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China

Chinese chains on competition

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It is very easy to claim that China works to suppress economic competition — one only need point to the state sector.

A stronger claim is that China’s suppression of competition remains intense compared to market economies, with effects starting at home but also extending overseas. And that the outlook for more open competition is poor.

This should ring true at least initially, since the Chinese Communist Party (CCP) loathes any sort of political competition even down to the level of individual dissidents and small social groups. Extending beyond politics is the desire to control information — the CCP casts itself as the only legitimate information source for all decision making, including economic.

The setting for economic competition is therefore discouraging. In general, what matters most for large economies is not exports or foreign investment, but fundamental policies at home pertaining to capital, innovation, labour and land. An assessment of these policies in China reveals intense repression.

Despite talk of reform, the mobility of Chinese workers remains restricted for reasons of ‘social stability’, with the effect of reducing competition and productivity in the labour market.

The state also controls most land, a powerful tool to tilt the playing field. Preferred recipients can receive free land while unwanted firms are blocked from land purchases entirely. These are potentially serious export subsidies and barriers to entry respectively. Land is tied to warping competition for the sake of ‘innovation’. It is the government that decides which sectors are highly valued at any time, leaving firms in many other sectors starving for land and capital. This practice long pre-dates the now somewhat infamous ‘Made in China 2025’ policy.

Capital allocation is also anti-competitive. The banking system sees only a few private players, being otherwise dominated by the state. The rise of non-bank financials has been driven primarily by moving assets off state bank books. On the borrower side, state-owned enterprises (SOEs) have privileged access to loans and creditors cannot force them into bankruptcy. Others can be credit-starved.

Nor is the future bright. While October’s 19th Party Congress provides an opportunity for change, labour market reform is likely to maintain its painfully slow pace. There is again talk of sharper land ownership rights for private entities, but we have heard this before.

Stilted corporate competition was tipped at the 2013 CCP plenary meetings, a time wrongly hailed by some as heralding reform. What was actually promised was more private cooperation with the state sector — the exact opposite of what is needed. Since then, the state sector has seen a series of mergers, which is termed ‘reform’ but turns oligopolies into monopolies.

Suppression of economic competition goes hand in hand with suppression of political and information competition to give the Party control over Chinese society. There is a further goal: the giant enterprises created by free land, free capital and enforced consolidation in the home market are to become global champions. Of course, other countries are expected to offer a fair and open competitive environment.

The inconsistency belies President Xi’s support of globalisation. With China now the world’s premier manufacturer, Beijing advocates open trade in most manufactured goods. But service imports are inhibited both indirectly through capital and land subsidies and directly through assured market share for state-owned banks, insurers, telecom firms, media, professional services and so on, which are never allowed to fail.

The hypocrisy extends beyond services and trade. Foreign companies are limited to peripheral investments in energy, petrochemicals, shipping and other ‘sensitive’ industries.

Chinese officials still bemoan the unfairness of the United States rejecting China National Off-Shore Oil’s (CNOOC) 2005 bid for Unocal, though an American attempt to buy CNOOC remains inconceivable.

It is not just isolated cases. While China is deliberating whether to create new SOE monopolies, the anti-monopoly law is employed with increasing frequency. It is not being used against SOEs — they are largely exempt. Instead, the biggest targets are what Beijing sees as ‘dangerously competitive’ multinationals.

There is a counter-argument: there’s far more economic competition in China than 40 years ago. Of course this is true, and important. But the same cannot be said in comparison to China 10 or even 15 years ago. Pro-competitive reforms disappeared under Hu Jintao and show no signs of reappearing under Xi Jinping.

The extent of and trend in China’s repression of competition…

Author: Derek Scissors, AEI
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Trends and Future Prospects of Bilateral Direct Investment between China and Germany

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China and Germany experienced a decline in direct investment in 2023 due to global economic uncertainty and policy changes. Despite this, China remains an attractive destination for German FDI. Key industries like automotive and advanced manufacturing continue to draw investors, although FDI outflows from Germany to China decreased by 30% in the first three quarters of 2023. Despite this, the actual use of foreign capital from Germany to China increased by 21% in the same period according to MOFCOM. The Deutsche Bundesbank’s FDI data and MOFCOM’s actual use of foreign capital provide different perspectives on the investment trends between the two countries.


Direct investment between China and Germany declined in 2023, due to a range of factors from global economic uncertainty to policy changes. However, China remains an important destination for German foreign direct investment (FDI), and key industries in both countries continue to excite investors. We look at the latest direct investment data between Germany and China to analyze the latest trends and discuss key factors that could shape future business and commercial ties.

Direct investment between China and Germany has undergone profound changes over the past decade. An increasingly complex investment environment for companies in both countries has led to falling two-way FDI figures in the first three quarters of 2023, in stark contrast to positive trends seen in 2022.

At the same time, industries with high growth potential, such as automotive and advanced manufacturing, continue to attract German companies to China, and high levels of reinvested earnings suggest established firms are doubling down on their commitments in the Chinese market. In Germany, the potential for electric vehicle (EV) sales is buoying otherwise low investment among Chinese companies.

According to data from Deutsche Bundesbank, Germany’s central bank, total FDI outflows from Germany to China fell in the first three quarters of 2023, declining by 30 percent to a total of EUR 7.98 billion.

This is a marked reversal of trends from 2022, when FDI flows from Germany to China reached a record EUR 11.4 billion, up 14.7 percent year-on-year.

However, according to China’s Ministry of Commerce (MOFCOM), the actual use of foreign capital from Germany to China increased by 21 percent year-on-year in the first eight months of 2023. The Deutsche Bundesbank’s FDI data, which follows standards set by the IMF, the OECD, and the European Central Bank (ECB), includes a broader scope of transactions within its direct investment data, including, broadly, direct investment positions, direct investment income flows, and direct investment financial flows.

Meanwhile, the actual use of foreign capital recorded by MOFCOM includes contracted foreign capital that has been concluded, including the registered and working capital paid by foreign investors, as well as the transaction consideration paid for the transferred equity of domestic investors.

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.

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Manila blasts China’s ‘unprovoked aggression’ in latest South China Sea incident

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China’s coast guard on Saturday fired a water cannon at a Philippine supply boat in disputed waters in the South China Sea, causing “significant damages to the vessel” and injuring its crew, the Philippine coast guard said.

Manila was attempting to resupply troops stationed on a ship at the Second Thomas Shoal, known locally as Ayungin Shoal, when the Chinese coast guard and maritime militia “harassed, blocked, deployed water cannons, and executed dangerous maneuvers against the routine RoRe (rotation and resupply) mission,” said the Philippine National Task Force for the West Philippine Sea.

The West Philippine Sea is the part of the South China Sea that Manila claims as its jurisdiction.

The Chinese coast guard also set up “a floating barrier” to block access to shoal where Manila ran aground an old warship, BRP Sierra Madre, to serve as a military outpost.

The Philippine task force condemned China’s “unprovoked aggression, coercion, and dangerous maneuvers.”

Philippines’ RoRe missions have been regularly blocked by China’s coast guard, but this is the first time a barrier was set up near the shoal. 

The Philippine coast guard nevertheless claimed that the mission on Saturday was accomplished.

Potential consequences

The Second Thomas Shoal lies within the country’s exclusive economic zone where Manila holds sovereign rights. 

China, however, claims historic rights over most of the South China Sea, including the Spratly archipelago, which the shoal forms a part of.

A Chinese foreign ministry’s spokesperson on Saturday said the Philippine supply vessel “intruded” into the waters near the shoal, called Ren’ai Jiao in Chinese, “without permission from the Chinese government.”

“China coast guard took necessary measures at sea in accordance with law to safeguard China’s rights, firmly obstructed the Philippines’ vessels, and foiled the Philippines’ attempt,” the ministry said.

“If the Philippines insists on going its own way, China will continue to adopt resolute measures,” the spokesperson said, warning that Manila “should be prepared to bear all potential consequences.”

Chinese Maritime Militia vessels near the Second Thomas Shoal in the South China Sea, March 5, 2024. (Adrian Portugal/Reuters)

U.S. Ambassador to the Philippines MaryKay Carlson wrote on social media platform X that her country “stands with the Philippines” against China’s maneuvers.

Beijing’s “interference with the Philippines’ freedom of navigation violates international law and threatens a free and open Indo-Pacific,” she wrote.

Australian Ambassador to the Philippines Hae Kyong Yu also said that Canberra shares the Philippines’ “serious concerns about dangerous conduct by China’s vessels adjacent to Second Thomas Shoal.” 

“This is part of a pattern of deeply concerning behavior,” Yu wrote on X.

Edited by Jim Snyder.

Read the rest of this article here >>> Manila blasts China’s ‘unprovoked aggression’ in latest South China Sea incident

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Foreigners in China: 2024 Living and Working Guidelines

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China’s Ministry of Commerce released updated guidelines for foreign businesspersons living and working in China in 2024. The guidelines cover accommodations, visas, work permits, and emergency protocols. It also outlines responsibilities regarding social security premiums and individual income tax obligations. prompt registration for temporary accommodation is required upon arrival.


The updated 2024 guidelines for foreign businesspersons living and working in China, released by the country’s Ministry of Commerce, outline essential procedures and considerations covering accommodations, visas, work permits, and emergency protocols.

On January 25, 2024, China’s Ministry of Commerce (MOFCOM) released the latest version of the Guidelines for Foreign Businessmen to Live and Work in China (hereinafter referred to as the “guidelines”).

The document is divided into four main sections, labeled as:

Furthermore, the guidelines elucidate the regulatory framework governing foreign businessperson’s responsibilities concerning social security premiums and individual income tax obligations.

This article provides a comprehensive overview of the guidelines, delving into their significance and implications for foreign businesspersons in China.

Upon arrival in China, prompt registration for temporary accommodation is required.

If staying in a hotel, registration can be facilitated by the hotel staff upon presentation of a valid passport or international travel documents.

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.

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