China
South Korea’s US–China conundrum
Author: Jae Ho Chung, Seoul National University
Seoul is being pulled back and forth between Beijing and Washington as the two compete for regional influence. South Korea must figure out how to navigate these choppy waters while putting its own interests first.
In the 27 years since diplomatic normalisation between South Korea and China, relations have gone through ebbs and flows. Four principal crises stand out. The first two were the ‘garlic battle’ trade dispute of 1999–2000 and the historiographical controversy over the ancient dynasty of Koguryo in 2004. In 2010, a rift formed after China one-sidedly defended North Korea when it sank the South Korean navy ship Cheonan and shelled Yeonpyeong Island. The relationship further worsened in 2016 over South Korea’s deployment of the Terminal High-Altitude Area Defense (THAAD) system.
The latter two crises were over hard security issues and included third parties (North Korea and the United States), pushing South Korea–China relations into a stage where conflict resolution is more difficult.
Since the Lee Myung-bak administration (2008–2013) prioritised improving the South Korea–US alliance, the succeeding government under Park Geun-hye (2013–2017) found a window of opportunity for rebuilding Seoul’s damaged relations with Beijing. Consequently a view spread that South Korea was tilting toward China at the expense of US relations. Much of the ‘improvement’ through 2013–2015 was an outcome of excessive politicisation of foreign affairs and an exaggeration of the ‘friendship’ between Park Geun-hye and Chinese President Xi Jinping.
But this friendship shattered, perhaps too easily, when THAAD became a thorny issue. Seoul clearly over-estimated the strategic bond it had cultivated with Beijing under the slogan of ‘trust diplomacy’.
Notable among South Korea’s problems is the factor of ‘proxy competition’ between China and the United States. Despite their ever-intensifying strategic competition, the nuclear balance of terror prevents Washington and Beijing from engaging in any direct war. China’s lack of allies precludes proxy wars with US allies as in the Cold War. What is happening now is mostly proxy competition (or third-party coercion) where the United States and China both continually ask of other states the exclusivity question — ‘are you with us or against us?’
South Korea’s struggle with proxy competition manifested in its agonised decisions over whether to join the China-initiated Asian Infrastructure Investment Bank and whether to support the tenet of ‘Asian security by Asian peoples’ at the 2014 Conference on Interaction and Confidence-Building in Asia. Other decisions included whether to take part in the 2015 V-Day commemoration in Beijing, to deploy THAAD, to support the Permanent Court of Arbitration’s ruling on the South China Sea, to accept Washington’s demands against Huawei and to support the Indo-Pacific strategy.
Amid growing proxy competition, South Korean President Moon Jae-in has sought to improve relations with China even by making concessions. Seoul dispatched three special envoys in two months to dissuade Beijing from applying THAAD-related sanctions to no avail, and defined the THAAD deployment as ‘temporary’ until a general environmental assessment is completed (which is still pending). It then decided to forgo the option of suing China at the World Trade Organization for its THAAD retaliation.
More importantly, South Korea also agreed on the ‘three no’s position’ — no additional THAAD deployment, no joining the US missile defence system and no development of trilateral security cooperation between South Korea, the United States and Japan into a military alliance. These major measures, and even Moon’s 2017 state visit to China, produced only minor changes to China’s THAAD sanctions.
South Korea–China relations since early 2018 remain ‘undefined’ as Seoul’s diplomacy has been fully devoted to a rapprochement with Pyongyang. Three traits characterise South Korea’s approach: underestimating the threat posed by North Korea, overestimating China’s willingness to resolve the North Korean conundrum, and undervaluing its own alliance with the United States. As far as the North Korean issue is concerned, South Korea’s approach is more closely in line with China’s.
While Seoul’s affinity toward China might have decreased somewhat since the much-criticised state visit, progressive politicians in power are not necessarily willing to give much credit to the…
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.
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- New Report from Dezan Shira & Associates: China Takes the Lead in Emerging Asia Manufacturing Index 2024
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