China
China’s Pearl River Delta Development: A game changer for Hong Kong
Some leaders in the region have warned that the Pearl River Delta is becoming less important to China’s economy and may even lose its power in China’s economic development.
“Hong Kong government has to think out of the box and take initiative to lead Hong Kong to break the bottle neck in economy development,” said Dr. Fang Zhou, Research Director of One Country Two Systems Research Institute (OCTSRI), a non-government public policy think tank in Hong Kong, at a seminar organized by Lau Chor Tak Institute of Global Economics and Finance at the Chinese University of Hong Kong in November 2016.
In the seminar, Dr. Fang shared with the audience his insights into the development of Pearl River Delta region and the implications to Hong Kong, and how the city can be taken to the next level.
According to Dr. Fang, China’s 13th Five-Year Plan outlined several regions as the country’s major regional development engines, such as Beijing-Tianjin-Hebei region, Yangtze River Delta region and also One Belt One Road.
But Greater Pearl River Delta, China’s long-time economic development engine in the past 20 years, is not included in this blueprint of China’s economy development for the following five to ten years.
Greater Pearl River Delta consists of Hong Kong Special Administrative Region, Macao Special Administrative Region, and the Pearl River Delta region of Guangdong Province.
Therefore some leaders in the region have warned that the Pearl River Delta is becoming less important to China’s economy and may even lose its power in China’s economic development.
“Such sense of crisis is not unfounded,” said Dr. Fang, citing Hong Kong’s GDP share of China’s GDP as an example. “In 1995, Hong Kong’s GDP was about 25% of China’s GDP, but in 2015, its GDP has shrunk to 2.7% of that of China.”
As the most dynamic region in China, Greater Pearl River Delta region, particularly Hong Kong, has long served as the bridge between China and the world, conveying trade and investment flows both ways.
“But that role has diminished in recent years as China has opened its borders and plugged itself directly into the global economy,” said Dr. Fang. “Obviously, Greater Pearl River Delta region, including Hong Kong, is less important now than in the past.”
To stay ahead of the game, Guangdong province has implemented a series of reforms, such as upgrading its economic industrial structure and enhancing urban infrastructures, aiming to maintain its economic status in China.
For example, Guangdong province used to be the world’s factory, but facing rising labor costs and intense global competition, it is upgrading its economy from a labor-intensive and high-energy consumption manufacturing industry to high-tech industries, such as telecommunications, biomedicine and new energy industries.
Meanwhile, an intercity rail transport network featuring three circular and eight outbound routes will be built by 2020. The network will connect all Pearl River Delta cities and create a “one-hour intercity circle”.
According to Dr. Fang, Guangdong province is also forging closer cooperation with Hong Kong and Macao through policies such as developing Lok Ma Chau Loop into a higher education area with supplementary R&D facilities and connecting Hong Kong and Macao via infrastructure constructions, including the Hong Kong-Zhuhai-Macao Bridge, and the Hong Kong-Shenzhen Western Express Line between the airports of Hong Kong and Shenzhen.
As the transportation between Hong Kong and Pearl River Delta region is getting more convenient, Hong Kong will be expecting more visitors from mainland China. In light of this, Dr. Fang suggested that Hong Kong should be prepared to respond to these changes and challenges by adjusting its urban planning effectively.
He went on to share that in the past decades, Hong Kong’s urban development direction was mainly towards the south of Kowloon, but now as the connection between Hong Kong and mainland China is getting closer, the urbanization need in the north of Kowloon is imperative as well.
So for example, he suggested that Hong Kong government can build more shopping centers in New Territories near the border of Shenzhen to cater for shoppers and tourists from the mainland, leading them to explore the north of Kowloon and helping to ease the over-crowdedness on Hong Kong Island.
According to the statistics of the Hong Kong Census and Statistics Department, due to the rising number of mainland visitors to Hong Kong, the gross proceeds of the retail industry had grown by 1.3 times between 2002 and 2011; however, the retail floor space had increased only by 30% during the same period, leading to the rise of rents and commodity prices.
“Obviously, retail is one the major economic activities of Hong Kong and the demand far exceeds the supply. However, the government didn’t take sufficient measures to address the problem in the past decade. This has not only caused a lot of missed business opportunities for Hong Kong, but has also led to the discontent among Hong Kong people towards mainlanders,” said Dr. Fang.
Another example is the coordination among the airport authorities of Hong Kong, Shenzhen, Guangzhou, Zhuhai and Macao. According to Dr. Fang, Guangzhou Baiyun Airport, Shenzhen Airport, Hong Kong International Airport, Zhuhai Airport and Macao Airport have all started their constructions of new runways or terminals to enlarge air traffic capacities. Most of the constructions will be finished by mid 2020s.
By then, the air traffic among these airports will be more congested and the competition among them will also be fiercer. Hence, to fully utilize the capacities of these airports and meet the growing demand of air traffic services, Dr. Fang suggested that coordination and cooperation is the key.
He further pointed out that the runways in Shenzhen Airport and Macao Airport are vertical from north to south, whereas those of Hong Kong International Airport are horizontal from west to east, which would lead to more congested air traffic and unhealthy competitions in the region. So it is necessary for the airport authorities in these cities to coordinate with each other in advance in order to ensure the efficiency of air space and maintain a healthy competition.
“Airports in Hong Kong, Shenzhen and Macao are all close to each other geographically,” Dr. Fang said. “If we had planned and better coordinated when the airports were under construction in 1990s, we would’ve made better use of our resources in air traffic.”
“If Hong Kong government can take the initiative to seize the opportunity to cooperate with other major Pearl River Delta cities now and in the future, Hong Kong’s role as a super connector in the region will be more vital and special, which undoubtedly will also enhance the city’s competitive strength and bring Hong Kong to the next level,” Dr. Fang concluded.
By Fang Ying, Senior Writer, Chinese Business Knowledge@CUHK
This article is republished with permission by China Business Knowledge at Chinese University of Hong Kong Business School. You can access the original article here.
China
Q1 2024 Brief on Transfer Pricing in Asia
Indonesia’s Ministry of Finance released Regulation No. 172 of 2023 on transfer pricing, consolidating various guidelines. The Directorate General of Taxes focuses on compliance, expanded arm’s length principle, and substance checks. Singapore’s Budget 2024 addresses economic challenges, operational costs, and sustainability, implementing global tax reforms like the Income Inclusion Rule and Domestic Top-up Tax.
Indonesia’s Ministry of Finance (MoF) has released Regulation No. 172 of 2023 (“PMK-172”), which prevails as a unified transfer pricing guideline. PMK-172 consolidates various transfer pricing matters that were previously covered under separate regulations, including the application of the arm’s length principle, transfer pricing documentation requirements, transfer pricing adjustments, Mutual Agreement Procedure (“MAP”), and Advance Pricing Agreements (“APA”).
The Indonesian Directorate General of Taxes (DGT) has continued to focus on compliance with the ex-ante principle, the expanded scope of transactions subject to the arm’s length principle, and the reinforcement of substance checks as part of the preliminary stage, indicating the DGT’s expectation of meticulous and well-supported transfer pricing analyses conducted by taxpayers.
In conclusion, PMK-172 reflects the Indonesian government’s commitment to addressing some of the most controversial transfer pricing issues and promoting clarity and certainty. While it brings new opportunities, it also presents challenges. Taxpayers are strongly advised to evaluate the implications of these new guidelines on their businesses in Indonesia to navigate this transformative regulatory landscape successfully.
In a significant move to bolster economic resilience and sustainability, Singapore’s Deputy Prime Minister and Minister for Finance, Mr. Lawrence Wong, unveiled the ambitious Singapore Budget 2024 on February 16, 2024. Amidst global economic fluctuations and a pressing climate crisis, the Budget strategically addresses the dual challenges of rising operational costs and the imperative for sustainable development, marking a pivotal step towards fortifying Singapore’s position as a competitive and green economy.
In anticipation of global tax reforms, Singapore’s proactive steps to implement the Income Inclusion Rule (IIR) and Domestic Top-up Tax (DTT) under the BEPS 2.0 framework demonstrate a forward-looking approach to ensure tax compliance and fairness. These measures reaffirm Singapore’s commitment to international tax standards while safeguarding its economic interests.
Transfer pricing highlights from the Singapore Budget 2024 include:
This article is republished from China Briefing. Read the rest of the original article.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.
China
New Report from Dezan Shira & Associates: China Takes the Lead in Emerging Asia Manufacturing Index 2024
China has been the world’s largest manufacturer for 14 years, producing one-third of global manufacturing output. In the Emerging Asia Manufacturing Index 2024, China ranks highest among eight emerging countries in the region. Challenges for these countries include global demand disparities affecting industrial output and export orders.
Known as the “World’s Factory”, China has held the title of the world’s largest manufacturer for 14 consecutive years, starting from 2010. Its factories churn out approximately one-third of the global manufacturing output, a testament to its industrial might and capacity.
China’s dominant role as the world’s sole manufacturing power is reaffirmed in Dezan Shira & Associates’ Emerging Asia Manufacturing Index 2024 report (“EAMI 2024”), in which China secures the top spot among eight emerging countries in the Asia-Pacific region. The other seven economies are India, Indonesia, Malaysia, the Philippines, Thailand, Vietnam, and Bangladesh.
The EAMI 2024 aims to assess the potential of these eight economies, navigate the risks, and pinpoint specific factors affecting the manufacturing landscape.
In this article, we delve into the key findings of the EAMI 2024 report and navigate China’s advantages and disadvantages in the manufacturing sector, placing them within the Asia-Pacific comparative context.
Emerging Asia countries face various challenges, especially in the current phase of increased volatility, uncertainty, complexity, and ambiguity (VUCA). One notable challenge is the impact of global demand disparities on the manufacturing sector, affecting industrial output and export orders.
This article is republished from China Briefing. Read the rest of the original article.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.
China
Is journalist Vicky Xu preparing to return to China?
Chinese social media influencers have recently claimed that prominent Chinese-born Australian journalist Vicky Xu had posted a message saying she planned to return to China.
There is no evidence for this. The source did not provide evidence to support the claim, and Xu herself later confirmed to AFCL that she has no such plans.
Currently working as an analyst at the Australian Strategic Policy Institute, or ASPI, Xu has previously written for both the Australian Broadcasting Corporation, or ABC, and The New York Times.
A Chinese language netizen on X initially claimed on March 31 that the changing geopolitical relations between Sydney and Beijing had caused Xu to become an expendable asset and that she had posted a message expressing a strong desire to return to China. An illegible, blurred photo of the supposed message accompanied the post.
This claim was retweeted by a widely followed influencer on the popular Chinese social media site Weibo one day later, who additionally commented that Xu was a “traitor” who had been abandoned by Australian media.
Following the publication of an ASPI article in 2021 which exposed forced labor conditions in Xinjiang co-authored by Xu, the journalist was labeled “morally bankrupt” and “anti-China” by the Chinese state owned media outlet Global Times and subjected to an influx of threatening messages and digital abuse, eventually forcing her to temporarily close several of her social media accounts.
AFCL found that neither Xu’s active X nor LinkedIn account has any mention of her supposed return to China, and received the following response from Xu herself about the rumor:
“I can confirm that I don’t have plans to go back to China. I think if I do go back I’ll most definitely be detained or imprisoned – so the only career I’ll be having is probably going to be prison labor or something like that, which wouldn’t be ideal.”
Neither a keyword search nor reverse image search on the photo attached to the original X post turned up any text from Xu supporting the netizens’ claims.
Translated by Shen Ke. Edited by Shen Ke and Malcolm Foster.
Asia Fact Check Lab (AFCL) was established to counter disinformation in today’s complex media environment. We publish fact-checks, media-watches and in-depth reports that aim to sharpen and deepen our readers’ understanding of current affairs and public issues. If you like our content, you can also follow us on Facebook, Instagram and X.
Read the rest of this article here >>> Is journalist Vicky Xu preparing to return to China?
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