Asia Daily: December 5, 2023
News
Kyrgyzstan, Tajikistan drop fresh hints on border deal. Recent talks between the security service heads of Kyrgyzstan and Tajikistan suggest progress towards a border demarcation deal, potentially easing longstanding tensions between the two nations. Kamchybek Tashiyev of Kyrgyzstan and Saimumin Yatimov of Tajikistan held discussions in Buston, Tajikistan, yielding significant decisions on resolving border disputes. A focal point of these talks was the management of the Vorukh-Khojai A'lo road, a historically contentious area where the Kyrgyz and Tajik roads intersect. The negotiations also touched on ensuring uninterrupted access for both countries to lands within each other's borders. This development follows a pattern of positive dialogue since October, when the presidents of both countries hinted at an imminent breakthrough in border delimitation, a complex issue spanning approximately 980 kilometers, with about one-third still undefined. Eurasianet, December 4
South Korea flies solid-fuel rocket amid space race with North Korea. South Korea has successfully tested a solid-fuel rocket, marking a significant advancement amid the ongoing space race with North Korea. Launched near Jeju Island, the rocket carried a satellite intended to enhance South Korea's surveillance and reconnaissance capabilities. This development follows North Korea's recent deployment of its first military spy satellite, which has been criticized by the U.S. and its allies for contravening U.N. security resolutions. North Korea has condemned the perceived double standards regarding satellite launches, emphasizing its commitment to developing aerospace surveillance capabilities. The test by South Korea aims to reduce its reliance on American intelligence systems, as regional tensions escalate over aerospace advancements. Hyunsu Yim, Ju-min Park and Soo-hyang Choi, Reuters, December 4
China’s credit reshuffle aims to squelch risk, restore confidence as recovery lags. China is undertaking a significant financial overhaul to address financial risks and restore economic stability. This effort includes consolidating about 130 small rural lenders in Henan province into a single entity to strengthen oversight and reduce systemic weaknesses. As financial risk prevention remains a priority, President Xi Jinping has emphasized the importance of managing small banks and local government financing vehicles. The National Administration of Financial Regulation (NAFR) is focusing on reforms and risk mitigation for small and medium financial institutions. Analysts note that weaknesses in the property sector and local government exposures could impact loan demand and asset quality. Despite having over 300 high-risk banks, their assets constitute less than 2% of the overall banking sector in China. Efforts to reduce shadow banking and manage non-performing loan (NPL) ratios are ongoing, but concerns about data manipulation and the real situation of asset quality persist. The People's Bank of China (PBOC) maintains that financial risks are generally controllable, even as the real estate sector's market adjustments continue to pose challenges. Ji Siqi, South China Morning Post, December 4
Remains of 5 found in search for crashed U.S. Osprey crew in Japan. The U.S. forces, in collaboration with Japan, discovered the remains of five individuals from the U.S. military Osprey aircraft that crashed last week off southwestern Japan. This discovery brings the current death toll to six, marking it as the deadliest accident involving U.S. Ospreys. Two bodies were recovered near Yakushima Island, Kagoshima Prefecture, with efforts ongoing to recover the other three. The CV-22 tilt-rotor aircraft, assigned to Yokota Air Base in Tokyo, was en route from Iwakuni to Kadena Air Base in Okinawa when it crashed, sparking renewed concerns over the safety of Osprey aircraft. The cause of the accident remains unknown. Kyodo News, December 4
Singapore to triple AI talent to 15,000 experts, deputy PM says. Singapore is set to triple its artificial intelligence (AI) talent pool, aiming to increase the number of AI experts to 15,000. Deputy Prime Minister Lawrence Wong outlined this goal as part of the country's national AI strategy, focusing on enhancing capabilities in machine learning and related technologies. The initiative will involve boosting high-performance computing resources through partnerships with chipmakers and cloud service providers. Additionally, the government plans to enhance incentives for the AI sector, support accelerator programs for AI startups, and establish AI centers of excellence. Efforts will also be made to recruit foreign talent while increasing local AI training programs and providing access to graphics processing units for researchers. This move underscores Singapore's commitment to becoming a major player in the global AI landscape and aligns with the country's position as a hub for major tech giants in Asia. Fanny Potkin, Reuters, December 4
At least 13 killed in armed fighting in India’s ethnic riots-hit Manipur. In India's Manipur state, a violent clash between two unidentified armed groups in the Tengnoupal district resulted in at least 13 deaths. The bodies, found with multiple bullet wounds, were discovered following a reported "massive" gunfight. Officials have yet to determine the identities of the deceased or the militant groups involved. This incident is part of ongoing ethnic violence in Manipur, which has led to the deaths of at least 180 people and the displacement of thousands. The unrest, primarily between the majority Meitei group and the minority Kuki-Zo community, is related to disputes over government benefits and quotas. The situation has been criticized as a security and political failure by the ruling Bharatiya Janata Party. Al Jazeera, December 4
NA Chairman Huệ meets with Party General Secretary, President of Laos. National Assembly Chairman Vương Đình Huệ of Vietnam met with Thongloun Sisoulith, General Secretary of the Lao People's Revolutionary Party and President of Laos, in Vientiane. This meeting, part of Huệ's visit to attend the first Cambodia-Laos-Việt Nam (CLV) Parliamentary Summit, aimed to strengthen the cooperative relationship between Vietnam and Laos. Both leaders emphasized the importance of closely implementing high-level agreements and preparing for future meetings. They also discussed enhancing economic, trade, and investment cooperation, with a focus on sectors like energy, transport, and minerals. The Lao leader expressed hope for increased Vietnamese investment in Laos. Additionally, Huệ reaffirmed Vietnam's support for Laos, especially in its upcoming role as the chair of ASEAN and ASEAN Inter-Parliamentary Assembly in 2024, underscoring the importance of mutual support in international and regional forums. Vietnam News, December 4
Belarus President Lukashenko returns to China, seeks stronger ties. Belarusian President Alexander Lukashenko met with Chinese President Xi Jinping in Beijing, emphasizing Belarus's desire to strengthen economic ties with China amid Western sanctions. Lukashenko's visit, framed as a "working visit," included discussions on strategic cooperation and industrial projects, such as the China-Belarus Industrial Park. Despite Belarus's heavy economic reliance on Russia, particularly after backing Russia's invasion of Ukraine, Lukashenko seeks to expand commercial relationships with China. Xi Jinping expressed willingness to deepen bilateral relations and encouraged initiatives to enhance cross-border transport and trade. Belarus, under Lukashenko, faces sanctions from the U.S., E.U., Britain, Canada, and other countries due to its support for Russia's actions in Ukraine and issues related to political repression. Lukashenko praised China's Belt and Road Initiative, contrasting it with Western approaches, while Xi highlighted the role of China and Belarus in global governance reform. Channel News Asia, December 4
McDonald's raises China bet, bucking Western firms' derisking trend. McDonald's is intensifying its focus on China, contrasting with the trend of multinational corporations reducing investments due to geopolitical and economic challenges. The fast-food giant repurchased a 28% stake in its China business from Carlyle Group, increasing its share to 48% in a venture worth $6 billion, which includes operations in Hong Kong and Macau. This strategic move leverages the political support of its majority partner in China, CITIC, a powerful state-owned conglomerate, offering significant geopolitical protection. Since 2017, McDonald's has doubled its restaurant count in China to 5,500, making it the company's second-largest market, with plans to expand to over 10,000 stores by 2028. Despite risks associated with worsening China-West relations, McDonald's is seen as well-positioned to succeed, thanks to China's massive limited-service restaurant sector and adaptations to local tastes. Analysts note that China's economic slowdown and consumer spending trends have impacted global businesses, but factors like a value-driven middle class and lower rents may benefit McDonald's expansion in the region. Casey Hall and Kane Wu, Reuters, December 4
Yoon replaces 6 Cabinet ministers, including finance minister. President Yoon Suk Yeol of South Korea implemented a partial Cabinet reshuffle on Monday, with significant changes in economic roles. Choi Sang-mok, previously Yoon's senior secretary for economic affairs, has been appointed as the new finance minister and deputy prime minister. This follows speculation that current Finance Minister Choo Kyung-ho may run for parliament in the upcoming general elections. Other appointments include Kang Jung-ai as the minister for veterans affairs, Song Mi-ryung as agriculture minister, Park Sang-woo as land minister, Kang Do-hyung as oceans minister, and Second Vice Foreign Minister Oh Young-ju as SMEs minister. The reshuffle, announced by presidential chief of staff Kim Dae-ki, reflects a focus on economic affairs in Yoon's administration. Lee Haye-ah, Yonhap News Agency, December 4
Long Form
Western Firms Should Leave China Now. The strategy of economic engagement with authoritarian regimes, aimed at fostering global stability and democracy, has not been effective in democratizing China. Despite significant investments by Western companies in the Chinese economy and educational exchanges, China is moving towards an economic confrontation with the United States. US companies are advised to start withdrawing their supply chains and business operations from China. This recommendation is based on the observation that the interdependence created by extensive trade, while successful in post-World War II Western Europe, has not led to similar outcomes in China. The current situation calls for a reassessment of business ties with China by Western firms. Simon Johnson, Yuriy Gorodnichenko, and Ilona Sologoub, Project Syndicate, December 4
Bhopal’s Endless Health Crisis. Nearly four decades after the Bhopal disaster, one of the world's worst industrial catastrophes, its victims continue to endure significant health challenges with limited options for recourse. The disaster, caused by the release of methyl isocyanate (MIC) used in pesticides, affected nearly half a million people in Bhopal, India. The immediate aftermath saw thousands of fatalities, and in the years since, the incident has contributed to more deaths and a range of chronic health issues, including cancers and reduced life expectancies. Survivors still struggle daily with debilitating conditions, seeking relief without clear medical solutions. By Nicholas Muller, The Diplomat, December 4
No, China Is Not Intervening in Myanmar’s Civil War. Contrary to some speculations, China is not involved in supporting the ongoing offensive by ethnic rebel groups in Myanmar's Shan State. The conflict, led by the Three Brotherhood Alliance comprising the Myanmar National Democratic Alliance Army (MNDAA), the Ta’ang National Liberation Army, and the Arakan Army, has seen significant territorial gains against the Myanmar junta. The MNDAA, in particular, has advanced towards the junta-aligned town of Laukkai, close to the China-Myanmar border. This development is part of a long-standing ethnic conflict in northern Myanmar, especially over the control of the Kokang region. The MNDAA's current offensive, termed Operation 1027, aims to regain control over this strategically important area, which they lost to the Myanmar military in 2009. The operation's initiation follows a failed attempt in 2015 to reclaim Kokang, highlighting the enduring ethnic tensions in the region. By Nian Peng, The Diplomat, December 4
Japan's 2024 Problem: Trucker Overtime Curbs Risk an Economic Pile-Up. Japan is facing a significant challenge in 2024 as new regulations capping truck driver overtime are set to take effect. These restrictions, aimed at addressing the acute driver shortage in aging Japan, are predicted to reduce the country's cargo delivery capacity by over a third by 2030. The trucking industry, vital for nearly 90% of Japan's freight, is grappling with how to maintain operations amid these changes. The reduction in driving time, coupled with an aging driver workforce, poses a threat to various sectors reliant on road transportation. Solutions being considered include raising truck speed limits, building lanes for autonomous vehicles, and revising parcel delivery terms. The situation in Japan reflects a global issue, with a significant truck driver shortage in many countries. This impending change is expected to impact consumers, as the cost of efficient delivery, currently absorbed by businesses, might soon be reflected in shopping bills. By Chihiro Ishikawa, Nikkei Asia, December 5
'Green Tech Partnership' Offers Way to De-Risk While Decarbonizing
Western governments face the challenge of securing essential green technologies like solar panels and batteries while reducing reliance on China, the main supplier. China's advanced position in controlling raw materials and manufacturing techniques makes it difficult for other countries to compete. A proposed solution is a "green partnership" among countries with different comparative advantages to create a supplementary value chain for green tech supplies. This partnership would complement Chinese production by uniting high-demand markets with resource-rich countries and others offering economies of scale and low wages. The approach could lead to new green technologies, more reuse and recycling, and reduce the risk of disruptions in green tech production. By Alicia Garcia-Herrero and Heather Grabbe, Nikkei Asia, December 5