China
North Korea pokes the polarisation bear
Authors: Francesca Frassineti, University of Bologna, Edward Howell, University of Oxford and Ria Roy, University of Cambridge
After Russia’s invasion of Ukraine, North Korea capitalised upon China’s and Russia’s tense relationship with the United States by reviving ties with its Cold War partners. Such rapprochement is anything but a strategic realignment. It is transactional — a way for North Korea to benefit economically while accelerating the scope and sophistication of its nuclear and missile capabilities.
Since the start of 2022, Pyongyang has intensified its missile testing to an unprecedented degree, most recently witnessed in a spate of missile launches in early November. These actions can be attributed to Kim Jong-un seeking to fulfil his five-year military plan — unveiled at the 8th Workers’ Party Congress in January 2021. North Korea is also becoming increasingly impatient at a lack of sanctions relief from the United States.
North Korea has never been a priority for US President Joe Biden, and the state of relations is a far cry from when an improved dialogue with the United States was sustained during Donald Trump’s presidency, largely thanks to the facilitation of former South Korean president Moon Jae-in. After failing to obtain any easing of sanctions from Washington following the collapse of talks in October 2019, Kim is now turning to Russia and China. North Korea remains eager to take advantage of the current paralysis in the UN Security Council, especially given how the Chinese leadership seems increasingly unable or unwilling to restrain its neighbour.
Rather than any concerted ideological or strategic realignment, North Korea’s recent overtures to Russia and China are opportunistic. On 14 July, Pyongyang recognised Russia-controlled breakaway republics in Eastern Ukraine. On 12 October, North Korea was among the four countries that voted against the UN General Assembly resolution condemning Russian ‘attempted illegal annexation’ of four Ukrainian regions. In early August, North Korea also denounced US ‘interference’ in Taiwan.
These actions cannot be detached from North Korea’s domestic economic crisis. Pyongyang will use every avenue to gain financial remittances, whether from workers in China and Russia — in violation of multilateral sanctions — or vocal support from Russia and China, in vetoing the imposition of further multilateral sanctions.
Since 2013, Kim has sought to strengthen domestic legitimacy by bolstering North Korea’s military and nuclear capabilities while accelerating economic development. In 2018, having declared the completion of the state nuclear force, Kim outlined a ‘new strategic line’, directing all energy to domestic economic development. But this has not borne fruit due to COVID-19, meteorological catastrophes, sluggish industrial output and a failure to meet construction targets.
Against the backdrop of decades-old sanctions, the self-imposed border closure of January 2020 was a key factor contributing to North Korea’s worst economic downturn in over 25 years. From late 2020, Kim publicly criticised government officials for failing to implement his guidelines. On 10 August 2022, Kim announced victory over COVID-19 and a re-examination of border controls. Trade with China has slowly resumed, although at a limited level, due to North Korea’s ongoing controls at disinfection and quarantine stations.
Relations between Pyongyang, Beijing and Moscow have not always been fruitful. Ties were disrupted at the end of the Cold War with the establishment of Soviet and Chinese relations with South Korea in 1990 and 1992. Pyongyang’s rapprochement with Moscow is a continuation of improved relations over the past decade, as Russia has become increasingly authoritarian.
In 2014, the Russian parliament wrote off 90 per cent of North Korea’s Soviet-era debt, worth over US$10 billion. The Russian Minister for Far Eastern Development also visited North Korea, pledging to increase trade. In 2019, Kim met Russian President Vladimir Putin and committed to strengthening ties.
Bilateral cooperation between Pyongyang and Beijing has also recently grown amid North Korea’s support for Beijing’s crackdown in Hong Kong and improved personal ties between Kim and Chinese President Xi Jinping, marked by Xi’s state visit to North Korea in 2019. There was also a reaffirmation of ties following the 60th anniversary of the Sino–DPRK Treaty on Friendship, Cooperation, and Mutual Assistance in July 2021.
Although Russia’s invasion of…
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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