China
Simandou is China’s poisoned chalice
Authors: Luke Hurst, Lydekker and Peter Cai, Lowy Institute
In September 2021, Alpha Conde — the octogenarian president of Guinea — was toppled by the special forces he created. It is the latest episode of political instability in the West African state with not only rich resources but also a history of military coups.
A Chinese foreign ministry spokesperson, in an unusual move, spoke against the military coup and urged the immediate release of the former president. This is a departure from Beijing’s cardinal foreign policy dictate of non-interference in other countries’ domestic affairs.
China has a big stake in the country. Guinea is China’s biggest supplier of bauxite, a key raw material for the aluminium industry. But perhaps more importantly, Guinea is home to the world’s largest untapped iron ore deposit, Simandou.
With an estimated 2.4 billion tons of high-grade iron ore reserves, Simandou is widely seen as China’s best hope of reducing dependency on Australia, which is by far the largest supplier of iron ore to the country. Beijing’s relationship with Canberra has sunk to new lows during the last two years over a range of bitter disputes from the South China Sea to the decision to exclude Huawei from Australia’s 5G network.
Guinea was mentioned as an option for China to develop a large-scale iron ore mine in its five-year plan for the steel industry released by the Ministry of Information Technology and Industry in early 2021. It is a key piece in China’s strategy of achieving a higher degree of resource security.
Two Chinese companies already have strategic stakes in the Simandou project — the state-owned Chinaclo and the privately controlled Weiqiao. In 2020, China’s largest steelmaker, Baowu Steel Group, was reportedly exploring the possibility of establishing a US$6 billion consortium to develop Simandou in partnership with other steelmakers, engineering companies and sovereign wealth funds.
The ouster of Alpha Condo could derail Beijing’s ambition to reduce its dependency on Australia for iron ore, highlighting one of Simandou’s biggest risk factors: political instability in a country ravaged by civil war and tribal conflicts.
China is cognisant of political risk and is not afraid of airing it publicly. China Geological Survey published a report in 2020 highlighting the Guinea government’s lack of respect for contractual arrangements, political instability and rising African resource nationalism.
The report is critical of industrial relations in the country and cites increasingly frequent strikes as a ‘negative’ for investment. It concludes by saying that while the Simandou project’s advantages are clear, the risks are also significant, including huge investment outlay, a long investment cycle, and uncertainty. Chinese firms have acquired mining rights, but there is significant uncertainty about the profitability of the project. The report notes, ‘Chinese companies will face significant challenges during implementation and operation stages of this project’.
The Chinese government’s geology services further warn about the Guinean government’s desire to extract as much as US$15.5 billion in tax. A non-Chinese mining executive who was heavily involved in the early development of the Simandou project noted: ‘the biggest [issue] is that Simandou is a national crown jewel and in any country … resources of that scale come with very big political strings … this is far bigger than anything they’ve ever had to deal with before’.
Australian miner and Chinalco’s partner in the project, Rio Tinto, understood the risk too well as the victim of Guinea’s past expropriations after winning the exclusive development rights in 1997. Today, Rio Tinto’s share in the Simandou project has been whittled down to 44.05 per cent.
In Simandou, Beijing faces a huge dilemma. It is a significant opportunity to reduce its dependency on a supplier that it no longer trusts. But geography, price fluctuations and political instability also present significant risks.
Despite Beijing’s established ties in Africa, its large cheque book and ability to deliver massive infrastructure projects quickly, there are things even the Chinese Communist Party find beyond their control.
Luke Hurst is Managing Director at Lydekker, an Australian-based Asia strategy and market advisory firm.
Peter Cai is Research Fellow and Director of China-Australia relations at the Lowy Institute.
The post Simandou is China’s poisoned chalice first appeared on East Asia Forum.
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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