Asia is set for a difficult year in 2018 – much of it centred around China



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China is increasingly viewed by the United States as a full-spectrum adversary.
Shutterstock

Nick Bisley, La Trobe University

In 2017 we finally realised that the four decades of geopolitical stability enjoyed by Asian countries and societies had come to an end. In 2018, the major patterns that will come to dominate the region will become increasingly clear.

China and the United States worked out a way to live with one another in the 1970s, and that paved the way for the region’s remarkable economic growth. The US actively sought to engage China in the belief that Chinese economic integration with the world would eventually lead to the liberalisation of China’s political system.

But as Xi Jinping’s first five years in office have made clear, that optimism was misplaced. A more affluent China has become more authoritarian, more nationalistic, and increasingly intent on changing the international environment to one it perceives better reflects its interests.

In his first year in office, US President Donald Trump surprisingly played a gentle hand with China. In contrast to this campaign rhetoric, his administration approached China with moderation, focusing principally on establishing a good personal relationship with Xi and trying to garner Chinese help to manage North Korea’s nuclear ambitions.




Read more:
At APEC, Donald Trump and Xi Jinping revealed different ideas of Asia’s economic future


That is likely to change in 2018. As signalled in the National Security Strategy and the National Defence Strategy, the US sees strategic competition among major powers as the most important feature of the country’s security environment.

The active engagement of China by the US, even one tempered by a degree of containment, is coming to an end. China is viewed now as a country that seeks to mould the international environment in its own image. Expect the US to increasingly contest China’s power and influence, both in the region and globally.

This is likely to take both military and economic forms, as China is increasingly viewed by the US as a full-spectrum adversary. This will mean some kind of action on what the US perceives as China’s predatory trade policy, as well as a ratcheting up of military steps to push back on Chinese activities, particularly at sea.

China will not respond to the likely increase in American pressure with equanimity. Indeed, one real risk in 2018 is that China will overplay its hand. Its lesson from 2017 is that Trump is a paper tiger. Trump is perceived as being neither able nor willing to match his bombastic words with deeds. China could be emboldened to act provocatively because it miscalculates how the US might respond.

Much attention this year will focus on the power struggle between the US and China.
Reuters/Jonathan Ernst

The disputed islands in the East China Sea are probably the most likely place for this to happen. The South China Sea disputes have a slightly lower risk in 2018, as China has largely achieved its objectives in that area, and while the US would prefer that this hadn’t occurred, it can live with the consequences for the time being.

While Sino-American competition will increase the regional temperature, it is by no means the only way in which great power rivalry will shape the region.

Last year’s Doklam crisis reminds us that the extensive border between China and India is highly contested. Expect India’s ambitions and China’s confidence to lead to further tensions in the Himalayas.

China was slightly surprised by India’s response in Doklam, and will have learned from that occasion. When, and not if, China next tests India, it will probably involve a higher level of military risk.

In late 2017, senior officials from the US, Japan, India and Australia met, reviving the “quadrilateral initiative” of a decade ago.

The move is publicly framed as efforts to coordinate policies of countries that value an open and free Indo-Pacific. In substance, it is about collaborating to limit Chinese influence and sustain the liberal order. The “new quad” will take further steps in 2018 and China will respond in ways that will further heighten regional tensions.

This year will also see a further decline in the stock of liberalism in Asia. For a period in the early 2000s, liberalism seemed ascendant. China joined the World Trade Organisation, democracy was on the march in Southeast Asia, and economic globalisation was seen as an unalloyed good thing.




Read more:
China’s ambition burns bright – with Xi Jinping firmly in charge


No longer. There are no democracies in continental Southeast Asia. Rodrigo Duterte is undermining liberalism in the Philippines, shutting down a vibrant news website, and some fear that the martial law he imposed in the restive south may be expanded across the country in 2018.

Cambodia has stripped away its thin democratic veneer, while Myanmar’s democratisation process remains highly limited. Even in Japan and India, liberal ideas are under challenge from thin-skinned nationalists.

In 2018, liberal ideas in Asia will face an increasingly difficult environment, particularly as the geopolitical competition will encourage erstwhile champions of liberal ideas to put interests ahead of values in order to manage that contest.

This year will sadly see the Rohingya crisis linger on, with insufficient political incentives for international actors to help end the crisis. The alignment of interests between the military and the government in Naypidaw will mean the region’s worst humanitarian crisis in decades will continue.

There is also a good chance that in 2018 we will work out how to live with a nuclear North Korea. The US will ultimately realise that it has no options for managing the crisis – or at least none that carry acceptable costs – and that a nuclear north can be managed. Indeed, a North Korea that feels secure may finally undertake the kind of economic reforms that its populace needs, and which could integrate the isolated country into the regional economy.

The ConversationContested Asia has become a geopolitical and geo-economic reality. In 2018 we will see just how sharp the contests will become. The wounded nationalism of China, the erratic and unpredictable US, and the weak political leadership in many regional powers mean the coming year in Asia is going to be even more challenging than 2017.

Nick Bisley, Executive Director of La Trobe Asia and Professor of International Relations, La Trobe University

This article was originally published on The Conversation. Read the original article.

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In the economic power struggle for Asia, Trump and Xi Jinping are switching policies


Giovanni Di Lieto, Monash University

Donald Trump is flexing the United States’ economic muscle in East Asia by introducing a web of new-generation bilateral trade deals to contain China’s challenge. But Beijing is fighting back by political means.

A closer look at the US president’s 2017 trade policy agenda and its ensuing initiatives reveals a pattern. Obama’s trade policy favoured multilateral, comprehensive and ultra-regional deals such as the failed Trans-Pacific Partnership (TPP) agreement, and the frozen Trade in Services Agreement (TiSA). Whereas Trump pushes for bilateral and more targeted deals.

Obama used trade deals, such as one with South Korea, to confront China on the regional status quo. But Trump is reshuffling the cards.

Under Trump, the US Trade Representative (USTR) office prioritises the strict enforcement of US trade laws to counter foreign government subsidies – even if that means undermining the World Trade Organisation and risking trade retaliations.

Trump’s deals in Asia

Beside the deal with Australia, the US has only two bilateral free trade agreements (FTA) in force with Asian countries, namely South Korea and Singapore. In comparison, China has nine FTAs in force in Asia, another four under negotiation, and five more under consideration.

The US boasts it has more than ten Trade and Investment Framework Agreements (TIFAs) with Asian economies. Essentially, these agreements may form the basis for future FTAs or Bilateral Investment Treaties.

This isn’t a trade policy U-turn in Asia but actually a strategic convergence between security and trade.

Previous US administrations have often sacrificed domestic industrial manufacturing to prop up international trade, using it as a bargaining tool to exert security influence over geopolitical partners and rivals. Before Trump, the US openly accepted trade deficits and the rorting of international trade laws as the price paid for advancing its defence policy agenda globally.

Imagine it as a strategic pyramid, with defence on top, trade in the middle and industry at the bottom.

Now with Trump we have a strategic triangle. Industry is the top point, with trade and defence interlinked, on the same level, at the bottom. This evolution is nowhere clearer than in the Asia Pacific region.

Curbing China’s power

China’s goal is to use the Regional Comprehensive Economic Partnership (RCEP) negotiations to accelerate its major Asian infrastructure projects. The most notable of these is the Belt and Road Initiative and the Asian Infrastructure Investment Bank. This initiative promises to compete with the Western-centric World Bank and Japan-led Asian Development Bank.

It’s not an arms race, but infrastructure projects, investments and even humanitarian aid are fuelling Xi’s “major-power diplomacy with Chinese characteristics”. This means clusters of Asian countries are becoming more and more embedded in China’s economic and strategic policy.




Read more:
Trump’s ‘America first’ trade policy ignores key lesson from Great Depression


Strangely, Trump’s strategic triangle is making US policy look like China’s, after it opened to the global economy in the 1980s. Conversely, Xi Jinping’s more assertive regional politics is moving China where the US was before Trump – with defence on top of trade and industry.

The US’ bilateral trade moves are also targeting new commercial routes. The US is looking at a free trade agreement with India. This would be a great win for the US, as it would further push India away from the China-led RCEP deal.

Indeed, after a promising start, the RCEP negotiations have stalled mainly because of India’s resistance to eliminating tariffs on imported goods from China. India’s trade deficit with China is on the rise and already exceeds US$50 billion.

A balanced US-India FTA would be a win-win solution for both countries in their quest to muscle out China commercially and politically, especially if it precluded finalising the RCEP.

Adding to this is a recent US trade report which urged allied economies to coordinate an anti-dumping action on China’s industries. This is designed to protect trade secrets and intellectual property rights.
The report pointed out that China systematically:

…imposes requirements that US firms develop their IP in China or transfer their IP to Chinese entities as a condition to accessing the Chinese market.

In exchange for all of this, the US offers maritime security for a close range of key partners such as Australia, Japan, Singapore, South Korea and Taiwan. This explains why the US administration is wooing India to join Japan and Australia in a revived trade-security alliance against China, the so called Quadrilateral Security Forum.

This recent Trump policy is a remake of Nicholas J Spykman’s “Rimland Theory” that framed the US understanding of Eurasian power politics during the Cold War years. Spykman memorably wrote:

Who controls the rimland rules Eurasia; who rules Eurasia controls the destinies of the world.

The ConversationFor one thing, Trump’s restoration of bilateral trade shows a clear direction for the US strategy in Asia. Beyond that, the convergence of trade and security policies has the potential to effectively reshape the US as an indispensable Asian power.

Giovanni Di Lieto, Lecturer, Bachelor of International Business, Monash Business School, Monash University

This article was originally published on The Conversation. Read the original article.

China wants to dominate the world’s green energy markets – here’s why



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xieyuliang / shutterstock

Chris G. Pope, University of Sheffield

If there is to be an effective response to climate change, it will probably emanate from China. The geopolitical motivations are clear. Renewable energy is increasingly inevitable, and those that dominate the markets in these new technologies will likely have the most influence over the development patterns of the future. As other major powers find themselves in climate denial or atrophy, China may well boost its power and status by becoming the global energy leader of tomorrow.

President Xi Jinping has been vocal on the issue. He has already called for an “ecological civilization”. The state’s “green shift” supports this claim by striving to transition to alternative energies and become more energy efficient.

But there are material benefits as well. China’s proactive response has impacted on global energy markets. Today, five of the world’s six top solar-module manufacturers, five of the largest wind turbine manufacturers, and six of the ten major car manufacturers committed to electrification are all Chinese-owned. Meanwhile, China is dominant in the lithium sector – think: batteries, electric vehicles and so on – and a global leader in smart grid investment and other renewable energy technologies.

This is only a start. There are modest projections that just 20% of the country’s primary energy consumption will come from non-carbon sources by 2030. Nonetheless, China’s sheer size means Beijing’s aggressive pursuit of emergent and expanding renewables markets should not be ignored. After all, dominating such markets has strong material benefits, while pioneering a green revolution provides intangible benefits in terms of state image and prestige.

So what are these benefits? First, concerns over environmental degradation are very real in China, owing to issues such as air, food and water pollution, and should be acknowledged. Beijing doesn’t want food and water scarcity or smoggy skies either, whether for altruistic environmental reasons or concerns over its popular legitimacy.

But it is worth also considering the geopolitical implications of climate change leadership. Take the US for example, historically the largest carbon emitter. The country had previously been active in climate policy, if somewhat hypocritical (support for hydraulic fracturing, for instance). But the current Trump administration is forthright in its baseless denial of climate change, having withdrawn from the Paris Agreement. It has also hired climate deniers to head its environmental agencies and other offices of power.

Contrast this with China, which is becoming increasingly proactive. In 2016 it became the largest shareholder in a new Asian Infrastructure Investment Bank which, along with the BRICS-established New Development Bank, invests heavily in green energy. The two institutions are seen as potential competitors to the IMF and the World Bank.

Of course, the situation is not black and white with China “going green” and everyone else sitting idly by. The Shanghai Cooperation Organisation (SCO), which commits to political, economic and military integration across Eurasia, the world’s largest landmass, for instance, comprises of nations with strategic interests in exporting hydrocarbons and coal. However, the same is true for the more environmentally aware Obama administration which advocated forcefully the Trans-Pacific Partnership that would have overriden attempts to establish green industries and constrained signatory states to its agreements with big business ahead of climate change action.

To this end, former president Obama argued that it was necessary for the US to shape the rules of global trade to US benefit. That being the case, what about China? As a major power, it is strengthening its international agency by pioneering these multilateral alternatives, many of which heavily invest in green energy projects. Through development banks or Asian trade agreements, China can provide an alternative vision to an international integration ostensibly based on the universal values espoused by the US and its chief allies.

“Going green”, then, while undeniably necessary, is a useful image or value to uphold as it serves to legitimate Chinese international and regional leadership. In this sense, it mirrors the way G7 nations espouse “democracy” or “freedom”. Going green also happens to be economically viable for those that have the funds to invest, contributing to China’s transition from the world’s manufacturing base to a truly major power.

The ConversationChina’s response to climate change combined with the size of its economy has thrust it to the centre of a global shift. Large-scale funding through Chinese-led multilateral frameworks could see a new energy system emerge – led by China. This would greatly extend its influence on the international political economy at the expense of those major powers unable or unwilling to respond.

Chris G. Pope, Researcher, University of Sheffield

This article was originally published on The Conversation. Read the original article.

What we can expect from China’s economy in 2018



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This year the Chinese Communist Party will tackle some of it’s biggest economic hurdles.
AAP

Alice de Jonge, Monash University

In 2017, we saw the consolidation of China’s power and influence globally, and of Communist Party leader Xi Jinping’s power nationally. This year, the party will try to use this to tackle some of its biggest economic hurdles such as financial risk, environmental pollution and maintaining social cohesion.

A first and overriding priority will be managing and preventing major financial risks within the Chinese economy. China will continue to clean up and tighten controls over its financial sector.

Beijing has already banned risk-laden Bitcoin from its financial system, and the government says it will maintain a “proactive fiscal policy and prudent monetary policy” for 2018.

This is in line with moves earlier in 2017 to curb credit growth and consolidate the country’s 100 trillion yuan (US$15 trillion) financial services asset-management industry under a single regulatory umbrella.

Regulators have also issued a 36-point code of conduct for the country’s private enterprises to follow when investing overseas. This is part of a move to clip the wings of China’s most aggressive global deal makers, firms like HNA Group and Fosun International. These businesses responded enthusiastically to the government’s “going out” policy to link China to the rest of the global economy, launched at the beginning of the century.

On the one hand, China has banned investments in gambling and “sensitive” industries and restricted investments in property, hotel, film and sports. But projects linked to China’s ambitious Belt and Road initiative are actively encouraged. So 2018 should see a continuation of China’s expanding economic influence globally through infrastructure and other major projects.

Beijing’s agenda is clear and the message from the centre is tightly controlled.
How Hwee Young/AAP

Tackling pollution, of all kinds

In line with the party’s focus on stability and risk minimisation is a clear determination to move away from high-speed growth to high-quality growth. “Quality” here means an economy that is cleaner and more user friendly.

The government is trying to reduce pollution. Measures to close down polluting factories and make local officials more accountable for environmental damage are starting to make a difference.

A major component of the shift to a cleaner economy is China’s determination to free itself from any reliance upon carbon imports.
This has potentially major implications for the Australian economy, which has done so well over the past few decades largely because of its commodity exports to China.

China is also no longer willing to accept imports of Australian waste, leaving Australia with the question of how else to deal with its accumulating stockpiles.


Read more: China’s Xi sets his sights on the world


Social stability for economic and political stability

In an unusual move during last year’s annual end-of-year economic convention, the government detailed concerns from the wider public on issues such as online scams, sex discrimination in the workplace and a lack of kindergarten services in certain regions. This reflects the party’s concern with social cohesion.

Maintaining a harmonious society has long been a concern of China’s leaders. In 2018, the anti-poverty campaign – one of Xi Jinping’s pet projects – will accelerate, with millions of rural poor being relocated to new housing with water and power. This will not only boost GDP and economic growth figures, it’s also aimed at promoting support for the party and its leaders.

Chinese leadership’s emphasis on social harmony extends to supporting the party in its policy endeavours. A series of recent measures have been aimed at strengthening party organisations in business and civil society organisations.

In line with existing provisions in China’s Company Law, these measures seek to ensure that all organisations in China (local and foreign, commercial and non-profit) make room within the organisation for the operations of a Communist Party cell. This allows the party to monitor and influence the operations of any organisation.


Read more: Why China is cracking down on overseas investment


The rolling out of a social credit system is also aimed at monitoring and influencing the behaviour of both organisations and individuals. It operates by awarding social credit points for good social behaviour, whether it be corporate philanthropy or an individual picking up rubbish on the kerbside. It also deducts points for bad behaviour, such as traffic law violations, failing to pay bills on time or domestic violence. There are even “blacklists” for the worst offenders.

Beijing’s agenda is clear and the message from the centre is tightly controlled. But the messiness and the unknowns will lie in its local implementation.

China has always struggled, and always will struggle, with the question of how to balance direction from a central government with local implementation for local circumstances.

For example, a recent decree requiring all local areas to move away from coal fired heating, towards natural gas, hit a snag when thousands of houses and schools were left without heating in freezing conditions in northern China. It forced authorities to back-track on implementing the policy.

The key for the government will be to strike a balance between reform and preserving stability. Aggressive reforms will be duly countered by other policies if they are seen as posing risks to economic stability.

The ConversationIf successful, China’s reforms will allow its economy to take the lead in adapting to a dynamic world. But the sheer size of its ambitions (both global and local) also contains the risk that failures, if they occur, could have devastating impacts.

Alice de Jonge, Senior Lecturer, International Law; Asian Business Law, Monash University

This article was originally published on The Conversation. Read the original article.

China steps into soft power vacuum as the US retreats under Trump


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US President Donald Trump and his Chinese counterpart Xi Jinping.
Reuters/Thomas Peter

Asit K. Biswas, National University of Singapore and Cecilia Tortajada, National University of Singapore

Soft power is the ability of a country to shape other countries’ views, attitudes, perceptions and actions without force or coercion. Its importance has been acknowledged for centuries, though the term was only coined by American political scientist and author Joseph Nye in the late 1980s.

A country’s soft power depends on many factors, including its performance, global image and international reputation. A state can use soft power to attract supporters and partners towards its policies, views and actions.

Take, for instance, the case of China’s giant pandas.

In 685 AD Empress Wu Zetian of the Tang Dynasty presented two giant pandas to the Japanese emperor. More than a millennium later, in 1941, Chinese leader Chiang Kai-Shek gifted another pair to the Bronx Zoo in appreciation of the US’s wartime help. Pandas remain a hallmark of Chinese soft power even today.

These animals have become symbols of China’s efforts in wildlife preservation and environmental protection. They are a way for China to communicate a caring and genial approach and culture.

And soft power will remain a key strategy for China into the coming decades. In October 2017, at the governing party’s national congress, President Xi Jinping outlined steps to enhance China’s soft power and make its culture more globally appealing:

We will improve our capacity for engaging in international communication so as to tell China’s stories well, present a true, multi-dimensional and panoramic view of China, and enhance our country’s soft power.

China is stepping into a soft power vacuum created by the US’s new administration. Since Donald Trump was elected president, the US has eschewed soft power. It’s withdrawn from a global climate change agreement; renegotiating a number of bilateral treaties and taken an openly “America first”, and somewhat isolationist stance. Its cordial relations with many traditional allies have become strained.

China has spotted the gap and is attempting to woo many countries whose US relations are wavering. One of China’s key weapons is the “One Belt, One Road” programme, a USD$900 billion initiative that aims to strengthen land and sea transportation links through major investments in transport infrastructure in Asia, Europe and Africa.

This is the equivalent of the US’s Marshall plan, which significantly improved West European countries’ economies after World War II. This help was not altruistic; nor is China’s “One Belt, One Road” programme. Assisting other nations through economic growth is a way of wielding soft power and advancing a country’s global standing. This will be important for China, which needs to counter its reputation as a one party state with hegemonic intentions.

How soft power has featured

China’s economic success, massive infrastructural development, academic and research progress, cultural heritage and success in sports will continue to increase its soft power in the future.

Culture and tourism are always important aspects of soft power. Some 138 million tourists visited China in 2016, a growth of 3.5% over 2015
Similarly, 122 million Chinese visitors went abroad in 2016, a growth of 4.3% over 2015. This increasing interchange of the visitors will give foreigners an insight into Chinese culture, history and its economic might – all of which will further enhance China’s soft power.

China is also emerging as a global leader in terms of academic and research progress. High income countries’ share of global research and development (R&D) expenditure fell from 88% to 69.3% between 1996 and 2013.

China alone filled this gap. It increased its share from a paltry 2.5% to 19.6% in 17 years. Recently, China’s average annual R&D expenditure growth has been 18.3%, compared to an anaemic growth rate in upper and middle income countries of 1.4%.

Increased educational and research activities have ensured that the number of foreign students in China is increasing rapidly. China now ranks third in attracting foreign students, after the US and UK. Its universities are climbing the global rankings. This, along with rapid internationalisation, policies that support foreign students, and affordability of study and living costs compared to the West, means China could soon become the top destination for international students.

And the reverse is also true. Of some 5 million international students pursuing higher education outside their countries, nearly 25% are Chinese. It’s another form of cultural interchange that will contribute to China’s soft power, as are the many Confucius Institutes set up around the world to showcase China’s culture, history, language, economic and social development. The idea is somewhat similar to the UK’s British Councils, Germany’s Goethe Institutes and France’s Alliance Francaise.

China fills gap left by US

American soft power, on the other hand, is now in retreat.

The asymmetry of views between leaders of the world’s two soft powers has made Xi the poster child for globalisation, free trade and international cooperation.

During the Asia-Pacific Economic Cooperation Summit in November 2017, in Vietnam, Trump reconfirmed his “America first” policy. This approach will further decrease America’s soft power.

Meanwhile, Xi is singing from a different hymn sheet. Also in Vietnam, he noted in his speech that globalisation is an “irreversible historical trend” and championed multilateral trading regimes.

He presented a vision of the future that is interconnected and invited “more countries to ride the fast train of Chinese development.”

China’s rise as the world’s leading soft power will not be without hurdles. It must tackle border issues with its neighbours; navigate the current South China Sea disputes and find solutions to its extensive environmental pollution problems, among other things.

The ConversationDespite these challenges, the US’s many missteps and China’s demonstrated social and economic success – as well as its increasing use of soft power – mean that the Asian giant is on the rise.

Asit K. Biswas, Distinguished Visiting Professor, Lee Kuan Yew School of Public Policy, National University of Singapore and Cecilia Tortajada, Senior Research Fellow, Lee Kuan Yew School of Public Policy, National University of Singapore

This article was originally published on The Conversation. Read the original article.

China’s economic power is actually a lot smaller than you think


Peter Robertson, University of Western Australia

China’s economic presence on world markets is actually much smaller than that of the United States of America and smaller than our key three asia-pacific allies combined.

In recent years, reports by financial institutions like the World Bank have claimed China is the world’s largest economy. China’s annual gross domestic product (GDP), when converted to United States dollars using purchasing power parity exchange rates is estimated to be worth around US$19 trillion, surpassing the USA’s GDP of US$17 trillion.


Read More: As China flexes its muscles in Antarctica, science is the best diplomatic tool on the frozen continent


China’s size is a good indicator of potential economic opportunities for Australia. But China’s rise is also creating a growing discomfort in how China will use its economic power. In both Washington and Canberra questions are being asked about how to our balance economic interests with these growing political and security concerns.

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As a large country China may insist on a greater acceptance of its own ideals and priorities as a condition of economic engagement. As a dictatorship, however, its ambitions are unclear and may not align well with Australia and other democratic countries in the region.

Likewise China’s assertiveness in the South China Sea has rekindled interest in security cooperation between the region’s largest democracies, Japan, India and Australia, as well as the United States through the Quadrilateral Security Dialogue.

The concerns raised are real, but are in some ways exaggerated. Specifically, the figure of US$19 trillion is an estimate based on a purchasing power parity exchange rate, which overstates China’s impact on world markets.

This is because the purchasing power parity exchange rate tells us how much money you need in China to be as well off as you are in the US. It is a measure of how big China’s GDP would be if costs of living were the same as the US.

This can be useful, but it is not an indicator of China’s footprint in the world economy.


Read more: Australia is hedging its bets on China with the latest Foreign Policy White Paper


A reasonable measure of a country’s economic footprint on the world economy is how much it could potentially change demand or supply on world markets.

When countries export they have to accept payment based on market exchange rates. Likewise when countries import they must pay in foreign currency based on market exchange rates. This means that to compare China’s market size with the US, we need to convert China’s GDP, measured through China’s currency renminbi, to US dollars, using market exchange rates.

China’s GDP measured at market exchange rates, however, is only US$9 trillion – almost half that of the US.

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This means that the impact China’s economy can potentially have on the world economy is really only about half as much as the US.

The difference in values arises for the same reason that tourists find that their money often goes much further in developing countries. That is if you convert your US dollars to renminbi, you will find that you can purchase a lot more in China than the US, especially in non traded goods and services such as haircuts or street food.

The purchasing power parity exchange rate is the rate that tells you how much you need in China to be just as well off – for example to buy the same basket of goods. It’s very useful rate for tourists and is great way to compare standards of living across countries.


Read More: China’s growing footprint on the globe threatens to trample the natural world


But it’s not a measure of how much you can actually buy. In order to measure the potential influence of China’s economy, it is buying and selling power that matters.

The same line of reasoning also effects how we should think about the asia-pacific partnership of regional democracies. The combined GDP of India, Japan and Australia, measured at purchasing power parity rates is smaller than China.

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But at market exchange rates their combined market size exceeds that of China. This is because just as purchasing power parity exchange rates make China seem too big, they make Japan seem small relative to its real buying and selling power on world markets.

The collective GDP of Japan, Australia, India and the United States represents a market that is around three times larger than China.

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These differences are quite significant and they are important because they affect the way we think about the value of economic opportunities and our security alliances. When interpreted appropriately China is a large country. But it still has a long way to go before it can match the sheer economic weight of the US.

The ConversationSo while China is very important, the market size of regional democracies should not be underestimated.

Peter Robertson, Professor, University of Western Australia

This article was originally published on The Conversation. Read the original article.

Australians working in China should expect fallout over questions of political interference



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The People’s Daily, the official newspaper of the Chinese Communist Party, has let its displeasure over questions of influence in Australian politics be known.
Reuters/Thomas Peter

Ryan Manuel, University of Hong Kong

Despite Sam Dastyari resigning this week over ongoing allegations of promoting Chinese interests, and regular denunciations of Chinese interference in Australian politics, little has been said about what China makes of it all.

On Monday, we received the definitive answer: an authoritative condemnation of Australia, signed off at the highest levels.

A brief timeline of Chinese responses shows how the matter escalated.

Last week, the Chinese Embassy in Australia issued an unusually heated statement criticising Australian media and politicians. Some politicians, it said, had made:

… irresponsible comments that hurt mutual trust, and that we fully reject.

The statement included a translation of a statement from Prime Minister Malcolm Turnbull that “Chinese influence is interfering with Australian politics”.

The embassy in Canberra clearly reported their displeasure to the foreign ministry in Beijing. Foreign ministry spokesmen at the Beijing press conferences in the following days made similar statements.

The following day, Turnbull said “the Australian people stand up” to China, a phrase he said was inspired by Mao’s 1949 declaration that the Chinese people had stood up.


Read more: Dastyari saga shows the need for donations reform, and for politicians to take more care


The matter then escalated. Following the comments being reported, and a meeting in Beijing (almost certainly the next day) to determine the official line, China launched a full rhetorical assault on December 11.

China’s official government spokesperson made a public statement that China:

… offer(s) Australia a word of advice: some of these people should stop saying things that hurt Australia’s image and Australia-China mutual trust.

Turnbull’s statement that Australian people “stand up” was the third-leading item on the national news put out by China’s state television broadcaster. Most significantly of all, the People’s Daily, China’s official newspaper of record, had a special signed editorial attacking Australia’s government and media.

Of these events, it is the People’s Daily editorial that is the most authoritative.

The People’s Daily is the official newspaper of the Communist Party that runs China. It has a number of different classes of editorial. This one is known as a “signed editorial”: it represents the “voice of China”. It must be signed off on by a member of China’s highest leadership committee, and drafted by a special group within the People’s Daily. It is the third-highest ranking editorial that can be released. The two highest-ranking editorials are only released for special occasions, roughly monthly.

Why is this editorial so important? Because it immediately signals to the entire Chinese political system, including roughly 90 million party members and 40 million public servants, that their top leaders are angry at Australia.

Based on the television broadcast and the official editorial, the issues appear to be with Australian media, the public discourse on China, and with the prime minister’s phrase that “the Australian people stand up” (which was described as “laughable”).

Next, the many ministries, departments, bureaux, businesses and Communist Party bodies of the massive Chinese state must determine how seriously they take this official displeasure. Chinese leaders rarely release specific orders with targets. Rather, they release exhortations and vague statements for which they then expect the lower level actors to provide specific solutions. So subordinate departments are to prepare and submit a response that is in line with the editorial so that the leaders may look favourably on them.

None of these measures threatens the Australian state, nor our economy. China will not launch a trade war over this. But we need to be clear: “breaching mutual trust”, as the Chinese government describes it, can be lived with as long as the benefits to Australia outweigh the costs. Based on the current official Chinese media, costs are highly probable.


Read more: Ban on foreign political donations is both too broad and too narrow, and won’t fix our system


The last time that Australia received an official editorial condemning its actions was in 2009, when it refused official requests by China not to issue a visa to a dissident filmmaker (at the same time as the arrest of Australian citizen and Rio Tinto employee Stern Hu in China). A pointed editorial, albeit one of lower rank than the one issued on Monday, warned about “Australia’s Choice”.

Australia’s prime minister at that time was expert sinologist Kevin Rudd, who refused to intervene personally in the situation. Rudd was not personally criticised in the editorial. And China eventually sent the head of its government over to make an unusual joint public statement. As this statement would also have needed to be signed off at the highest levels, it sent a new signal to the Chinese system that Australia was out of the dog house.

So until a new line or editorial comes out of Beijing, Australian business and government representatives in China can probably expect some rather heavy-going.

Recent events are likely to be raised in many meetings. It very likely will also retard the progress of the next stage of the Australia-China free trade agreement. Finally, there is likely to be a reduction in the number of Chinese students allowed to study in Australia – the editorial argued that these students had been “significantly wounded”.

The ConversationThere are some other factors that may reduce costs. This is the best time to incur the wrath of the Chinese government. Due to the delay between choosing new national Party leaders and then assigning them to their various government ministries (which occurs in March), government agencies tend to be less reactive to official media signals than usual.

Ryan Manuel, AsiaGlobal Fellow, University of Hong Kong

This article was originally published on The Conversation. Read the original article.

Grattan on Friday: The ‘China factor’ is an unknown in Bennelong but a big issue for Australia


Michelle Grattan, University of Canberra

The stakes in Saturday’s Bennelong byelection could hardly be higher. While both Liberal and Labor camps predict John Alexander will hold on against the ALP’s Kristina Keneally, a government defeat would be calamitous for Malcolm Turnbull, leaving the Coalition with a minority on the floor of the House of Representatives.

In the event of a very narrow win by Alexander – who has a handy 9.7% margin – how the result was interpreted would become important in whether Turnbull lost serious skin.

The byelection is certainly not risk-free for Bill Shorten – after several bad weeks, he needs a strong Labor performance if he’s to end the year with some momentum.

A Fairfax Media-ReachTEL poll done on Tuesday in Bennelong had the Liberals leading 53-47% on a two-party basis; a weekend Newspoll had a 50-50% result. Turnbull describes it as “a very tight contest”.

The likely impact of the “China factor” has been been much talked about in the byelection lead-up because the seat has a high proportion of voters with a Chinese background. About 21% of the Bennelong population have Chinese heritage (compared with 5.2% in New South Wales generally), and around 16% of the voters. Bennelong is the top electoral division for percentage of Chinese-Australian voters, based on the 2016 Census.

The “China factor” is a potent cocktail of issues: the behaviour of Labor’s Sam Dastyari, who has now announced he is quitting parliament; the government’s legislation cracking down on foreign (notably Chinese) interference in Australian politics; and the ALP’s shrill byelection rhetoric about “Chinaphobia”.

It is not clear how these issues will have gone down with the Bennelong Chinese, diverse in themselves, or how they’ll rate compared with other drivers of their votes, including Alexander’s earlier efforts at sandbagging his support among members of the Chinese community.

And then there is the question of what impact these debates have on the rest of the seat’s voters.

The Fairfax poll found two-thirds of the electors supported the move against foreign interference.

Given the timing and the government’s ruthless exploitation of the Dastyari affair, it is easy to cast what is happening to counter foreign interference just in a short-term political context.

In fact, it represents a much bigger, more fundamental change in concerns about and policy towards Chinese influence in Australia.

As strategic expert Hugh White, from ANU, writes in his Quarterly Essay, published in late November, “Without America: Australia in the New Asia”: “Suddenly the Chinese seem to be everywhere [in Australia]. Areas of concern include espionage and cyber-infiltration, the vulnerability of major infrastructure, influence over Australia’s Chinese-language press, and surveillance and intimidation of Chinese nationals in Australia, including students.”

As well, of course, as the allegations “of attempts to buy influence over Australian politicians”.

White, it should be noted, draws a distinction between China’s capability and what it has actually done. Speaking to The Conversation this week, he said: “While it is wise to take precautions against China or other countries seeking to influence our politics in illegitimate ways, the government has so far not provided any clear evidence that Beijing is actively seeking to do so at the moment”.

The rise in government concern has manifested itself quite recently.
It was only in 2015 that the Port of Darwin was leased for 99 years to the Chinese company Landbridge. It was a decision by the Northern Territory government, but it was okayed and later strongly defended by the defence department’s officialdom.

It seemed then, and still seems, an extraordinary decision – and one that probably wouldn’t be made today.

The controversy around that decision served as something of a wake-up call, leading to moves to ensure more scrutiny of Chinese investment in infrastructure.

The government’s legislation, introduced last week, to counter covert foreign interference in Australian politics, ban foreign political donations, and set up a register of those lobbying for foreign interests has been driven to a substantial degree by rising concern from the security agencies.

China predictably has responded angrily, with harsh words and by calling in Australia’s ambassador in Beijing.

As White reminds, China will impose “costs” when there is pushback to its interests and behaviour. Currently, its reactions have been through diplomatic and media channels.

More tangible retribution, in the form of various irritants in the relationship, may be on the cards as the foreign interference legislation is considered – the only constraint being China not wishing to harm its own interests.

Obviously Australia doesn’t want to incur whatever costs China might eventually impose. But the price of avoiding costs, by not giving offence, has become too high to tolerate.

The effort to combat Chinese covert interference is not “Chinaphobia” despite Keneally likening it to the old “reds under the bed” scare. Nor is it an attack on our local Chinese community – some of whom are subjected to attempted Beijing influence – though in the heat of political combat it is being portrayed as that.

Turnbull has faced criticism even from his own side of politics, with former trade minister Andrew Robb lashing out after the government flagged he’d need to be on the proposed register of those working for foreign governments or companies.

Robb’s situation is contentious in itself. He went to work for Landbridge, lessee of the Darwin port, immediately after retiring from parliament at the 2016 election.

Robb says he does nothing for Landbridge within Australia, but is “employed to influence and to work with and to advise about doing deals in other countries”. He has bitterly condemned what he sees as “an attempt to use me as a convenient means of running a scare campaign against China”.

Despite Robb’s fury and his defence of his position, there was shock and unease among some former colleagues at such a rapid move to Landbridge, which would value highly his recent ministerial role and his networks.

His example points to the difficulty of identifying precisely what is appropriate or not appropriate for former politicians and bureaucrats in taking such jobs. Transparency is vital but beyond that there will be different views on where the line should be drawn.

The move to curb foreign interference and provide more scrutiny of activities on behalf of foreign interests is likely to stand as one of the most significant and indeed bold initiatives of the Turnbull government.

The legislation, which follows work Turnbull commissioned in August last year into foreign influence, interference and coercion, will be examined by the parliament’s Joint Committee on Intelligence and Security before being debated next year.

The ConversationIn June, Shorten urged Turnbull to act on foreign donations and foreign interference and advocated a foreign agents register. Labor will object to some of the detail of the government package but – after the noise of Bennelong has passed – it would seem likely the broad initiative will receive bipartisan support.

https://www.podbean.com/media/player/xac9s-7e77c6?from=site&skin=1&share=1&fonts=Helvetica&auto=0&download=0

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

Dastyari quits the Senate after pressure over his China links


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Sam Dastyari leaves parliament but insists he is a patriotic Australian.
AAP/Ben Rushton

Michelle Grattan, University of Canberra

Labor senator Sam Dastyari has succumbed to intense pressure to quit the Senate in the face of continued revelations that he had promoted Chinese interests.

Dastyari told a brief news conference, at which he took no questions, he had decided “the best service I can render to the federal parliamentary Labor Party is to not return to the Senate in 2018”.

He said his ongoing presence would detract from “the pursuit of Labor’s mission” and he wanted to spare the party “any further distraction”.

Earlier this week, it was revealed that in 2015 Dastyari tried to dissuade Labor’s then shadow foreign minister Tanya Plibersek from meeting a pro-democracy advocate during her trip to Hong Kong.

This followed an earlier revelation that Dastyari had tipped off his Chinese businessman benefactor, Huang Xiangmo – who is of interest to Australian security authorities – that his phone was likely tapped.

Opposition Leader Bill Shorten said that following their discussions, Dastyari had informed him he was resigning from the Senate. “I told him I thought this was the right decision.”

It is understood that Shorten had been in intensive talks with factional allies to resolve the Dastyari crisis. Labor had no power to force Dastyari out of parliament – and sources said he was reluctant to go.

In his statement, Dastyari strongly defended himself, saying he left parliament “knowing that I’ve always honoured my parliamentary oath”.

He said he had always acted with integrity “and I remain a loyal, patriotic Australian”.

Dastyari has been under sustained pressure to quit the Senate, with this week’s leak of his representations to Plibersek seen as part of the effort from within the ALP to get him out. On Monday two frontbenchers, Linda Burney and Catherine King, made it clear he should consider his position.

Sources said some people in Labor’s right had been concerned about the precedent set by Dastyari having to resign – given that he had not done anything illegal.

The government had maintained a constant attack on Shorten for not forcing Dastyari to leave, casting the issue as a test of Shorten’s leadership.

Dastyari’s resignation comes in the dying days of the Bennelong byelection, which a Newspoll in Tuesday’s Australian shows as being extremely close. The Newspoll has the Labor and Liberal parties on a 50-50 two-party-preferred vote, and each on a 39% primary vote.

The byelection follows the resignation of the Liberals’ John Alexander in the citizenship crisis; he is being challenged by former New South Wales premier Kristina Keneally.

Keneally’s name has recently been mentioned as a possible replacement senator for Dastyari if she failed in her bid to win Bennelong.

Bennelong has a significant Chinese community, and the row about Dastyari and also more generally the concern about foreign interference in Australian politics, could have some influence in the byelection, although how those factors will play out there is unclear.

Dastyari entered the Senate in 2013. A former secretary of the NSW Labor Party, he has been a significant figure and numbers man in the NSW right faction. In parliament, he has been active on issues of banking and misconduct in that industry.

He said he would continue to be an active grassroots member of the Labor Party.

Shorten said that Dastyari could be proud of what he had achieved as a senator. “He has sought justice for the victims of banking misconduct, exposed the tax minimisations processes of international giants, pushed for a better deal for younger Australians and promoted an inclusive multicultural nation.”

Joseph Cheng Yu-Shek, the pro-democracy activist that Dastyari unsuccessfully tried to persuade Plibersek not to meet, told the ABC that Chinese authorities “operated a very powerful, very resourceful machinery trying to influence the policies of various foreign countries”.

“This machinery tries to cultivate ties with influential politicians, tries to persuade them to be friends of China, and as friends of China, they should avoid meeting enemies of China,” he said.

The Conversation“If these situations become effective, the politicians concerned will be rewarded and then they will be pressured to do something even more compromising later,” he said.

https://www.podbean.com/media/player/xac9s-7e77c6?from=site&skin=1&share=1&fonts=Helvetica&auto=0&download=0

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

Two Labor frontbenchers urge Sam Dastyari to consider his position



File 20171211 27689 11no6ev.jpg?ixlib=rb 1.1
Sam Dastyari is facing increased pressure to consider his position as a Labor senator.
AAP/Mick Tsikas

Michelle Grattan, University of Canberra

Labor senator Sam Dastyari is under renewed pressure to quit after allegations that he repeatedly pressed the ALP’s then foreign affairs spokeswoman Tanya Plibersek not to meet an advocate for Chinese democracy in 2015.

ALP frontbencher Linda Burney told Sky News early on Monday: “It is now up to Mr Dastyari to consider his position … Sam Dastyari I’m sure is thinking very deeply about his role within the party”.

Shortly after, another Labor frontbencher, Catherine King, also said: “Sam needs to reflect upon his position”.

The new allegation comes after earlier revelations about Dastyari tipping off a Chinese benefactor who was of interest to Australian security services that his phone was likely tapped.

The latest report in the Fairfax Media said that in January 2015, Plibersek went to Hong Kong. There, her meetings included one with Joseph Cheng Yu-shek, a prominent academic with Australian citizenship.

Dastyari “repeatedly attempted to warn Ms Plibersek that her meetings in Hong Kong would upset figures in the Chinese community in Australia”, the report said. He left messages on her phone and contacted her office multiple times, it said.

But he was unable to reach her directly, because she had left her mobile phone at home for security reasons – although his messages were passed on to her, according to the report.

A spokesman for Dastyari said the claims were “complete rubbish”.

The latest claims against Dastyari, which appear to have come from within Labor, are thought to be part of an effort to get him to resign from the Senate.

Dastyari’s links with China have become a severe embarrassment to Opposition Leader Bill Shorten. The government is relentlessly pursuing Shorten over them.

After it was revealed that Dastyari alerted Chinese businessman Huang Xiangmo about his phone being probably tapped, and audio emerged of Dastyari reflecting China’s line on the South China Sea, Shorten stripped him of his position as deputy opposition whip in the Senate.

Late last week, Shorten said Dastyari’s career was “going nowhere, fast”. Dastyari was doing no media on Monday morning, but his office said he wasn’t quitting.

Labor cannot force him to resign from the parliament – it could only throw him out of the party. But any move against him by Shorten is complicated by Dastyari being a leading member of the New South Wales right, whose support Shorten needs.

Plibersek’s office has consistently declined to be drawn about Dastyari’s representations. Rumours about these have been circulating in Canberra for some time.

A spokesman said Plibersek’s “itinerary in Hong Kong, including a meeting with a prominent pro-democracy activist, went ahead precisely as scheduled – I think that speaks for itself”.

The Fairfax story put forward “one suggested explanation” for the Dastyari representations – that he contacted her office following an inquiry from a Sydney Chinese-language media outlet, which was preparing a critical story on her meetings.

Immigration Minister Peter Dutton accused Dastyari of being “a double agent”, saying “he can’t be in the Australian Senate and it is important that Linda Burney has called for him to go and now Bill Shorten should do the same”.

The latest controversy around Dastyari comes days after Prime Minister Malcolm Turnbull introduced into parliament legislation to combat foreign interference in Australian politics. The government and the security agencies have become increasingly alarmed at the growing scale of this intervention.

The ConversationBut the new legislation, which includes a register for those lobbying for foreign governments and businesses, has sparked an angry backlash from China. It has also been criticised by former trade minister Andrew Robb, who now works for the Chinese company Landbridge Group.

https://www.podbean.com/media/player/xac9s-7e77c6?from=site&skin=1&share=1&fonts=Helvetica&auto=0&download=0

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.