Posts Tagged ‘China’

Anti-Dumping Duty: What It Is, How It Works, Examples

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What Is an Anti-Dumping Duty?

An anti-dumping duty is a protectionist tariff that a domestic government imposes on foreign imports that it believes are priced below fair market value. Dumping is a process wherein a company exports a product at a price that is significantly lower than the price it normally charges in its home (or its domestic) market.

Key Takeaways

  • An anti-dumping duty is a protectionist tariff that a domestic government imposes on foreign imports that it believes are priced below fair market value.
  • In order to protect their respective economy, many countries impose duties on products they believe are being dumped in their national market; this is done with the rationale that these products have the potential to undercut local businesses and the local economy.
  • While the intention of anti-dumping duties is to save domestic jobs, these tariffs can also lead to higher prices for domestic consumers.
  • In the long-term, anti-dumping duties can reduce the international competition of domestic companies producing similar goods.
  • In the U.S., the International Trade Commission (ITC)–an independent government agency–is tasked with imposing anti-dumping duties.
  • The World Trade Organization (WTO)–an international organization that deals with the rules of trade between nations–also operates a set of international trade rules, including the international regulation of anti-dumping measures.

In order to protect their respective economy, many countries impose duties on products they believe are being dumped in their national market because these products have the potential to undercut local businesses and the local economy.

Understanding Anti-Dumping Duties

In the U.S., the International Trade Commission (ITC)–an independent government agency–is tasked with imposing anti-dumping duties. Their actions are based on recommendations they receive from the U.S. Department of Commerce and investigations by the ITC and/or the Department of Commerce. 

In many cases, the duties imposed on these goods exceeds the value of the goods. Anti-dumping duties are typically levied when a foreign company is selling an item significantly below the price at which it is being produced.

While the intention of anti-dumping duties is to save domestic jobs, these tariffs can also lead to higher prices for domestic consumers. And, in the long-term, anti-dumping duties can reduce the international competition of domestic companies producing similar goods.

The World Trade Organization (WTO) is an international organization that deals with the rules of trade between nations. The WTO also operates a set of international trade rules, including the international regulation of anti-dumping measures. The WTO does not intervene in the activities of companies engaged in dumping. Instead, it focuses on how governments can—or cannot—react to the practice of dumping. In general, the WTO agreement permits governments to act against dumping “if it causes or threatens material injury to an established industry in the territory of a contracting party or materially retards the establishment of a domestic industry.”

This intervention must be justified in order to uphold the WTO’s commitment to free-market principles. Anti-dumping duties have the potential to distort the market. In a free market, governments cannot normally determine what constitutes a fair market price for any good or service.

Example of an Anti-Dumping Duty

In June 2015, American steel companies United States Steel Corp., Nucor Corp., Steel Dynamics Inc., ArcelorMittal USA, AK Steel Corp., and California Steel Industries, Inc. filed a complaint with the U.S. Department of Commerce and the ITC. Their complaint alleged that several countries, including China, were dumping steel into the U.S. market and keeping prices unfairly low.

After conducting a review, one year later the U.S. announced that it would be imposing a total of 522% combined anti-dumping and countervailing import duties on certain steel imported from China. In 2018, China filed a complaint with the WTO challenging the tariffs imposed by the Trump administration. Since then, the Trump administration has continued to use the WTO to challenge what it claims are unfair trading practices by the Chinese government and other trading partners.

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Asian Development Bank (ADB): What It Is, How It Works, Members

Written by admin. Posted in A, Financial Terms Dictionary

Annuity Due: Definition, Calculation, Formula, and Examples

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What Is the Asian Development Bank?

The Asian Development Bank’s primary mission is to “foster economic growth and cooperation” among countries in the Asia-Pacific Region. Founded in 1966 and based in Manila, Philippines, the ADB assists members and partners by providing loans, technical assistance, grants, and equity investments to promote social and economic development.

The ADB has been responsible for major projects in the region and raises capital regularly through the international bond markets. The ADB also relies on member contributions, retained earnings from lending, and the repayment of loans for the funding of the organization.

Key Takeaways

  • The Asian Development Bank’s (ADB) primary mission is to promote economic growth and cooperation in the Asia-Pacific Region. 
  • The majority of the ADB’s members are in the Asia-Pacific region.
  • The ADB provides assistance to its developing member countries in the region.
  • It also provides financing to certain private sector projects as well as public-private partnerships through grants, loans, technical assistance, and equity investments to promote development.
  • The ADB is controlled by member countries, with the U.S. and Japan having the largest stake.

How the Asian Development Bank Works

The Asian Development Bank provides assistance to its developing member countries, the private sector, and public-private partnerships through grants, loans, technical assistance, and equity investments to promote development. The ADB regularly facilitates policy dialogues and provides advisory services. They also use co-financing operations that tap official, commercial, and export credit sources while providing assistance.

Membership in the ADB is open to members and associate members of the United Nations Economic Commission for Asia and the Far East. It’s also open to other regional countries and non-regional developed countries that are members of the U.N. or of any of its specialized agencies. 

Financing Provided by the Asian Development bank

The ADB provides both private financing and sovereign (public) financing. Private sector efforts focus on projects that help promote private investments in the region that will have significant development impact and will lead to accelerated, sustainable, and inclusive growth. Public-sector financing provides funding for member countries with flexibility in determining how they can achieve development goals.

In 2021, the ADB committed nearly US$13.5 billion to help its developing member countries address the impacts of the COVID-19 crisis and address vaccination needs, and has mobilized a further $12.9 billion in co-financing from partners. Through a $9 billion Asia Pacific Vaccine Access Facility, or APVAX, announced in December 2020, the ADB provided funding for vaccine procurement, logistics, and distribution.

The total private financing portfolio consisted of $14.2 billion at the end of 2021. In terms of sovereign financing, ADB’s portfolio stood at $104 billion by the end of 2021, consisting of 713 loans, 392 grants, 915 TA projects, one guarantee, and 1 equity investment.

Structure of the Asian Development Bank

According to ADB’s website, “the Agreement Establishing the Asian Development Bank, known as the ADB Charter, vests all the powers of the institution in the Board of Governors, which in turn delegates some of these powers to the Board of Directors. The Board of Governors meets formally once a year during ADB’s Annual Meeting.” The ADB’s highest policy-making body is its Board of Governors, which comprises one representative from each member.

The two largest shareholders of the Asian Development Bank are the United States and Japan. Although the majority of the Bank’s members are from the Asia-Pacific region, the industrialized nations are also well-represented. Regional development banks usually work in harmony with both the International Monetary Fund (IMF) and the World Bank in their activities.

Asian Development Bank Country Relationships

When ADB was founded in 1966, it consisted of 31 members. Since then, membership has grown to 68 members, which is made up of 48 regional and 19 non-regional members. Membership as of 2022 includes:

Source: Asian Development Bank
Source: Asian Development Bank

The two largest shareholders of the Asian Development Bank are the United States and Japan. Both countries have a majority ownership of the bank with 15.6% each.

Who Controls the Asian Development Bank?

The ADB is run by a board of governors, which represent the member countries of the ADB. As of 2022, ADB’s five largest shareholders are Japan and the United States (each with 15.6% of total shares), the People’s Republic of China (6.4%), India (6.3%), and Australia (5.8%).

Where Is the Asian Development Bank Headquartered?

The Asian Development Bank has its headquarters in Manila, Philippines.

Is India a Member of the Asian Development Bank?

Yes, India is a regional member country of the ADB.

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China A-Shares: Definition, History, Vs. B-Shares

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China A-Shares: Definition, History, Vs. B-Shares

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What Are China A-Shares?

China A-shares are the stock shares of mainland China-based companies that trade on the two Chinese stock exchanges, the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE). Historically, China A-shares were only available for purchase by mainland citizens due to China’s restrictions on foreign investment.

However, since 2003, select foreign institutions have been able to purchase these shares through the Qualified Foreign Institutional Investor (QFII) system. Established in 2002, the QFII program allows specified licensed international investors to buy and sell on mainland China’s stock exchanges.

A-shares are also known as domestic shares because they use the Chinese renminbi (RMB) for valuation.

Key Takeaways

  • China A-shares are the stock shares of mainland China-based companies that trade on the two Chinese stock exchanges, the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE).
  • Historically, China A-shares were only available for purchase by mainland citizens due to China’s restrictions on foreign investment.
  • China A-shares are different from B-shares; A-shares are only quoted in RMB, while B-shares are quoted in foreign currencies, such as the U.S. dollar, and are more widely available to foreign investors.

China A-Shares vs. B-Shares

China A-shares are different from B-shares. A-shares are only quoted in RMB, while B-shares are quoted in foreign currencies, such as the U.S. dollar, and are more widely available to foreign investors. Foreign investors may have difficulty accessing A-shares because of Chinese government regulations, and Chinese investors may have difficulty accessing B shares most notably for currency-exchange reasons. Some companies opt to have their stock listed on both the A-shares and B-shares market.

Due to the limited access of Chinese investors to B-shares, the stock of the same company often trades at much higher valuations on the A-shares market than on the B-shares market. Although foreign investors may now invest in A-shares, there is a monthly 20% limit on repatriation of funds to foreign countries.

The Shanghai Stock Exchange (SSE) publishes the key performance index for A-shares, known as the SSE 180 Index. In composing the index, the exchange selects 180 stocks listed on the SSE. The selection is diversified between sector, size, and liquidity to ensure adequate representation. Thus, the index’s performance benchmark reflects the overall situation and operation of the Shanghai securities market.

History of China A-Shares

Since its inception in 1990, including a major reform in 2002, the index has seen great fluctuations. However, it has grown along with the Chinese economy. The years 2015 to 2016 were a particularly difficult period, with a 52-week performance of -21.55% as of July 20, 2016.

As China grows from an emerging market to an advanced economy, there is substantial demand for Chinese equity. Stock exchange regulators continue efforts to make A-shares more broadly available to foreign investors and have them recognized by the global investing community.

In June 2017, the MSCI Emerging Markets Index announced a two-phase plan in which it would gradually add 222 China A large-cap stocks. In May 2018, the index began to partially include China large-cap A shares, which make up 5% of the index. Full inclusion would make up 40% of the index.

It is important for countries such as China to open their markets to global investors to stay competitive and thrive economically. China A-shares provide an alternative investment for those interested in trading in Chinese securities.

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