China
Chinese chains on competition
It is very easy to claim that China works to suppress economic competition — one only need point to the state sector.
A stronger claim is that China’s suppression of competition remains intense compared to market economies, with effects starting at home but also extending overseas. And that the outlook for more open competition is poor.
This should ring true at least initially, since the Chinese Communist Party (CCP) loathes any sort of political competition even down to the level of individual dissidents and small social groups. Extending beyond politics is the desire to control information — the CCP casts itself as the only legitimate information source for all decision making, including economic.
The setting for economic competition is therefore discouraging. In general, what matters most for large economies is not exports or foreign investment, but fundamental policies at home pertaining to capital, innovation, labour and land. An assessment of these policies in China reveals intense repression.
Despite talk of reform, the mobility of Chinese workers remains restricted for reasons of ‘social stability’, with the effect of reducing competition and productivity in the labour market.
The state also controls most land, a powerful tool to tilt the playing field. Preferred recipients can receive free land while unwanted firms are blocked from land purchases entirely. These are potentially serious export subsidies and barriers to entry respectively. Land is tied to warping competition for the sake of ‘innovation’. It is the government that decides which sectors are highly valued at any time, leaving firms in many other sectors starving for land and capital. This practice long pre-dates the now somewhat infamous ‘Made in China 2025’ policy.
Capital allocation is also anti-competitive. The banking system sees only a few private players, being otherwise dominated by the state. The rise of non-bank financials has been driven primarily by moving assets off state bank books. On the borrower side, state-owned enterprises (SOEs) have privileged access to loans and creditors cannot force them into bankruptcy. Others can be credit-starved.
Nor is the future bright. While October’s 19th Party Congress provides an opportunity for change, labour market reform is likely to maintain its painfully slow pace. There is again talk of sharper land ownership rights for private entities, but we have heard this before.
Stilted corporate competition was tipped at the 2013 CCP plenary meetings, a time wrongly hailed by some as heralding reform. What was actually promised was more private cooperation with the state sector — the exact opposite of what is needed. Since then, the state sector has seen a series of mergers, which is termed ‘reform’ but turns oligopolies into monopolies.
Suppression of economic competition goes hand in hand with suppression of political and information competition to give the Party control over Chinese society. There is a further goal: the giant enterprises created by free land, free capital and enforced consolidation in the home market are to become global champions. Of course, other countries are expected to offer a fair and open competitive environment.
The inconsistency belies President Xi’s support of globalisation. With China now the world’s premier manufacturer, Beijing advocates open trade in most manufactured goods. But service imports are inhibited both indirectly through capital and land subsidies and directly through assured market share for state-owned banks, insurers, telecom firms, media, professional services and so on, which are never allowed to fail.
The hypocrisy extends beyond services and trade. Foreign companies are limited to peripheral investments in energy, petrochemicals, shipping and other ‘sensitive’ industries.
Chinese officials still bemoan the unfairness of the United States rejecting China National Off-Shore Oil’s (CNOOC) 2005 bid for Unocal, though an American attempt to buy CNOOC remains inconceivable.
It is not just isolated cases. While China is deliberating whether to create new SOE monopolies, the anti-monopoly law is employed with increasing frequency. It is not being used against SOEs — they are largely exempt. Instead, the biggest targets are what Beijing sees as ‘dangerously competitive’ multinationals.
There is a counter-argument: there’s far more economic competition in China than 40 years ago. Of course this is true, and important. But the same cannot be said in comparison to China 10 or even 15 years ago. Pro-competitive reforms disappeared under Hu Jintao and show no signs of reappearing under Xi Jinping.
The extent of and trend in China’s repression of competition…
Author: Derek Scissors, AEI
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Business
China’s Golden Rooster Film Festival Kicks Off in Xiamen – Thailand Business News
The 2024 China Golden Rooster and Hundred Flowers Film Festival began in Xiamen on Nov 13, featuring awards, cultural projects worth 31.63 billion yuan, and fostering international film collaborations.
2024 China Golden Rooster and Hundred Flowers Film Festival Opens
The 2024 China Golden Rooster and Hundred Flowers Film Festival commenced in Xiamen, Fujian province, on November 13. This prestigious event showcases the top film awards in China and spans four days, concluding with the China Golden Rooster Awards ceremony on November 16.
The festival features various film exhibitions, including the Golden Rooster Mainland Film Section and the Golden Rooster International Film Section. These showcases aim to highlight the achievements of Chinese-language films and foster global cultural exchanges within the film industry.
On the festival’s opening day, a significant milestone was reached with the signing of 175 cultural and film projects, valued at 31.63 billion yuan ($4.36 billion). Additionally, the International Film and Television Copyright Service Platform was launched, furthering the globalization of Chinese film and television properties.
Source : China’s Golden Rooster film festival opens in Xiamen – Thailand Business News
China
Italy and China New DTA Set to Take Effect in 2025: Important Changes and Implications
Italy ratified an upgraded Double Tax Agreement (DTA) with China, effective in 2025, to reduce tax burdens, prevent evasion, and enhance investment. The DTA introduces modern provisions aligned with international standards, targeting tax avoidance and improving dispute resolution for Italian businesses.
Italy recently ratified the upgraded Double Tax Agreement (DTA), which will finally take effect in 2025. This agreement was signed in 2019 and was designed to reduce tax burdens, prevent tax evasion, and promote Italian investment in China.
On November 5, 2024, Italy’s Chamber of Deputies gave final approval to the ratification of the 2019 Double Tax Agreement (DTA) between Italy and China (hereinafter, referred to as the “new DTA”).
Set to take effect in 2025, the new DTA is aimed at eliminating double taxation on income, preventing tax evasion, and creating a more favorable environment for Italian businesses operating in China.
The ratification bill for the new DTA consists of four articles, with Article 3 detailing the financial provisions. Starting in 2025, the implementation costs of the agreement are estimated at €10.86 million (US$11.49 million) annually. These costs will be covered by a reduction in the special current expenditure fund allocated in the Italian Ministry of Economy’s 2024 budget, partially drawing from the reserve for the Italian Ministry of Foreign Affairs.
During the parliamentary debate, Deputy Foreign Minister Edmondo Cirielli emphasized the new DTA’s strategic importance, noting that the agreement redefines Italy’s economic and financial framework with China. Cirielli highlighted that the DTA not only strengthens relations with the Chinese government but also supports Italian businesses, which face increasing competition as other European countries have already established double taxation agreements with China. This ratification, therefore, is part of a broader series of diplomatic and economic engagements, leading up to a forthcoming visit by the President of the Italian Republic to China, underscoring Italy’s commitment to fostering bilateral relations and supporting its businesses in China’s complex market landscape.
The newly signed DTA between Italy and China, introduces several modernized provisions aligned with international tax frameworks. Replacing the 1986 DTA, the agreement adopts measures from the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project and the OECD Multilateral Instrument (MLI), targeting tax avoidance and improving dispute resolution.
The Principal Purpose Test (PPT) clause, inspired by BEPS, is one of the central updates in the new DTA, working to prevent treaty abuse. This clause allows tax benefits to be denied if one of the primary purposes of a transaction or arrangement was to gain a tax advantage, a move to counter tax evasion through treaty-shopping.
| This article was first published by China Briefing , which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in China, Hong Kong, Vietnam, Singapore, and India . Readers may write to info@dezshira.com for more support. |
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Business
China’s New Home Prices Stabilize After 17-Month Decline Following Support Measures
China’s new home prices fell for the 17th month in October, declining 0.5% from September, but slowing, indicating potential market stabilization amid supportive measures. Second-hand home prices showed mixed trends.
Decline in China’s Home Prices Stabilizes
China’s new home prices continued to decline in October for the 17th consecutive month, although the drop showed signs of slowing. Recent support measures from Beijing appear to be inching the market toward stabilization, as evidenced by a lighter decline compared to earlier months.
Monthly and Yearly Comparisons
According to the latest data from the National Bureau of Statistics, new home prices across 70 mainland cities fell by 0.5% from September, marking the smallest decrease in seven months. Year-on-year, prices dropped by 6.2%, slightly worse than the September decline of 6.1%. In tier-1 cities like Beijing and Shanghai, prices decreased by 0.2%, a smaller fall than 0.5% in the previous month.
Second-Hand Home Market Trends
Second-hand home prices in tier-1 cities experienced a 0.4% increase in October, reversing a 13-month downward trend. Conversely, tier-2 cities observed a 0.4% drop in second-hand prices, while tier-3 cities faced a similar 0.5% decline. Overall, recent trends indicate a potential stabilization in China’s property market.
Source : China’s new home prices slow 17-month decline after support measures kick in
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