China
The multilateral system: use it, or lose it
Author: Editorial Board, ANU
Asia’s businesses and households rely on a global system of rules and institutions to do business overseas. That global system is under attack, and Asian governments are yet to mobilise to stop it. Governments in the region weaken the system every time they preference short-term bilateral band-aids over long-term multilateral solutions; from managing US–China tensions to the response to COVID-19. Now is the time for Asian governments to show leadership on the global system and its reform. If they don’t use it, they’ll lose it.
Losing it would be a big problem for the region. Asia relies on the global system for its prosperity. Asian governments rely on the World Trade Organization to settle trade disputes and rely on the global trade rules for the majority of their trade. They rely on the Paris Agreement to address climate change, the WHO to address global health challenges and international law to bolster security. Asia relies on the US-led global financial system for investment, finance and stability.
The global system is vital to Asia’s interests. Yet, one by one, global rules and institutions have been undermined in recent years. The United States has shelved the WTO dispute settlement process, shown contempt for trade rules and trade partners, withdrawn from the Paris Agreement and cut funding to the WHO. The United Kingdom has threatened to breach international law in its Brexit negotiations. China has responded to US flouting trade rules with managed trade and shows disrespect for international human rights law in Hong Kong and in its treatment of Uighurs in Xinjiang. The United States, China, Japan and South Korea have sidelined the multilateral system in their trade disputes. During the COVID-19 crisis the cooperation and solidarity of the global financial crisis has been replaced with confrontation and suspicion.
The multilateral system is far from perfect. It’s fragmented, inefficient and out of date. It’s been 27 years since the WTO concluded a comprehensive trade round. Its trade rules are silent on the digital economy, data flows, subsidies, state-owned enterprises, technology transfer and all the things fuelling tensions today. Attempts to plug the gaps with plurilateral and hundreds of bilateral trade agreements have created a noodle bowl of inefficient and incompatible rules that businesses and households struggle to navigate.
Finance is no better. The IMF is too under-resourced to fend off a widespread shock. Its governance structure is from a bygone era. Countries remain hopelessly reliant on the US dollar, scrambling to build mountains of costly reserves that divert resources away from development programs while hurting US exports and inflaming trade tensions. Attempts to create regional substitutes for the IMF have made crisis responses slower and less effective, often creating a false sense of security.
Whether it’s trade, finance, technology, climate, human rights or geopolitical conflict, the global system has failed to keep up with the growing need for international cooperation. But these deficiencies should inspire reform, not retreat. If out of date trade rules are fuelling tensions, the solution is to update the trade rules, not to let even more trade take place outside the rules. Global problems require global solutions. Yet the response of many countries, most notably the United States, has been to abandon the system, creating more problems and tensions in the process.
Asia’s efforts to protect the global system are not commensurate with its incentives to do so. Asia’s dependency on the global rules-based system means it has a huge stake in protecting it. Too many Asian governments have imprudently favoured short-term bilateral band-aids over long-term multilateral solutions. Responses to COVID-19 have focused on bilateral deals on trade in personal protection equipment, vaccines, borders and financial support rather than promoting regional or global cooperation. Attempts to manage spill-overs from US–China tensions have often been bilateral rather than working with other countries in the region that are in the exact same boat. While Indonesia has shown leadership in pushing for WTO reform in the G20, too few Asian countries have supported it, focusing instead on trying to put out bilateral spot fires and win favour with superpowers.
There is a better way. If Asia wants the multilateral system to survive, it needs to promote it, use it and, most importantly, reform it. US–China tensions, combined with the November US…
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.
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- 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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