China
The question of income distribution
Cao Xin, CCCP Reform and the opening up of China’s economy has been successful on several fronts, and these achievements coincide with remarkable changes in China’s economy and society. The national economy is increasing by roughly 10 per cent annually. China’s aggregate output is second largest in the world. Gross domestic product per capita is now more than US$4,000. China’s estimated GDP in 2010 was RMB39.8 trillion (US$6 trillion), representing a 10.3 per cent increase when compared with 2009 . State revenue was RMB8.3 trillion (US$1.3 trillion) — an increase of RMB1.45 trillion (US$0.21 trillion), representing a 21.3 per cent increase when compared with 2009. The net per capita income of rural residents is now RMB5,919 (US$913), having increased by 10.9 per cent since 2009 in real terms. Urban per capita disposable income is now RMB19,109 (US$2,949), a real increase of 7.8 per cent. Food consumption expenditure as a proportion of household expenditure in rural and urban areas for 2010 totalled 41.1 per cent and 35.7 per cent respectively. At the end of 2010, the impoverished rural population was 26.8 million — a decrease of 9 million since 2009 if we use the rural poverty standard of 2010. Income and standard of living continue to increase each year. But, unfortunately, the income gap between different social classes is also widening. This trend appears not only between rural and urban areas, but also between different industries and sectors. The income gap can be seen in statistics. First, the share of GDP accounted for by wages has decreased year by year. Second, the income gap between rural and urban areas is also very wide. Third, the income gap between different industries is growing. Finally, the income gap between different stratums is growing. According to measurements by the World Bank, the Gini coefficients of Europe and Japan are generally between 0.24 and 0.36. China’s, on the other hand, has risen to 0.47. This is higher than the internationally recognised warning limit of 0.4. To reverse growing income disparity and level up people’s incomes with economic growth, payment for labour needs to match growth in labour productivity. Increasing household income as a proportion of the national income and increasing the proportion of the GDP accounted for by payments to labour are urgent objectives in the 12th Five Year Plan . An ineffective income distribution system is the primary cause of the increasing income distribution problems . It is imperative that China accelerate reform of the income distribution system, adjust the structure of income distribution, expand the middle class’s share of national income, increase the income of farmers, and establish a reasonable income distribution system. Cao Xin is Professor in the Department of Economics, Chinese Central Party School, Beijing. This article was published in the most recent edition of the East Asia Forum Quarterly , ‘ Governing China ’ . Reducing Indian poverty: Income transfers through social safety nets The question of Chinese over-investment and over-capacity – Weekly editorial Chinese wages and the turning point in the Chinese economy
Cao Xin, CCCP
Reform and the opening up of China’s economy has been successful on several fronts, and these achievements coincide with remarkable changes in China’s economy and society.
The national economy is increasing by roughly 10 per cent annually. China’s aggregate output is second largest in the world.
Gross domestic product per capita is now more than US$4,000. China’s estimated GDP in 2010 was RMB39.8 trillion (US$6 trillion), representing a 10.3 per cent increase when compared with 2009. State revenue was RMB8.3 trillion (US$1.3 trillion) — an increase of RMB1.45 trillion (US$0.21 trillion), representing a 21.3 per cent increase when compared with 2009.
The net per capita income of rural residents is now RMB5,919 (US$913), having increased by 10.9 per cent since 2009 in real terms. Urban per capita disposable income is now RMB19,109 (US$2,949), a real increase of 7.8 per cent. Food consumption expenditure as a proportion of household expenditure in rural and urban areas for 2010 totalled 41.1 per cent and 35.7 per cent respectively. At the end of 2010, the impoverished rural population was 26.8 million — a decrease of 9 million since 2009 if we use the rural poverty standard of 2010.
Income and standard of living continue to increase each year. But, unfortunately, the income gap between different social classes is also widening. This trend appears not only between rural and urban areas, but also between different industries and sectors. The income gap can be seen in statistics. First, the share of GDP accounted for by wages has decreased year by year. Second, the income gap between rural and urban areas is also very wide. Third, the income gap between different industries is growing. Finally, the income gap between different stratums is growing. According to measurements by the World Bank, the Gini coefficients of Europe and Japan are generally between 0.24 and 0.36. China’s, on the other hand, has risen to 0.47. This is higher than the internationally recognised warning limit of 0.4.
To reverse growing income disparity and level up people’s incomes with economic growth, payment for labour needs to match growth in labour productivity. Increasing household income as a proportion of the national income and increasing the proportion of the GDP accounted for by payments to labour are urgent objectives in the 12th Five Year Plan.
An ineffective income distribution system is the primary cause of the increasing income distribution problems. It is imperative that China accelerate reform of the income distribution system, adjust the structure of income distribution, expand the middle class’s share of national income, increase the income of farmers, and establish a reasonable income distribution system.
Cao Xin is Professor in the Department of Economics, Chinese Central Party School, Beijing.
This article was published in the most recent edition of the East Asia Forum Quarterly, ‘Governing China’.
- Reducing Indian poverty: Income transfers through social safety nets
- The question of Chinese over-investment and over-capacity – Weekly editorial
- Chinese wages and the turning point in the Chinese economy
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The question of income distribution
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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