China
Trump’s trade deal poses new dangers to Southeast Asia
Author: Calvin Cheng, ISIS Malaysia
After two years of alternating between tense escalation and fleeting periods of calm, the United States and China reached a preliminary phase one trade deal in December 2019. Government spokespersons in both countries promptly cheered the signing of the agreement — but observers around the world remain a little more circumspect.
The primary achievement of the phase one deal seemed to be tempering the uncertainty of further tariff escalation, with both sides agreeing to cancel their upcoming tariff hikes. But it ultimately does very little to improve things in the immediate term. The agreement did not remove existing tariffs on more than US$500 billion of US–China bilateral trade.
Discussions on the thorniest issues like state subsidies have been put off and left to a future ‘phase two’ agreement. Trade watchers also raise concerns about the purchase component of the deal that requires China to buy US$200 billion more US products over the next two years. The full text of the agreement specifically lists approximately 549 products at the HS 4-digit level for China to buy from the United States — covering agriculture, manufacturing and energy-related products.
Some of these concerns revolve around the ability of China to make good on its commitments to increase purchases from the United States amid lofty US purchase targets and rising risks to Chinese economic growth. But perhaps the more serious concern lies in the United States’ shift towards managed trade. Forcibly tying Chinese import requirements to the trade deal risks violating global trading rules, distorting and diverting world trade.
And here lies the crux of the problem. This kind of distortion and diversion threatens to create a new source of gloom for exporters in Southeast Asia, as China’s increase in US goods imports will likely come at the expense of other countries in the region.
Recent analysis suggests that agriculture exporters like Brazil, the European Union, Australia and New Zealand may see declines in Chinese agriculture demand as it buys more US produce. Similarly, non-US sources of manufactured goods like the European Union, Japan and South Korea may also be affected, while the energy-related products on the list would likely affect commodity exporters in the Gulf as well as Australia.
Countries in the Southeast Asian region may not be spared. Of the main exporting economies in the region, ISIS Malaysia estimates suggest that Malaysia remains the country with the highest exposure. US$52.7 billion worth — about 83 per cent — of Malaysian exports to China are of products similar to the 549 products listed in the phase one purchase agreement and thus at risk of losing market share to US producers.
Separated into broad product classes, Malaysian exports of four categories could be the most vulnerable — electronics and electrical parts and equipment; food and beverage-related products; industrial chemicals and metals; and energy-related products like petroleum and palm oil.
Looking deeper into specific product types — and filtering for products the United States has a sizeable market share of — the data indicates that Malaysia’s exports of chemicals compounds such as rare-earth metals, organo-sulphur compounds, ethyl alcohol and acids appear particularly susceptible. Food-related products like vegetable oils, cocoa and coffee products and sugar confectionery also appear to be at risk.
The Philippines and Singapore are the next most-exposed economies in Southeast Asia, with 82 per cent and 66 per cent of exports to China affected by the phase one purchase agreement, respectively. In the Philippines, at-risk products are primarily in agricultural commodities like coconut products, fruit and nuts. In Singapore, at-risk products span refrigerators and disk drives, industrial chemicals like phenols, petroleum oils and organic compounds.
Vietnam and Thailand are relatively less exposed, with less than 65 per cent of exports to China affected by the purchase agreement in the phase one deal. Still, Vietnamese exporters of cereals, vegetable and fish products should be wary, as should Thai exporters of industrial chemicals and vegetable products.
While this phase one deal does ease anxieties surrounding further trade escalations between the United States and China, it also brings new risks and fresh unknowns. In any case, trade protectionism and tariffs have become the new normal.
Since the beginning of the year alone, US President Donald Trump has broadened Section 232 national…
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
- Is journalist Vicky Xu preparing to return to China?
- Guide for Foreign Residents: Obtaining a Certificate of No Criminal Record in China
- China Unveils Plan to Upgrade Industrial Equipment
