China
US retreat from multilateralism blunts the fight against COVID-19
Author: David Lubin, Citigroup
During the early stages of the COVID-19 pandemic, the IMF and the World Bank were quick to trumpet their contribution to stabilising the global economy from an unprecedented shock. But the noisy claims belie the fact that multilateral institutions have little room to manoeuvre now that the United States — the country that underpins multilateralism — has lost interest in the idea.
Take the World Bank. Although its widely voiced promise was that it would lend US$160 billion to help the developing world deal with the crisis, it turns out not a penny of this represents additional lending — it is all money the Bank would have disbursed anyway.
Granted, it is accelerating some disbursements and offering a temporary moratorium on debt service payments from poor countries. But given the scale of this crisis, one might have expected more.
The basic problem is that the World Bank’s capital is down to 22 per cent of its loan book and, for prudential reasons, it cannot fall below 20 per cent. One way out would be for the Bank to seek more capital, which the Trump administration has in the past agreed to provide. But these days it’s hard to imagine the US government looking kindly on such a request.
As President Trump told the UN General Assembly last September, ‘The future does not belong to the globalists. The future belongs to patriots’. From Trump’s point of view, the IMF and the World Bank are globalist by nature. They also fail his value-for-money calculation: US influence in these institutions is too small, he thinks, to justify the cheques written by the United States to keep them going.
This kind of thinking has been plainly on display in the way the United States has limited the role of the IMF in managing the global crisis. The most straightforward way for the IMF to support its members is to provide international liquidity in the form of additional Special Drawing Rights (SDRs). These SDRs, credited to the accounts of IMF member countries, are exchangeable for the five basket currencies: the US dollar, euro, sterling, yen and renminbi.
Creating SDRs formed part of the IMF’s response to the global financial crisis in 2009, but this time around the idea was quashed by US Treasury Secretary Steve Mnuchin. To be fair, there is one good reason why SDR creation may not have been the right tool: SDRs are allocated according to members’ quotas at the IMF, meaning some 70 per cent of the extra liquidity would have gone to rich countries who need it least. But two other lines of thought were likely more influential in the US decision.
The first is that the more SDRs there are out there, the more prominence the IMF has as an institution. The United States would rather keep the IMF dependent on resources that it has to borrow from rich countries, enhancing US leverage and keeping the Fund on a short leash.
The second is that giving the SDR prominence plays straight into China’s agenda. In 2009, then governor of the People’s Bank of China Zhou Xiaochuan pushed for the creation of a ‘super-sovereign reserve currency’ to take over the US dollar’s central role in the international monetary system. Zhou argued that the SDR should be the seed from which such a currency might grow.
In the Trumpian worldview, what’s good for China is not good for the United States. Keeping the dollar as the centre of the international monetary system has huge strategic value for Washington. It keeps China dependent on a currency it has no power to print.
Multilateralism as we have known it since the Second World War has only ever been a set of institutions underpinned by US power. Multilateralism is useful to the United States so long as those institutions — including the IMF and the World Bank — serve its interests.
President Trump’s decision to withdraw from the World Health Organization is the starkest evidence yet that Washington no longer believes this condition is being met. Equally significant, though less visible, is the United States hobbling of the role that the IMF and World Bank can play in easing the economic pain of COVID-19. The anchor on which post-war multilateralism has depended is coming loose.
How much weaker might this anchor get? We should know more in early November.
David Lubin is head of emerging markets economics at Citigroup. He is also an associate fellow of the Global Economy and Finance programme at Chatham House.
This article is part of an EAF special feature series on the novel coronavirus crisis and its impact.
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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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- Is journalist Vicky Xu preparing to return to China?
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