China
What’s at stake in decoupling innovation?
Author: Andrew Kennedy, ANU
Some degree of ‘decoupling’ between the United States and China is already underway, but it remains unclear how far it will go and what it could mean for the world. Much of the analysis so far has focused on the potential decoupling of high-tech supply chains and product markets. Even so, decoupling could also curtail transnational connections between national innovation systems, reshaping how high-tech products and knowledge are created in the first place.
Transnational innovation linkages have become increasingly important in recent decades. Multinationals invest growing sums in global research and development (R&D) networks, scientists increasingly collaborate with colleagues overseas, and ‘brain circulation’ between countries has become entrenched. What would decoupling mean for these growing cross-border connections?
In some regards, China remains a small player in transnational innovation. Between 2000 and 2019, Chinese organisations participated in 12 per cent of all multinational R&D alliances, while US organisations participated in 62 per cent. Foreign firms have also limited their R&D activity in China due to concerns about intellectual property protection, cybersecurity policies, limited local talent and compliance with Chinese standards.
While Chinese firms’ investment in R&D abroad has increased in recent decades, much of this activity reflects the expansion of just one firm — technology giant Huawei. Chinese firms more generally remain marginal players in the innovation systems of OECD countries.
The United Kingdom is a striking example. A remarkable 53 per cent of all business R&D spending in the country came from foreign firms in 2018. Chinese firms accounted for just 2 per cent of this number. US firms accounted for 40 per cent, non-UK European firms made up 29 per cent, and Japanese firms contributed 7 per cent.
China has become a major player in other aspects of transnational innovation, however. China has clearly emerged as a key global partner in basic scientific research. China-based scientists contributed to 23 per cent of the more than 1.5 million scientific articles featuring authors from multiple countries between 2016 and 2019. They were second to only their counterparts in the United States, who contributed to 42 per cent.
China’s rise as a key partner in basic science reflects close collaboration with the United States in particular. China is now the leading source of co-authors for US-based scientists, eclipsing traditional partners like the United Kingdom and Germany. More than 12 per cent all of scientific articles published by US-based scientists from 2016 to 2019 featured a China-based co-author. China-based scientists are also key collaborators for counterparts in Australia, Canada, Japan, and the United Kingdom.
China also plays a critical role in cross-border flows of the ultimate ingredient in innovation: brainpower. The annual number of Chinese students going abroad jumped from 144,000 in 2007 to more than 700,000 in 2019. While many of these students return home after completing their studies, the circulation of Chinese brainpower has also enriched other countries. This is not only because Chinese students spend money in their host countries, but also because Chinese migrants enrich pools of human capital abroad.
In 2015–2016, there were 4.6 million migrants from China in OECD countries, 2 million of which had post-secondary educations — an increase of roughly 300,000 since 2010–2011. This growing pool of mobile human capital contains many of China’s most talented graduates, since China still struggles to bring back its best and brightest.
The United States has been the most obvious beneficiary of the circulation of Chinese brainpower. US universities attract more Chinese students than those of any other country in the world, and many of these students pursue graduate degrees in science and engineering (S&E). Students from China earned 32 per cent of all S&E doctorates awarded to foreign students in the United States between 2000 and 2017.
In addition, most of these new PhD graduates remain in the United States to work. Between 2011 and 2013, 11,000 Chinese students earned doctorates in S&E fields from US universities. As of 2017, 83 per cent of them were still in the country.
The ability of the United States to attract Chinese brainpower is also clearly evident in emerging fields like artificial intelligence (AI). A recent study of top AI researchers trained in China found that three-quarters had moved…
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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