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China

ASEAN supply chain links with China and the perils of decoupling

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Employees work at an assembly line in the Proton manufacturing plant, Tanjung Malim, Malaysia, 16 December 2019 (Photo: Reuters/Lim Huey Teng).

Author: Ken Heydon, LSE

China’s global value chain (GVC) links with ASEAN are both less dominant and more beneficial than they appear at first sight. But there are major challenges ahead for ASEAN. With ASEAN public opinion seeking more alignment with the United States and less with China, ASEAN’s GVC dependence on China might be seen as a cause for concern.

Over the past three decades, ASEAN trade links with the United States, the European Union and Japan have weakened relative to those with China. Moreover, dependence on China has been more in backward linkages (where China’s share of foreign value added exports incorporated in ASEAN exports has risen from 5 per cent to 17 per cent) than in forward links (where China’s share of ASEAN value added exports incorporated in other countries’ exports has risen from 4 per cent to just 12 per cent).

But this account needs nuance. ASEAN’s links with the United States, the European Union and Japan are not as weak as they appear. And the links with China are highly beneficial to ASEAN.

The relatively weaker trade links between ASEAN and the United States, European Union and Japan have been largely compensated by increased market-seeking and efficiency-seeking investment and production, within ASEAN, of affiliates of these countries. ASEAN’s GVC links beyond China have been transformed rather than weakened. It is precisely the presence of these globally oriented, transnational affiliates that helps explain ASEAN’s strong, and otherwise surprising, forward linkages with, in particular, the European Union.

When intra-EU trade — Europe’s regional value chain — is taken into account, the European Union accounts for a greater (albeit declining) share of ASEAN exports incorporated into other countries’ exports (28 per cent) than China (12 per cent). ASEAN, through its forward linkages, is more integrated with the EU GVC than with that of China — particularly in technologically advanced sectors like electronics.

But the most important corrective to an alarmist narrative of ASEAN GVC bonds with China is that backward links with China are fostering development within ASEAN. It is thus the scarcity of these backward linkages, and correspondingly limited access to foreign value added, for ASEAN small and medium-sized enterprises (SMEs) that helps explain why SMEs play a disproportionately minor role in ASEAN exports. ASEAN SMEs have had less exposure to ‘learning by importing’.

But backward links are not equally shared throughout ASEAN. Malaysia, Singapore, Thailand and Vietnam are developing a manufacturing base with strong backward links (foreign value added makes up 60 per cent of ASEAN vehicle exports). Brunei, Indonesia, Laos and Myanmar remain dependent on natural resource activities with weak backward links (foreign value added makes up just 5 per cent of Indonesia’s agribusiness exports).

This means that policy settings will need to differ by country. Nevertheless, all ASEAN states will face three common GVC challenges: an increase in the importance of inwards investment relative to trade, more focus on domestic demand in dynamic partner economies and the persistence of GVC vulnerability to disruption. China will be central to all these challenges.

It can be expected that as China moves to counter its demographic ageing and rising domestic costs it will increasingly follow the path already taken by the United States, European Union and Japan in favouring investment over trade in its GVC links with ASEAN. China’s FDI in Southeast Asia grew fourfold between 2010–2018. Given the sovereignty concerns associated with inward FDI, this shift will need to involve a change in China’s ‘tendency to downplay the autonomous agency’ of developing neighbours.

Equally critical will be ASEAN’s own policy settings to maximise gains from investment inflows, including through stronger environmental safeguards, technological upgrading and greater domestic regulatory coherence.

ASEAN’s second GVC challenge will be a shift in the relative importance of final consumption (rather than onward export) within partner economies with expanding domestic markets. This again will call for adaptability in ASEAN as it shifts product design towards, in particular, China’s domestic consumers as opposed to China’s overseas customers — consistent with China’s domestically oriented Dual Circulation Strategy.

The third GVC challenge facing ASEAN is persistent vulnerability to disruption. This will call for flexibility and resilience, whether by removing…

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Trends and Future Prospects of Bilateral Direct Investment between China and Germany

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China and Germany experienced a decline in direct investment in 2023 due to global economic uncertainty and policy changes. Despite this, China remains an attractive destination for German FDI. Key industries like automotive and advanced manufacturing continue to draw investors, although FDI outflows from Germany to China decreased by 30% in the first three quarters of 2023. Despite this, the actual use of foreign capital from Germany to China increased by 21% in the same period according to MOFCOM. The Deutsche Bundesbank’s FDI data and MOFCOM’s actual use of foreign capital provide different perspectives on the investment trends between the two countries.


Direct investment between China and Germany declined in 2023, due to a range of factors from global economic uncertainty to policy changes. However, China remains an important destination for German foreign direct investment (FDI), and key industries in both countries continue to excite investors. We look at the latest direct investment data between Germany and China to analyze the latest trends and discuss key factors that could shape future business and commercial ties.

Direct investment between China and Germany has undergone profound changes over the past decade. An increasingly complex investment environment for companies in both countries has led to falling two-way FDI figures in the first three quarters of 2023, in stark contrast to positive trends seen in 2022.

At the same time, industries with high growth potential, such as automotive and advanced manufacturing, continue to attract German companies to China, and high levels of reinvested earnings suggest established firms are doubling down on their commitments in the Chinese market. In Germany, the potential for electric vehicle (EV) sales is buoying otherwise low investment among Chinese companies.

According to data from Deutsche Bundesbank, Germany’s central bank, total FDI outflows from Germany to China fell in the first three quarters of 2023, declining by 30 percent to a total of EUR 7.98 billion.

This is a marked reversal of trends from 2022, when FDI flows from Germany to China reached a record EUR 11.4 billion, up 14.7 percent year-on-year.

However, according to China’s Ministry of Commerce (MOFCOM), the actual use of foreign capital from Germany to China increased by 21 percent year-on-year in the first eight months of 2023. The Deutsche Bundesbank’s FDI data, which follows standards set by the IMF, the OECD, and the European Central Bank (ECB), includes a broader scope of transactions within its direct investment data, including, broadly, direct investment positions, direct investment income flows, and direct investment financial flows.

Meanwhile, the actual use of foreign capital recorded by MOFCOM includes contracted foreign capital that has been concluded, including the registered and working capital paid by foreign investors, as well as the transaction consideration paid for the transferred equity of domestic investors.

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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Manila blasts China’s ‘unprovoked aggression’ in latest South China Sea incident

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China’s coast guard on Saturday fired a water cannon at a Philippine supply boat in disputed waters in the South China Sea, causing “significant damages to the vessel” and injuring its crew, the Philippine coast guard said.

Manila was attempting to resupply troops stationed on a ship at the Second Thomas Shoal, known locally as Ayungin Shoal, when the Chinese coast guard and maritime militia “harassed, blocked, deployed water cannons, and executed dangerous maneuvers against the routine RoRe (rotation and resupply) mission,” said the Philippine National Task Force for the West Philippine Sea.

The West Philippine Sea is the part of the South China Sea that Manila claims as its jurisdiction.

The Chinese coast guard also set up “a floating barrier” to block access to shoal where Manila ran aground an old warship, BRP Sierra Madre, to serve as a military outpost.

The Philippine task force condemned China’s “unprovoked aggression, coercion, and dangerous maneuvers.”

Philippines’ RoRe missions have been regularly blocked by China’s coast guard, but this is the first time a barrier was set up near the shoal. 

The Philippine coast guard nevertheless claimed that the mission on Saturday was accomplished.

Potential consequences

The Second Thomas Shoal lies within the country’s exclusive economic zone where Manila holds sovereign rights. 

China, however, claims historic rights over most of the South China Sea, including the Spratly archipelago, which the shoal forms a part of.

A Chinese foreign ministry’s spokesperson on Saturday said the Philippine supply vessel “intruded” into the waters near the shoal, called Ren’ai Jiao in Chinese, “without permission from the Chinese government.”

“China coast guard took necessary measures at sea in accordance with law to safeguard China’s rights, firmly obstructed the Philippines’ vessels, and foiled the Philippines’ attempt,” the ministry said.

“If the Philippines insists on going its own way, China will continue to adopt resolute measures,” the spokesperson said, warning that Manila “should be prepared to bear all potential consequences.”

Chinese Maritime Militia vessels near the Second Thomas Shoal in the South China Sea, March 5, 2024. (Adrian Portugal/Reuters)

U.S. Ambassador to the Philippines MaryKay Carlson wrote on social media platform X that her country “stands with the Philippines” against China’s maneuvers.

Beijing’s “interference with the Philippines’ freedom of navigation violates international law and threatens a free and open Indo-Pacific,” she wrote.

Australian Ambassador to the Philippines Hae Kyong Yu also said that Canberra shares the Philippines’ “serious concerns about dangerous conduct by China’s vessels adjacent to Second Thomas Shoal.” 

“This is part of a pattern of deeply concerning behavior,” Yu wrote on X.

Edited by Jim Snyder.

Read the rest of this article here >>> Manila blasts China’s ‘unprovoked aggression’ in latest South China Sea incident

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Foreigners in China: 2024 Living and Working Guidelines

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China’s Ministry of Commerce released updated guidelines for foreign businesspersons living and working in China in 2024. The guidelines cover accommodations, visas, work permits, and emergency protocols. It also outlines responsibilities regarding social security premiums and individual income tax obligations. prompt registration for temporary accommodation is required upon arrival.


The updated 2024 guidelines for foreign businesspersons living and working in China, released by the country’s Ministry of Commerce, outline essential procedures and considerations covering accommodations, visas, work permits, and emergency protocols.

On January 25, 2024, China’s Ministry of Commerce (MOFCOM) released the latest version of the Guidelines for Foreign Businessmen to Live and Work in China (hereinafter referred to as the “guidelines”).

The document is divided into four main sections, labeled as:

Furthermore, the guidelines elucidate the regulatory framework governing foreign businessperson’s responsibilities concerning social security premiums and individual income tax obligations.

This article provides a comprehensive overview of the guidelines, delving into their significance and implications for foreign businesspersons in China.

Upon arrival in China, prompt registration for temporary accommodation is required.

If staying in a hotel, registration can be facilitated by the hotel staff upon presentation of a valid passport or international travel documents.

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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