China
China’s crackdown on flamboyant billionaires
Author: Martin Miszerak, SolBridge International School of Business
In March 2023, China’s National People’s Congress announced the establishment of a Central Finance Commission, a ‘super-regulator’ tasked with the supervision and overhaul of the entire financial sector. The new body is to be chaired by none other than Chinese President Xi Jinping. The Commission’s first ‘unofficial’ financial restructuring may well have been the mid-February disappearance of billionaire investment banker Bao Fan.
Bao is the founder and chairman of China Renaissance, the country’s top investment bank. The disappearance of Bao Fan remains a mystery, although a rumour later circulated that he was ‘cooperating’ with an investigation by ‘certain authorities’.
Bao Fan is not the first Chinese billionaire to vanish. He follows in the footsteps of Jack Ma, founder of the e-commerce giant Alibaba and former controlling shareholder of Ant Group. Ant Group was a financial services powerhouse scheduled to go public in Hong Kong in November 2020 in the biggest initial public offering (IPO) ever. Jack Ma disappeared shortly after he delivered a speech in Shanghai which was highly critical of the Chinese banking sector and its regulators.
The IPO was put on hold and Ant Group has been subjected to extensive restructuring. Jack Ma unexpectedly reappeared in mainland China in late March 2023, presumably as a part of the government’s initiative to improve sentiment among the private sector. It is not clear how long the government will allow him to stay on the mainland, but any executive role in Ant Group is over for him.
Bao Fan’s business philosophy sheds some light on the possible circumstances of his disappearance. Bao was an unabashedly global citizen but doing business in an environment of intensifying nationalism and authoritarianism under Xi Jinping. The son of Chinese diplomats, he lived a privileged youth, with the ability to travel internationally and attend high school in the United States. Armed with a Master of Business Administration, he spent several years working for investment banks Credit Suisse and Morgan Stanley. Bao was a titan of China’s technology and finance industries and his fame lay in his unceasing focus on networking and deal-making.
While Bao’s company China Renaissance operates a wealth management division, the company’s core business was investment banking, accounting for 44 per cent of its total revenue in 2021. Given his focus on deal-making, it is hard to imagine Bao Fan spending much time on the study of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, which may have been a fatal error.
Bao operated on the model of a flamboyant ‘master banker’ and ‘rainmaker’, reminiscent of the late US investment banker Bruce Wasserstein, who also bolted out of First Boston (today Credit Suisse) to set up his boutique investment bank and later led the buyout and IPO of Lazard Freres. China Renaissance’s business model eerily resembles that of Lazard Freres, which is generally thought to be home to ‘swashbuckling’ star bankers.
Bao Fan’s flamboyance and aggressive deal-making as ‘king’ of the platform tech industry were incompatible with Xi Jinping’s Marxist vision for the financial sector. Under Xi’s vision, the financial sector should be limited to supporting China’s manufacturing sectors, particularly those prioritised in Made in China 2025. While Xi Jinping is not against the private sector and Premier Li Qiang has repeatedly affirmed China’s commitment to the private sector, their imperative is for the private sector to be under Chinese Communist Party (CCP) control and promote party objectives.
There is no room for someone like Bao Fan within such a private sector model. For Xi, an ideal entrepreneur is someone like Ren Zhengfei, founder and Chief Executive Officer of Huawei. Ren blends unquestionable entrepreneurial talents with a dedication to communism and Mao Zedong, after whom he ‘fashions himself’ and the company. He reads the Selected Works of Mao Zedong in his spare time.
It is difficult to be optimistic about the future of either Bao Fan or China Renaissance. The ‘reappearance’ of Bao Fan as if nothing had happened is highly unlikely. He is much more likely to follow in the footsteps of Jack Ma, either remaining incommunicado under house arrest or being forced into exile.
China Renaissance is likely to follow in the path of Ant Group by ‘inviting’ a major state-owned shareholder and demoting Bao Fan to…
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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