China
US retreat from multilateralism blunts the fight against COVID-19
Author: David Lubin, Citigroup
During the early stages of the COVID-19 pandemic, the IMF and the World Bank were quick to trumpet their contribution to stabilising the global economy from an unprecedented shock. But the noisy claims belie the fact that multilateral institutions have little room to manoeuvre now that the United States — the country that underpins multilateralism — has lost interest in the idea.
Take the World Bank. Although its widely voiced promise was that it would lend US$160 billion to help the developing world deal with the crisis, it turns out not a penny of this represents additional lending — it is all money the Bank would have disbursed anyway.
Granted, it is accelerating some disbursements and offering a temporary moratorium on debt service payments from poor countries. But given the scale of this crisis, one might have expected more.
The basic problem is that the World Bank’s capital is down to 22 per cent of its loan book and, for prudential reasons, it cannot fall below 20 per cent. One way out would be for the Bank to seek more capital, which the Trump administration has in the past agreed to provide. But these days it’s hard to imagine the US government looking kindly on such a request.
As President Trump told the UN General Assembly last September, ‘The future does not belong to the globalists. The future belongs to patriots’. From Trump’s point of view, the IMF and the World Bank are globalist by nature. They also fail his value-for-money calculation: US influence in these institutions is too small, he thinks, to justify the cheques written by the United States to keep them going.
This kind of thinking has been plainly on display in the way the United States has limited the role of the IMF in managing the global crisis. The most straightforward way for the IMF to support its members is to provide international liquidity in the form of additional Special Drawing Rights (SDRs). These SDRs, credited to the accounts of IMF member countries, are exchangeable for the five basket currencies: the US dollar, euro, sterling, yen and renminbi.
Creating SDRs formed part of the IMF’s response to the global financial crisis in 2009, but this time around the idea was quashed by US Treasury Secretary Steve Mnuchin. To be fair, there is one good reason why SDR creation may not have been the right tool: SDRs are allocated according to members’ quotas at the IMF, meaning some 70 per cent of the extra liquidity would have gone to rich countries who need it least. But two other lines of thought were likely more influential in the US decision.
The first is that the more SDRs there are out there, the more prominence the IMF has as an institution. The United States would rather keep the IMF dependent on resources that it has to borrow from rich countries, enhancing US leverage and keeping the Fund on a short leash.
The second is that giving the SDR prominence plays straight into China’s agenda. In 2009, then governor of the People’s Bank of China Zhou Xiaochuan pushed for the creation of a ‘super-sovereign reserve currency’ to take over the US dollar’s central role in the international monetary system. Zhou argued that the SDR should be the seed from which such a currency might grow.
In the Trumpian worldview, what’s good for China is not good for the United States. Keeping the dollar as the centre of the international monetary system has huge strategic value for Washington. It keeps China dependent on a currency it has no power to print.
Multilateralism as we have known it since the Second World War has only ever been a set of institutions underpinned by US power. Multilateralism is useful to the United States so long as those institutions — including the IMF and the World Bank — serve its interests.
President Trump’s decision to withdraw from the World Health Organization is the starkest evidence yet that Washington no longer believes this condition is being met. Equally significant, though less visible, is the United States hobbling of the role that the IMF and World Bank can play in easing the economic pain of COVID-19. The anchor on which post-war multilateralism has depended is coming loose.
How much weaker might this anchor get? We should know more in early November.
David Lubin is head of emerging markets economics at Citigroup. He is also an associate fellow of the Global Economy and Finance programme at Chatham House.
This article is part of an EAF special feature series on the novel coronavirus crisis and its impact.
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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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