Asian Affairs: June 15-30, 2023
Antony Blinken made a long-awaited trip to Beijing in June, while economic and trade-related matters made up the backdrop of this month's affairs in Asia.
Antony Blinken Meets With Xi Jinping, Other Chinese Leadership in Beijing
Antony Blinken, American Secretary of State, made his highly anticipated trip to Beijing in mid-June after a four-month delay from the trip’s originally scheduled date in February. It was the first visit to China by an American Secretary of State since Mike Pompeo’s 2018 visit.
Speaking during press availability at the Beijing American Center, Blinken walked a fine line between diplomacy and candid speech when addressing the state of US-China relations.
“Both the United States and China have an obligation to manage this relationship responsibly,” Blinken said. “Doing so serves the best interests of the United States, of China, indeed, of the world.”
Seconds later, Secretary Blinken remarked that the US is “clear-eyed about the challenges posed by [China],” issuing a reminder that the two countries still disagree on many first-principle questions. Meanwhile an official release by China’s Ministry of Foreign Affairs (MOFA) likewise described the relationship between the two countries as being “at the lowest point since its establishment” though also noting that the meeting between Blinken and Qin provided “candid, in-depth and constructive talks at length on the overall bilateral ties and important issues.”
As is by this point customary for US-China engagement, the matter of Taiwan was discussed between the two parties.
On Taiwan, I reiterated the longstanding U.S. “one China” policy. That policy has not changed. It’s guided by the Taiwan Relations Act, the three Joint Communiqués, the Six Assurances. We do not support Taiwan independence. We remain opposed to any unilateral changes to the status quo by either side. We continue to expect the peaceful resolution of cross-strait differences. We remain committed to meeting our responsibilities under the Taiwan Relations Act, including making sure that Taiwan has the ability to defend itself. We also spoke about a range of bilateral issues, including continuing to develop principles to guide our relationship, as discussed by President Biden and President Xi in Bali late last year.
-Antony Blinken, United States Secretary of State
Also addressed during Mr Blinken’s press availability was North Korea, with the Secretary stating that “China is in a unique position to press Pyongyang to engage in dialogue and to end its dangerous behavior.”
Mao Ning, MOFA Spokesperson, responded to Mr Blinken’s comments with a less direct approach, stating that all parties to the question of North Korea “need to face the crux of the issues squarely, step up to their respective responsibilities, and address the legitimate concerns of all parties in a balanced way through meaningful dialogue.”
On the June 19 meeting between Secretary Blinken and President Xi Jinping, both the US Department of State and China’s MOFA were of few words in their official releases on the matter. The Guardian has reported the meeting between Mr Blinken and Mr Xi as lasting only 35 minutes. That said, both men later referred to Mr Blinken’s visit as being candid and constructive.
During talks between Mr Blinken and Mr Qin, the two-sides agreed to continue to encourage academic exchange between American and Chinese students and scholars, as well as encouraging increased passenger flights and tourism between the two countries.
Japan Lifts South Korea Trade Restrictions
Japan has reinstated South Korea as a preferred nation with fast-track trade status, effective from July 21 onward. This marks the end of a four-year economic dispute that was exacerbated by historical disagreements. The countries have also agreed to establish a framework to review and adjust the systems as necessary. This development is part of the rapid improvement in their ties, which has been driven by the need for three-way security cooperation with Washington, in response to growing regional threats from North Korea and China.
The dispute began in July 2019 when Japan removed South Korea from its "white list" of countries to which Japan would offer preferential trading status. This was seen as a response to South Korean court rulings in 2018 that ordered Japanese companies to compensate Korean workers for abusive treatment and forced labor during World War II. The dispute escalated when Japan tightened export controls on key chemicals used by South Korean companies to make semiconductors and displays, leading South Korea to file a complaint with the World Trade Organization (WTO) and remove Japan from its own list of countries with preferred trade status.
The resolution of this trade dispute is expected to simplify import and export procedures and accelerate exchanges and cooperation between the countries companies. The news of Japan's decision to roll back export restrictions on essential ingredients for the manufacture of displays and semiconductors led to a price surge for shares of Korean electronics manufacturers such as SK Hynix Inc., Samsung Electronics Co., and LG Electronics Inc.
The breakthrough in the dispute came after South Korean President Yoon Suk -yeol announced that South Korean companies, rather than Japanese ones, would finance a foundation set up to address the forced labor dispute. South Korea has also said it will drop its complaint to the WTO. However, the exact timeline for easing the export restrictions and whether South Korea will be categorized as a most-favored trading partner again by Japan is yet to be decided.
The three materials that had most concerned Seoul are controlled almost wholly by Japanese companies such as JSR Corp., Shin-Etsu Chemical Co., and Tokyo Ohka Kogyo Co. — a leftover legacy from when Japan led the world in semiconductor technology in the 1980s. Tokyo had expressed concerns about South Korea’s export controls when it tightened exports of the three chemical products. Seoul’s export controls have since improved, according to Japanese trade ministry officials.
Pakistan Avoids Default With IMF Deal
Pakistan has reached a staff-level agreement with the International Monetary Fund (IMF) for a $3 billion bailout package, which is expected to stabilize its struggling economy and alleviate the economic crisis that has left many of the country’s214+ million people under severe economic strafin. The agreement, which is subject to approval by the IMF's executive board in mid-July, comes after an eight-month delay and is higher than the expected $2.5 billion remaining from a $6.5 billion bailout package agreed to in 2019.
The nation is facing its worst economic crisis since gaining its independence from Britain in 1947, with the economy already struggling due to years of financial mismanagement. The situation has been exacerbated by a global energy crisis, devastating floods in 2022, and the international commodity price spike in the wake of the ongoing war in Ukraine. The country's annual inflation rate hit a record high in May of almost 38%, and its foreign exchange reserves fell to a level that covered less than three weeks of imports.
To secure the deal, Pakistani authorities have taken steps including raising taxes, cutting spending, and raising the central bank's main interest rate to a record high of 22%. The IMF has highlighted the need for steadfast policy implementation by Pakistan to overcome challenges, particularly in the energy sector, where it expects a rise in electricity prices.
The bailout package is expected to give Pakistan much-needed access to US dollar funding, enable additional financing from creditors, and reduce the risk of default. It is also expected to provide a policy anchor and a framework for financial support from multilateral and bilateral partners in the period ahead. However, experts have warned that high inflation, limited foreign reserves, and lacking macroeconomic stability will require time and sustained fiscal discipline to overcome.
The agreement comes amidst political turmoil in the country, with former Prime Minister Imran Khan being arrested on corruption charges, sparking deadly protests and rattling financial markets. Despite these challenges, the agreement is seen as a significant step towards economic recovery, providing Pakistan with some much needed economic breathing space.
China, Vietnam to Enhance Military Cooperation
China's Defense Minister, Li Shangfu, expressed China's willingness to strengthen communication and cooperation with Vietnam in the military domain. During a meeting with Vietnamese Defense Minister Phan van Giang in Beijing, Li emphasized the complex and challenging international situation, particularly regarding the security of the Asia-Pacific region.
Li emphasized the importance of China and Vietnam working together and uniting to protect their shared strategic interests and contribute positively to regional peace and stability. He acknowledged the positive progress in military relations between the two countries and expressed China's readiness to elevate these relations to a new level.
The meeting took place after the USS Ronald Reagan, a US aircraft carrier, made a port stop in Danang, Vietnam. This visit occurred amidst ongoing tensions between China and the United States in the South China Sea, where both countries vie for influence in the energy-rich region. The article mentions that Li has met military officials from other countries but has not engaged in talks with the US Defense Secretary, Lloyd Austin, despite attending a security summit in Singapore together.
Important to note is that Li Shangfu is under US sanction due to his involvement in a 2017 arms purchase from Russia. China has expressed its desire for the sanctions to be lifted to facilitate discussions. With tensions persisting in the South China Sea, which is claimed by multiple nations and witnesses military activities, any progress in military relations between China and the United States is closely monitored. Last year, Beijing terminated three significant military communication channels with the United States in response to a visit by Nancy Pelosi, the former U.S. House Speaker, to Taiwan, a territory China considers self-ruled.
US Senior Official Visits Taiwan for Economic Discussions
Matt Murray, an American official responsible for managing relations with the Asia-Pacific Economic Cooperation (APEC) group visited Taiwan this week to discuss the United States' plans to host the organization's gathering this year, according to the American Institute in Taiwan (AIT), generally regarded as a de facto American embassy in Taipei.
APEC is one of the few international organizations in which Taiwan, a territory claimed by China but considered a separate entity by the United States, participates, as China restricts Taiwan's involvement in most other global forums. Against the backdrop of military tensions between Beijing and Taipei, previous APEC summits have provided a rare opportunity for direct engagement between Taiwan and China, both of which are members of the organization.
Mr Murray, held discussions with senior Taiwanese officials on APEC-related matters and the strong economic relationship between the United States and Taiwan. The talks encompassed various topics, including upcoming high-level meetings in Seattle, Washington in August which will focus on disaster preparedness, food security, health, the economy, energy, women's economic empowerment, and small and medium enterprises.
A statement released by the AIT did not specify the individuals Murray met during his visit. The main leaders' summit is scheduled to take place in San Francisco in November. While Taiwan's presidents do not attend APEC summits, the island is represented by former high-ranking officials or business leaders, such as Morris Chang, the founder of semiconductor manufacturer Taiwan Semiconductor Manufacturing Company, who attended the Bangkok summit last year. During that time, Chang briefly conversed with Chinese President Xi Jinping and discussed semiconductors with U.S. Vice President Kamala Harris.
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