China's mounting debt raises specter of chronic stagnation –Soros claims China resemble financial crisis of 2007

George Soros observed that the situation in China "eerily resembles what happened during the financial crisis in the U.S. in 2007-08, which was similarly fueled by credit growth," American media reported April 20. China is fighting to dispel uncertainty over its economy as a slowdown and ballooning debt spur foreign investors to warn of the sort of recession seen in Japan's lost decade and in the U.S. after the global financial crisis.

The famed investor had weighed in on China in January, asserting that "a hard landing is practically unavoidable." His comment drew sharp retorts from Chinese media.

Beijing is using every means at its disposal to inject money into the economy. Social financing, or lending by banks and other institutions to companies and households, swelled by 2.34 trillion yuan ($361 billion) in March, triple the previous month's growth, data released April 15 by the People's Bank of China shows. While the government's efforts paid off, with economic indicators showing improvement in March, Soros called the rise in debt a warning sign.

Both Japan's economic bubble in the 1980s and the U.S. housing bubble in the 2000s were accompanied by surging debt. The balance sheet adjustments required after they burst led to protracted economic slumps.

As for China, nonfinancial companies there had $17.44 trillion in debt on their books at the end of last September, according to the Bank for International Settlements -- quadruple the figure at the end of 2008. The country accounted for nearly 90% of the total global increase over that period.

"Even though China's annual [nominal gross domestic product] is growing just 6%, outstanding loans are rising 15% a year," said Kengo Yoshida, a strategist at Mizuho Securities (Asia). Based on Japan's experience, the credit bubble will burst in about three years, he said.

China and Japan share concerning population trends, which Wells Fargo explored in a March report titled "Does China Face a Japanese-Like 'Lost Decade'?" The authors, including global economist Jay Bryson, noted that Japan's working-age population topped out in 1995. China's working-age population has peaked and will drop off sharply starting in 2030, they said. The report warned that the country will face a prolonged slowdown if it cannot compensate for population loss through productivity growth.

Chinese authorities have reiterated that the economy can weather downward pressure. But markets are skeptical, partly because the country has not yet come out with a comprehensive solution to the debt problem.

Premier Li Keqiang has proposed having banks swap bad corporate debt for equity. But some argue that this plan would create a moral hazard among borrowers if poorly executed. It could also prolong the lives of inefficient "zombie" companies, running counter to structural reform.

"In the next three to five years, China's economy will face stiff challenges," Jack Ma Yun, executive chairman of Chinese e-commerce behemoth Alibaba Group Holding, recently told a Hong Kong newspaper.

"The traditional industries are struggling, but we also see growth in domestic consumption, the services industry and the high-tech sector," he noted, advising against panic. These factors will promote economic recovery, keeping a chronic slump at bay, he argued.

Ma's optimism should be taken with a grain of salt given his coziness with the ruling Communist Party. But his point that "the most important thing is entrepreneurship" should be heeded. Technological innovation can drive economic growth even amid a population decline. Undertaking drastic reform while unleashing the ingenuity of the public may be the quickest way to avoid stagnation.

KEIICHIRO MORIYASU, NQN staff writer

Time for Indonesia to END Child Marriage

For hundreds of years, women have been struggling to seize their rights, through organizing themselves and galvanizing a women’s movement to push for better government policies, among other things. However, many women, particularly those from poor rural families, are still vulnerable to dropping out of school, giving them no other option but to settle for work in the informal sector, leaving them exposed to violence.

Denied of protection and security, they can work up to 15 hours a day for only meager wages and are still expected to do household work. The 2013 Social Barometer Survey revealed women are 1.5 times more likely to earn wages lower than Rp 500,000 ( US$38.07 ) per month, compared with men. Given this situation, what is the significance of Indonesia’s position as the only permanent ASEAN member in the G-20, and the optimism that it will be one of the world’s seven largest economies in the next ten years?

Amid the continued economic growth and rapid development, women remain poor. One factor that perpetuates this cycle among women is child marriage. 

One woman in East Lombok, for instance, studied only until second grade and was married at 15. Her two children fared a little better; yet the cycle of poverty may continue for them as with her earnings as a vendor, she only managed to send them to junior high school. As a single parent she tried to avoid the local stigma against widows, and remarried four times. All marriages failed, she said, owing to unfaithful husbands and domestic violence. 

This was just one story shared in sessions of Sekolah Perempuan ( informal Women’s School, facilitated by NGOs ) which have been held in Pangkajene islands in South Sulawesi, Gresik in East Java, Jakarta, Kupang in East Nusa Tenggara, Padang in West Sumatra, and other areas.

Unlike these poor women the heroine RA Kartini, born on April 21, 1879, was from a noble family; but was similarly unable to go against her parents, and was forced to enter a polygamous marriage. Since her teenage years she had already tried to resist what was then seen as the inevitable fate for girls, and continued to fight for girls’ right to education.

According to a 2014 World Bank study, inequality in Indonesia has worsened and it is girls who are bearing the brunt. Children from poor families fall back into poverty as 71 percent of them are likely to drop out of high school. An earlier 2007 study on education by E-net for Justice, a coalition of NGOs, already showed the dropout rate in poor families reached 77.85 percent.

When the Millennium Development Goals expired in 2015, Indonesia had failed to meet the goal of reducing maternal mortality to 108 per 100,000 live births — which were traced to a high rate of child marriage, as well as poor access to safe pregnancy and delivery services. 

Child marriage here remains widespread; we rank second among Southeast Asian countries in terms of the number of early marriages. According to the 2010 Basic Health Research, child marriage in Indonesia accounts for 46.7 percent of all marriages. 

However, apart from failing to attract wide attention, 137 years after Kartini, whose birthday we commemorate each year as Kartini Day, we also see resistance against the fight to end child marriage. Under the pretext of culture, religion and morality, the issue is conveniently swept under the carpet. The state continues to endorse child marriage through the 1974 Marriage Law, which sets the legal minimum marrying age for girls at 16, while it is 19 for boys. 

A Constitutional Court ruling last year turned down a judicial review request of the 1974 Marriage Law. Though advocates for females had urged the minimum marrying age be increased to 18, the law was upheld by the Court even though child marriage largely leads to disruption of the constitutional right to education.

The Court said an increased marriage age would not guarantee a reduction in health problems and divorce. It disregarded Article 31of the Constitution, which states, “every citizen should receive mandatory basic education and the government must take responsibility for its financing”.

Marriage of children under 18 also flouts the National Development Priorities that explicitly stipulates 12 years of compulsory basic education. Apart from violating the 2003 education law, child marriage contravenes the 1999 Human Rights Law, and the 1984 ratification of the Convention on the Elimination of All Forms of Discrimination against Women. 

It also violates the 2002 law on child protection that states that a child is anyone under the age of 18, and other international commitments, as well as the recently adopted Sustainable Development Goals. 

If President Joko “Jokowi” Widodo’s mental revolution aims to create a new life for the nation, changing mindsets and cultural and political practices are a must to reconstruct a new life for children, especially girls, as the foundation of our future. Let’s not leave half of tomorrow’s generation stuck in the trap of poverty. Child marriage must immediately be ended by transforming mindsets and shedding conservative views that legitimize the practice. 

It is now time for the House of Representatives to revise the outdated 1974 marriage law and the education law to guarantee children’s right to education through the 12-year compulsory education policy. Such a move would be a decisive step to break the chains of poverty in Indonesia. 

 

***

The write, Missiyah is executive director of Kapal Perempuan ( Women’s Ship ) Institute in Jakarta.

China is moving to a darker era - we need to listen and ask why

As China has become a larger player in the world economy and its influence in world political affairs has grown, the need to understand the Chinese political system and how political power is exercised within it has grown commensurately. Policymakers and markets around the world are now affected everyday by the decisions of Chinese political leaders in some way or other.

Many in the rest of the world are now in routine contact with their business partners, professional colleagues, family and friends in China on a scale unprecedented in human history. It is inevitable that they are increasingly sensitive to how the Chinese people view their political leaders and the process whereby they govern this massive polity. In these days of interconnected technologies, not even state security in China can long deny these exchanges if China continues to want the prosperity that derives from openness to the world economy.

China matters economically and politically and the way in which it is run matters more and more to the success of the stated aspirations of its people through its leadership and its extensive dealings within the international community. No wonder then that the importance of informed and careful analysis of developments in the Chinese political system is at a premium around the world today.

There are analysts, of course, and there are analysts, and not all deserve equal weight or attention. There are those who have made long professions of predicting political implosion and collapse in China, as the political system, through economic reform, has opened China to the rest of the world, and that industry has naturally expanded as China faces the challenges of the next phase of its economic reform and the response to its political presence externally.

In this week’s lead, when Carl Minzner an eminent scholar of Chinese governance suggests that ‘China is clearly moving to a darker era’, we need to listen and ask why.

Minzner characterises this ‘darker era’ in two ways: a crackdown on lawyers, journalists and civil society activists; and a ‘steady breakdown of the authoritarian political rules of the game that have held sway since the beginning of the modern era’.

It is the second of these that worries him most. He thinks that Xi Jinping is trying to personalise institutional reforms, and argues that this personalisation of institutional power will lead to the Chinese Communist Party (CCP)’s ‘cannabalis[ing] itself’. Nathan Attrill has similar concerns, noting that Xi’s personalised leadership is attended by great risks.

What does this mean?

According to Minzner, the mechanisms by which the central state exerts power are steadily sliding towards de-institutionalised channels. These channels include: ‘cultivation of a budding cult of personality around Xi and a steady ideological pivot away from the Communist Party’s revolutionary socialist origins in favour of the “China Dream”, a revival of an ethno-nationalist ideology rooted in imperial history, tradition and Confucianism, and a revival of Maoist-era tactics of “rule by fear” including televised confessions and unannounced disappearances of state officials and civil society activists alike. Fear, tradition and personal charisma do not amount to institutional governance…The Party-state’s reform-era efforts to build more institutionalised systems of governance are being steadily eroded’.

Xi Jinping is undoubtedly a stronger and more high-profile leader than his predecessor Hu Jintao. He came to the leadership with the Party in some disarray over major scandals such as the Bo Xilai affair and facing a tide of concern about flagrant corruption across all levels of government. Xi’s anti-corruption campaign has been more thorough and far-reaching than the one Hu launched when he came to power. Xi has broken previous norms — specifically, don’t target Politburo Standing Committee members and don’t snatch people from overseas (or if you do, definitely don’t smirk about it). The committees that coordinate China’s diverse interests and make policy are now often reporting directly to Xi rather than to the nominal head of that policy area.

Minzner’s case is plausible. Xi’s centralisation of power may have advantages in dealing with big issues but it also increases the risks of failure — and the risk of Xi’s being held personally responsible if things go wrong.

Minzner’s claim that the CCP is ‘cannibalising itself’ is more provocative.

For starters, while leadership is essential to any state — more so in what is analytically unhelpfully characterised as an authoritarian state — there are limits to what Xi himself can do.

The centres of power and influence and the constraints on central power in China are real. Personalisation of institutional reform has its boundaries. Xi is General Secretary of the Chinese Communist Party, the head of the world’s largest political organisation and, while constitutional constraints may be weak, the selectorate wields structured power on many levels. While Xi can disturb and change the incentives of Party members through his anti-corruption drive, his control over cadre behaviour has its limits.

In consolidating a number of policy areas underneath him (including national security), Xi has undoubtedly increased the coherence in Chinese policymaking. He also invites himself to be held directly accountable should there be policy failure. At the popular level, this accountability is assuredly weak; there are no inclusive democratic elections. But within the Party, there is a more robust, if also still weak, system of accountability. And as we move into the first phase of leadership succession in 2017, it will matter, as it would matter in a democracy, how people beyond the Party think about how successfully the leadership has been traveling. Policy developments must be framed and assessed in the context of a more pluralist political system than is instinctively assumed of a one-party state.

Minzner speaks powerfully for many in both China and the West who see this as a ‘dark period’ of Chinese governance, where hoped-for progress towards a more representative system of government is very difficult at present to discern. But there are many shades in darkness that shroud easy judgment about the evolution of the Chinese political system.

China must be dealt with as it is — case by case, rule by rule, situation by situation. Seeing China clearly as it is, beyond whatever hopes and dreams we may have for its future, requires understanding and accepting the limits on anyone’s power to change it inside or outside the system, and working with the China we have, not the China that even President Xi encourages to dream of 50 or a 100 years hence.

The EAF Editorial Group is comprised of Peter Drysdale, Shiro Armstrong, Ben Ascione, Ryan Manuel and Jillian Mowbray-Tsutsumi and is located in the Crawford School of Public Policy in the ANU College of Asia and the Pacific.

 

Thailand is once again considering a controversial new constitution. A look at how the new charter attempts to fight vile and venal politicians, much like an infectious disease

The nation’s two largest political parties have each condemned the draft charter as an attempt by the military to extend its time in power. Meanwhile, the ruling National Council for Peace and Order (NCPO) has all but banned criticism of the draft, even as it gears up for an aggressive nationwide pro-draft campaign ahead of an 7 August referendum.

The draft (available in Thai here) reflects a widely shared view among Thailand’s conservative elite regarding the problems at the root of recent political crises. This new charter can be read as a response to a two-fold diagnosis of what ails Thai democracy.

First, political parties have been too large and too strong. Second, ignorant voters keep electing “bad people”. Given this diagnosis, the new constitution is designed to provide the appropriate treatment by fragmenting and weakening political parties, and minimising the power of elected politicians.

The first complaint is that democratically elected governments since 1997 have been too powerful. Specifically, the ruling party has been too big and too strong, leading to a “parliamentary dictatorship” or “tyranny of the majority.” The drafters appear to be using constitutional reforms to try and re-fragment the party system and ensure that no party ever again captures a majority. The primary means for doing this is changing the electoral system from a mixed-member majority system to what is being called a mixed member apportionment system (MMA).

Together with Bangkok Pundit I’ve written elsewhere about the effects of a switch to MMA. In brief, the big winners from the change are likely to be medium-sized parties like Bhumjai Thai and Chart Pattana Pheu Paendin. Pheu Thai, on the other hand, would be the big loser. Under our simulation Pheu Thai goes from a 53 per cent majority of seats to only 45 per cent of the seats, making coalition government a necessity and opening the door for someone from a party other than Pheu Thai to become Prime Minister.

In addition to trying to re-fragment the party system the draft appears designed to weaken political parties and the connections between parties, voters and candidates. For example, with the switch to MMA the constitution removes the ability for voters to cast a separate party list vote—an act that has helped voters to think about parties, not just candidates. And most controversially, the draft once again opens the door to a non-elected individual to become Prime Minster (more on this below).

Let’s turn to the second diagnosis: ignorant voters keep electing “bad” politicians. The fundamental problem with Thai democracy, according to many of the ruling elite, is that ignorant, backwards, immoral voters (particularly from the North and Northeast) keep electing the wrong people. These bad people then come into office and (predictably) make a mess of things. The reason that these voters keep voting for the wrong side is traced back, in this line of thinking, to their lack of knowledge—their ignorance. This oft-expressed sentiment was most recently given voice by Prime Minister Prayuth Chan-ocha during his New Year’s speech:

Do gardeners working outside of the Parliament’s building or farmers know anything about democracy? Of course not…Don’t talk to me about citizenry. Those people only go to vote because they were paid.

Given these attitudes, it is not surprising that the junta has placed so much emphasis on re-education. These efforts come in a variety of forms, from the frequent (and now expanded) use of “attitude adjustment” for regime opponents, to the promotion of Prayuth’s 12 Core Values, to the campaign to teach citizens about the virtues of the new charter while prohibiting any public discussion of the draft.

But despite its best efforts, the junta is learning that re-education is much harder than anticipated. The NCPO seems genuinely surprised and puzzled that people still disagree with them, even after all the their efforts to help people come to a “correct understanding.” Deputy Prime Minister Prawit Wongsuwan recently lamented the slow progress towards attitude adjustment, noting that those who underwent sessions still “expressed their thoughts.”

So, the draft charter contains a back-up remedy, just in case the junta can’t induce voters to vote correctly: namely, containment.

The drafters of this constitution seem determined to go much farther than their predecessors were willing or able to in 2007 to try and contain or put a hedge around the power of elected politicians. The idea is to circumscribe the power of elected politicians while putting more power in the hands of “good people” (almost by definition, unelected people).

The keystone of this effort is the 250-seat Senate. Under this draft the Senate will be a completely appointed body with six seats reserved, ex-officio, for: the commanders of the army, navy, air force, police; the armed forces commander-in-chief; and the permanent secretary of the Defense Ministry. When combined with the 500-seat House this means that a third of the Parliament will be populated by people chosen by the junta.

In addition, this unelected Senate will enjoy unprecedented powers over the elected government, including the responsibility to ensure that the junta’s reform agenda is carried out by its elected successor. Under the charter the cabinet is required to report to the Senate every three months on the progress of reforms. The Senate is empowered to speed up the process if they deem progress unsatisfactory.

If both questions posed to voters in the August referendum pass, the Senate will also play a role in selecting the prime minister. Interestingly, in the original draft the Senate only participates in choosing a prime minister if the parties in the House cannot agree on a candidate. However, this was not enough for the junta-appointed National Legislative Assembly, which passed a resolution adding the following question to the August referendum.

In order to ensure continuity in the implementation of national reform under the national strategy during the five-year transition period, do you agree that a joint sitting of parliament should be allowed to vote to select a prime minister and that this should be included in a provisional clause [of the draft charter]? [Official English Translation].

If passed, this would give unelected senators the power to join with MPs in choosing a prime minister right from the start. Under this rule a party would need to secure 376 votes in order to select its candidate for prime minister (Pheu Thai captured 265 seats in 2011). In practice this means it would be very difficult to select a prime minister that the military doesn’t approve of.

In addition, the five-year transition period means that the Senate will be guaranteed a role in the selection of at least two prime ministers. The motive behind giving the unelected Senate a role to play in selecting the prime minister is spelled out clearly by NLA member Wanchai Sornsiri: “Senators can help screen out not-so-good or not-so-intelligent persons. At the same time, they can help support a good prime minister who in the past was usually not elected or toppled by street protests.”

The Senate is just one part of a multi-pronged strategy to ensure rule by “good people”. Other provisions in the charter include:

·         A constitutional obligation for elected government to carry out policies and reforms begun by the NCPO.

·         New restrictions and oversight on government spending.

·         A Constitutional Court with more authority to intervene in the political sphere.

·         A byzantine amendment process that makes it nearly impossible for future governments to amend the constitution.

At the end of the day Thailand’s constitution leaves elected representatives with much less power and room to manoeuver. The purpose, it appears, is to contain vile and venal politicians, much as you would an infectious disease, while empowering “good people” to manage Thailand’s affairs.

Allen Hicken is Associate Professor in the Department of Political Science, University of Michigan.

 

The neo-authoritarian threat in the Philippines

Presidential candidate and Davao City Mayor Rodrigo Duterte. Photo: LYN RILLON

Rodrigo Duterte’s rise in opinion polls ahead of presidential elections on 9 May represents potentially the most serious crisis of Philippine democracy since ‘people power’ overthrew the Marcos dictatorship 30 years ago. Julio C Teehankee and Mark R Thompson outline why.

Nearly two years ago in these pages, several New Mandala contributors questioned Indonesian presidential candidate Prabowo Subianto’s commitment to democracy (or more specifically his threats to undermine it). Prabowo, one of the most repressive high ranking generals in the Suharto dictatorship, narrowly lost the July 2014 presidential elections in Indonesia to Joko Widodo, who, although a disappointment to many of his supporters, has not posed a significant threat to the country’s democratic institutions as president.

Now it is the Philippines turn to have a major neo-authoritarian presidential candidate. Davao City Mayor Rodrigo ‘Digong’ Duterte, who the latest Pulse Asia national opinion shows leading a field of four major presidential candidates with about a third of the vote (which would translate into a comfortable 5 million vote lead over his nearest rival in a multi-candidate race), has shown little regard for the archipelago’s (often fragile) democratic institutions. His coarse language and outrageous statements have recently surfaced in the international media, notably his tacit approval for the use of ‘extrajudicial’ killings to ‘cleanse’ the country of criminals and drug lords in three to six months, and, most notoriously, his recent casually insensitive, misogynous remark concerning the rape and murder of a female missionary in Davao.

He uses his record as mayor of the once rough and tumble city of Davao in the southern island of Mindanao as his calling card in the campaign. He claims he pacified the once dangerous city after he went after drug gangs, murderers and other criminals. He has shrugged off critics’ accusations that he used death squads to achieve his goal, promising to implement his Davao model nationwide and daring human rights activists to stand in his way. He has threatened to abolish Congress and tame the courts if they do not prove cooperative with his radical plans to implement peace and order.

In another recent development, and according to the same electoral survey, Ferdinand ‘Bongbong’ R Marcos Jr, the son of the dictator Ferdinand E Marcos, is now narrowly ahead in the race for the vice presidency, which is elected separately in the Philippines, with victors often coming from different parties than the president. This is an ominous sign, adding to the neo-authoritarian danger facing the country as Marcos refuses to apologise for the crimes of his father’s regime — both its human rights violations and economic plunder which he flat-out denies.

From populism to neo-authoritarianism
Duterte’s unorthodox campaign style has captured the imagination of Filipino voters. His political back story runs parallel with the archetypical Filipino populist, ousted president Joseph “Erap” Estrada. Both come from middle-class families with minor political connections who found affinity with the poor at an early age. Both were expelled from Jesuit-run schools, and both started their careers as successful mayors: Erap during the Marcos era, Digong during the post-Marcos era. Both projected a “siga” (tough guy) image — Erap magnifying this persona in the movies and in the Metro Manila town (later city) of San Juan, and Digong crafting this image in the communist infiltrated and crime infested city of Davao.

Estrada, however, managed to rise earlier from local to national politics: having been elected Mayor of San Juan in the late 1960s shortly before martial law and then to the Senate in 1987, as vice president in 1992, and as president in 1998. Digong, on the other hand, spent most of his political career in Davao (except for a short stint in Congress from 2001-2004). While Erap was viewed suspiciously by elites but enjoyed tremendous popularity among poor voters, Duterte’s electoral appeal has been strongest among upper- and middle-class voters.

Duterte’s calls for a federal system draws on ‘anti-Imperial Manila’ sentiments, particularly in Mindanao. Besides this strong regional base (which extends into parts of the Visayas islands in the middle of the country) he strongly appeals to voters within Manila itself where his calls for a brutal and immediate implementation of a ‘law and order’ have resonated particularly well.

Given that Duterte has his strongest base in the elite and the middle class, his campaign is distinct from the pro-poor populism of Estrada and of one of his current electoral rivals for the presidency Jejomar ‘Jojo’ Binay  –who before becoming Vice President was long-serving mayor of the Metro Manila city of Makati where he was noted for his welfare measures directed at the disadvantaged. Duterte’s emerging neo-authoritarian constituency was initially concentrated among the elite, and middle class and only recently has moved down the social ladder. Duterte is the candidate of the wealthy, newly rich, well off, and the modestly successful (including taxi drivers, small shopkeepers and overseas Filipino workers abroad).

The end of the EDSA ‘people power’ regime
Duterte’s rise in the polls has to do with frustration and anger with the limits of the reformist agenda of the Aquino administration, but more generally with the “yellow” good governance pledged regimes stretching back to Fidel Ramos and Corazon Aquino. But this dissatisfaction is different than the kind Estrada tapped into in 1998 (after the presidency of Fidel V Ramos, when, like under the Aquino administration, growth rates were high but poverty was not substantially reduced). It is also different to incumbent vice president Binay’s attempts to mobilise voters during this presidential election with welfare appeals to the poor. Duterte’s rise is not a reaction by the dispossessed, the losers of “exclusive” growth, but rather it is symptomatic of the anxieties about criminality, rampant smuggling and government corruption of those now marginally better off after a couple of decades of solid economic growth.

Like Prabowo, Duterte appeals to the longing of the better off in Philippine society for the reimposition of discipline in the spirit of the dictator, whose most famous slogan was ‘Sa ikauunlad ang bayan, disciplina ang kailangen’ (in order to make progress, the country requires discipline). This also reflects Lee Kuan Yew’s infamous words to Filipino business people in a visit to the country in the early 1990s: ‘the Philippines needs more discipline than democracy.’

Duterte’s rise in opinion polls represents potentially the most serious crisis of Philippine democracy since ‘people power’ overthrew the Marcos dictatorship 30 years ago. The enormous powers of the Philippine presidency and Duterte’s record of close ties to the military in Davao (and his promise to raise military salaries) make ‘the punisher’s’ threats to implement the Davao model nationwide, killing criminals without asking questions and pushing aside democratic insitutions and due process if they stand in the way only too credible.

Julio C Teehankee is Full Professor of Political Science and International Studies and Dean of the College of Liberal Arts at De La Salle University. He is also the Executive Secretary of the Asian Political and International Studies Association (APISA).

Mark R Thompson is acting head and Professor of Politics of the Department of Asian and International Studies and director of the Southeast Asia Research Centre, both of the City University of Hong Kong.

 

China has denied the US aircraft carrier USS Stennis and accompanying naval vessels permission to make a port call in Hong Kong

It was not immediately known what prompted the Chinese action, but it comes amid growing tension between the two countries over Beijing's moves to assert its claims to much of the South China Sea.

"We were recently informed that a request for a port visit by a US carrier strike group, including the USS John C Stennis and accompanying vessels, to Hong Kong was denied," Commander Bill Urban, a Pentagon spokesman, said.

"We have a long track record of successful port visits to Hong Kong, including with the current visit of the USS Blue Ridge, and we expect that will continue," he added.

It was the first time US naval ships had been denied permission to make a Hong Kong port call since August 2014, Urban said.

The Chinese Foreign Ministry told Hong Kong's South China Morning Post newspaper that port calls by US ships are decided on a "case by case basis in accordance with sovereignty principles and specific circumstances."

US Defense Secretary Ashton Carter visited the Stennis on April 15 as it sailed off the Philippines near the disputed area where China has expanded islets and reefs into islands capable of supporting airfields and other installations.

During a preceding stop in Manila, Carter had emphasized that the United States would support the Philippines and other allies as they faced "coercion and intimidation."

The two countries also announced they have begun joint naval patrols in the South China Sea, and Carter said a contingent of 275 US troops and five A-10 ground attack aircraft in the Philippines for an annual exercise would remain in the country until the end of the month.

China claims nearly all of the South China Sea, through which pass some of the world's most active shipping lanes. The Philippines, Vietnam, Malaysia, Brunei and Taiwan also have overlapping claims. AP

 

Asia’s New Battlefield: The Philippines’ South China Sea Moment of Truth

A specter is haunting Asia—the specter of full Chinese domination in the South China Sea. Latest reports suggest that China could soon move ahead with building military facilities on the Scarborough Shoal, a contested land feature it has occupied since 2012. This would allow China, according to a Mainland source, to “further perfect” its aerial superiority across the contested waters. By building a sprawling network of dual-purposes facilities, and more recently deploying advanced military assets to its artificially created islands, China is inching closer to establishing a de facto Air Defense Identification Zone (ADIZ) in the area. Integrating the Scarborough Shoal into its burgeoning defensive perimeter across the South China Sea will not only give it an upper hand in the contested waters, but also allow China to place the Philippines’ capital and industrialized regions within its strategic reach.

This is nothing short of a nightmare for the Philippines, which is already struggling to protect its supply lines in the Spratly chain of islands due to growing Chinese military assertiveness in contested waters. Unlike most of Chinese occupied features, which lie well beyond the immediate shores of other claimant states, the Scarborough Shoal is located just about 120 nautical miles off the coast of the Philippines, well within the country’s Exclusive Economic Zone (EEZ)—and also its continental shelf. To put things into perspective, the shoal lies nine hundred kilometers away from the closest Chinese coastline. For Manila, the contested land feature is arguably what James Shoal is to Malaysia and Hainan is to Mainland China.

Manila lost control over the shoal after a tense standoff with Chinese coast guard forces in the middle of 2012. But for more than a century, the Philippines has treated Scarborough Shoal as its northernmost outpost in the South China Sea. In fact, as far back as the Spanish colonial era, the Southeast Asian country has treated the shoal as the natural extension of its national territory. During Cold War years, it was a gunnery range and regular area of naval exercises for American forces, which accessed military bases in the Philippines.

As a leading Filipino maritime-law expert, Jay Batongbacal, explains, it was only after the departure of American military bases (1991) that China began to “take concrete action to assert its long-dormant paper claim to the shoal, beginning with the issuance of amateur-radio licenses to hobbyists in 1994,” the year China wrested control of the Philippine-claimed Mischief Reef. In short, China’s assertion of its (supposedly) historical claim on the land feature was hinged on coldblooded balance-of-power calculations. Cognizant of the Philippines’ minimal-to-nonexistent deterrence capability and the Obama administration’s equivocations on the extent of its defense obligations to Manila, China felt confident enough to usurp control over the shoal.

Meanwhile, the Philippines has been drenched in the ecstasy of presidential elections, with growing indications that the next government could be on a much more friendly footing with China, which giddily expressed its hope that the “new [Philippine] government can adopt positive and well-thought policies towards China, properly deal with relevant disputes, and improve bilateral relations with concrete actions."

Yet it’s far from assured that the next Filipino president will continue the incumbent administration’s alignment with America as well as its tough posturing against China. With the Arbitral Tribunal at The Hague expected to issue its final verdict on the Philippines’ case against China in coming months, the predisposition of the incoming Filipino president has gained greater salience. Above all, however, everyone is wondering about the United States’ next move: Will it stand by its ally and try to prevent China’s prospective militarization of the Scarborough Shoal, or, alternatively, will it continue its futile—if not counterproductive—policy of strategic ambiguity on the issue? Time is of essence.

Tightening Noose

China is beginning to feel the heat. Earlier this year, the usually meek Association of Southeast Asian Nations (ASEAN), after a retreat with U.S. president Barack Obama at Sunnylands, released a joint statement, which can be interpreted as a collective support for the Philippines’ arbitration case and, more explicitly, growing regional worry over China’s revanchist activities in the South China Sea.

Both American and ASEAN leaders expressed their shared "commitment to peaceful resolution of disputes, including full respect for legal [author’s emphasis] and diplomatic processes, without resorting to threat or use of force, in accordance with universally recognized principles of international law,” specifically the United Nations Convention on the Law of the Sea (UNCLOS). They also reiterated the centrality of "non-militarization and self-restraint" in the disputed waters, in accordance to the 2002 Declaration on the Conduct of Parties (DOC) in the South China Sea, which (Paragraph V) discourages China and ASEAN claimant states from “inhabiting on the presently uninhabited islands, reefs, shoals, cays, and other features.”

Shortly after the Sunnyland Summit, the ASEAN foreign ministers reiterated their earlier joint statement with America, expressing how they have “remained seriously concerned over the recent and ongoing developments [in the South China Sea] and took note of the concern expressed by some ministers on the land reclamations and escalation of activities in the area." During the recently concluded Group of 7 (G7) summit, the world’s leading Western powers and Japan were even more specific in supporting the Philippines’ arbitration case against China.

In their joint statement, foreign ministers of the leading industrialized countries expressed their vigorous opposition to “intimidating, coercive or provocative unilateral actions that could alter the status quo and increase tensions,” an unmistakable jab against China’s activities in the South China Sea. They also emphasized the centrality of the “peaceful management and settlement of maritime disputes . . . through applicable internationally recognized legal dispute settlement mechanisms, including arbitration,” an unmistakable endorsement of the Philippines’ arbitration case against China, which has boycotted the whole proceeding.

A besieged China lashed back, urging “the G7 member states to honor their commitment of not taking sides on issues involving territorial disputes." Worried about isolation in the region, China has also stepped up its efforts to divide-and-conquer ASEAN, urging Brunei, Laos (the current ASEAN chair) and Cambodia to decouple the South China Sea disputes from the regional agenda. China’s continued foray into Malaysian and Indonesian fishing grounds has also provoked a massive diplomatic backlash, with Jakarta threatening to revisit its relations with Beijing in light of what it views as a direct assault on its territorial integrity and sovereign rights within its EEZ. Malaysia may follow suit. China has practically alienated all key ASEAN states, including (ethnic-Chinese-majority) Singapore, which has openly accused Beijing of undermining regional unity on the South China Sea issue.

Though China’s plans for dominating the so-called First Island Chain go back decades—mainly based on the strategic vision of Beijing’s Mahan, Liu Huaqing, who was the commander of the Chinese navy from 1982-88—it is only in recent years that China has developed the requisite capabilities and mustered sufficient political will to push across its adjacent waters. But China is also beginning to realize that it can’t dominate its adjacent waters without losing the good will of its smaller neighbors. Relations with the Philippines have been particularly toxic in recent years. In fact, under the Aquino administration, the Southeast Asian country has been on the forefront of efforts to build international pressure on China.

Great Uncertainty

The leaders in Beijing, however, seem optimistic that the upcoming elections in the Philippines may lead to some favorable recalibrations. And it has a lot of cards to play. For one, the shadow of an impending Chinese military base just 120 nautical miles off the coast of the Philippines is hovering above the Filipino presidential elections. One can’t rule out the possibility that China is trying to coax the Filipino presidential candidates into compromise by raising the prospect of militarizing the Scarborough Shoal.

More specifically, with the arbitration verdict expected soon, Beijing may be trying to intimidate the incoming Filipino administration against fully using the likely favorable outcome for the Philippines. Many legal experts expect the Arbitral Tribunal to nullify China’s claims over low-tide-elevations (LTEs) such as Mischief Reef and Subi Reef, providing a perfect legal pretext for expansive American-led Freedom of Navigation Operations (FONOPs) against China. The arbitration panel may even go so far as deciding on the validity of China’s notorious nine-dashed-line claims, which covers much of the South China Sea, as well as the validity and legal basis of its ‘historical rights/waters’ claims.

At the very least, China may be seeking to cajole the next Filipino president into keeping mum on the arbitration outcome, that is to say, to treat it as an advisory opinion and a relic of the past administration’s strategy rather than a binding legal decision under the aegis of the United Nations Convention on the Law of the Sea (UNCLOS). Interestingly, both leading presidential (Rodrigo Duterte) and vice-presidential (Ferdinand Marcos Jr.) candidates have signaled their interest in engagement rather than confrontation with China.

Asia Times