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East Asian economies resist decoupling

Quantifying the effect of supply chain decoupling is difficult. Trade controls, particularly export controls over high-tech products, became a major policy tool for decoupling in the United States and for some US allies, including Japan.

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Media on global trade frequently puts forward the narrative that the US–China confrontation will divide the world in two. But East Asian developing economies have a different view of supply chain decoupling since US–China merchandise exports and imports hit a record high in 2022 and East Asian production networks continue to move actively.

Author: Fukunari Kimura, Keio University

Quantifying the effect of supply chain decoupling is difficult. Trade controls, particularly export controls over high-tech products, became a major policy tool for decoupling in the United States and for some US allies, including Japan.

Items subject to export controls are specified in terms of traded goods, used technologies, export destination, importers and end-use. But the coverage is set very wide and only a small portion of exports are actually under strict control. Governments do not disclose information on products that are banned or under investigation. They also do not disclose how long the investigation took, even ex-post. Private firms may refrain from exporting without seeking an official decision. The international trade commodity classification may not match sensitive export items such as high-end semiconductors.

According to my on-going study with Mitsuyo Ando and Kazunobu Hayakawa, monthly international trade data at the industry level does not show any clear evidence of supply chain decoupling or a drastic reorganisation of production networks until the end of 2022. Yet the August 2020 US export controls that targeted Huawei substantially slowed down the company’s production in China and subsequently reduced Japanese exports to China, especially for parts and components used in Huawei’s wireless communication equipment assemblies. Regression analyses find a statistically significant reduction in Japanese exports to China since August 2020, particularly in semiconductor-intensive parts. The on-going study estimates a 3.3 per cent reduction in exports during this period compared to 2019 trade data. Supply chain decoupling is real, but the trade-reducing effect seems to be limited in scale so far.

Supply chain decoupling in the US–China confrontation came into a new phase when the Biden administration endorsed the Chips and Science Act in August 2022 and strengthened US export controls in October 2022. Though the implementation details of these policies have not been disclosed yet, they will likely further disrupt supply chains in terms of parts, materials, production machines and technologies used for supercomputers.

But supply chain decoupling will likely only be partial. International production networks have overall remained active, particularly in East Asia. Globalisation has provided many private firms with global economic opportunities. With the current heated geopolitical debate between the United States and its allies, the expansion of trade controls is inevitable. But the ‘rest’ of the economy outside of effective trade controls should not be neglected in this debate. The world must keep economic dynamism.

For middle powers such as Japan, the government can take several measures to ensure the health of the rest of the economy. The border between the economy, which is placed under strict trade controls, and the rest of the economy, which is not, must be delineated as clearly as possible.

It is important for civilians that military-use technologies do not get lumped in with regular technologies to avoid an adverse effect on the rest of the economy. If the border is not made clear, the private sector will face huge uncertainties that may shrink trade and investment. It is not only middle powers that must mark clear borders between the economy under trade controls and the rest of the economy, but also the United States. Middle-power governments should communicate closely with the United States and provide relevant information to the private sector. The cost of a blurred border will punish small and medium enterprises as well as firms in developing countries.

Middle powers such as Japan must practice economic diplomacy for the Global South — especially ASEAN — by deepening economic and social relationships, rather than being forced to choose a side. The South is interested in promoting a new agenda on digital and green trade and investment. The negotiation over the Indo-Pacific Economic Framework, for example, must enhance multilateral economic relationships, rather than just pushing an economic security agenda.

The rest of the economy must keep to the rules-based trading regime. While the G7…

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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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