Economy & Trade

China Turns to Russia as Most Important Trade and Political Ally

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By Dezan Shira & Associates

Li-Hui

Li Hui, Chinese Ambassador to Russia

The Chinese government has made statements concerning its view of the developing world, as China’s Ambassador to Russia, Li Hui, spoke on Wednesday at a government news conference organized in response to the results of the 19th Chinese Communist Party Congress in October.

The two countries – leading diplomatic and military rivals of the US – have been pursuing greater relations in past years as they both embark on initiatives to modernize their military and assume a more assertive role in international politics.

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Foreign Investment in Guangdong: New Incentives Announced

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By Alexander Chipman Koty and Zhou Qian

Guangdong province, China’s manufacturing heartland, has announced new measures to attract foreign investment.

On December 1, the Guangdong provincial government issued a report delineating 10 policies to expand the province’s openness to foreign investors and foreign capital.

The measures are in support of the State Council’s Measures to Expand Opening-up and Actively Utilize Foreign Investment (Guo Fa [2017] No. 5) and the Measures to Promote Foreign Capital Growth (Guo Fa [2017] No. 39). They include policies to improve Guangdong’s business environment, promote fair competition between foreign and domestic companies, expand market access, and offer investment incentives.

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China Cuts Import Duties on Consumer Goods

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By Alexander Chipman Koty and Zhou Qian

China is cutting import tariffs on nearly 200 types of consumer goods in a bid to encourage domestic consumption. The new tariff rates will take effect from December 1, 2017, according to an announcement by the Customs Tariff Commission of the State Council.

After the reductions, the average import tariff for these products will drop from 17.3 percent to 7.7 percent. Among the changes, the tariff rates for milk powders and diapers, which are in high-demand in China, will be reduced from 20 percent and 7.5 percent, respectively, to zero percent.

Hannah Feng, Senior Corporate Accounting Service Manager at Dezan Shira & Associates, said, “Chinese parents will be more than happy about this change: milk powders and diapers are two of the hottest products that Chinese want to purchase from overseas”. More broadly, she noted that the tariff reductions can be “seen as a signal that Chinese leaders are deepening supply-side reform”.

The reduced tariff rates will greatly benefit foreign businesses looking to sell their products in China, as they will now be cheaper and more competitive compared to domestic alternatives. The development also marks another step in China’s restructuring from an economy based on manufacturing and exports to services and consumption.

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Hong Kong Finalizes FTA with ASEAN, DTAA with India

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By Alexander Chipman Koty and Vasundhara Rastogi

ASEAN-HK-FTA-banner

Hong Kong recently finalized a series of agreements that, taken together, shift Asia’s trade and investment landscape.

On November 12, Hong Kong and ASEAN signed the ASEAN-Hong Kong, China Free Trade Agreement (AHKFTA), and the ASEAN-Hong Kong Investment Agreement (AHKIA). Prior to this, on November 10, Hong Kong and India agreed to a double taxation avoidance agreement (DTAA) with India.

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A China-US Trade War: Good News for Asia

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CDE Op-Ed Commentary

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.

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China Close to Signing Free Trade Agreement with Eurasian Economic Union

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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.

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China’s Inbound and Outbound FDI Goals

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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.

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Trump’s China Visit: What to Expect

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By Alexander Chipman Koty

China is preparing a lavish welcome for US President Donald Trump, who is set to arrive in Beijing for a three-day visit beginning November 8th.

China’s Vice Foreign Minister, Zheng Zeguang, has stated that Trump will receive a “state visit-plus”, and that the two countries are preparing for the visit to be a “historic success”. The visit will include a private tour of the Forbidden City in Beijing and an extravagant banquet, among other events.

However, while Trump’s China visit will be high in pomp, most observers do not expect significant progress to be made on substantive bilateral issues.

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