China
Great power competition has shifted in the United States’ favour
Author: Ryan Hass, Brookings Institution
At the start of 2022, China’s economy appeared strong, Beijing seemed to have contained the spread of COVID-19, Sino–Russian relations were deepening and there was growing talk of autocracies stealing the march on democracies across the world. China’s leaders were proclaiming that ‘time and momentum’ were on China’s side in its great power competition with the United States.
Meanwhile, the United States was mired in partisan paralysis, with President Joe Biden’s ‘Build Back Better’ agenda seemingly stuck. Washington was reeling from the reputational damage of the United States’ chaotic withdrawal from Afghanistan. Within Asia, talk was growing louder of China dominating the 21st century.
A year later, the script reads differently. China’s economy has turned sluggish, pulled down by expanding state intervention in the economy, waves of COVID-related lockdowns, a property sector slowdown and softening international demand for Chinese exports. Beijing’s messy exit from its zero-COVID policy has exacerbated domestic stressors. Even as China remains the largest trading partner for most of the world, its economic lustre has dimmed amid declining economic growth.
China’s international image in most of the developed world has also suffered. Part of this owes to China’s rhetorical support for Russia amid Moscow’s barbarism in Ukraine. China’s plummeting image is also attributable to its hardening authoritarianism at home, its nationalistic ‘wolf warrior’ diplomacy and its growing military activity along its periphery, including in the waters and airspace around Taiwan.
By comparison, Biden’s political position has strengthened. At home, the Biden administration secured passage of the bipartisan Infrastructure Investment and Jobs Act, the CHIPS and Science Act and the Inflation Reduction Act, which together add up to over US$1 trillion in government spending. Though elements of these investments favouring domestic manufacturing have generated friction with US trading partners, they represent a generational investment in US innovation. Technology companies such as Taiwan Semiconductor Manufacturing Company, Samsung, Micron, SK Hynix, Intel and IBM announced investments in semiconductor production in the United States exceeding US$100 billion.
The United States also strengthened its position abroad. Transatlantic unity deepened under the stress of the joint response to Russia’s invasion of Ukraine. Coordination strengthened in other purpose-driven groupings, such as the Quad and AUKUS. The G7 bolstered its relevance as its members acted with greater cohesion on global challenges, including financing Indonesia and Vietnam’s clean energy transitions. US–ASEAN ties were elevated to a comprehensive strategic partnership. The United States’ relationships with Pacific Island countries also advanced, including through the release of the White House’s Pacific Partnership Strategy.
Looking ahead, several potential flashpoints will require careful management in 2023, including North Korea’s nuclear program, China–India border flareups and rising tensions in the Taiwan Strait. A key question will be whether the United States’ progress and China’s relative setbacks over the past year create conditions conducive for Washington and Beijing to lower the temperature of bilateral relations.
Biden will face domestic political pressure to maintain an unyielding posture on China. China’s President Xi Jinping, similarly, is unlikely to relent on issues that are aggravating tensions. Still, from a strategic standpoint, the United States’ global partners would welcome efforts by Washington to cool tensions, even if they do not yield reciprocal actions from Beijing.
US officials are receiving consistent demands from foreign counterparts to responsibly manage competition with China. Many countries around the world are more focussed on addressing proximate challenges, such as rising sea levels and mounting debt, than they are on great power competition. They want to see the United States galvanise global efforts to tackle common challenges rather than grow fixated on tit-for-tat games with China.
The Biden administration entered office believing it needed to invest at home and deepen relations with partners to put the United States in a ‘situation of strength’ to deal directly with China. Now that it has made historic investments in US innovation and strengthened bonds with global partners, a key question is whether the Biden…
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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