China
Trump versus Huawei: right target, disastrous strategy
Author: William H Overholt, Harvard Kennedy School
The United States has valid complaints about Huawei, but US President Donald Trump is botching the negotiation. The principal issue with Huawei is the lack of reciprocal market access. As long as Huawei has access to all three major markets — the United States, European Union and China — and foreign tech companies are prevented from having full access to the Chinese market, it will soon dominate the global 5G market. With access to all markets, Huawei can sustain research and development budgets larger than its major competitors — Ericsson and Nokia — combined; they cannot compete with Huawei’s superior technological advance. Their imminent unfair destruction is unacceptable.
This happens in many areas. Take credit cards — China UnionPay’s global market share dwarfs that of Mastercard or Visa, not because it’s a better company but because UnionPay has fuller access to all three major markets.
This also happened earlier with pork. US food processing company Hormel Foods was an outstanding company when Chinese companies were smaller and less efficient, but in China it was prominent only in Shanghai. It agreed to buy one of the biggest Chinese pork producers, with the consent of the Chinese company. But the local Chinese Communist Party secretary blocked the deal. Despite being less competitive, over time some Chinese companies grew huge because they had largely exclusive access to the biggest and fastest growing market, China, as well as Western markets. For example, the Chinese food processing company WH Group grew so big that it was able to buy US meat processing company Smithfield Foods. It is now the biggest force in the US market, towering over Hormel Foods. If this trend continues, it will be fatal for many major Western companies. Major US and EU businesses therefore support a decisive challenge to China’s misbehaviour.
The right strategy to counter this is to restrict or deny market access to Chinese companies in sectors where China formally or informally restricts foreign companies’ access. And Western governments should help domestic companies develop technology superior to Huawei’s. They should make it clear that Huawei — and other Chinese companies — will get access when Chinese policy offers commensurate market access and meets their security concerns. Denying Huawei market access now is appropriate, but the door must be open for a future solution. Since Huawei’s major foreign competitors are European, this is the perfect opportunity to build US–EU cooperation.
The United States and European Union are wide open in the sectors where China has a comparative advantage, namely manufacturing, while China remains largely closed in the sectors where the West has a comparative advantage, mainly services. So in addition to restricting China’s access in services, Western countries need targeted restrictions in manufacturing too.
Similar market reciprocity issues existed between the United States and Japan when the latter became a major global economy. This included security issues, with Toshiba selling the Soviet Union technology that impaired US security. Then US president Richard Nixon responded by imposing a 10 per cent tariff on all Japanese exports while making it clear that the United States wanted to solve the problems, not bring Japan down. The United States was largely successful against a competitor that was more sophisticated than today’s China. Past US negotiations with China have been easier than with Japan but this changed when Chinese President Xi Jinping and Trump took power.
Trump focusses on security concerns — which many key international allies do not buy into — and attacks EU allies rather than emphasizing cooperation. He proposes to deny vital exports to Huawei in order to threaten its existence. He deliberately creates a cold war atmosphere designed to mobilize his domestic voter base rather than to solve international problems. He has convinced China’s leaders that his goal is to bring China down. In so doing, he alienates much of the US and EU business community, who want the problems solved, not rendered impossible. Unsurprisingly, China responds with threats to cripple or kill US companies like Boeing.
When Xi came to power, Chinese and foreign elites expected, based on the book China 2030 and other extensive planning efforts, that China was about to move decisively ahead to liberalise its obsolete infant industry protectionism. Instead, Xi has moved backward, with more policies to secure a…
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
