China
China ups anti-monopoly reforms to curb digital platform power
Author: Lianrui Jia, UTSC
China recently joined the global anti-monopoly movement, placing its leading digital platforms under closer scrutiny. Released in November 2020, China’s new draft anti-monopoly guidelines target anti-competitive behaviour in the internet sector such as forced exclusivity, big data price discrimination, use of subsidies to crowd out competition and exclusive cooperation agreements.
The guidelines are underpinned by China’s Anti-Monopoly Law (AML), which was formally enacted in 2008. The AML was drafted with three objectives in mind: to curb foreign competition and foster domestic industrial growth, to protect consumers, and to limit monopolies by state-owned and administrated entities.
This is not the first time the AML has been applied in the information and communication technology sector. In 2014, China’s State Administration for Industry and Commerce (SAIC), one of the organisations responsible for enforcing the AML, investigated Microsoft over the use of its Windows operating system in China. In 2015, US chipmaker Qualcomm was fined US$975 million for violating the AML — which remains by far the largest fine in China’s corporate anti-monopoly history.
Skeptics of China’s anti-monopoly regime argue the application of the AML is often limited to warding off foreign competitors and protecting domestic industry. Amongst domestic tech giants, the AML is frequently leveraged between market participants to secure competition and market dominance. One of the first landmark anti-monopoly cases in China’s internet sector was the dispute between Qihoo 360 and Tencent. The court ruled in favour of Tencent, upholding that it did not have market dominance.
China’s latest antitrust investigation targeted former Alibaba CEO Jack Ma and the Ant Group in December 2020, putting an emergency halt on Ant’s proposed US$35 billion initial public offering (IPO) in Hong Kong. Ant Group is China’s leading fintech service provider and one of the largest private proprietors of financial, transactional, behavioural and demographic data. The investigation was the culmination of the Chinese Communist Party’s tightening fintech regulatory reform that began in 2015. These reforms aimed to better manage risks, economic growth and social stability and ultimately ensure the Party’s leadership over the digitisation of finance.
Strengthening anti-monopoly laws has long been a concern for Chinese authorities. But it is becoming all the more urgent as the internet in China becomes concentrated in hands of a few tech giants.
Monopolistic competition comes at a price. It encloses users into different walled gardens with poor data portability and compatibility. And it further divides the already federated Chinese commercial internet ecosystem along the fault lines of corporate interests and ownership.
In December 2020, the State Administration for Market Regulation (SAMR) fined Alibaba approximately US$76,500 for failing to seek approval before increasing its US$2.6 billion stake in department store chain Intime Retail Group in 2017. Tencent’s China Literature was fined the same amount over its buyout of New Classic Media in 2018. And in 2015, Microsoft and Shanghai Oriental Pearl Media Co Ltd were each fined US$31,430 for failing to report their Xbox venture to antitrust regulators.
But questions remain as regulatory probing continues — what happened to other unregistered mergers, acquisitions and joint ventures that triggered the reporting threshold, such as the killer acquisition between Didi and Uber in the country’s ride-hailing market?
The growth of tech giants in China has induced a vicissitude of sociocultural changes, including the rise of start-up culture and changes to labour relations, e-commerce and online culture. The latest anti-monopoly move is simply playing catch-up with these developments. Market competition still largely shapes platform policies. For example, WeChat formalised rules for external links in its External Link Content Management Regulation, banning links to services that are similar to WeChat or other platforms without authorisation from Tencent. Similarly, ByteDance’s Douyin banned all external links to third parties on its livestreaming platform in October 2020.
When it comes to doing business though, the Party still holds the moral bottom line. It criticised Tencent Games for its ‘poisonous’ effect on youth in 2017 and called out microblogging service Weibo for monetising its Hot Searches list in 2018. In 2019, it issued a warning to the largest…
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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