It is a classic complaint among China’s rulers: foreign countries do not understand the People’s Republic. But to fully understand the full pictures, you need to look at both sides of the same coin. The everyday life of foreign journalists working in China, who set out to understand the country and its people, is becoming increasingly difficult. Marcel Grzanna describes how even reports on the Olympic Games or on the catastrophic flooding in Henan are provoking vicious threats against Western media.
Beijing is currently also cracking down on other unpopular industrial sectors: private education companies are under fire – if only metaphorically. Our team of authors in Beijing reports on how China’s authorities are brutally cracking down on companies that up until now stood for rapid growth and big profits. But if and how new rules and guidelines will actually give stressed-out students more free time and equal educational opportunities remains to be seen.
Meanwhile, Taiwanese semiconductor manufacturer TSMC is considering Germany as a location for one of its plants. Plans may still be at an early stage, but given the importance of chips for several economic branches, the construction of a new plant would be an important competitive advantage for TSCM. As one of many affected branches, German car manufacturers have had to reduce or even interrupt production in many cases over the recent months due to the shortage.
Last but not least, I would like to recommend our “Tool” for today. In it, we explain the incoming changes to China’s stamp duty tax – and how companies can benefit from it.
I hope you will enjoy our latest issue!
The Chinese embassy in Sri Lanka is in outrage. On Twitter, news agency Reuters had published the news of the victory by weightlifter Hou Zhihui at the Olympic Games in the weight class of up to 49 kg, accompanied by a picture of the athlete. The photo depicted the exact moment as Hou lifts the barbell upwards. Inevitably, the young woman’s face reflects the enormous effort required to pull almost twice her own body weight up from the ground over her head in one movement.
Chinese diplomats in Sri Lanka, however, recognized in the image selection a malicious move of Western media against their home country. The reason is probably that the face of the gold medal winner looks tense and distorted at this moment. Certainly a disadvantage for a model, but probably not of any concern for a power athlete. “Out of all the pictures in this contest, Reuters has chosen the one that proves how ugly they (Reuters) are… Shameless.” The tweet was linked with a polemical comment in which the accusing news agency labels itself as unbiased media, while putting politics and ideology above sports.
This raises the fundamental question of whether the portrayal of China in Western media is in fact part of a grand conspiracy against the second-largest economy, or whether the representatives of the Chinese government use every opportunity to categorically denigrate the reputation of foreign reporting on their country in order to divert attention from their own mistakes and marginalize critics.
Curiously, a Tweet by the online editorial staff of the English-language daily newspaper China Daily pointed out that they also had selected the very same picture “from all the pictures of this competition” as Reuters did to announce the second Chinese gold medal in Tokyo. The staff of China Daily apparently saw nothing defamatory in the picture but perceived it for what it was: an example of excellent photojournalism, in which the picture’s message sums up the character of a sport. Accordingly, this resulted in numerous polemical comments targeting the embassy in Sri Lanka.
A reporter who writes about China and Taiwan for the Wall Street Journal followed a more objective approach. “It seems as if the hatred of foreign media in China is reaching a new dimension,” she commented on the photo dispute, referring to the recent hostilities against Western reporters reporting on the flooded regions in the province of Henan. In one of many cases, the correspondent of German international broadcaster Deutsche Welle had been loudly insulted as soon as he was identified as a journalist. The situation somewhat calmed down after it became clear that the reporter was not traveling on behalf of the British BBC. The German journalist suspected numerous civilian officials among the angry mob that suddenly approached him.
The BBC has been the center of massive threats by Chinese authorities for months, mainly because of its investigative work on Chinese human rights violations against Muslim Uighurs. One of its correspondents had to relocate to Taiwan a few months ago out of fear for his and his family’s safety. The mere presence of BBC reporters in the flood-hit region incited a new wave of intimidation over the weekend. “There have been threats of violence and personal family-targeted abuse send to the private phones of those working in the foreign media as part of this clearly-orchestrated campaign of harassment, especially focusing on the BBC,” BBC reporter and former president of the Foreign Correspondents’ Club of China (FCCC) Stephen McDonell wrote on Twitter.
The Chinese authorities would like to give the impression that it is the general Chinese population whose displeasure is provoked by foreign journalists in China. The Communist Party applies the same tactics when it comes to reprimanding foreign companies. Time and again, the feelings of 1.4 billion Chinese are said to have been hurt when, for example, someone questions whether Taiwan – as propagated – is really an “inseparable part” of the People’s Republic. The political leadership uses its means of censorship and exclusive dissemination of facts to claim that it speaks for all Chinese. But this is by no means the case.
If a foreign media professional is working in China and talks to people from all different walks of life without knowledge of the authorities, you will experience a much more nuanced view of the “Laobaixing” (ordinary citizens). Of course, there are occasional people who represent the Chinese government’s point of view. In the vast majority of cases, however, people are willing to talk and by no means see foreign media as the embodiment of an anti-Chinese spirit. Nevertheless, it is becoming increasingly difficult for Western media to find Interviewees for their reports, as the FCCC noted in its 2020 annual report. In the past year, 88 percent of all foreign media employees surveyed had experienced that appointed interviews with Chinese citizens had been cancelled or that the interviewees had been prevented from doing so.
While the Chinese Communist Party keeps complaining that foreigners do not understand their country, as soon as foreign journalists set out to get to know and understand China and its people, authorities feel threatened in their monopoly on opinion – and in doing so, present an artificially constructed image of China. And this image is currently accompanied by threats. However, this has little to do with the everyday life of the Chinese people.
If authorities in Beijing have their way, China’s schoolchildren will soon be able to enjoy much more free time. Until now, the situation looked like this: An already exhausting school week is followed by additional private courses on Saturday and Sunday, for which parents usually pay a substantial amount of money. This “private tutoring” was not only aimed at weaker students who simply couldn’t keep up in their classes; it was also quite normal for the best students to take additional classes on weekends in order to improve an already stellar performance.
Chinese parents did everything in their power to ensure that their offspring could excel, and in doing so they occasionally forgot that children also have other needs besides studying relentlessly all day. From this perspective, Beijing has now made a decision that should please many young Chinese students. On Saturday, authorities announced a host of rule changes for private education companies in an effort to reduce the workload of students. These new regulations now endanger the providers’ previous business model.
In the future, for example, companies will be prohibited from offering curriculum-related tutoring sessions on weekends or during holidays – not even via the Internet, as it has been a widespread practice in the past. Companies will also no longer be allowed to operate for profit or go public. Foreign investment will also be banned. The sector has been “eaten away by capital”, Beijing argues. Private education for children younger than six will be completely banned.
The decision sent markets into a shock. On Friday, as soon as the first news about the new rules went public, the stocks of New Oriental, one of the largest providers of private education, plummeted by 40 percent. Competitors such as TAL Education and Gaotu suffered a similar fate.
Investors assume that these new rules will deprive private education companies of almost all opportunities for growth. This is despite the fact that, until recently, education was considered an absolute boom sector in China, which was soon to generate revenue equivalent to more than 100 billion US dollars. This confirms observers, who have been warning for some time now, that China’s regulators no longer take the impact their own decisions have on the stock market into account.
The Chinese Internet giant Tencent, which invests heavily in the education sector, also suffered another sharp drop in the stock market on Monday. In the past six months, Tencent had already lost around a third of its value because regulatory authorities had targeted a whole series of Chinese tech companies and imposed stricter rules.
Large parts of the Chinese tech industry are feeling the increased pressure. Back in April, China’s competition regulators imposed a record fine of ¥18 billion (€2.3 billion) on Chinese internet giant Alibaba. Shortly afterward, the competition regulator SAMR invited 34 Internet heavyweights to a meeting and announced “severe repercussions” if the companies violated these rules in the future.
Since the beginning of July, Chinese ride-hailing service Didi Chuxing has also been under pressure. Shortly after the company went public on the New York Stock Exchange, Chinese authorities pulled their app from all app stores. Now there is even talk of having to cancel Didi’s entire IPO. Since trading launched a few weeks ago, Didi’s shares have lost 43 percent in value. Almost across the entire board, Chinese tech stocks have lost significant value since the beginning of the year, while US competitors such as Facebook or Amazon have been able to reach new highs.
It seems clear that investors are once again among the big losers of a regulatory decision made by Beijing. But whether there will also be any winners, profiting from these new policies, remain to be seen. Observers are already fearing that if companies are no longer allowed to offer their services, parents will resort to private tutors. A black market for the best tutors could make tuition even more expensive for families. And children from poorer backgrounds would fall even further behind. GregorKoppenburg/Joern Petring
Taiwanese chipmaker Taiwan Semiconductor Manufacturing Co (TSMC) has officially confirmed for the first time that it is considering Germany as a location for its new fab. “We are seriously considering Germany,” group chief executive Mark Liu said at the company’s annual general meeting in Taipei on Monday. However, he stressed that the process was still at a rather early stage. TSMC will first consult its key customers in Germany, Liu said. The company wants to determine how important local production is for its customers. Taiwan Semiconductor Manufacturing Co., headquartered in Hsinchu, is the world’s largest contract chip manufacturer.
TSMC is currently building a $12 billion plant in the US state of Arizona and has plans for another factory in Japan. It will “proceed very cautiously” in its further expansion plans, Liu said, referring to the company’s plans to expand overseas.
Many industry branches currently suffer from a shortage of computer chips, partly because demand has increased again during the COVID-19 crisis. As one of the sectors affected, German car manufacturers have had to reduce or even interrupt production in many cases over the recent months due to the shortage. Chip manufacturers are therefore currently investing a lot of money in expanding their capacities. In its expansion plans, TSMC wants to distribute the resulting costs to customers and the respective countries in which a factory is being built.
TSMC had already asked its customers to accept the higher prices in April (as China.Table reported). Only then could the company increase investment to cope with a “structural and fundamental increase” in chip demand, a letter by company CEO C.C. Wei stressed at the time. China has also long taken action against the chip shortage. In the past five months alone, the People’s Republic has raised a total of $6 billion in new investment in this sector. According to a report by US law company Katten and Chinese chip industry monitor Ijiwei.com, companies obtained their funds mainly from state sources and venture capital firms close to the Chinese state (as China.Table reported).
In spring, the Shanghai Development and Reform Commission alone announced an investment of $12 billion US dollars in new facilities of Semiconductor Manufacturing International Corporation (SMIC). Here, their focus lies on elements with a structure width of 14 nanometers and below. While already very modern, it is not yet among the most advanced technology available. Although China is quick to implement and create capacities, technically it is lagging behind South Korea, the USA, and TSMC from Taiwan. rad
China’s Ministry of Ecology and Environment has criticized the EU’s proposed carbon border tax as an obstacle to global economic growth. Moreover, the European Union is expanding climate issues into trade, which violates international principles, ministry spokesman Liu Youbin said, according to a report by Reuters. The EU Commission had unveiled the Carbon Border Adjustment Mechanism (CBAM) plan in mid-July (as China.Table reported). Even back then, opposition from Beijing was expected, as Chinese representatives in Brussels and President Xi Jinping had already spoken out against the border tax in the past.
“CBAM is essentially a unilateral measure to extend the climate change issue to the trade sector,” said Liu Youbin, a spokesman of the Ministry of Ecology and Environment. The scheme “undermines mutual trust in the global community and the prospects for economic growth.” He again reiterated China’s stance that each country should respond to climate change according to its capabilities and economic development. But the carbon border tax affects the ability of individual countries to address the problem, the report further quoted the spokesman.
The tax amount is to be based on the average weekly price that European companies have to pay for EU emission certificates. Companies from third countries will be able to claim CO2 costs incurred in their home country, and in turn, they correspondingly will have to present fewer “CBAM rights”. In mid-July, China also launched its emissions trading. Whether this will be compatible with the European ETS, however, is highly questionable. ari
The electric vehicle start-up Faraday Future, which has been pronounced dead time and again, continues to prove its resilience. According to media reports, through the listing of the Chinese-American company at the US technology exchange NASDAQ at the end of last week, around $1 billion in additional capital have been acquired. Previously, Faraday had merged Property Solutions Acquisitions – a process not uncommon in the USA for the sole purpose of creating an investment vehicle. Their freshly earned capital should now help to finally launch the company’s first model, a luxury electric SUV called FF91, CEO Carsten Breitfeld told news agency Reuters.
The FF91 is to leave production lines at a factory in Hanford, California, which was acquired by Faraday a few years prior. Its capacity is initially only 10,000 cars a year, Breitfeld said. The FF91 will be launched first in the US, then in China, and possibly later in Europe, he said. According to Breitfeld, the batteries will be supplied by the Korean company LG Chem.
In 30 months, Faraday Future plans to launch the FF81, a slightly cheaper model that will leave production lines at a contract manufacturer in South Korea and will compete with Tesla’s Model S and Model X. In the US, company founder Jia Yueting confirmed in talks with a Chinese TV station that the FF81 would be followed by another model called FF71. Jia had fled to the US in 2017 due to allegations of fraud and had to file for personal bankruptcy in 2019 – partly because he had put too much of his own capital into the shaky start-up. Breitfeld, an ex-BMW manager, was part of the founding team of the bankruptcy-prone electric startup Byton, which he left in 2019.
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According to media reports, the UK is seeking ways to exclude China’s state-owned nuclear energy company China General Nuclear Power Group (CGN) from all future power projects in the country. Reuters and the Financial Times reported on this, citing people close to planning procedures. Should the UK go through with their plan, it would impact the planned expansion of Sizewell C of the Sizewell nuclear power station in Suffolk, England, which French energy company EDF intends to jointly execute with CGN. The fate of proposals to build a new plant at Bradwell-on-Sea in Essex would also become uncertain, as the Financial Times reported.
Beijing immediately rejected this action: “The UK government should effectively provide Chinese companies with an open, fair and non-discriminatory business environment,” the newspaper quoted Zhao Lijian, spokesperson for the Chinese Foreign Ministry. “China and the UK are important trade and investment partners,” he added.
The EDF had purchased British Energy in 2009. In September 2016, the French company and CGN signed contracts to jointly develop Sizewell C. In May 2020, the construction was officially approved by authorities. ari
Hamburg’s First Mayor Peter Tschentscher (SPD) has spoken out in favor of plans by the Chinese company China Ocean Shipping Company (Cosco) to acquire a stake in the Hamburg container shipping terminal. “There are no political guidelines for this, but what makes sense from an entrepreneurial perspective must also be made possible and done in practice,” the SPD politician told the website n-tv.de. Hamburg must remain at the forefront of the competitiveness of northern European seaports, Tschentscher demanded. Hamburg is the third-largest European seaport – and China is by far the Hanseatic city’s biggest trading partner.
Hamburg terminal operator Hafen und Logistik AG (HHLA) is considering ceding a 30 to 40 percent stake in the Tollerort container terminal to the Chinese investor (as China.Table reported). Tollerort is one of the four major container terminals in the Port of Hamburg. Critics opposing the acquisition by Cosco fear that China could thus exert too much influence on the Port of Hamburg. Thus, ships owned by Cosco could expect preferential treatment, suspects TV station NDR. Trade union Verdi, in turn, is concerned that working conditions on ships and in ports could deteriorate in the longer term as a result.
Cosco is a state-owned company headquartered in Beijing. Its European headquarters are located in Hamburg. Ships owned by Cosco Shipping have been calling port at Hamburg’s Tollerort container terminal for almost 40 years.
“There are good reasons why Cosco and other shipping companies are interested in owning a stake in a terminal,” Tschentscher said. Hamburg’s First Mayor is convinced that, given the right conditions, the sale of a minority stake could make economic sense for both partners. “The terminal operators could improve their capacity utilization, shipping companies could secure reliable ports of call and participate in the entire value chain beyond the sea route”.
This is the reason why shipping companies and terminals in almost all ports – in Rotterdam, Antwerp, Marseille – have joined forces. In Hamburg, too, this concept is already working with Hapag-Lloyd’s stake in HHLA’s Altenwerder terminal and Grimaldi’s in Unikai. “I very much welcome this,” Tschentscher stressed.
The German government reportedly has no reservations about the takeover. However, Jürgen Hardt, foreign policy spokesman for the parliamentary group CDU/CSU, urges caution. “When it comes to international port logistics, we must exercise caution. As in other areas, we should look closely at whether we are becoming unilaterally dependent on Chinese investment in Germany and Europe,” Hardt said in an interview with German newspaper Neue Osnabrücker Zeitung. rad
China’s new stamp duty law comes into effect on 1 July 2022. This will bring a number of updates to the existing tax system, such as simplified compliance, changes to some tax rates and new tax exemptions.
On 10 June 2020, the Stamp Tax Law was adopted by the Standing Committee of the 13th National People’s Congress at its 29th session. The current regulation, the “Provisional Regulations of the People’s Republic of China on Stamp Tax” promulgated by the State Council on August 6, 1988, will be repealed upon its entry into force.
Compared to the interim regime, the Stamp Duty Act basically maintains the current stamp duty system. At the same time, there are some notable changes, including appropriate simplification of tax positions as well as tax reductions.
In view of the changes to the Stamp Duty Act, we would like to draw your attention to a number of points that you should bear in mind in your day-to-day dealings with stamp duty:
In 2015, the State Administration of Taxation issued the Guiding Opinions on Comprehensive Promoting the Governing of Taxes according to Law (Shui Zong Fa [2015] No. 32), which stipulated that China should accelerate the transformation of relevant tax regulations into laws to improve legal certainty and enhance the efficiency of tax administration. This is seen as an important part of China’s broader efforts to achieve a greater rule of law, meaning law-based administration of the country.
With the passage of the Stamp Duty Law, China has enacted legislation for 12 of the 18 existing taxes. Companies would be well advised to keep a close eye on future developments in China’s tax laws. More crucial changes are on the horizon.
This article first appeared in Asia Briefing, published by Dezan Shira Associates. The firm advises international investors in Asia and has offices in China, Hong Kong, Indonesia, Singapore, Russia, and Vietnam. Please contact them via info@dezanshira.com or the website www.dezshira.com.
We would like to correct a previous statement published on June 25, 2021:
Almut Rößner continues his position as Executive Director of the East Asian Association (OAV). The position on the board of the German Association for Asian Studies (DGA) is an additional mandate. China.Table had erroneously reported a change. We apologize for this error.
“In-Fa” is approaching: China’s east coast has felt the first effects of the approaching typhoon. A staff member patrols the Zhapu port area in Pinghu located in the eastern Chinese province of Zhejiang. “In-Fa” reached the mainland on Monday with winds reaching up to 100 kilometers per hour, according to the province’s flood control center. As state media reported, the typhoon could also be accompanied by further heavy rain for the flood-ravaged province of Henan in the coming days.
It is a classic complaint among China’s rulers: foreign countries do not understand the People’s Republic. But to fully understand the full pictures, you need to look at both sides of the same coin. The everyday life of foreign journalists working in China, who set out to understand the country and its people, is becoming increasingly difficult. Marcel Grzanna describes how even reports on the Olympic Games or on the catastrophic flooding in Henan are provoking vicious threats against Western media.
Beijing is currently also cracking down on other unpopular industrial sectors: private education companies are under fire – if only metaphorically. Our team of authors in Beijing reports on how China’s authorities are brutally cracking down on companies that up until now stood for rapid growth and big profits. But if and how new rules and guidelines will actually give stressed-out students more free time and equal educational opportunities remains to be seen.
Meanwhile, Taiwanese semiconductor manufacturer TSMC is considering Germany as a location for one of its plants. Plans may still be at an early stage, but given the importance of chips for several economic branches, the construction of a new plant would be an important competitive advantage for TSCM. As one of many affected branches, German car manufacturers have had to reduce or even interrupt production in many cases over the recent months due to the shortage.
Last but not least, I would like to recommend our “Tool” for today. In it, we explain the incoming changes to China’s stamp duty tax – and how companies can benefit from it.
I hope you will enjoy our latest issue!
The Chinese embassy in Sri Lanka is in outrage. On Twitter, news agency Reuters had published the news of the victory by weightlifter Hou Zhihui at the Olympic Games in the weight class of up to 49 kg, accompanied by a picture of the athlete. The photo depicted the exact moment as Hou lifts the barbell upwards. Inevitably, the young woman’s face reflects the enormous effort required to pull almost twice her own body weight up from the ground over her head in one movement.
Chinese diplomats in Sri Lanka, however, recognized in the image selection a malicious move of Western media against their home country. The reason is probably that the face of the gold medal winner looks tense and distorted at this moment. Certainly a disadvantage for a model, but probably not of any concern for a power athlete. “Out of all the pictures in this contest, Reuters has chosen the one that proves how ugly they (Reuters) are… Shameless.” The tweet was linked with a polemical comment in which the accusing news agency labels itself as unbiased media, while putting politics and ideology above sports.
This raises the fundamental question of whether the portrayal of China in Western media is in fact part of a grand conspiracy against the second-largest economy, or whether the representatives of the Chinese government use every opportunity to categorically denigrate the reputation of foreign reporting on their country in order to divert attention from their own mistakes and marginalize critics.
Curiously, a Tweet by the online editorial staff of the English-language daily newspaper China Daily pointed out that they also had selected the very same picture “from all the pictures of this competition” as Reuters did to announce the second Chinese gold medal in Tokyo. The staff of China Daily apparently saw nothing defamatory in the picture but perceived it for what it was: an example of excellent photojournalism, in which the picture’s message sums up the character of a sport. Accordingly, this resulted in numerous polemical comments targeting the embassy in Sri Lanka.
A reporter who writes about China and Taiwan for the Wall Street Journal followed a more objective approach. “It seems as if the hatred of foreign media in China is reaching a new dimension,” she commented on the photo dispute, referring to the recent hostilities against Western reporters reporting on the flooded regions in the province of Henan. In one of many cases, the correspondent of German international broadcaster Deutsche Welle had been loudly insulted as soon as he was identified as a journalist. The situation somewhat calmed down after it became clear that the reporter was not traveling on behalf of the British BBC. The German journalist suspected numerous civilian officials among the angry mob that suddenly approached him.
The BBC has been the center of massive threats by Chinese authorities for months, mainly because of its investigative work on Chinese human rights violations against Muslim Uighurs. One of its correspondents had to relocate to Taiwan a few months ago out of fear for his and his family’s safety. The mere presence of BBC reporters in the flood-hit region incited a new wave of intimidation over the weekend. “There have been threats of violence and personal family-targeted abuse send to the private phones of those working in the foreign media as part of this clearly-orchestrated campaign of harassment, especially focusing on the BBC,” BBC reporter and former president of the Foreign Correspondents’ Club of China (FCCC) Stephen McDonell wrote on Twitter.
The Chinese authorities would like to give the impression that it is the general Chinese population whose displeasure is provoked by foreign journalists in China. The Communist Party applies the same tactics when it comes to reprimanding foreign companies. Time and again, the feelings of 1.4 billion Chinese are said to have been hurt when, for example, someone questions whether Taiwan – as propagated – is really an “inseparable part” of the People’s Republic. The political leadership uses its means of censorship and exclusive dissemination of facts to claim that it speaks for all Chinese. But this is by no means the case.
If a foreign media professional is working in China and talks to people from all different walks of life without knowledge of the authorities, you will experience a much more nuanced view of the “Laobaixing” (ordinary citizens). Of course, there are occasional people who represent the Chinese government’s point of view. In the vast majority of cases, however, people are willing to talk and by no means see foreign media as the embodiment of an anti-Chinese spirit. Nevertheless, it is becoming increasingly difficult for Western media to find Interviewees for their reports, as the FCCC noted in its 2020 annual report. In the past year, 88 percent of all foreign media employees surveyed had experienced that appointed interviews with Chinese citizens had been cancelled or that the interviewees had been prevented from doing so.
While the Chinese Communist Party keeps complaining that foreigners do not understand their country, as soon as foreign journalists set out to get to know and understand China and its people, authorities feel threatened in their monopoly on opinion – and in doing so, present an artificially constructed image of China. And this image is currently accompanied by threats. However, this has little to do with the everyday life of the Chinese people.
If authorities in Beijing have their way, China’s schoolchildren will soon be able to enjoy much more free time. Until now, the situation looked like this: An already exhausting school week is followed by additional private courses on Saturday and Sunday, for which parents usually pay a substantial amount of money. This “private tutoring” was not only aimed at weaker students who simply couldn’t keep up in their classes; it was also quite normal for the best students to take additional classes on weekends in order to improve an already stellar performance.
Chinese parents did everything in their power to ensure that their offspring could excel, and in doing so they occasionally forgot that children also have other needs besides studying relentlessly all day. From this perspective, Beijing has now made a decision that should please many young Chinese students. On Saturday, authorities announced a host of rule changes for private education companies in an effort to reduce the workload of students. These new regulations now endanger the providers’ previous business model.
In the future, for example, companies will be prohibited from offering curriculum-related tutoring sessions on weekends or during holidays – not even via the Internet, as it has been a widespread practice in the past. Companies will also no longer be allowed to operate for profit or go public. Foreign investment will also be banned. The sector has been “eaten away by capital”, Beijing argues. Private education for children younger than six will be completely banned.
The decision sent markets into a shock. On Friday, as soon as the first news about the new rules went public, the stocks of New Oriental, one of the largest providers of private education, plummeted by 40 percent. Competitors such as TAL Education and Gaotu suffered a similar fate.
Investors assume that these new rules will deprive private education companies of almost all opportunities for growth. This is despite the fact that, until recently, education was considered an absolute boom sector in China, which was soon to generate revenue equivalent to more than 100 billion US dollars. This confirms observers, who have been warning for some time now, that China’s regulators no longer take the impact their own decisions have on the stock market into account.
The Chinese Internet giant Tencent, which invests heavily in the education sector, also suffered another sharp drop in the stock market on Monday. In the past six months, Tencent had already lost around a third of its value because regulatory authorities had targeted a whole series of Chinese tech companies and imposed stricter rules.
Large parts of the Chinese tech industry are feeling the increased pressure. Back in April, China’s competition regulators imposed a record fine of ¥18 billion (€2.3 billion) on Chinese internet giant Alibaba. Shortly afterward, the competition regulator SAMR invited 34 Internet heavyweights to a meeting and announced “severe repercussions” if the companies violated these rules in the future.
Since the beginning of July, Chinese ride-hailing service Didi Chuxing has also been under pressure. Shortly after the company went public on the New York Stock Exchange, Chinese authorities pulled their app from all app stores. Now there is even talk of having to cancel Didi’s entire IPO. Since trading launched a few weeks ago, Didi’s shares have lost 43 percent in value. Almost across the entire board, Chinese tech stocks have lost significant value since the beginning of the year, while US competitors such as Facebook or Amazon have been able to reach new highs.
It seems clear that investors are once again among the big losers of a regulatory decision made by Beijing. But whether there will also be any winners, profiting from these new policies, remain to be seen. Observers are already fearing that if companies are no longer allowed to offer their services, parents will resort to private tutors. A black market for the best tutors could make tuition even more expensive for families. And children from poorer backgrounds would fall even further behind. GregorKoppenburg/Joern Petring
Taiwanese chipmaker Taiwan Semiconductor Manufacturing Co (TSMC) has officially confirmed for the first time that it is considering Germany as a location for its new fab. “We are seriously considering Germany,” group chief executive Mark Liu said at the company’s annual general meeting in Taipei on Monday. However, he stressed that the process was still at a rather early stage. TSMC will first consult its key customers in Germany, Liu said. The company wants to determine how important local production is for its customers. Taiwan Semiconductor Manufacturing Co., headquartered in Hsinchu, is the world’s largest contract chip manufacturer.
TSMC is currently building a $12 billion plant in the US state of Arizona and has plans for another factory in Japan. It will “proceed very cautiously” in its further expansion plans, Liu said, referring to the company’s plans to expand overseas.
Many industry branches currently suffer from a shortage of computer chips, partly because demand has increased again during the COVID-19 crisis. As one of the sectors affected, German car manufacturers have had to reduce or even interrupt production in many cases over the recent months due to the shortage. Chip manufacturers are therefore currently investing a lot of money in expanding their capacities. In its expansion plans, TSMC wants to distribute the resulting costs to customers and the respective countries in which a factory is being built.
TSMC had already asked its customers to accept the higher prices in April (as China.Table reported). Only then could the company increase investment to cope with a “structural and fundamental increase” in chip demand, a letter by company CEO C.C. Wei stressed at the time. China has also long taken action against the chip shortage. In the past five months alone, the People’s Republic has raised a total of $6 billion in new investment in this sector. According to a report by US law company Katten and Chinese chip industry monitor Ijiwei.com, companies obtained their funds mainly from state sources and venture capital firms close to the Chinese state (as China.Table reported).
In spring, the Shanghai Development and Reform Commission alone announced an investment of $12 billion US dollars in new facilities of Semiconductor Manufacturing International Corporation (SMIC). Here, their focus lies on elements with a structure width of 14 nanometers and below. While already very modern, it is not yet among the most advanced technology available. Although China is quick to implement and create capacities, technically it is lagging behind South Korea, the USA, and TSMC from Taiwan. rad
China’s Ministry of Ecology and Environment has criticized the EU’s proposed carbon border tax as an obstacle to global economic growth. Moreover, the European Union is expanding climate issues into trade, which violates international principles, ministry spokesman Liu Youbin said, according to a report by Reuters. The EU Commission had unveiled the Carbon Border Adjustment Mechanism (CBAM) plan in mid-July (as China.Table reported). Even back then, opposition from Beijing was expected, as Chinese representatives in Brussels and President Xi Jinping had already spoken out against the border tax in the past.
“CBAM is essentially a unilateral measure to extend the climate change issue to the trade sector,” said Liu Youbin, a spokesman of the Ministry of Ecology and Environment. The scheme “undermines mutual trust in the global community and the prospects for economic growth.” He again reiterated China’s stance that each country should respond to climate change according to its capabilities and economic development. But the carbon border tax affects the ability of individual countries to address the problem, the report further quoted the spokesman.
The tax amount is to be based on the average weekly price that European companies have to pay for EU emission certificates. Companies from third countries will be able to claim CO2 costs incurred in their home country, and in turn, they correspondingly will have to present fewer “CBAM rights”. In mid-July, China also launched its emissions trading. Whether this will be compatible with the European ETS, however, is highly questionable. ari
The electric vehicle start-up Faraday Future, which has been pronounced dead time and again, continues to prove its resilience. According to media reports, through the listing of the Chinese-American company at the US technology exchange NASDAQ at the end of last week, around $1 billion in additional capital have been acquired. Previously, Faraday had merged Property Solutions Acquisitions – a process not uncommon in the USA for the sole purpose of creating an investment vehicle. Their freshly earned capital should now help to finally launch the company’s first model, a luxury electric SUV called FF91, CEO Carsten Breitfeld told news agency Reuters.
The FF91 is to leave production lines at a factory in Hanford, California, which was acquired by Faraday a few years prior. Its capacity is initially only 10,000 cars a year, Breitfeld said. The FF91 will be launched first in the US, then in China, and possibly later in Europe, he said. According to Breitfeld, the batteries will be supplied by the Korean company LG Chem.
In 30 months, Faraday Future plans to launch the FF81, a slightly cheaper model that will leave production lines at a contract manufacturer in South Korea and will compete with Tesla’s Model S and Model X. In the US, company founder Jia Yueting confirmed in talks with a Chinese TV station that the FF81 would be followed by another model called FF71. Jia had fled to the US in 2017 due to allegations of fraud and had to file for personal bankruptcy in 2019 – partly because he had put too much of his own capital into the shaky start-up. Breitfeld, an ex-BMW manager, was part of the founding team of the bankruptcy-prone electric startup Byton, which he left in 2019.
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According to media reports, the UK is seeking ways to exclude China’s state-owned nuclear energy company China General Nuclear Power Group (CGN) from all future power projects in the country. Reuters and the Financial Times reported on this, citing people close to planning procedures. Should the UK go through with their plan, it would impact the planned expansion of Sizewell C of the Sizewell nuclear power station in Suffolk, England, which French energy company EDF intends to jointly execute with CGN. The fate of proposals to build a new plant at Bradwell-on-Sea in Essex would also become uncertain, as the Financial Times reported.
Beijing immediately rejected this action: “The UK government should effectively provide Chinese companies with an open, fair and non-discriminatory business environment,” the newspaper quoted Zhao Lijian, spokesperson for the Chinese Foreign Ministry. “China and the UK are important trade and investment partners,” he added.
The EDF had purchased British Energy in 2009. In September 2016, the French company and CGN signed contracts to jointly develop Sizewell C. In May 2020, the construction was officially approved by authorities. ari
Hamburg’s First Mayor Peter Tschentscher (SPD) has spoken out in favor of plans by the Chinese company China Ocean Shipping Company (Cosco) to acquire a stake in the Hamburg container shipping terminal. “There are no political guidelines for this, but what makes sense from an entrepreneurial perspective must also be made possible and done in practice,” the SPD politician told the website n-tv.de. Hamburg must remain at the forefront of the competitiveness of northern European seaports, Tschentscher demanded. Hamburg is the third-largest European seaport – and China is by far the Hanseatic city’s biggest trading partner.
Hamburg terminal operator Hafen und Logistik AG (HHLA) is considering ceding a 30 to 40 percent stake in the Tollerort container terminal to the Chinese investor (as China.Table reported). Tollerort is one of the four major container terminals in the Port of Hamburg. Critics opposing the acquisition by Cosco fear that China could thus exert too much influence on the Port of Hamburg. Thus, ships owned by Cosco could expect preferential treatment, suspects TV station NDR. Trade union Verdi, in turn, is concerned that working conditions on ships and in ports could deteriorate in the longer term as a result.
Cosco is a state-owned company headquartered in Beijing. Its European headquarters are located in Hamburg. Ships owned by Cosco Shipping have been calling port at Hamburg’s Tollerort container terminal for almost 40 years.
“There are good reasons why Cosco and other shipping companies are interested in owning a stake in a terminal,” Tschentscher said. Hamburg’s First Mayor is convinced that, given the right conditions, the sale of a minority stake could make economic sense for both partners. “The terminal operators could improve their capacity utilization, shipping companies could secure reliable ports of call and participate in the entire value chain beyond the sea route”.
This is the reason why shipping companies and terminals in almost all ports – in Rotterdam, Antwerp, Marseille – have joined forces. In Hamburg, too, this concept is already working with Hapag-Lloyd’s stake in HHLA’s Altenwerder terminal and Grimaldi’s in Unikai. “I very much welcome this,” Tschentscher stressed.
The German government reportedly has no reservations about the takeover. However, Jürgen Hardt, foreign policy spokesman for the parliamentary group CDU/CSU, urges caution. “When it comes to international port logistics, we must exercise caution. As in other areas, we should look closely at whether we are becoming unilaterally dependent on Chinese investment in Germany and Europe,” Hardt said in an interview with German newspaper Neue Osnabrücker Zeitung. rad
China’s new stamp duty law comes into effect on 1 July 2022. This will bring a number of updates to the existing tax system, such as simplified compliance, changes to some tax rates and new tax exemptions.
On 10 June 2020, the Stamp Tax Law was adopted by the Standing Committee of the 13th National People’s Congress at its 29th session. The current regulation, the “Provisional Regulations of the People’s Republic of China on Stamp Tax” promulgated by the State Council on August 6, 1988, will be repealed upon its entry into force.
Compared to the interim regime, the Stamp Duty Act basically maintains the current stamp duty system. At the same time, there are some notable changes, including appropriate simplification of tax positions as well as tax reductions.
In view of the changes to the Stamp Duty Act, we would like to draw your attention to a number of points that you should bear in mind in your day-to-day dealings with stamp duty:
In 2015, the State Administration of Taxation issued the Guiding Opinions on Comprehensive Promoting the Governing of Taxes according to Law (Shui Zong Fa [2015] No. 32), which stipulated that China should accelerate the transformation of relevant tax regulations into laws to improve legal certainty and enhance the efficiency of tax administration. This is seen as an important part of China’s broader efforts to achieve a greater rule of law, meaning law-based administration of the country.
With the passage of the Stamp Duty Law, China has enacted legislation for 12 of the 18 existing taxes. Companies would be well advised to keep a close eye on future developments in China’s tax laws. More crucial changes are on the horizon.
This article first appeared in Asia Briefing, published by Dezan Shira Associates. The firm advises international investors in Asia and has offices in China, Hong Kong, Indonesia, Singapore, Russia, and Vietnam. Please contact them via info@dezanshira.com or the website www.dezshira.com.
We would like to correct a previous statement published on June 25, 2021:
Almut Rößner continues his position as Executive Director of the East Asian Association (OAV). The position on the board of the German Association for Asian Studies (DGA) is an additional mandate. China.Table had erroneously reported a change. We apologize for this error.
“In-Fa” is approaching: China’s east coast has felt the first effects of the approaching typhoon. A staff member patrols the Zhapu port area in Pinghu located in the eastern Chinese province of Zhejiang. “In-Fa” reached the mainland on Monday with winds reaching up to 100 kilometers per hour, according to the province’s flood control center. As state media reported, the typhoon could also be accompanied by further heavy rain for the flood-ravaged province of Henan in the coming days.
