China
Cambodia’s electric Chinese aid and investment affair
Author: Shahar Hameiri, University of Queensland
The debate about China’s rapidly growing global investment and development financing footprint has focused on deciphering Chinese intentions — whether China aims to revise or maintain the US-led ‘liberal international order’. A manifestation of this approach is the controversial ‘debt trap diplomacy’ trope — the idea that China is using its money to ensnare recipients in unequal relationships that secure Chinese geostrategic interests.
But the role of recipient governments in promoting large-scale Chinese projects and shaping their impact is often neglected.
Cambodia is a case in point. Observers often view Cambodia as China’s staunchest ally in Southeast Asia. Cambodia’s refusal, when ASEAN Chair in 2012, to release a communique criticising China’s conduct in the South China Sea was seen as evidence of this.
China is Cambodia’s biggest aid provider and Chinese investors hold almost a quarter of Cambodia’s total FDI stock. Distinguishing Chinese aid from investment is difficult, but there is no doubting China’s huge economic impact in Cambodia.
Yet the Cambodian government is often the driving force behind the biggest Chinese-financed projects. Keen to maintain the flow of economic opportunities to crony-capitalists whose support underpins the regime, Cambodian leader Hun Sen has reached out to China to finance controversial and sometimes financially unviable projects, especially in the hydropower sector.
The characteristics of China’s sprawling and fragmented development financing domain enable this. Chinese leaders often pledge headline-grabbing sums of money to particular countries or regions. In Cambodia’s case, US$500–700 million per annum was pledged in 2014. But disbursing the funds depends on project-by-project negotiations, typically between recipients and Chinese officials from local embassies and state-owned companies. China’s development financing is also generally ‘demand-driven’, so project ideas usually come from recipients — although state-owned enterprises often propose projects to recipients informally.
In Cambodia, the demand-driven system is shaped by patronage politics centred on Hun Sen and the Cambodian People’s Party. Unlike any other development partner, Chinese development financing is managed directly from the Prime Minister’s office, not via the Council for the Development of Cambodia, affording Hun Sen considerable scope to shape China’s development financing in Cambodia.
A prominent example is the Lower Se San 2 (LS2) dam. Construction of the dam displaced around 5,000 Cambodians. Tens of thousands more have been negatively affected by its effects on water flows and fish migration.
Cambodia’s ruling elites developed an interest in hydropower in the early 2000s, initially for export, but later to provide electricity to rural areas. Hun Sen has promised to provide electricity to 70 per cent of households by 2030, partly in an effort to address his party’s declining electoral support in its rural heartland.
The Cambodian government struggled to finance costly priority projects, and turned to the ‘Build, Operate, Transfer’ (BOT) model to attract investors. It offered generous terms — tax breaks, free licences for dam construction and water use, rapid environmental approvals and pledged to guarantee energy purchases and buy out operating companies in case of force majeure.
Initially the Cambodian government signed a memorandum of understanding with Electricity Vietnam (EVN) to develop the site, but it soon transpired that EVN was struggling to raise sufficient finance. In January 2011 EVN announced that Royal Group — a company owned by Cambodia’s richest crony-capitalist Kith Meng — had taken a 49 per cent share in the project despite having no experience in the energy sector. Rumours circulated that EVN was trying to pull out.
In November 2012, after Cambodia’s Council of Ministers approved LS2, it was suddenly announced that the state-owned China Huaneng Group had become a 51 per cent shareholder in the project. EVN became a sleeping partner, holding 10 per cent while Royal Group retained 39 per cent.
After lengthy negotiations, Huaneng, the national utility company Electricite du Cambodge and the Hydro Power Lower Se San 2 Company agreed on a financing deal, which Cambodia’s National Assembly signed into law in February 2013. The dam company agreed to pay 30 per cent of the cost from unknown sources, with the remainder coming from a bank loan for 15 years at 6.5 per…
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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