China in the Xi Era


November 20, 2018

China in the Xi Era

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by: David Shambaugh, George Washington University

Xi Jinping is widely viewed as the strongest leader China has had since Deng Xiaoping or Mao Zedong. But six years into his perhaps indefinite tenure, what has Xi actually accomplished? And where might China be headed under his rule?

 

Like all Chinese leaders since the 1870s, when Qing dynasty rulers launched the Self-Strengthening Movement, Xi also seeks ‘the great rejuvenation of the Chinese nation’. The quest has been consistent for 150 years: for China to acquire the material attributes of a major international power and the commensurate respect from others. The legacy of the country’s former weakness and humiliation continues to haunt Xi and his generation.

So too does the collapse of Communist Party rule in the former Soviet Union. Now having ruled almost as long as their Soviet counterparts, Xi and his peers in the Chinese Communist Party (CCP) live in regular trepidation of a similar meltdown. These two issues — augmenting China’s strengths while rectifying the Communist Party’s weaknesses — are intertwined in Xi’s thinking and dominate his agenda.

Xi believes in the absolute power of the Communist Party. As Xi told the 19th Congress of the CCP in October 2017: ‘The party controls all’. Unlike Deng Xiaoping, who launched China’s reforms four decades ago and sought to relatively reduce party power, Xi wants to bring the party-state back into all aspects of national life.

The CCP under Xi is also reaching back to the Maoist era by constructing a massive personality cult around Xi’s own persona. Maoist rhetorical throwbacks such as zhuxi (chairman), lingxiu (leader), hexin (core), even da duoshou (great helmsman) are again commonly used to refer to Xi. The official ideological canon of ‘Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era’ has now been enshrined in the party constitution too. Xi personally chairs all central Leading Groups and party and military organs. He has also emasculated the authority of Premier Li Keqiang.

Xi is systematically rolling back many of the core elements of Deng’s reforms that guided China’s leaders for the past four decades: no personality cult around the leader, collective leadership and consensual decision-making, bottom-up ‘inner-party democracy’ rather than top-down diktat, active feedback mechanisms from society to the party-state, relative tolerance of intellectual and other freedoms, limited dissent, some de facto checks and balances on unconstrained party power, fixed term limits and enforced retirement rules for leaders and cadres, a society and economy open to the world, and a cautious foreign policy. These and other norms were all central elements of Deng’s post-1978 reform program and they were all accepted and continued under Jiang Zemin and Hu Jintao — but all are being systematically dismantled and rolled back by Xi Jinping.

So dominant is Xi that Chinese politics have become a sycophantic echo chamber. Xi is trying to run the party like a military, with orders given and to be followed — rather than as an organisation with feedback mechanisms and procedures to curtail dictatorial practices. Xi is very much a mid-20th century Leninist leader ruling a huge country in the globalised, early-21st century era. There is thus a contradiction between Xi’s modality of rule and the realities of the modern world and China’s developmental needs.

Since coming to power in 2012, Xi has sought to relatively close China’s doors rather than further open them. There has been a significant tightening of the foreign investment and corporate operating environment, a sweeping suppression of civil society and foreign NGOs, stepped-up study of Marxism and an assertion of ideological controls over the entire educational sphere, and xenophobic campaigns against ‘hostile foreign forces’.

Meanwhile, the party continues to enforce strict media controls, carry out pervasive public security surveillance, tighten control over Xinjiang and Tibet, and persecute Christians and other organised religions. Xi has also cracked down on corruption in the party (and government and military), and presided over the most draconian purges and political repression in China since the 1989–92 post-Tiananmen period.

These actions have more in common with Maoism than Dengism. To be certain, Xi has definitely succeeded in strengthening the party institutionally over the past five years — but it is fair to wonder whether he has not actually weakened it in the longer term? How long can such retrograde and repressive actions endure in an increasingly globalised, wealthy and sophisticated society?

Xi’s economic impact is mixed. GDP growth remains very respectable at 6.9 per cent. Xi has also launched programs to eliminate poverty by 2020, spur innovation and high-tech manufacturing under the Made in China 2025 program, increase urbanisation and build eco-cities, expand coverage of social services, attack pollution and transition to a green economy, decrease desertification and increase forestation, deleverage China’s ballooned debt while expanding domestic consumption and services as drivers of growth. These are all commendable goals and initiatives — but they are all just that. Time will tell whether they are achieved.

On the other hand, Xi’s administration has significantly failed to meet the benchmarks or implement the policies of the Third Plenum economic reform plan of November 2013. The significance of this shortfall is that the Chinese economy is not making the structural adjustments needed to navigate through the middle-income trap and up the value-added chain to become a developed economy over time. Structural maladies and overcapacity continue to plague economic efficiency, the stock market has plummeted, while dangerously high debt levels loom overhead.

If there is one policy area where Xi does deserve better marks, it is in foreign relations. China is now widely seen as a global power. Xi has taken a personal interest in global governance. As a result, China under Xi is contributing much more to the United Nations operating budget, global peacekeeping, overseas development assistance and the Millennium Development Goals. And it is more active in a range of areas from combatting public health pandemics to disaster relief, energy and sea lane security, counter-terrorism and anti-piracy operations.

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Xi’s signature Belt and Road Initiative (BRI) is also noteworthy. An infrastructure development initiative unparalleled in history, the BRI will build rail lines, pipelines, telecommunications networks, electric grids, deep-water ports, highways, cities and other needed infrastructure from Asia to Europe. While the BRI is encountering criticism of late, it is nonetheless illustrative of China’s new foreign policy activism under Xi.

To be certain, China’s international relationships are not all rosy — but they are, on balance, positive. Only with the United States — and perhaps Australia, Japan and India — are China’s bilateral ties strained. Everywhere else they are sound.

The same must also be said about China’s military and defense — probably Xi’s No. 2 priority (after strengthening the party) over the past five years. Under the new title of Commander-in-Chief of the armed forces, in January 2016 Xi launched a sweeping reorganisation — the most comprehensive ever — of China’s military and paramilitary forces. The restructuring is but one part of systematic efforts to build a world-class military and, in Xi’s repeated exhortations, to ‘prepare to fight and win wars’.

Like all leaders, Xi’s tenure has so far achieved mixed results. But this variegated verdict is at variance with the overwhelmingly positive portrayals proclaimed in China’s official media. In Beijing’s rendering, Xi can do no wrong. This in itself may prove to be his Achilles’ heel. No leader is infallible. The subterranean grousing about Xi’s ‘imperial’ leadership style now increasingly heard in China (and from Chinese when they go abroad and speak with foreigners), may be a harbinger of difficulties to come.

Having constructed a caricature of an infallible Xi Jinping, the regime will find it very difficult — if not impossible — to deconstruct this image of China’s new ‘great helmsman’. And there are many constituencies in China that are suffering from Xi’s policies — including the party and state cadres and military officers who have lost their positions and privileges as a result of Xi’s anti-corruption purges — all of whom lie in wait for him to trip up.

David Shambaugh is the Gaston Sigur Professor of Asian Studies, Political Science and International Affairs at The George Washington University, Washington, DC.This is an adapted version of an article originally published here in Global Asia.

 

ASEAN — finding middle path in the US-China conflict


 

November 9, 2018

Opinion

ASEAN — finding middle path in the US-China conflict

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Despite local uncertainties, the region must be bold in shaping its own future

For almost a decade, the basic strategic issue for Southeast Asia has been how to respond to the changing dynamics of the Sino-American relationship as it enters a new phase of heightened long-term competition.

The U.S. and China will not quickly or easily reach a new modus vivendi. Southeast Asia will have to navigate a prolonged period of unusual uncertainty.

U.S.-China rivalry in the South China Sea has emerged as something of a proxy for their competition. Strategically, the situation is a stalemate. China will not give up its territorial claims and the deployment of military assets. But neither can China stop the U.S. and its allies operating in the area without risking a war it does not want because it cannot win.

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The Trump administration has given the 7th Fleet more latitude to conduct Freedom of Navigation Operations in the South China Sea. Japan and other U.S. allies are beginning to push back against China’s claims. The U.S. has signaled its intention to conduct even larger shows of force. This raises the risk of accidental clashes. Still, that risk does not at present seem unacceptably high.

A premeditated war is improbable. China will feel it must fight only if the U.S. supports Taiwan independence. This is unlikely. If an accidental clash should occur in the South China Sea or elsewhere, both sides will probably try to contain it. The Association of Southeast Nations ought to be able to cope with situations short of a U.S.-China war. ASEAN has previously managed far more dangerous circumstances. But this will require greater agility, unity and resolve than ASEAN has shown recently.

 

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The most obvious manifestation of increased Sino-American competition is U.S. President Donald Trump’s “trade war.” Trade is the means; the objective is strategic competition. China accuses the U.S. of using trade to hamper its development. China is not wrong.

Although attention has focused on the tit-for-tat tariffs, the more significant aspect is new U.S. legislation to limit technology transfers to China, which sets new rules that future administrations will find hard to change.

Trump’s attitude toward China is no aberration, but reflects a bipartisan view — widely shared in business as well as politics — that the U.S. has been too accommodating to Beijing. Whoever succeeds Trump will likely stay tough on China.

The Trump administration has often been described as isolationist, but this is a distortion. Rather, it believes that this is an era of great power competition and is determined to compete robustly, with a preference for bilateralism over multilateralism, and a return to “peace through strength.”

China has misread the implications of the global financial crisis of 2008-2009 by believing its own propaganda about the U.S. being in irrevocable decline. It missed the souring mood of U.S. business toward China, mainly over intellectual property theft and forced technology transfers. These concerns are shared by businesses in other developed economies, which support Trump’s goals although they may disagree about his methods.

President Xi Jinping’s 19th Party Congress speech a year ago abandoned Deng Xiaoping’s approach of “hiding light and biding time.” But his main focus was domestic. Xi said China’s new “principal contradiction” was between “unbalanced and inadequate development and the people’s ever-growing needs for a better life.” This poses a fundamental challenge. Unless those needs are met — which will require immense resources — Communist Party rule could be at risk.

To find a new growth model, the party must balance control and market efficiency. An enhanced role for markets implies a loosening of control.

It remains to be seen what Xi will do. So far he seems to have opted for stronger control, and may have sharpened the problems he faces.

The Belt and Road Initiative is as much about this domestic challenge as China’s global ambition. The BRI exports the old growth model based on state-led infrastructure investment. The BRI buys time to find a new balance between the market and the party.

But the BRI rests on the foundation of U.S.-led globalization. Can it succeed if the world turns protectionist? China may well be the main loser if that global order frays. China cannot replace U.S. leadership. An open international order cannot be based on a largely closed Chinese model. BRI partner countries are pushing back, including in Southeast Asia, and implementation will be problematic.

China is not happy with every aspect of the post-Cold War order based on U.S.-led globalization. China wants its new status acknowledged. But Xi has championed and profited from globalization. The trade war is now hurting China and slowing growth. China may seek to become more self-sufficient technologically, but this will take time while the pressures are immediate.

Some have speculated that there may be opportunities for ASEAN if foreign companies shift production from China. This is possible. But doing so is easier said than done and no one will forgo the Chinese market. ASEAN members must also resist temptations to act as a backdoor into the U.S. for Chinese companies.

A prolonged trade war and concerns that China may have compromised the security of supply chains, are likely to upend existing supply links. This could seriously complicate ASEAN members’ efforts to move up the value chain, for example if U.S. groups relocate business back to America. In response, ASEAN must attract higher grade investments by improving infrastructure and skills, and assuring investors their technology is secure.

Low labor costs and a potential market of 700 million consumers are no longer sufficient to make Southeast Asia an attractive investment destination. The attitude of ASEAN members toward China and the extent to which they are beholden to it are likely to become important considerations in investment decisions.

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BALI, Oct 12 — Tun Dr Mahathir Mohamad has lamented ASEAN for not fully tapping its potential as an economic powerhouse, despite having abundant resources and a consumer market of nearly 700 million people.

ASEAN needs to move decisively to hedge against long-term uncertainties, while taking advantage of available opportunities.

Reforms such as the removal of non-tariff barriers and harmonization of ASEAN’s approach toward services and labor mobility could help make Southeast Asia a common production platform. Member states meanwhile should implement plans to upgrade skills and infrastructure. But internal political changes in some member countries could undermine the goal of closer economic integration. Unfortunately, ASEAN has, in recent years, become too timid for its own good.

 

 

Ambassador A Large Bilahari Kausikan, a former Permanent Secretary at Singapore Ministry of Foreign Affairs, is Chairman of the Middle East Institute at the National University of Singapore.

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China’s Foreign Policy under Xi Jinping


October 24, 2018

China’s Foreign Policy under Xi Jinping

by Neil Thomas, University of Chicago

http://www.eastasiaforum.org/2018/10/21/chinese-foreign-policy-under-xi-jinping/

  …”contrary to some recent commentary, it seems unlikely that ‘world power’ or ‘world domination’ are China’s priorities. The CCP observed the Soviet errors of external overreach and antagonism toward the US-led system during the Cold War. China now interacts with the international order like other major states: it complies with the order because to do so serves its interests and tries to influence this order where it does not”.–Neil Thomas

There is a risk of a ‘new Cold War’ between the United States and China. After decades of bilateral engagement and multilateral collaboration, the Trump administration’s first National Security Strategy (NSS) branded China a ‘revisionist power’ that seeks to ‘displace the United States in the Indo-Pacific region’ and ‘shape a world antithetical to [US] values and interests’ in an age of renewed ‘great power competition’.

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Rising powers like China rattle ruling powers like the United States because their ascendance creates tension within existing structures of global power. US power lies in its unmatched military capabilities and the ‘international order’ of multilateral institutions, interstate rules and global norms that promote economic openness and rules-based dispute resolution. The charges of ‘revisionism’ levelled in the NSS show that the Trump administration fears that China will replace the United States as global hegemon and threaten the basic tenets of international order.

China has indeed become a more active participant in global affairs under the leadership of Xi Jinping, who took office in November 2012. Signs of China’s rising power, though, are a natural result of its growth. More important is what China intends to do with its newfound capabilities. Does Xi want to revolutionise Chinese foreign policy? Stop opening China’s economy? Overturn the international order?

International policymakers must study Xi’s words because he, as the Chinese Communist Party’s (CCP) General-Secretary and head of the Central Foreign Affairs Commission, is pivotal in setting the overarching orientations and strategies of China’s foreign policy. The most authoritative articulation of Xi’s policy agenda is his ‘Report’ to the 19th CCP National Congress in October 2017.

An analysis of Xi’s foreign policy discourse suggests that there may exist more continuity than often assumed between the strategies of Xi and his predecessors. This intersection between past and present is captured neatly in the foreign policy section of Xi’s Report: ‘Following a path of peaceful development and working to build a community of common destiny for humankind’.

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What’s new is that Xi stamped his authority on CCP foreign policy under his signature formulation of ‘building a community of common destiny for humankind’ — although Hu Jintao had used the phrase previously. The ‘community of common destiny’ is basically an international system in which deeper economic integration and political dialogue eases conflict and bolsters security. Xi is proactively ‘building’ this future through an intense focus on the Belt and Road Initiative (BRI) and global governance.

What’s not new is that Xi retains the ‘peaceful development’ strategy articulated by Hu in the mid-2000s, which derives from the CCP’s ‘basic line’ of ‘peace and development’ in international relations that Deng Xiaoping introduced in 1985. In the Report, Xi framed the foreign policy achievements of his first five-year term, including the BRI and the Asian Infrastructure Investment Bank, as ‘new contributions to global peace and development’. He has told Party leaders that the ‘peace and development’ strategy is ‘aligned with the fundamental interest of the country’ and is a ‘fundamental foreign policy goal’.

This ‘peace and development’ strategy reflects the belief that China’s economic development requires a peaceful external environment and cooperative relations with major powers. It replaced the Maoist creed of inevitable conflict between the capitalist and socialist worlds as the CCP’s official ‘assessment of the international situation’. Deng believed this strategy would help China ‘exert a much greater influence’ in a global system that the CCP perceived as dominated by Western powers.

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Xi’s policy statements imply that the overarching concern of China’s foreign policy remains the creation of a ‘more enabling international environment’ for China’s continued development. As China’s interests continue to expand, so too does its desire to participate in global affairs.

But contrary to some recent commentary, it seems unlikely that ‘world power’ or ‘world domination’ are China’s priorities. The CCP observed the Soviet errors of external overreach and antagonism toward the US-led system during the Cold War. China now interacts with the international order like other major states: it complies with the order because to do so serves its interests and tries to influence this order where it does not.

Xi’s Report also reaffirmed Deng’s ‘opening to the outside world’ as a ‘basic national policy’. ‘Opening’ for Deng meant China would integrate into the global economy, enter international institutions and improve living standards in a manner that sustained CCP control.

Xi has insisted that China ‘absolutely must not waver’ from ‘reform and opening’ because it is the ‘propelling force’ behind China’s ‘international status’. He even framed his signature economic policy — a ‘new normal’ focused on consumption, services and markets — as a ‘new structure’ of reform and opening that ‘improves its quality and level’.

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Xi’s continuation of key strategies like ‘peace and development’ and ‘reform and opening’ suggest he may not have changed China’s objectives so much as the means by which the CCP pursues them. Xi’s China is ‘revisionist’ in the narrow sense of hoping for changes that reflect new realities but not in the existential sense of wanting to supplant the current order or global hegemon.

Until recently, White House views on China were quite consistent: the United States would ‘welcome the rise of a stable, peaceful, and prosperous China’ and ‘reject the inevitability’ of ‘confrontation’ if China acted within the international order. But the latest NSS said the ‘engagement’ strategy had ‘failed’.

The endurance of ‘reform and opening’ and of ‘peace and development’ in Xi’s foreign policy discourse imply that engagement is not such a failure. The continuance of these two key foreign policy concepts intimate that, while Xi’s CCP does want to project China’s power, it is still constrained by a belief in the benefit to China of global order and stability.

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US relative power in global affairs is declining, but this trend is mostly the result of other countries’ embrace of the international order built by the United States, which nonetheless retains significant advantages in military, diplomatic, commercial, technological and cultural power. It would best advance its national interests by accepting but proactively managing China’s rise within an improved iteration of this order. We should avoid a ‘new Cold War’.

Neil Thomas is Research Associate in the Think Tank of The Paulson Institute at the University of Chicago.

This article appeared in the most recent edition of East Asia Forum Quarterly, ‘Asian crisis, ready or not’.

Gearing Up for the next Financial Crisis


October 22,2018

Gearing Up for the next Financial Crisis

by Andrew Sheng

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http://www.eastasiaforum,org

In July 2018, the Bank for International Settlements (BIS) asked whether the world was heading towards a perfect financial storm, with the US stock market heading for record highs even as emerging markets like Argentina and Turkey were running into foreign exchange problems. Twenty years after the Asian financial crisis of 1997–98 and the global financial crisis of 2007–08, storm clouds are gathering once again.

Conventional economic models failed to predict the last two crises because the technical definition of financial risk is measured volatility. The global financial crises proved that current models of financial risk, largely used by banks and financial regulators, are totally blind to Black Swan or Grey Rhino events of unmeasurable uncertainty.

This time round, the consensus is that the Grey Rhino (an event with high probability and high impact, but where the trigger is uncertain) is the looming rise in US interest rates in response to a domestic economy that is running at nearly full capacity, with low unemployment levels and signs of creeping inflation. As the BIS has warned, non-financial borrowers outside the United States owe US$11.5 trillion dollars, of which US$3.7 trillion is owed by emerging markets.

Turkey’s recent currency woes are symptoms of domestic policies badly managed, aggravated by the US threat of economic sanctions. Turkey alone has US$467 billion of foreign debt. As global risks rise, capital is flowing back to the booming US stock market and potentially higher interest rate yields. Emerging markets have no alternative but either to allow exchange rate depreciation or defend themselves with higher interest rates that depress their own growth potential. Recently both Indonesia and Hong Kong had to defend their exchange rates through higher interest rates and intervention, respectively.

The tricky thing about US interest rates is that economies with high domestic and foreign debt are vulnerable to tighter liquidity and financial fragility, because their interest rates and credit-risk spreads rise non-linearly. Doomsayers of East Asia’s financial collapse argue that China’s debt of 250 per cent of GDP is the tipping point.

Financial risks are rising not just in China, but globally. Dun and Bradstreet’s Global Risk Matrix, published in May 2018, suggested that US interest rate rises could trigger a fresh debt crisis, sending the global economy into contraction. Echoing this sentiment, the International Monetary Fund’s July 2018 World Economic Outlook argued that rising trade tensions are threatening growth recovery in Europe, Japan and Britain more than predicted. Any overheating in the United States would trigger currency crises for some emerging markets.

In short, we cannot separate financial risks from geopolitical risks. Any unforeseen event arising from a geopolitical miscalculation, climate change disaster, war or cyber-induced disruption could trigger another round of financial crises.

Global financial fragility comes from two structural imbalances. First, the United States is the leading deficit country in terms of trade and debt, owing the world a net US$7.7 trillion, or 39.8 per cent of GDP. This amount is growing because of rising fiscal debt and the low level of national savings. Second, below-par global growth since 2008 has been underwritten almost completely by central bank unconventional monetary policies, which have brought interest rates to an unsustainably low level.

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Market fears that the large central banks will withdraw quantitative easing — QExit — threaten to jeopardise the current frail recovery, which is why US President Donald Trump is also against the Federal Reserve raising interest rates.

If geopolitical risks trump financial risks, what could go wrong in the coming months?

Western analysts think that the trigger will be a Chinese debt meltdown. But Chinese debt is internal debt, as China has foreign exchange reserves equivalent to 188 per cent of its foreign debt and still runs a current account surplus. China’s debt problem is an internal debt issue, very much like that of Japan. While Japanese debt is owed largely to Japanese households, Chinese debt is largely owed by state-owned enterprises and local governments to state-owned banks. In such a situation, China is well positioned to rewrite its national balance sheet, a privilege not possible for more privately dominated markets.

A possible Black Swan (a low probability but high impact event) is an unexpected sharp increase in the yen–dollar exchange rate. Japan is the third largest economy after the United States and China and has been increasing its overseas assets since the 1990s. Between 2007 and July 2018, the Bank of Japan has grown its assets the most among the major central banks (to US$4.9 trillion, or just over 100 per cent of GDP). By the end of 2017, Japan’s gross foreign and net assets grew to US$9 trillion and US$2.9 trillion respectively, equivalent to nearly one quarter of US growth in gross foreign liabilities during the same period.

US trade deficits have been sustained by foreign inflows (which had central bank origins) in which Japan is a major player. During the Asian financial crisis, sharp volatility in the yen–dollar exchange rate caused a dramatic withdrawal of Japanese bank loans from Asia, aggravating a regional liquidity crisis that was already spurred by speculative currency attacks.

What complicates today’s financial fragility is Trump’s attempt to control the US trade deficits. He assumes that bilateral negotiations can reverse the unsustainable growth of national debt, which tripled in the last decade and may grow to 100 per cent of GDP in another decade. But tariffs only increase inflation for the consumer, which would trigger higher interest rates and jeopardise the fragile financial stability achieved through unsustainable monetary policies.

The next global crisis will most likely be triggered by geo-political mistakes. In an age when politicians are proving fickle in their decisions, central bankers are perhaps the only professionals who appear able to do something about financial risks. But since Trump does not care much about professional advice, Asian markets worry less about measurable financial volatility than unmeasurable personality risks.

Andrew Sheng is Distinguished Fellow at the Asia Global Institute, University of Hong Kong. 

This article appeared in the most recent edition of East Asia Forum Quarterly, ‘Asian crisis, ready or not ’.

Growing Disaster of Trump’s Foreign Policy


October 15, 2018

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Growing Disaster of  Trump’s Foreign Policy

by: Philip Bowring

https://www.asiasentinel.com

The developing world is being slow to wake up to the potentially devastating consequences of a key aspect of US President Donald Trump’s foreign policies, particularly now that that John Bolton and his strident “f… the world” views have become so important.

News almost everywhere is dominated by the display of politics and hypocrisy accompanying the appointment of a member of the US Supreme Court, a supposed judicial appointment marred by tawdry performance on all sides. One needs to ask why this display should concern a world simultaneously confronting three frighteningly serious economic issues.

The first is the long-needed rise in interest rates which is necessary but unsettling after so long a period of cheap money, which has boosted asset prices more than economies. The second is Trump’s trade war. Its scope has narrowed with deals with Mexico, Canada and Korea that change the trade picture very little but provide the president with necessary political cover. But the war against China is ever more intense, with unpredictable consequences for world trade generally and Asian trade in particular.

The third however could prove as important as the other two. That is the US attempt to shut down Iran’s sales of oil. The mind boggles at how self-defeating this policy is to US global interests. The main beneficiary is Vladimir Putin’s Russia, which is not only reaping billions of dollars but becoming an even more influential player in the global oil market. Meanwhile US relations are growing poisonous with Europe, which refuses to go along with Trump’s agenda and is sticking with its nuclear deal with Iran. Then there is India, whose friendship the US badly needs if it is not to cede supremacy in Asia to China. It not only needs Iranian oil but has long seen Iran as an informal ally for influence in the Indian ocean, and countering China’s influence via its huge investments in Pakistan roads and ports.

Trump’s Iran threats have added US$15-20 a barrel to the price of oil, and a further rise to US$100 a barrel is widely forecast. The strains this is placing on the trade balances of the likes of India, the Philippines and Indonesia, not to mention an already troubled Turkey and countries in Latin America, has already shown up in steep falls in currencies and stock markets throughout the developing world, and has had an outsized impact on interest rates. As of now it seems unlikely to spark a major crisis, but if oil hits US$100 plus, there is no knowing the consequences.

 

As it is, the price increase is already limiting the room for the major east Asian importers China, Japan, South Korea, to spur domestic demand to offset weakness from the trade wars.

Trump has been complaining about the oil price rise, which is also hitting consumers, but he has only himself to blame for a policy towards Iran which has only two beneficiaries apart from Russia: Israel and Saudi Arabia. The former has had nuclear weapons for decades without being sanctioned by anyone.

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Now Trump is adding to support for a state which is not only self-evidently expansionist but is now overtly racist by law as well as practice. Thanks to US protection 5 million Palestinians in the West Bank and Gaza are under Israel’s iron fist, which also treats the 1.7 million Arabs in Israel as second-class citizens.

The other beneficiary is Saudi Arabia whose vicious war in Yemen is causing as many casualties as in Syria. Crown Prince Muhammad bin Salman has stirred up the Gulf while his promises of modernizing the country are largely for overseas consumption. A desert empire built by warrior King Ibn Saud is unlikely to last long if the price of oil falls back to US$40 and stays there. Such are the few friends of Trump’s America. No wonder the world laughs as well as cries and treats the US claim to be defender of liberty and democracy as a sham.

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It is reminder too of how childish the US can be – hardly the sign of a superpower with staying power. It took it 20 years to get over its loss of the Vietnam war. Its view of Iran is still driven by the need for revenge nearly 40 years after the 1979 overthrow of the Shah and the humiliation of the failure of its Tehran hostage mission. It is also a US view which conveniently forgets the CIA-organized coup against the elected secular nationalist Dr Mohammed Mossadeq in 1953, which enabled the Shah to impose a royal rule which became increasingly unpopular, leading to the 1979 revolution.

And it forgets US behind-the-scenes encouragement of the invasion of Iran by Saddam Hussein (later to become evil incarnate) which solidified the rule of the clergy under Ayatollah Khomeini.

Longer term, the biggest damage to the US from its Iran fixation will be to drive others away from using the US dollar. Dependence on that currency for trading and settlement has enabled the US to make it difficult for countries to buy Iranian oil without incurring US reprisals. US policies are already beginning to push countries to use other currencies such as the euro and yuan, but for now the mechanisms are poorly developed and oil majors also fear US reprisals in other ways.

But the more the wider world loathes US arrogance, the more it will seek alternatives to allying with a country which is untrustworthy as well as arrogant. Meanwhile those with smart ways around the sanctions will make a lot of money.

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In Asia, there one country which is benefiting from Trump’s Iran policy: Malaysia. He cannot like the thought, but luckily for retreaded Prime Minister Mahathir Mohamad, for the time being revenues from the oil price are partly offsetting the coalition’s rash promise to voters to abolish the Goods and Services Tax and bring in the narrower-based Sales and Services tax. Revenue from this source has been cut in half. As the Asian Development Bank in its mid-year update of the Asian Development Outlook points out, Malaysia’s goal of reducing reliance on commodity prices for revenue has “received a major setback,” endangering fiscal health unless new sources of revenue can be found.

On China– Civilization or State


October 13,2018

On China– Civilization or State

by Dr. Rais Hussin

http://www.malaysiakini.com

COMMENT | Take away the invention of paper, gunpowder and the abacus, three of the finest contributions of the Chinese civilisation to humankind, there is a motley collection of philosophical systems in China that makes China one of the most progressive and advanced entities in the world.

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Indeed, it was the late Dr Lucian Pye, a political scientist at MIT, who famously said that “China was a civilisation pretending to be a state.” Pye wasn’t making the observation in jest. He was simply commenting in a matter-of-factly manner.

The problem with China is it switches on and off, with this civilisational awareness. To the outside world, China has urged at least 68 countries to be a part of its “Belt and Road Initiative” (BRI). Thus from October 2013 onwards, President Xi Jin Ping fired the first salvo in Almaty, Kazakhstan, followed by a second boost by urging Indonesia to be a part of the BRI too.

Surely, China could not have missed the plain fact that these were two Muslim countries that have renounced Communism in all its forms.

 

Yet, regardless of whether it was Kazakhstan or Indonesia, the leaders of these two countries dealt with China, alas, as a “state” even as a civilisation, too, since China was propagating the importance of restoring the ancient

For the lack of better word, these two countries, including Malaysia, adopted the Confucian concept of “Chung Yung” or “the Middle Way.”

Instead of trying to distance themselves from China or BRI, Kazakhstan, Indonesia, and Malaysia, three of the most progressive Muslim countries the Islamic world has yet witnessed, sought to engage China, indeed, to give President Xi Jin Ping’s grand strategy a huge boost.

While it is true that China has pledged close to US$100 billion to fund the Asian Infrastructure Investment Bank (AIIB) with another US$50 billion for the Silk Road Fund, it is also true that some countries who took the loans have found themselves unable to repay these debts.

Sri Lanka, Maldives, Pakistan, potentially and Tonga in the Pacific, are now on this list. Even Venezuela, which falls out of the scope of BRI, has faced immense headwinds. Caracas has had to make good on its debt commitments to China by way of bartering their oil exports back to China.

Beijing, for the lack of better word, isn’t giving cost-free financial assistance and loans. They carry a huge impact on the recipient countries.

Even the Philippines, which was promised a total of US$2.6 billion worth of Chinese development aid – largely to build up Mindanao and Manila – has yet to see the Chinese money rolling in. When the money does not come in, President Roberto Duterte is subsequently accused by his political opponents and the people of having been misled by the Chinese.

The political cost to Duterte, once again, is huge, as his support would begin to bleed as long as the Chinese financial support does not come flowing as had been promised.

Image result for jho low and the china issue

In Malaysia, one of our own infamous citizens, Jho Low seems to be cowering under the protection of China. Some Chinese shell companies, if the accounts of the Ministry of Finance in Malaysia are to be taken at face value, have been used as a scheme to launder the money of 1MDB.

Image result for silk road

 

In spite of the high tolerance of China’s “dream”, “design” and “development” priorities, many Muslim countries are now expected to just sit and watch – with their mouths shut – when up to one million Uyghurs in China are subject to “re-education” camps.

‘Made in China’

The authorities in Xinjiang (known earlier as Urumqi) appear to challenge the habits and lifestyles of local Muslims wholesale, by fighting what they called “pan-halal” tendencies.

Muslims have heard of “kosher” which is Jewish dietary preparations consistent with Islamic standards but none have ever heard of “pan-halal” habits.

Thus it must surely come as a shock to more than 1.8 billion Muslims the world over that their potential sensitivity to the sources of their food and consumer items can now be regarded in China as something verging on “extremist tendencies.” Does this mean Muslims are not welcome in China?

This is odd because as Japan is preparing for the Tokyo Olympics 2020, the authorities in Japan have asked more Islamic countries, especially Malaysia, to guide them on how to serve halal food. Beijing has hosted the 2008 Olympics before and the 2010 Shanghai World Exhibition.

In fact, “Made in China” is practically the three word that keeps the world of manufacturing – which includes canned food – thriving and growing from 1976 onwards when China opened up to the rest of the world. How can China now be biting the hand that feeds it?

In all the confusion, Muslims are told to find the Middle Way. This is known as the Aristotelian Way of the Mean too. China, as mentioned, had earlier been ingrained with the concept in the form of “Chung Yung”. In fact, Jewish philosopher, Moses Maimonides once affirmed that when all laws failed, the one principle to guide anyone is “to not do others what you do not want others to do to you” – which again is a Confucian concept familiar to China.

“Pan-halal,” is befuddling and confusing, since it is an extra-judicial attempt to ask all Muslims in Xinjiang (Urumqi) and China to conform to the diktat of the Chinese Communist Party.

But how can those countries in the Islamic world, especially Turkey, that wants to help China in BRI, do exactly that when China isn’t friendly to its Muslim brethren? It is time for China to give the world some clear answers. And, the clarity cannot morph into scripted answers on how the campaign to stop “pan-halal” habits is a way to contain “separatism,” “secessionism,” and “splittism”; also known in China as “the three evils.”

The “three evils” are not a crucible supported by any member state in BRI, as all are aware of the extent to which these three tendencies will introduce chaos to the utmost degree. But no one wants to see Islamophobia in China too, especially one that is drummed up by the local party cadres in Xinjiang (Urumqi). The sooner China respects Muslims within its own confines and the larger Islamic world, the better.

By this token, contrary to what was reported in The Star Malaysia, that Malaysia is ‘defying’ China by releasing 11 Turkic Uyghur from detention, and allowing them to fly to Turkey, it should be stated that Malaysia is a country that follows the rule of law since the electoral turn over of the government on May 9, 2018.

If China should wish to challenge the release, they are welcome to do so in a court of law too in Malaysia.The world sure hopes we are not witnessing another Tibet in progress. This time in Urumqi or Xinjiang.

Dr. RAIS HUSSIN is a supreme council member of Bersatu. He also heads its policy and strategy bureau.

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.