China
How China’s state serves the Party
Author: Kerry Brown, King’s College London
Xi Jinping is a Party man. His first words in November 2012 after being made General Secretary of the Chinese Communist Party were about closing the gap between the Party and the people. Ever since then, making sure that the Party can indeed create a sustainable governance model — and not be washed away by the forces of history as the Soviet Union was — has been his core task. Despite the vast and ongoing challenges through 2020 because of COVID-19, the Party has never looked more dominant.
That includes over the state. In China, the state exists in many shapes. While those formally designated as ‘civil servants’ (gongwuyuan) at the national and provincial levels amount to around 8 million, there are almost 60 million working for state enterprises. According to the World Bank, total Chinese public sector employment, including those involved in education, healthcare and other administrative areas, together come to about 46 million.
From an overall employment figure of 770 million, 13 per cent are public sector or state enterprise workers, with the number of state employees more than the membership of the Party, which totalled 90 million in 2019. Despite the view from outside that China is a state-controlled behemoth, the irony is that state employment has a lower share than in the United States, at 16 per cent, or a staggering 26 per cent in France.
The state and public sector still has a commanding role in administration and industries. This is one that the Party continues to control vigorously. In the 1980s, some Chinese leaders said they embraced the market like a ‘bird in a cage’ — free to develop up to certain limits. These limits were often deliberately left vague and undefined so that changing circumstances could be responded to.
A similar situation prevails between the state and the Party, with the latter controlling the state’s political parameters. That, in a sense, is the cage. The state takes Party ideology and translates it into implementable policy. It does not have the agency to originate policy or political direction. In the Xi era, the change has come from making sure that there is real clarity about where the ‘cage’ that binds the state is.
One key mode of control is simply for the Party to use its powers of appointment in the public and state enterprise sectors to ensure that the state performs as expected. In the era of former president Hu Jintao, Xi’s predecessor, galloping growth meant that officials were often more like entrepreneurs. State-owned enterprises became vast generators of cash, much of which was filtered into the hands of corrupt networks of influence. The state was big business and the Party looked more often like the poorer, more virtuous relative. Now, under Xi, the Party is back.
Any idea of parity, or even subservience, has been expelled. This was largely achieved through the anti-corruption struggle that began after the Party’s 18th National Congress in 2012, when Hu retired and was replaced by Xi as General Secretary of the Party. The cadres who had misunderstood that their key role was to be politicians — not business people — were disciplined. Some were removed from power. Others were demoted. The signal was clear, though: state workers had their ultimate loyalty to the Party.
China under Xi is a repressive place — but it is repressive without favour. In the past, rules were negotiable. Everything could be solved by finding ‘the back door’ and your networks were your greatest asset.
These days, there are rules. Actions that are seen as eroding the national mission under Xi to become a great, rich nation are seen as akin to high treason. It sounds counterintuitive, but in Xi’s China, repressive rules cause as much stress for bureaucrats seeking to wander beyond their designated powers as they do for activists wanting to find more areas for social and organised political action. Xi’s China is many things, but unpredictable is now not one of them.
The Party is above all a crisis-management entity. It performs best when there are crises. The vast stress of COVID-19 has shown it at its best. While Western governments have largely floundered, the Party has managed to face down the problem, aided by huge voluntary assistance from the public. It seems to already be pulling out of the worst of the economic downturn, with more than 4 per cent growth predicted by some for 2020.
Those in China who need to relate to the state — and that means practically everyone — have to ensure that while…
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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