An editorial in the South China Morning Post this week has discussed the potential for a looming trade war between the China and the US. In the editorial, Scott Kennedy, a deputy director at the Freeman Chair in China Studies and director of the Project on Chinese Business and Political Economy at the Center for Strategic and International Studies, lays out how the US may be preparing itself to battle with China over what Washington DC and President Donald Trump have labelled “unfair practices”. Kennedy writes that the US is in the process of building regulatory mechanisms to support the US in the event of a major trade conflict.
This comes as China has removed Skype from the Chinese app stores, citing security and legal concerns. To be fair, given what we’ve learned over the past few years concerning US surveillance, that should hardly come as a surprise: if the US spies on its own citizens, it is sure to have infiltrated software used in global communications. Isolating American influence is a strategy increasingly being played out by both China and Russia, with Russia also about to block Facebook. LinkedIn is already restricted in both countries.
By Dezan Shira & Associates
China is getting very close to signing off a free trade agreement with the Eurasian Economic Union (EAEU), Russia’s First Deputy Prime Minister Igor Shuvalov said in an interview on Monday with the Moscow-based Rossiya24 TV channel.
Shuvalov’s comments will raise hopes that the agreement will see tariffs on Chinese goods either be significantly reduced or lowered to zero on thousands of items entering the EAEU, a trade bloc that includes Russia, Belarus, Armenia, Kazakhstan and Kyrgyzstan, as well as reductions for goods entering China.
By Ana Cicenia
Foreign direct investment (FDI) in China has changed significantly as wages continue to rise and the country’s economy matures from a heavy manufacturing base to one led by consumption and services. Foreign investors are taking a more cautious approach to investing in China than in years past, while Chinese outbound investors have been more bullish.
Naturally, the government has taken notice. Following a slowdown in inbound FDI, and a significant increase in outbound FDI, the government in August released the Notice on Promotion of Foreign Investment Growth (“the Notice”) to ease restrictions on inbound FDI and the Administrative Measures for Outbound Investment by Enterprises to regulate outbound FDI.
By Dezan Shira & Associates
Editors: Ramya Bodupalli and Zhou Qian
China’s value-added tax (VAT) reform is the largest tax overhaul in the country since 1994. The reform began as a Shanghai-based pilot program – a popular method for incubating reforms in the country – in 2012 before expanding to other cities and nationwide to all sectors in 2016.
In short, the reform replaced the Business Tax (BT) – which previously coexisted alongside VAT, and applied to a select number of industries – with the VAT. After VAT reform, authorities treated the sale of goods and services alike, eliminating the disproportionate taxation of services and simplifying China’s tax system
By Alexander Chipman Koty and Zhou Qian
Labor costs in China continue to rise – 19 regions have increased their minimum wages so far in 2017.
Regional authorities in Beijing, Fujian, Guizhou, Henan, Hubei, Hunan, Inner Mongolia, Jiangsu, Jiangxi, Jilin, Ningxia, Qinghai, Shaanxi, Shandong, Shanghai, Shanxi, Shenzhen, Tianjin, and Zhejiang have all raised their minimum wages in 2017. In total, these 19 regions are more than the nine that increased wages in 2016, equal to the 19 in 2015, and less than the 24 in 2014.
While the growth rate of minimum wages is lower than that of much of the last decade, wages are growing from a higher base than before, and wage increases continue to outstrip increases in productivity.
Minimum wages in parts of China – such as Beijing, Shanghai, and Shenzhen – are now higher than certain areas in the EU, namely Bulgaria. However, at their lowest levels – like in parts of Anhui, Guangxi, and Heilongjiang – wages are more comparable to countries such as India and Vietnam.
Op/Ed by Michael Mudd, Managing Partner, Asia Policy Partners LLC
The EU – via the EU Commission – has enacted two key regulations relating to data processing: the General Data Protection Regulation (GDPR) and the Network and Information Security Directive (NISD). While both came into force in April 2016, they will not apply until May 25, 2018.
When the GDPR comes into full force, any company based in Hong Kong, or anywhere else for that matter, will need to have governance policies in place if they solicit or target, collect, store or process any data on a citizen of the EU. Despite the ‘Brexit’ filing, this also means UK citizens for the foreseeable future.
A recent survey by the UK Chartered Institute of Marketing indicated that only five percent of marketers say they wholly understand what the GDPR means for their business.
Half say they don’t know anything about it at all and a surprising 16 percent do not think GDPR is relevant to them. Heavy fines await businesses that are not compliant – fines for breaking the regulations are capped at US$23.3 million or four percent of global turnover, whichever is higher.
By Melissa Cyrill
Bitcoin trading recently bounced back to US$7,000, recovering after a historic dip in value following Beijing’s crackdown on cryptocurrencies in September. Bitcoin is both a digital currency and payment system that is managed by decentralized computer networks.
The ten-fold increase in bitcoin’s value over last year reflects a level of market optimism that is puzzling for independent observers. This has not gone unnoticed by the country’s regulators, which recently banned all initial coin offerings (ICOs), or fund raising activities, for new cryptocurrency ventures.
By Dezan Shira & Associates
Dezan Shira & Associates, the professional services firm, celebrates its 25th anniversary of doing business in China today, with celebratory events and a gala dinner being held in Shanghai. The firm, which began life on November 10, 1992 with the formation of a limited company in Hong Kong, and a small office in Shenzhen, was founded by Chris Devonshire-Ellis, now the Chairman of the practice, with the support of two Sichuan girls acting as interpreters and administrative staff. Later, and current equity partners, include Alberto Vettoretti, recently Vice Chair of the European Chamber of Commerce South China, Sabrina Zhang, and Adam Livermore.
Today, Dezan Shira & Associates, together with its Asian Alliance members in Malaysia, Philippines, and Thailand, operate 28 regional offices throughout Asia and employ some 600 professional staff. Dezan Shira & Associates’ own offices includes 12 in mainland China, plus offices in Hong Kong, Delhi and Mumbai in India, Jakarta in Indonesia, Singapore, as well as Saigon and Hanoi in Vietnam.