is said to be taking advantage of the CEPA deal, which makes location in a low-tax Chinese mainland Special Economic Zone an irrelevance for Hong Kong-based companies in many instances.

In November, 2004, the Chinese State Administration of Taxation announced an increase in export tax rebates for domestically-manufactured products catering for the information technology sector. According to the government announcement, the tax rebate was set to rise to 17% from 13%, and benefit makers of integrated circuits, liquid crystal displays and mobile telephone base stations, among other products.

The increase in the tax rebate was retroactively applied from 1st November, 2004.

In January, 2005, the second phase of the Closer Economic Partnership Arrangement (CEPA II) came into force. Under the trade liberalisation deal, from January 1 2005, Hong Kong originated products covered in 1,108 Mainland 2005 tariff codes may enter China tariff-free, while Hong Kong service suppliers will gain preferential access to the Mainland market in 26 service areas.

According to the government, applications for CEPA Certificates of Origin, or CO(CEPA), and Certificates of Hong Kong Service Supplier (HKSS) are increasing steadily, and the Trade and Industry Department has also started receiving applications for CEPA II.

The TID operates four funding schemes for small and medium enterprises which allow Hong Kong firms to secure financing enabling them to produce zero-tariff goods. The schemes also permit firms to hold trade fairs and exhibitions to promote their business in the Mainland and take courses about the opening-up of the Mainland market.

"Publicity about CEPA is a priority area of the TID's work,” the TID spokesman continued, adding:

"We will continue to proactively liaise with the business and professional communities to understand their needs and discuss with them appropriate policy measures that may help them.”

In October, 2005, Hong Kong and China reached agreement on liberalisation measures under the third phase of the Mainland and Hong Kong Closer Economic Partnership Arrangement.

The legal text of CEPA III was signed on October 18 by Hong Kong's Financial Secretary, Mr Henry Tang and China's the Vice-Minister of Commerce, Mr Liao Xiaoqi, after a High Level Meeting of the Joint Steering Committee under CEPA.

Welcoming the agreement, Mr Tang observed that the new measures will substantially build upon trade liberalisation already put into effect under the first and second phases of the CEPA.

"These additional measures will offer new business opportunities on the Mainland for Hong Kong enterprises and professionals and enhance Hong Kong's attractiveness to overseas investors. They will also help sustain Hong Kong's broad-based economic recovery and facilitate creation of new jobs in the private sector," he explained.

Under CEPA III, the Mainland agreed to give all products of Hong Kong origin tariff free treatment starting from January 1, 2006, upon application by local manufacturers and upon the CEPA rules of origin (ROOs) being agreed and met.

On trade in services, under CEPA III, there are 23 liberalisation measures spreading across 10 areas, namely legal, accounting, audiovisual, construction, distribution, banking, securities, tourism, transport and individually owned stores.

The Mainland has also agreed to allow Hong Kong legal representative offices to enter into association with Mainland law firms in different cities of the same province; and to allow Hong Kong people practising law on the Mainland to be employed at the same time by a law firm outside the Mainland.

All the liberalisation measures took effect on January 1, 2006.

China's State Council eased restrictions on the trading of the Chinese currency, the renminbi, in Hong Kong under an agreement between the Mainland and the Special Administrative Region to expand the scope of the Closer Economic Partnership Arrangement (CEPA).

Hong Kong importers are allowed to settle direct import trades from the Mainland in renminbi, while financial institutions in the Mainland can issue renminbi financial bonds in Hong Kong.

Additional new measures under CEPA also cover goods and services, and enhanced cooperation on intellectual property protection.

All measures took effect from January 1, 2007.

In July 2008, Supplement V to the CEPA was signed, expanding the total number of services sectors covered from 38 to 40.

The Chinese mainland has introduced 29 liberalisation measures covering 17 service sectors, including two new sectors - services incidental to mining, and related scientific and technical consulting services.

The measures came into force on 1st January, 2009.

Hong Kong and Guangdong also implemented a package of liberalisation and facilitation measures on an early and pilot basis to enhance mutual economic and trade co-operation.

HK Financial Secretary John Tsang and China's Vice-Minister of Commerce Jiang Zengwei signed the document.

Witnessing the signing, Chief Executive Donald Tsang observed that the new package will open more opportunities for Hong Kong traders who wish to enter the Mainland market.

The measures will not only bring mutual economic benefits but will also create a solid platform for enhancing economic integration between the two jurisdictions, he suggested.

For conventions and exhibitions, enterprises formed by Hong Kong service suppliers on a wholly-owned, equity joint venture or contractual joint venture basis in Beijing, Tianjin, Chongqing and Zhejiang will be allowed to organise overseas exhibitions on a pilot basis.

In banking, any Mainland-incorporated banking institution established by a Hong Kong bank will be allowed to locate its data centre in Hong Kong, subject to the fulfilment of certain requirements.

In construction and related engineering services Hong Kong professionals obtaining the mainland's registered Urban Planner or Supervision Engineer qualification will be allowed to register and practice in Guangdong regardless of whether they are registered practitioners in Hong Kong or not.

Restrictions on the proportion of the total capital contributed by mainland partners in forming construction and engineering design enterprises in the form of an equity joint venture or contractual joint venture on the mainland will also be removed.

In accounting, the validity period of the Provisional Licence to Perform Audit-related Services, applied for by Hong Kong accounting firms to conduct auditing businesses on a temporary basis on the mainland, will be extended from two years to five.

In addition to various other measures, the two sides also agreed to enhance co-operation in branding, trademark, e-commerce in the area of trade and investment facilitation, and to continue work on mutual recognition of professional qualifications in accounting and construction.

In February 2010, a total of 100 cartoon production companies in China passed scrutiny and became certificated by the Ministry of Culture, the Ministry of Finance and the State Administration of Taxation in order to gain entitlement to preferential tax treatment.

Selected as key players from about 400 candidates across the nation, these companies, 34 of whom have registered capital of at least RMB10m (USD1.47m), will be exempt from at least six types of taxes in 2010. Of these enterprises, 26 are located in Beijing, 15 in Jiangsu, 10 in Hunan, eight in Guangdong, and seven in Tianjin.

They will be entitled to preferential tax treatment in value-added tax, corporate income tax, business tax, import tariff, and import-related VAT. From May to July each year, provincial agencies will conduct annual inspections to ensure that the companies live up to expected standards in order to continue enjoying preferential tax treatment.

The Ministry of Culture published a policy statement in August, 2009, laying out China's ambition to become a big player in the industry, supported by the 300 million or more Chinese youngsters who watch cartoons. According to China Daily, Chinese cartoons shine on the world stage, now that cartoon channel Nickelodeon has launched ChinaToon, a one-hour segment showcasing original Chinese animations.

Xiao Yongliang, deputy dean of the School of Arts and Communication, Beijing Normal University, told China Daily that the government had promoted the industry since 2006 by investing, giving tax breaks and setting up an office to coordinate efforts. Xiao pointed out that China could learn from the US, where at "Disney, Pixar, or Dreamworks, there are special teams developing software to make cartoons, but in China, we only use foreign techniques."

The certification jointly carried out by the Ministry of Culture, the Ministry of Finance and the State Administration of Taxation is considered an important step to implement the nation's fiscal policy in support of animation enterprises in an all-around way.

In May, 2010, international transport services incorporated within China were granted an exemption from business tax under a notice issued by the Chinese government. The Notice, issued jointly by the Ministry of Finance and the State Administration of Taxation, applies to revenues generated from international and regional routes, and applied retroactively from January 1, 2010.

In a statement made to the Hong Kong Stock Exchange, Air China said that, based on actual air traffic revenue earned from international and regional routes, the airline would obtain an estimated benefit of approximately CNY549m (USD80m) for 2009.

The exemption applies to any firm or individual that provides international delivery services, including shipping companies, according to the ministry of finance website, and any tax already paid would be refunded.

Cosco Shipping Co., a unit of China Ocean Shipping (Group) Co., also announced an expected CNY42m saving for 2009 from the tax exemption.

In August, 2010, China said it would grant tariff and value-added tax exemptions on imports of qualifying scientific and technological equipment, components, and raw materials to be used on major approved strategic projects.

Circular [2010] 28 issued by the the Chinese State Administration of Taxation on July 24, 2010 entitled “interim provisions for special import taxes on major technology imports” states that, as from July 15, 2010, tax exemptions may be applied for imports that assist in the implementation of the State Council's national long-term scientific and technological development plan (2006-2020).

The Circular states that the imports should be in support of “major national strategic products, key generic technologies and major engineering research and development, and which help create an environment encouraging independent innovation”.

The exempted items can include supplies to the following sectors:

• Core electronics;
• High-technology universal chips;
• Basic software;
• Integrated circuit-manufacturing equipment;
• New generation wireless mobile communication networks;
• High technology machine tools and basic manufacturing equipment;
• Large oil and gas fields and coal bed methane development;
• Large-scale advanced pressurized water reactor and temperature gas cooled reactor nuclear power stations;
• Water pollution control and management;
• New genetically modified organisms; and
• New pharmaceuticals for prevention and treatment of some infectious diseases like AIDS and hepatitis.

In the same month, the government identified a need for Chinese shipbuilders to have more tax-friendly financial packages at their disposal. China overtook South Korea to become the world's top shipbuilding country for the first time in the first half of 2010.

In anticipation of the need to provide support services for shipping, Tianjin, China's third largest city has been nominated for development. Tianjin is located on the estuary of the Haihe River on Bohai Bay and is the main port of North China.

Incentives may be offered to foreign companies wishing to establish the right kind of shipping service offices there, which could include allocation of land and tax breaks.

With the approval of the National Development and Reform Commission, the Tianjin Shipbuilding Industry Fund was established at the end of 2009 with initial investments of CNY2.85bn (USD420m) and ambitions to raise CNY20bn.

Cui Jindu, deputy mayor of Tianjin recently announced that China's two major shipbuilders, China CSSC Holdings and the China Shipbuilding Industry Corp., intended participating in the fund.

A recent report indicated that the fund had already financed 45 new ship orders for domestic shipbuilders and fostered investments of CNY15bn in shipbuilding projects.

Tianjin has the ear of central government with regard to providing the right tax incentives for ship financing packages and is spearheading developments in this direction.

However, there are also complaints that ship-financing in China is hindered by red tape and tax regulations, especially a 5% tax on operating leases which some consider to be discouraging business. Other issues such as vessel registration procedures may also act as a disincentive.

Additionally, in August, China said it wanted to promote growth in the outsourcing industry by offering exemption from business (turnover) tax on offshore service outsourcing business in 21 cities.

According to a notice issued by the Chinese ministry of finance, the 5% business tax exemption was effective from July 1 this year until December 31, 2013 in Beijing, Tianjin, Dalian, Harbin, Daqing, Shanghai, Nanjing, Suzhou, Wuxi, Hangzhou, Hefei, Nanchang, Xiamen, Ji'nan, Wuhan, Changsha, Guangzhou, Shenzhen, Chongqing, Chengdu and Xi'an and refunds of tax already paid would be given.

Offshore service outsourcing income is defined as service revenue arising from contracts signed with offshore entities for the provision of information technology outsourcing, business processing outsourcing and knowledge processing outsourcing services.

Data provided in a report by the commerce ministry show that China is second only to India as a provider of outsourcing services, and in 2009, outsourcing service income generated in China increased by a record 151.9% to USD10.1bn.

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China: Availability of Skilled Workers and Business Infrastructure

China has a huge population, abundant labour resources and a relatively low level of wages. The Chinese work force is of a relatively high quality. Generally speaking, overseas-funded enterprises set up in China are satisfied with the quality of Chinese workers and technicians.

China's railway, highway, civil aviation and telecommunications sectors have been growing rapidly, and its urban and rural transport conditions have become convenient. Coastal areas have built or expanded large numbers of ports, wharves and berths, and enjoy excellent conditions for ocean-going transportation. Advanced modern telecommunications technology and equipment have found extensive use in China's telecommunications and telephone networks. Electricity supply to foreign-funded enterprises can be guaranteed. In many cities, facilities for foreigners' living, cultural entertainment and commercial services are complete.