China
China’s developing country status brings it few benefits in the WTO
Authors: Henry Gao, SMU and Weihuan Zhou, UNSW
Whether China is a ‘developing’ or ‘developed’ country for the purposes of the World Trade Organization (WTO) matters a lot to US President Donald Trump. Trump ignited a new front in the US–China trade war in July 2019 by tweeting that the world’s richest nations are masquerading as developing countries to get special treatment. They are ‘cheating’, according to Trump. He directed the US Trade Representative Robert Lighthizer to ‘use all available means to secure changes’ at the WTO.
Then Australia joined in. While in the United States, Australian Prime Minister Scott Morrison referred to China as a ‘newly developed economy’. He backed Trump by saying that, ‘Obviously, as nations progress and develop then the obligations and how the rules apply to them also shift’.
China is digging in. It stands by a statement from its Commerce Ministry spokesman Gao Feng in April 2019 that ‘China’s position on WTO reform has been very clear. China is the largest developing country in the world’.
What’s at stake? In practical terms, almost nothing. Trump and Morrison are demanding something that would give them little.
In the WTO, developing countries are entitled to ‘special and differential treatment’ set out in 155 rules. But none of those rules define a ‘developing country’. Instead, each member is able to ‘self-designate’, subject to challenges from other members.
Being recognised as a developing country was one of the three key principles on which China insisted when negotiating to join the WTO in 2001. It faced resistance. Several members cited ‘the significant size, rapid growth and transitional nature of the Chinese economy’.
In response, the WTO took what it called a ‘pragmatic approach’, meaning that China received hardly any of the special treatment that would normally be accorded to a developing country. For example, under the Uruguay Round of tariff reductions that applied to developing countries already in the WTO, China would have only needed to cut its average industrial tariff from 42.7 per cent to 31.4 per cent. Instead, it agreed to cut it to 9.5 per cent.
Similarly, it agreed to cut its agricultural tariff from 54 per cent to 15.1 per cent, instead of the 37.9 per cent that would have been required had it already been in the WTO. These cuts put its commitments on par with those of developed rather than developing countries.
On some issues, China’s commitments far exceeded those of even developed countries. For example, it agreed to eliminate all export subsidies on agricultural products, an obligation that developed countries were only able to accept 14 years later. It also undertook eliminating all export taxes, which are still allowed under WTO rules and still widely used by many governments. Many of China’s WTO commitments were imposed only on China, or the general rules were modified to either impose heavier obligations on it or confer less rights on it.
Contrary to popular belief, China received hardly any of the benefits that accrue to developing countries when it became a WTO member, besides the ability to use the title ‘developing country’.
After its accession to the WTO, China acted as a member of the developing country group and pushed hard for the group’s interests. In 2003, it joined India and Brazil in pushing developed countries to reform their agricultural trade policies while retaining flexibility for developing countries, a move that is yet to achieve success.
In the meantime, China enjoys little preferential treatment itself, partly because it has eschewed special benefits and partly because most of the transition benefits that were available to it have expired. Some of the provisions available to it are essentially voluntary on the part of the country offering them. Other times, the benefits available to developing countries are not available to developing countries with large export shares. At times, China has also actively forgone important benefits such as by not invoking its right to receive technical assistance under the WTO’s Trade Facilitation Agreement.
On some other issues, China’s sheer size has made it difficult to accommodate the country’s claim to developing country treatment. The negotiation on fisheries subsides, for example, would not be able to move without substantial commitments from China, since it implements one of the largest subsidies in the world.
In its position paper on WTO reform, China says it ‘will never agree to be deprived of its…
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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