Asian Affairs: July 1-14, 2023
ASEAN convened its 56th Foreign Ministers' Meeting while Thailand's much-covered race for Prime Minister came to an unproductive head.
Janet Yellen, Antony Blinken Meet Chinese Counterparts
High-level meetings between senior officials from the United States and China in the first half of July have helped to sustain the already exigent attention being paid to the state of US-China relations. US Secretary of the Treasury Janet Yellen undertook a four-day trip to Beijing from July 6-9, while US Secretary of State Antony Blinken met with China’s top diplomat, Wang Yi, on the sidelines of The 56th Association of Southeast Asian Nations (ASEAN) Foreign Ministers’ Meeting.
Secretary Yellen described her visit as being meant to fulfill American President Joe Biden’s “directive to deepen bilateral communications after his meeting with President Xi last November.” The parties in said bilateral communications underwent a rotation last October when the Communist Party of China’s (CPC) 20th National Congress saw several high-ranking positions change hands - including He Lifeng’s appointment to the directorship of the CPC’s Central Financial and Economic Affairs Commission, as well as becoming one of four Vice Premiers appointed during the Congress. Many of the individuals promoted to high-ranking positions during the 20th National Congress have been noted to be closely linked to Chinese President and CPC General Secretary Xi Jinping.
In visiting China, Yellen met with Premier Li Qiang, Vice-Premier He, Minister of Finance Liu Kun and Party Secretary for the People’s Bank of China, Pan Gongsheng. Of these four high-ranking individuals, only Liu held his current position before the 20th National Congress.
In remarks delivered by Secretary Yellen, she highlts three isues of importance from her talks with Chinese officials.
First was the US’ continued desire for a cooperative and mutually beneficial economic relationship with China. Secretary Yellen reiterated that the US is not seeking to decouple from China, describing a hypothetical decoupling between the two as “disastrous for both countries and destabilizing for the world.”
I also communicated to my counterparts that healthy economic competition is only sustainable if it benefits both sides. I pressed them on our serious concerns about China’s unfair economic practices. That includes the breadth and depth of China’s non-market policies, along with barriers to market access for foreign firms and issues involving intellectual property. Fair treatment is critical so American firms and workers compete on a level playing field – and benefit economically from trade and investment with China and the huge market it presents for American goods and services. I also expressed my worries about a recent uptick in coercive actions against American firms.
-Janet Yellen, United States Secretary of the Treasury
Second, and less fleshed out than the previous point, was the United States’ ongoing commitment to protecting its interests in the realms of national security and human rights. “The U.S. will continue to take targeted actions that are necessary to protect our national security interests and those of our allies,” Yellen said. “As we do so, we adhere to a set of important principles like making sure our national security actions are transparent, narrowly scoped, and targeted to clear objectives. Importantly, these actions are motivated by straightforward national security considerations. They are not used by us to gain economic advantage.”
The discussion also touched on the importance of ending the ongoing war in Ukraine.
Finally, Yellen mentioned discussions involving issues of international cooperation such as climate change and sovereign debt sustainability, emphasizing the need for responsible global leadership and cooperation. They recognized the importance of sustained engagement on macroeconomic and financial developments for global financial stability. Yellen emphasized the importance of China’s support for these improvements as the largest bilateral creditor in the world. Collaboration on mobilizing private financing for climate action and modernizing international development finance were also discussed.
Yellen ended her remarks by emphasizing that the future of US-China relations is “not predestined” and expressed hope that continued bilateral engagement between the two countries would lead to a more stable and prosperous state of US-China relations.
Secretary of State Antony Blinken met with Wang Yi, Director of the Office of the CPC’s Central Foreign Affairs Commission, on the sidelines of ASEAN’s 56th Foreign Ministers’ Meeting in Jakarta, Indonesia.
The meeting was described in short order by both the US Department of State and China’s Ministry of Foreign Affairs (MOFA). Department of State Spokesperson Matthew Miller stated that the two diplomats held “candid and constructive discussions” on a range of issues and that “the United States, together with our allies and partners, will advance our vision for a free, open, and rules-based international order.”
MOFA Spokesperson Wang Wenbin offered more details on the meeting during a press conference on July 14, stating that the two discussed issues such as cyber security.
“The Chinese government agencies face numerous cyber attacks every day, most of which come from sources in the US,” Wang asserted. “We’ve shared relevant facts with the international community on multiple occasions. China is the biggest victim of cyber attack. The US needs to stop slapping false labels on China.”
Wang elaborated on the talks further when a member of the press from China Central Television brought up the matter of drug trafficking as a topic of discussion between Wang Yi and Blinken.
The two sides talked about fentanyl-related issues in the meeting, during which the Chinese side expressed our principled position and concerns. Director Wang Yi said that in terms of counter-narcotics, China has the strongest determination, most thorough policies and one of the best records in the world. To accommodate US concerns plus in the interest of the overall China-US relations, China decided several years ago to schedule fentanyl as a class. No other country has done the same. US attempt to take similar action has met with strong obstacles domestically. Instead of fully acknowledging China’s effort, the US has discredited and scapegoated China on fentanyl, and hunted Chinese citizens through “sting operations”. This is not at all constructive. The US needs to address this issue with an attitude based on equality, respect and cooperation, lift sanctions on Chinese counter-narcotics institutions as soon as possible, and remove obstacles for dialogue and cooperation.
-Wang Wenbin, Spokesperson - Ministry of Foreign Affairs
Antony Blinken and Wang Yi are reported to have agreed to further bilateral meetings during their talks in Jakarta.
Thai Parliament Fails to Select New Prime Minister
Pita Limjaroenrat, leader of Thailand’s Move Forward party failed to secure enough votes in parliament to form a government, dealing a setback to the country's democracy movement after years of military-backed rule. Move Forward won the most seats and popular votes in the May election, capitalizing on public anger over governance issues. However, Pita received only 324 parliamentary votes out of the required 376 to secure the position of Prime Minister. Another round of voting is scheduled for later.
Move Forward has promised significant reforms in Thailand, including changes to the military, economy, power decentralization and even reforms to the monarchy, which is a highly sensitive topic. The strict lese-majeste law, defined in Section 112 of the Thai Criminal Code, criminalizes criticism of the royal family and was a major point of contention during the election. Several senators and conservative parties opposed Pita due to his party's stance on Section 112.
The progressive movement led by Pita gained support from Thai youth, who are increasingly feeling disillusioned with authoritarian politics, economic challenges and a less-than-fruitful job market. Nonetheless, forming a government requires a majority of 376 seats in both houses of parliament, and Move Forward's coalition did not have enough support to do so. The Senate, appointed by the military rather by a free election, poses a significant obstacle to the country’s democratic forces as it has previously favored pro-military candidates.
The conservative establishment in Thailand, composed of the military, monarchy and influential elites, has a history of resisting fundamental changes. Move Forward's proposed structural reforms directly challenge this establishment. Additionally, Pita faces legal challenges as the Constitutional Court has accepted complaints against him and his party, potentially leading to his suspension from political duty.
With a majority out of reach in the first round of voting, Wan Muhamad Noor Matha, Speaker of the House of Representatives, has called for two more rounds of voting to declare the winner.
ASEAN Hosts 56th Foreign Ministers’ Meeting in Jakarta, Indonesia
The Association of Southeast Asian Nations (ASEAN) met in Jakarta, Indonesia from July 11-12 for the organization’s 56th Foreign Ministers’ Meeting. The meeting touched on several points of concern for the organization including the implementation of ASEAN Community Vision 2025, the ongoing humanitarian crisis in Myanmar, and the current state of affairs in the Indo-Pacific region.
ASEAN Community Vision 2025 sets forth the shared aspirations and commitments of the member states of the organization toward a united, prosperous, and harmonious community. It emphasizes the promotion of human rights, fundamental freedoms, and a sense of togetherness among ASEAN member states - at a time when the organization’s merits and effectiveness have been a topic of discussion among observers.
The organization reaffirmed its commitment to the five-point consensus, a proposed plan to relieve the ongoing humanitarian crises in Myanmar through five key points:
An immediate end to violence.
Dialogue among all parties.
The appointment of a special envoy.
Humanitarian assistance by ASEAN.
A visit by the regional bloc's special envoy to Myanmar to meet with all parties.
Regarding geopolitical matters in the South China Sea, concerns were raised about land reclamation, military activities, and serious incidents in the region which may jeopardize the safety of individuals and damage the marine environment. It was reiterated that mutual trust, self-restraint, and the pursuit of peaceful dispute resolution in accordance with international law, including the United Nations Convention on the Law of the Sea, are essential. The importance of non-militarization, self-restraint, and adherence to the 2002 Declaration on the Conduct of Parties in the South China Sea by all claimants and states was emphasized in hopes of avoiding further complications and escalating tensions.
The 43rd ASEAN Summit will take place from Sept. 4-7, 2023 in Jakarta.
China Expands Export Restrictions on Crucial Chip Materials
The global technology sector is bracing for significant changes following China's recent announcement to enforce export restrictions on germanium and gallium, two crucial materials used in the production of computer chips and other high-tech components. This decision made this month is part of China's strategy to safeguard its national security interests, and it has raised global concerns about the potential for further restrictions on other essential materials, especially rare earth, where China has a commanding lead.
Germanium and gallium are integral to the semiconductor industry, and China is a major supplier of these strategic materials, contributing to a significant portion of the world's production. The new export restrictions, set to commence from the beginning of August 2023, are predicted to have a substantial impact on the global tech industry.
In 2022, China's germanium exports reached 43.7 metric tons, with a market value of around $39 million, marking a 10% increase from the previous year. Similarly, gallium exports from China saw a 25% rise in 2022, amounting to 94 metric tons. The production of high-purity refined gallium was estimated to be about 290,000 kgs in 2022, a 16% increase from 250,000 kgs in 2021.
The export restrictions have brought renewed attention to China's dominance in the rare earths sector. Rare earths, a group of 17 elements, are used in a diverse range of products, from lasers and military equipment to magnets found in electric vehicles and consumer electronics. In 2022, China was responsible for 70% of the world's rare earth production and also possesses the majority of the world's capacity to process rare earth ores into materials that manufacturers can use.
The move has evoked memories of 2010 when China restricted exports of rare earths to Japan following a territorial dispute, leading to a surge in prices and prompting Japan to seek alternative sources. This incident led to a worldwide effort to reduce reliance on China for these critical materials.
Since then, countries such as the United States, Australia, and Canada, as well as the European Union, have increased efforts to boost domestic production of critical minerals, including rare earths. However, the extraction and refining of these materials are complex and pose environmental challenges, which has allowed China to maintain its dominance in the sector.
In light of these developments, the global tech industry is closely monitoring China's export policies. The restrictions on germanium and gallium exports could potentially reshape the global supply chains for these critical materials and underscore the need for countries to diversify their sources of supply.
China’s EV Blitz Continues
Chinese manufacturers of electric vehicles (EVs) are making headway in their global expansion efforts, utilizing cutting-edge technology, competitive pricing, and strategic alliances to solidify their international presence.
In a notable development in July 2023, BYD, a prominent Chinese EV manufacturer, unveiled its inaugural manufacturing facility in South America, situated in Campinas, Brazil. The facility is set to generate around 450 local employment opportunities and will concentrate on the assembly and production of the world's only long-range pure electric transit bus in South America, as well as the creation of fire-safe and recyclable Iron-Phosphate battery packs. Concurrently, BYD has committed to a 3 billion reais ($620.17 million) investment in a new industrial complex in Bahia, a northeastern state in Brazil. The complex, housing three plants, will occupy the site of a former Ford plant in the Camacari industrial park that shut down in 2021.
In another significant move in June 2023, Contemporary Amperex Technology Co. Limited (CATL), a major Chinese battery manufacturer, pledged a $1.4 billion investment to tap into Bolivia's extensive, yet underutilized lithium reserves. This strategic collaboration with the Bolivian government is poised to bolster China's standing in the global EV market, considering the integral role of lithium in the fabrication of electric vehicle batteries.
Chinese EV manufacturers are broadening their horizons not only geographically but also technologically. For instance, BYD Auto is among a group of Chinese electric car exporters that are beginning to rival Western and Japanese brands in their domestic markets, offering advanced technology and competitive pricing that has been described as "intimidating" by Tesla Inc.'s chief financial officer.
In 2023, BYD Auto saw a fourfold increase in exports, with the majority of vehicles destined for India, Thailand, Brazil, and other emerging markets. The company also secured a sale of 1,000 vehicles to Mexico's VEMO, resulting in the largest EV taxi fleet outside China. Moreover, BYD Auto is contemplating the sale of SUVs and sedans to the American market, hinting at potential future expansion into the U.S.
Other ambitious Chinese EV exporters include NIO, and the Geely Group,. These companies are competing on various fronts, from pricing to performance and features, challenging Western and Japanese premium brands. For example, NIO Inc., which has convinced Chinese buyers to match Tesla's prices, has announced that its latest SUV will be available in Europe this year.
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