China
Global cooperation needed on rare earths
Author: Julie Klinger, Boston University
Today, as in 2010, the international discussion surrounding China’s dominance of the rare earth sector is partial and problematic. It is neither in China’s nor the international community’s interest for China to be responsible for supplying the majority of global demand for rare earth elements. In fact, in 2016, China released a Rare Earth Development Plan to protect domestic rare earth reserves while growing the domestic rare earth industry.
The point of this plan — and previous policy measures — is to change China’s position in the global division of toxic labour. For decades, China’s hinterlands and labourers bore the brunt of mining most rare earths for global consumption. After watching their crops fail, their livestock die, and their relatives succumb to cancer and bone diseases, people demanded better. Government responses have included consolidating the mining industry while incentivising research and development (R&D) in high-tech applications for rare earths.
In these times, China doesn’t want to mine rare earths for the rest of the world. And if recent news coverage is any indication, the rest of the world does not want to rely on China for the global rare earth supply.
Diversifying global rare earth supply chains is therefore a point of common interest between China and other major economies. But policymakers and investors in other rare earth-rich countries are instead fixated on geopolitically-charged rhetoric rather than the realities of the sector.
Rare earth elements are not rare, but they are crucial to our contemporary economy. They are expensive to produce, and refining them generates all manner of hazardous waste. In light of this, policymakers in Australia, the United States, Japan and other China-dependent economies must be straightforward about meeting these challenges. This requires careful regulation — not less, as some argue — and investments in multiple aspects of the rare earth supply chain.
Recent proposals to simply open more mines in different parts of the world may help ease the burden on China’s environmentally-exhausted mining regions. But it will do little to diversify the global supply chain if all raw materials are still routed through China for value-added processing.
The challenge is that downstream industries that produce rare earth-bearing technological components for critical information, energy and military technologies are struggling to beat the so-called ‘China price’. This has historically been low because it excluded the environmental costs of rare earth production — something the Chinese government now estimates amounts to several billion dollars in key mining areas. Without government support, firms outside China tried cutting costs in order to ‘beat China’, sometimes resulting in environmental and safety violations.
Abundant experience has already shown that such tactics do not provide lasting solutions. Companies that opened in Australia, Malaysia and the United States after 2010 struggled to address public fears of environmental mismanagement, and also failed to capture a significant market share from China. Private investment capital was there to help, but government policy was not. Despite an explosion of investment in the rare earth sector from 2011 to 2014, governments failed to provide a policy context to support the long-term sustainable growth of mining, refining, and value-added processing facilities outside China.
The missing ingredients were market certainty and environmentally-responsible practices. Without market certainty, companies are hard-pressed to invest in environmentally superior practices because the rules of the global free trade game mean that the cheapest producer wins. When China attempted to account for the environmental cost of rare earth production by increasing the price of exports, this actually created a global market more conducive to global supply chain diversification.
But China was sanctioned by the World Trade Organization and forced to remove all quotas and price adjustments in 2014. The subsequently lowered prices spelled disaster for almost all companies outside of China. If the international business community has learned nothing else in the last 30 years, it is that in the race to the bottom, China’s economy tends to win — albeit often at the expense of its workers.
Now, with the benefit of hindsight, policymakers can do things differently than they did post-2010 and perhaps this time actually solve the problems presented by China’s control over…
China
China Implements New Policies to Boost Foreign Investment in Science and Technology Companies
China’s Ministry of Commerce announced new policy measures on April 19, 2023, to encourage foreign investment in the technology sector. The measures include facilitating bond issuance, improving the investment environment, and simplifying procedures for foreign institutions to access the Chinese market.
On April 19, 2023, China’s Ministry of Commerce (MOFCOM) along with nine other departments announced a new set of policy measures (hereinafter, “new measures”) aimed at encouraging foreign investment in its technology sector.
Among the new measures, China intends to facilitate the issuance of RMB bonds by eligible overseas institutions and encourage both domestic and foreign-invested tech companies to raise funds through bond issuance.
In this article, we offer an overview of the new measures and their broader significance in fostering international investment and driving innovation-driven growth, underscoring China’s efforts to instill confidence among foreign investors.
The new measures contain a total of sixteen points aimed at facilitating foreign investment in China’s technology sector and improving the overall investment environment.
Divided into four main chapters, the new measures address key aspects including:
Firstly, China aims to expedite the approval process for QFII and RQFII, ensuring efficient access to the Chinese market. Moreover, the government promises to simplify procedures, facilitating operational activities and fund management for foreign institutions.
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
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 Implements New Policies to Boost Foreign Investment in Science and Technology Companies
- Q1 2024 Brief on Transfer Pricing in Asia
- New Report from Dezan Shira & Associates: China Takes the Lead in Emerging Asia Manufacturing Index 2024
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