China
Industrial policy the wrong treatment for COVID-19 woes
Author: Editorial Board, ANU
‘Governments are terrible at picking winners, but losers are great at picking governments’. It’s an old gag, but the observation remains truer today than ever. COVID-19 has seen governments unleash a fresh wave of industry policy as politicians abandon markets to boost their preferred industries. This is a mistake. Markets have performed well during COVID-19 and there is no evidence that governments have got any better at picking winners. Industry policy is a recipe for lower living standards, slower post-pandemic recovery and increased corruption.
There are no free lunches when it comes to economics. Countries have limited resources to produce goods and services. Trade allows countries to specialise. It allows countries to focus limited resources — workers, capital, energy, materials — on producing the things that they’re good at producing compared to the rest of the world, earn money on international markets and then use some of that money to import the things they’re relatively worse at making. The reason we trade is the same reason you don’t cut your own hair, build your own car or perform your own dentistry: specialisation makes us better off, trying to do everything yourself makes you poor.
This is the problem with industry policy. When governments use tariffs, quotas and subsidies to boost one industry, those resources come from other industries. As production increases in Industry A, it takes workers, capital, energy and materials from Industry B. ‘Buy local’ campaigns might sound intuitively attractive, but it means reallocating resources away from a country’s most productive and profitable industries and giving them to less productive and profitable industries.
Industrial policy, where governments intervene to support domestic manufacturing and other favoured industries, used to be Asia’s economic tiger balm, a widely used cure-all for catching up with the advanced economic powers. Japan was its exemplar, in practice and in theory. Never mind that when you took a careful look at the structure of tariffs, trade controls and industrial subsidies that went to favoured sectors in Japan in the heyday of industrial policy, as did the late Ben Miller from the ANU, they were overwhelmingly lavished on declining industries, not highly productive sectors of the economy. That’s just in manufacturing, not to mention the sinkhole of funding and support that went into agriculture and the old Liberal Democratic Party’s favourites in construction.
Asia, including China, learned the lesson that it was governments getting out of markets that boosted economic performance. The past 40 years of economic reform have seen steady Chinese government retreat from markets. In the rush of blood at the sudden realisation in Washington and like-minded capitals that the Chinese Communist Party still runs China, it’s somehow been forgotten that it’s the retreat from government intervention in markets that’s driven China’s remarkable economic success thus far.
Yet China’s embrace of Made in China 2025 to boost domestic growth of 10 high-technology sectors including electric cars, other new energy vehicles, aerospace, next-generation information technology and telecommunications, advanced robotics and artificial intelligence heralded a new age industrial policy, which itself is said to be inspired by Germany’s Industrial 4.0 development plan. To US policymakers it threatened to make China into a competitor technological superpower, although there’s still a question about how much Chinese state funding will go into the program compared with the R&D funding that the United States pours directly and indirectly into its high-tech sector.
If this context weren’t enough to inflame big power psychological anxieties, come COVID-19 and a host of other woes — the threat to national security, supply chain failure, health standards, employment protection, future growth potential — and the industrial policy tiger balm is once more all the rage.
In this week’s lead essay, Gary Hufbauer and Euijin Jung point out that before the Trump era, ‘industrial policy … was regarded as a hangover from the Soviet Union, to be embraced only by misguided developing countries’. Now President Trump has appealed to the disruption of international supply chains in justification of big government spending on domestic manufacturing — US$765 million to Kodak, for example, to produce generic drug ingredients in the United States, an entirely new line for the old photography…
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
- China’s Golden Rooster Film Festival Kicks Off in Xiamen – Thailand Business News
- Italy and China New DTA Set to Take Effect in 2025: Important Changes and Implications
- China’s New Home Prices Stabilize After 17-Month Decline Following Support Measures
- U.S. national debt is its Achilles’ heel, but China sees it as an opportunity
- Business Update: Southern Sun Reports Earnings Growth; China Stimulates Property Market – News24
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