Asia Daily: December 28, 2023
News
China eclipses Russia as Central Asia’s top trade partner in 2023. China has become the predominant trade partner in Central Asia, surpassing Russia in 2023. This shift is particularly evident in countries like Kazakhstan, where China's share of foreign trade has significantly increased. The change symbolizes Beijing's expanding economic influence in a region historically dominated by Russian trade ties. Eurasianet, December 28
South Korean loan for Poland arms deal does not exist, says PM. Polish Prime Minister Donald Tusk has stated that the supposed South Korean loan for financing arms deals with Poland is nonexistent, attributing the issue to a misunderstanding. Despite this setback, Tusk remains hopeful about continuing defense contracts, with ongoing discussions between Warsaw and Seoul to ensure contract fulfillment. The situation follows Poland's efforts to bolster its military amid Russia's invasion of Ukraine. Alan Charlish, Pawel Florkiewicz and Josh Smith, Reuters, December 27
North Korea kicks off key party meeting ahead of new year. North Korea has commenced a significant year-end ruling party meeting, led by Kim Jong Un, with expectations to unveil key policy decisions for 2024. This meeting replaces the traditional New Year's Day speech and serves as a platform for outlining policies in security, diplomacy, and the economy. The year 2023 was marked by Pyongyang's significant developments, including launching a reconnaissance satellite, declaring its status as a nuclear power, and test-firing an advanced intercontinental ballistic missile (ICBM). Kim Jong Un described 2023 as a transformative year, highlighting the achievements in various fields contributing to the nation's socialist construction and power enhancement. Channel News Asia, December 27
Office of LDP faction member searched amid funds scandal. Japanese prosecutors have searched the office of Yoshitaka Ikeda, a lawmaker from the ruling Liberal Democratic Party's (LDP) largest faction, in connection with a political fundraising scandal. This faction, previously led by Prime Minister Shinzo Abe, is accused of not declaring substantial revenue from fundraising parties and allegedly creating slush funds. Ikeda is suspected of receiving over 40 million yen ($280,000) over five years, a figure notably higher than other faction members. The scandal implicates five LDP factions, including one led by Prime Minister Fumio Kishida. The faction's accountant admitted to not reporting income, and lawmakers could face criminal charges if found colluding. Kyodo News, December 27
Taiwan election hopeful William Lai says KMT’s embrace of ‘one China’ is dividing island. Taiwanese Vice-President and presidential candidate William Lai has criticized the main opposition Kuomintang (KMT) party for embracing the 'one China' principle, which he believes is creating an identity divide and affecting national unity in Taiwan. Lai, from the Democratic Progressive Party, argues that the KMT's shift from being anti-communist to attempting to placate Beijing is problematic. He asserts that the KMT's stance is undermining Taiwan's future and accuses them of using fear tactics in the election campaign. Lawrence Chung, South China Morning Post, December 27
Life sentences upheld for three high-ranking officials in “repatriation flight” bribery case. In Vietnam, the High-level People's Court in Hà Nội has upheld life sentences for three high-ranking officials involved in the “repatriation flights” bribery case. The officials, from various government ministries, were convicted of taking bribes related to the arrangement of flights to repatriate Vietnamese citizens during the COVID-19 pandemic. The court also maintained or adjusted the sentences for several other defendants involved in the case. The prosecution of these officials is part of broader efforts to address corruption in Vietnam. Vietnam News, December 27
AFP official sees more joint patrols in WPS. Philippines Armed Forces spokesperson Col. Medel Aguilar anticipates more joint maritime patrols with foreign partners in the West Philippine Sea (WPS) in the upcoming year. This prediction follows China's warnings against collusion with external forces in the region. These patrols are expected to support the Philippines' sovereign rights and territorial jurisdiction in the WPS, reflecting the country's strategy to address regional maritime security challenges. Francisco Tuyay, The Manila Times, December 27
N. Korea will seek to increase nuclear weapons to improve 'second-strike capability': experts. North Korea aims to enhance its nuclear arsenal to better respond to a potential nuclear attack, according to experts. This strategic focus on increasing 'second-strike' capabilities involves expanding their nuclear weapon count, currently estimated at around 50, to over 100. Additionally, concerns about military cooperation between North Korea and Russia have been raised, especially regarding the transfer of arms related to intercontinental ballistic missiles. Yi Wonju, Yonhap News Agency, December 27
Russia warns Japan over providing Patriot air defence systems to Ukraine. Russia's foreign ministry has issued a stark warning to Japan regarding its plan to provide Patriot air defence systems to Ukraine, stating it could have severe consequences for their bilateral relations. This development adds tension to the already strained ties between the two countries, exacerbated by Japan's support of Western sanctions following Russia's military actions in Ukraine. Japan's decision marks a notable shift in its arms export policy, potentially indirectly aiding Ukraine through the United States. Dmitry Antonov, Reuters, December 27
India net importer of steel in April-Nov as Chinese shipments reach 5-yr high. In the April-November period, India shifted to being a net importer of finished steel, with a notable increase in imports from China, reaching a peak in five years. Chinese exports to India, mainly hot-rolled and cold-rolled coil or sheets, grew substantially. The Indian steel industry is now urging government action to protect against this surge in Chinese imports, highlighting the dynamic changes in global steel trade. Neha Arora, Reuters, December 27
Long Form
The Implications of China-Serbia Relations for Kosovo. The evolving partnership between Serbia and China, particularly in the context of Kosovo's independence, highlights the complex interplay of global powers in regional disputes. Serbia's collaboration with China and Russia in disputing Kosovo's statehood aligns with the Chinese Communist Party's (CCP) strategy to expand its global influence. This relationship impacts Kosovo's diplomatic efforts and its quest for fully recognized independence. The involvement of major powers like China in the Kosovo-Serbia issue underscores the broader geopolitical dynamics and the challenges faced by smaller nations in asserting their sovereignty and territorial integrity. By Ramadan Ilazi and Stefan Vladisavljev, The Diplomat, December 28
Why Early Retirement of Coal Power is Faltering in Southeast Asia. Efforts to retire coal-fired power plants early in Southeast Asia, as part of decarbonization initiatives, are facing significant challenges. While theoretically sound, the practical implementation of shutting down these plants before the end of their economic lives to reduce emissions and make way for renewable energy investments is proving difficult. High-profile clean energy initiatives, such as Indonesia's Just Energy Transition Partnership (JETP), are encountering obstacles in this process. The primary issue is the economic and contractual complexities involved in closing coal power plants prematurely. These plants are designed to operate for decades, and early retirement requires addressing financial implications and contractual commitments. The situation highlights the gap between clean energy ambitions and the realities of energy infrastructure and economic commitments in the region. By James Guild, The Diplomat, December 27
US Coast Guard’s Role in the Blue Pacific on the Rise. The United States has enhanced its presence in Oceania with the permanent deployment of the US Coast Guard Cutter Harriet Lane to the region. The cutter, which recently completed a 15-month life extension program, will focus on engaging with states in Oceania. This deployment aligns with the Coast Guard's strategy to be more involved in the Blue Pacific, emphasizing the importance of the region in the Indo-Pacific context. The arrival of the Harriet Lane at Joint Base Pearl Harbor-Hickam in Hawai’i on December 13, 2023, marks a significant step in the U.S. Coast Guard's expanded role in the Pacific, reflecting the United States' strategic interests in the region. By Ben Felton, The Diplomat, December 28
Thailand’s Wage Battle: Economic Boost or Competitiveness Concern? Thailand's recent decision to increase the minimum wage by 2.37 percent has sparked a debate about its economic implications and the impact on competitiveness. This move, part of a broader discussion on fair compensation and economic strategy, raises questions about the potential benefits and challenges for various sectors. The ruling Pheu Thai Party's advocacy for a substantial wage increase to 400 baht per day contrasts with concerns about the economy's performance compared to regional counterparts. This wage hike, set to take effect in January with potential further increases in March, highlights the delicate balance Thailand must strike between boosting economic growth and maintaining its competitive edge in the region. By Prem Singh Gill, The Diplomat, December 28
Putin Promises Xi to 'Fight for Five Years' in Ukraine. During a meeting in Moscow in March, Russian President Vladimir Putin informed Chinese President Xi Jinping that Russia would continue its military engagement in Ukraine for at least five years. This statement was intended to assure Xi of Russia's long-term commitment and victory in the conflict, while also serving as a warning to maintain China's pro-Russia stance. The revelation of Putin's remark is key to understanding recent shifts in Russia-China relations, including China's diplomatic moves in Europe and the dismissal of its foreign minister. Putin's words suggest a strategic calculation to create an illusion of moving towards a ceasefire, possibly to influence the upcoming Russian presidential election. Meanwhile, China, partly influenced by Putin's statement, has revisited its strategy, considering the prolonged war's impact on its ambitions and the potential pressure from Western nations. This situation reflects the intricate dynamics of international politics and the secretive nature of China-Russia relations. By Katsuji Nakazawa, Nikkei Asia, December 28
From India and Pakistan to Indonesia, Asia Set for Election-Packed 2024. Asia-Pacific is set for a busy election year in 2024, with over a billion registered voters across the region participating in key elections. These elections, spanning from Taiwan to Indonesia, will significantly influence the region's economic and diplomatic trajectory. In Taiwan, the presidential election will have a major impact on relations with China. Bangladesh's general election is clouded by opposition boycotts and international pressure for a fair vote. Pakistan's overdue polls mark a climax of political instability, while Indonesia's election will be the world's largest direct presidential vote. South Korea, India, Sri Lanka, and the U.S. will also hold crucial elections, shaping the political landscape for years to come. Nikkei Asia, December 26
Perceptions of Japan Have Never Been Better, but That Is Not Enough. Japan has achieved the top spot in the annual Anholt-Ipsos Nation Brands Index, reflecting its global admiration based on perceptions of its contributions to science, technology, and vibrant cities. Despite this, Japan faces challenges in areas like government and business efficiency, ranking 35th in the World Competitiveness Ranking. It also lags in language skills and digital and technological skills, impacting its global competitiveness. The EF Proficiency Index places Japan 87th in English proficiency, indicating a need for improvement in global mindset and work environment. While Japan's reputation is strong, these areas of concern could affect its attractiveness for investment and international talent. The Japanese government and private sector must leverage this goodwill to enhance the nation's competitiveness in other aspects. By Nancy Snow, Nikkei Asia, December 24
Central Asia’s Gradual Economic Repositioning. Central Asia is experiencing a shift in its economic orientation, moving from a north-south focus under Russian influence to reestablishing itself as a Eurasian crossroads. The region's leaders have shown increased willingness to cooperate, particularly in economic matters, amidst challenges like the Russia-Ukraine war and border disputes. The focus on East-West connectivity is gaining momentum, with significant infrastructure investments planned by the European Union in the Middle Corridor routes. Central Asian countries are diversifying their economies and reducing dependence on Russia, as seen in their multi-vector diplomacy and infrastructure plans to boost east-west links. While external and domestic challenges persist, ongoing cooperation and distancing from Russia mark a significant reorientation. The longer-term prospect for Central Asia is to return to its historic role as a Eurasian crossroads, with active collaboration from China, Turkiye, and the EU to promote east-west links. By Richard Pomfret, East Asia Forum, December 27
Exchange Rates Exert Limited Influence on China’s Exports. China's exports have become increasingly sophisticated since the 1990s, shifting from textiles and labor-intensive goods to more technologically advanced products. This evolution has made China's exports less sensitive to exchange rate fluctuations. Research indicates that while a stronger renminbi previously led to a significant decrease in exports, its impact has diminished over time. As China's export basket becomes more sophisticated, the exchange rate's importance in influencing exports decreases. This trend suggests that China can be more bold in reforming its exchange rate regime, focusing on upgrading its industries and promoting high-tech manufacturing to insulate its economy from exchange rate shocks. By Willem Thorbecke, East Asia Forum, December 26
Winners and Losers in China’s Industrial Policy. China's industrial policy has drawn global attention, with developed countries seeing it as a competitive threat and developing nations viewing it as a blueprint for economic success. Initially influenced by Soviet-style planned economy and Japanese post-war achievements, China's industrial policies have evolved, especially with the 2006 Outline of National Medium- and Long-term Program for Science and Technology Development. This shift towards innovation-driven growth is crucial as China faces challenges like an aging population and diminishing returns on investment. However, the effectiveness of these policies is debatable. Studies suggest that innovation subsidies based on quantity may actually impede economic growth, and government subsidies often correlate negatively with firms' productivity. While theoretically, Chinese industrial policy could benefit foreign industries downstream of China's targeted industries, negative spillovers might extend across borders, raising concerns about the overall impact of these policies. By Guangwei Li, East Asia Forum, December 26