China
Exposing the fragility of EU–China relations
Author: Tim Rühlig, Swedish Institute of International Affairs
2020 was supposed to be an important year for EU–China relations as the European Union’s China policy is undergoing a deep transformation. Four summits had been planned this year. The first two were cancelled and a mid-September leaders’ meeting in Leipzig risks suffering the same fate. It also seems unlikely that the two sides will conclude an EU–China Comprehensive Agreement on Investment in 2020 after seven years of negotiations.
COVID-19 is shrinking Beijing’s limited willingness to give in to European demands on unfair trade practices and more ambitious measures to curb climate change. This only adds to growing discomfort in the European Union over at least three developments shaping the relationship since 2016.
First, the perception among European policymakers and the traditionally optimistic European business community of China as an unfair competitor has increased significantly. Second, European assessments of political developments in China are increasingly negative regularly concluding that China under President Xi Jinping is turning even more authoritarian and nationalist. Beijing’s handling of demands for political reform in Xinjiang and Hong Kong only fuel European perceptions of a systemic difference between China and the European Union. Third, many EU officials worry that Chinese diplomacy is undermining European unity.
China’s targeted diplomacy highlights fractures in European China policy. While bilateral meetings never irritated Brussels, the 16+1 format, later known as the 17+1 format after Greece joined in 2019, includes China plus 17 central and central-eastern European countries, including 12 EU member states. Critics suggest that some government officials — such as those in Hungary and Greece — refused to criticise China, despite most EU member states advocating for a strong common position. Italy’s signing of a Belt and Road Initiative Memorandum of Understanding is yet another significant example of an EU country breaking ranks with European foreign policy unity. Recent criticism that the European External Action Service watered down a report on Chinese disinformation during the COVID-19 crisis is not convincing. Only days later, however, marking 45 years of diplomatic relations, EU Ambassador Nicolas Chapuis accepted to censor a passage in a remarkably friendly-toned op-ed published in China Daily co-authored by all EU ambassadors to China.
In 2019 the European Union adopted a new EU–China strategic outlook, describing China not only as a ‘partner’ but also an ‘economic competitor’ and ‘systemic rival’. The new European Commission characterises itself as a ‘geopolitical’ one. What appears to most observers an empty phrase might turn out to be a substantial EU policy shift on China. The new European Commission seems to be willing to adopt a ‘whole-of-Commission’ approach to EU–China relations. It now internally coordinates strategic objectives more closely to better leverage European power to achieve its core interests. But this new geopolitical turn is in its very early stages and there is no consensus over its priorities.
At the same time, Europe lacks unity and very different challenges now shape its relations with China. Widespread hope among central-eastern, eastern and southern European countries for major Chinese investments, after disappointment over EU solidarity in the global financial and the Euro crises that led Eurosceptics to gain influence, was followed by disenchantment. China’s foreign direct investment — once seen as an opportunity to gain more independent from the EU — was mostly directed towards high-technology industries in the continent’s north and west. At this point in time, a similar dynamic could occur in the COVID-19 crisis: the early successes of China’s mask diplomacy seem to have evaporated and the COVID-19 crisis may damage China’s reputation in the long term.
Growing rivalry between the United States and China is leaving its imprint in Europe. Poland and the Baltic states aim to maintain strong transatlantic partnerships because they perceive NATO and the United States as crucial security guarantors. But other EU member states, including Germany and France, are adopting a more critical approach towards US China policy.
The future of EU–China relations will largely be determined by four factors, of which China has influence over only one.
First, much will depend on whether or not EU member states — particularly the Eurogroup…
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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