China
Coronavirus’ economic impact in East and Southeast Asia
Author: Anne Oeking, AMRO
As the number of coronavirus cases continues to rise around the world, there are deep concerns over the potential economic impact of the virus. The virus originated in China, and given the size of China’s economy, a slowdown there from the COVID-19 outbreak will spill over to the rest of the ASEAN+3 region. The ASEAN+3 Macroeconomic Research Office (AMRO) estimates that the COVID-19 epidemic could deduct as much as half a percentage point from the economic growth of some regional economies in 2020.
Outside of China, the impact is also being felt in the rest of the ASEAN+3 economic bloc, which comprises the 10 member states of the Association of Southeast Asian Nations as well as China, Japan and South Korea — through three main channels.
The most immediate impact on the region has been the disruption to travel, tourism and related industries. Flight suspensions, travel advisories, restrictions and bans on visitors from China, China’s order to stop outbound travel groups and a more cautious approach to travel owing to fear of contagion have all led to a sharp drop in tourism in the region — both Chinese tourists as well as those from other countries.
During the SARS outbreak in 2002–2003, tourism from China to countries such as Japan, South Korea, Malaysia, Singapore and the Philippines dropped by as much as 50 to 90 per cent before rebounding fully the following year. But regional economies have become much more dependent on Chinese tourism since then. Today, visitors from China make up around 40 per cent of all tourist arrivals in the region — up from less than 20 per cent before SARS. Even a relatively short-lived embargo on Chinese travel will have a much bigger impact this time around, even if the subsequent rebound is strong enough to offset the initial pull-back.
Tourism’s contribution to economies of the region has increased almost everywhere since the early 2000s. In 2018, the tourism industry is estimated to have contributed more than 30 per cent of Cambodia’s GDP, and more than 20 per cent for Thailand and the Philippines. A drop in visitor arrivals from China and other countries is damaging for the ASEAN+3 region, especially for those countries with large tourism sectors and high volumes of Chinese visitors.
The epidemic is also affecting trade within the ASEAN+3 region. The manufacturing sector has been disrupted and domestic demand in surrounding countries is taking a hit. Many regional economies, such as Singapore and Vietnam, are deeply integrated within regional and global supply chains and China is an important link in these networks. Notably, trade between China and the ASEAN region has grown strongly over the last two decades, so any disruption in China will impact regional trade and production. Still, these disruptions are expected to be transitory — trade is expected to rebound in line with China’s demand for intermediate and final goods once the epidemic recedes.
Many countries in the ASEAN+3 region have a rapidly growing number of confirmed cases of COVID-19. The spread of the virus will affect these economies directly via impact on the healthcare sector, as well as indirectly through measures implemented to contain the outbreak, such as quarantines or travel restrictions. It also impacts business and consumer confidence, and triggers a change in public behaviour to avoid contagion. Just as in China, it will hurt economic activity across the region — though likely to a lesser degree — as a result of disruptions to domestic production and investment and reduced spending on goods and services.
If the Chinese economy slows down more than expected, or if the epidemic lasts longer and becomes more contagious than current estimates suggest, the impact on regional economies will be more severe.
That said, the ASEAN+3 economies still have policy space to mitigate the impact and shore up growth. China has already implemented measures to support its economy, including providing financial support to affected sectors. Other countries are likely to follow suit.
Skilful use of various policy levers by regional policymakers is more important than ever, given that uncertainty about the epidemic is high and the risk of continuing contagion and a global economic slowdown is rising.
Anne Oeking is an economist at the ASEAN+3 Macroeconomic Research Office (AMRO), Singapore.
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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