China
China meets its limits in Micronesia
Authors: Denghua Zhang, ANU and Gonzaga Puas, Micronesian Institute for Research and Development
In December 2019, the President of the Federated States of Micronesia (FSM) David Panuelo paid his first state visit to China. The visit celebrated the 30th anniversary of diplomatic relations between the two countries.
The FSM is a Freely Associated State of the United States in the North Pacific. The United States provides defence, funding grants and access to US social services for Micronesian citizens under the Compact of Free Association (COFA) signed in 1986.
Signatories of the COFA receive such benefits in exchange for US control over the airspace and waters of these nations. The visit therefore provides a lens through which to observe China’s influence in the Pacific Islands amid growing geopolitical competition between China and the United States.
Some achievements of the recent visit include a visa waiver for passport holders from the two countries, agreement on the renovation of the Pohnpei state government complex with US$10 million worth of Chinese aid, a grant of US$12 million to the FSM for economic cooperation and a US$2 million donation to the FSM Trust Fund.
Much of China’s influence derives from its development assistance to the FSM. A main reason for Panuelo’s visit was to seek additional Chinese infrastructure assistance. Chinese aid to the FSM amounts to more than US$100 million over the past three decades.
China-funded infrastructure projects across the FSM’s four island states include the Chuuk State government complex, the Kahmar bridge and the FSM–China friendship sports centre. China donated one China-made Y-12 aircraft to the FSM and one passenger-cargo ship to both Yap and Chuuk states respectively. Chinese aid also comes in the form of capacity building through demonstration farms used to exhibit agricultural techniques.
In contrast to other Pacific island countries such as Tonga and Vanuatu, both of which have borrowed large concessional loans from China, the FSM avoids debt risk by only taking Chinese aid grants thanks to its policy of not taking loans.
The FSM is appealing to China in at least three ways. First, the FSM is one of only two North Pacific island countries that recognise China over Taiwan. Second, Chinese companies have been exploring economic opportunities in the FSM, with fisheries being their main focus. The federation spreads over 7.4 million square kilometres and is endowed with rich fisheries despite its small population of 105,000 people. Third, the FMS is situated along the second island chain next door to US military facilities in Guam and the Marshall Islands which gives it significant military and strategic value.
The accelerated military modernisation of the People’s Liberation Army means that the second island chain could receive more Chinese attention in the future, especially if the China–US strategic rivalry increases drastically. But since the Compact of Free Association grants the US exclusive military access to the FSM, it is unlikely that China will establish a military foothold in the country.
There are limits to China’s influence in the FSM and the North Pacific. First, China faces strong competition from traditional powers such as the United States. US Secretary of State Mike Pompeo visited the FSM for the first time in August 2019 and pushed for the renegotiation of the Compact of Free Association with the FSM, Palau and Marshall Islands. The COFA denies any third party use of the islands for military purposes.
Second, Taiwan maintains a strong influence in the North Pacific. Three of its four diplomatic partners in the Pacific Islands are from the region. The governments of Palau, the Marshall Islands and Nauru have made it clear that they will stick with Taiwan.
Third, China is viewed with suspicion by some Micronesian citizens who claim that China is moving in on a territory traditionally controlled by the United States.
A fourth constraint is that China’s economic slowdown could affect its foreign aid budget. Its government-to-government approach also limits its engagement with other stakeholders in the FSM and Pacific Island countries, especially at the grassroots level. China’s Belt and Road Initiative is not well understood by the FSM population for this reason.
The FSM government is actively exploring different international avenues to achieve its economic objectives and lessen dependency on COFA funds provided by the United States. The inflow of Chinese aid fits with this endeavour.
The China factor could play a…
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
Is journalist Vicky Xu preparing to return to China?
Chinese social media influencers have recently claimed that prominent Chinese-born Australian journalist Vicky Xu had posted a message saying she planned to return to China.
There is no evidence for this. The source did not provide evidence to support the claim, and Xu herself later confirmed to AFCL that she has no such plans.
Currently working as an analyst at the Australian Strategic Policy Institute, or ASPI, Xu has previously written for both the Australian Broadcasting Corporation, or ABC, and The New York Times.
A Chinese language netizen on X initially claimed on March 31 that the changing geopolitical relations between Sydney and Beijing had caused Xu to become an expendable asset and that she had posted a message expressing a strong desire to return to China. An illegible, blurred photo of the supposed message accompanied the post.
This claim was retweeted by a widely followed influencer on the popular Chinese social media site Weibo one day later, who additionally commented that Xu was a “traitor” who had been abandoned by Australian media.
Following the publication of an ASPI article in 2021 which exposed forced labor conditions in Xinjiang co-authored by Xu, the journalist was labeled “morally bankrupt” and “anti-China” by the Chinese state owned media outlet Global Times and subjected to an influx of threatening messages and digital abuse, eventually forcing her to temporarily close several of her social media accounts.
AFCL found that neither Xu’s active X nor LinkedIn account has any mention of her supposed return to China, and received the following response from Xu herself about the rumor:
“I can confirm that I don’t have plans to go back to China. I think if I do go back I’ll most definitely be detained or imprisoned – so the only career I’ll be having is probably going to be prison labor or something like that, which wouldn’t be ideal.”
Neither a keyword search nor reverse image search on the photo attached to the original X post turned up any text from Xu supporting the netizens’ claims.
Translated by Shen Ke. Edited by Shen Ke and Malcolm Foster.
Asia Fact Check Lab (AFCL) was established to counter disinformation in today’s complex media environment. We publish fact-checks, media-watches and in-depth reports that aim to sharpen and deepen our readers’ understanding of current affairs and public issues. If you like our content, you can also follow us on Facebook, Instagram and X.
Read the rest of this article here >>> Is journalist Vicky Xu preparing to return to China?
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