Hong Kong’s 2019 Turmoil: A Dismal Future?

SYNOPSIS

As Hong Kong’s political crisis deepens, what are the options open to Beijing and what are the priority issues for the Hong Kong leadership?

COMMENTARY

THE TURMOIL currently sweeping Hong Kong is driven primarily by four main causes. One, fear of Beijing’s growing control. Two, concern over the erosion of its “freedoms and autonomy”. Three, the very high costs of living. Four, Western interference.

Under the 30 June 1997 China-UK Handover Agreement, Beijing promised to maintain Hong Kong’s “autonomy” for 50 years in three areas: freedom of speech, assembly, and religion. Today, Hong Kong is less important to China.

Fear over China’s Growing Control

In 1997, Hong Kong accounted for 20% of China’s GDP. The proportion now is 5%, with the rise of Shenzhen, Shanghai, and Chongqing. Shenzhen is becoming the high-tech centre of the world. In 1997, Hong Kong handled 50% of China’s foreign trade. Today, it is only 12%.

Hong Kong’s per-capita income used to be 35 times higher than China’s. Now it is five times higher. As China’s economy continues to expand, it will become richer and leave Hong Kong behind.

There is no chance that Beijing will accept the demands of the protestors: universal suffrage, full democratic elections, an independent inquiry into the protests and alleged police “brutality”. Beijing condemned the protestors as “rioters” engaged in a “colour revolution”.

Fear of Erosion of “Freedoms and Autonomy”

Extremist protestors desecrated Hong Kong’s parliament building (LegCo) and China’s Liaison Office. Many advocated Hong Kong independence, carrying American and British flags.

In early-September 2019, they called on President Trump to intervene to “liberate” Hong Kong. Protestors claim they want to preserve Hong Kong’s “freedoms and autonomy”. Not surprisingly, Beijing sees it as an attempt at secession.

China is watching the situation very closely. An authoritarian state, it crushes any dissent. During a 2017 visit, President Xi Jinping warned that challenges from Hong Kong would not be tolerated. He sees the current turmoil as an attempt to overthrow the rule of the Chinese Communist Party (CCP) on the mainland.

In July 2019, the Chinese military warned that it could be deployed to maintain social order. Four months earlier, in April 2019, Hong Kong chief executive Carrie Lam had introduced the Extradition (Fugitive Offenders’) Bill.

It would allow for the transfer of criminals to China to face justice. Many Hong Kongers say they do not trust China’s politicised judicial system.

Beijing’s Options

Beijing has at least four options to respond to the Hong Kong crisis.

First, the use of force can be ruled out, at least for now. China would not want a repeat of the 4 June 1989 Tiananmen Square Massacre. With a bitter trade war with the United States and a slowing economy, China would not want to intervene directly in Hong Kong.

It has used terms like “terrorism”, and “secession” to describe the violence. Beijing is clearly setting the stage for a more forceful response if the violence and turmoil continues.

Second, Beijing wants Carrie Lam to clean up the mess, which, contrary to expectations, got uglier despite China’s 70th anniversary on 1 October. It understands the need to keep the pro-establishment camp in Hong Kong united. Xi wants Carrie Lam to show that she can restore law and order without Beijing’s direct intervention.

Third, give strong support to the Hong Kong police to maintain peace and stability. It is one of the most professional police forces in the world. This includes encouraging more ordinary Hong Kongers to publicly show patriotic support for the mainland.

Four, quickly address the grievances of Hong Kongers. Outwardly, Hong Kong is prosperous, with many billionaires. An example is Li Ka-Shing. He is one of the richest men in the world, with a personal wealth estimated at US$29.4 billion.

Other notable tycoons are the Kwok brothers (Sun Hung Kai Properties), Cheng Yu-Tung (property, services, infrastructure), Liu Chee-Woo (casinos, entertainment), and Stanley Ho (casinos).

Housing Crisis

The majority of Hong Kongers is poor. Hong Kong has the worst income-wealth inequality in the world. Poverty in Hong Kong is at a high of 20%, the highest in a decade. Many Hong Kongers cannot afford decent housing.

Hong Kong faces a public housing crisis. Housing ownership is only 15% in Hong Kong compared with 80% in Singapore. The current waiting time for public housing in Hong Kong is more than five years. This is the longest period in 15 years. Many survive in tiny cubicles, the size of a ping-pong table. Many young Hong Kongers say they have “no stake” in society.

This bleak situation has fueled the anger of many Hong Kongers. Hong Kong’s economy is badly hit by the turmoil. Business and tourism are sharply down. Despite an August 2019 economic package of S$4.23 billion, recession looms. For 2019 as a whole, the forecast is for zero growth, the worst in 20 years.

Western Interference

Carrie Lam has withdrawn the Extradition Bill. She has started a public dialogue to get ideas to peacefully resolve the crisis. But the violent protests have continued. The West, as expected, is very critical of Beijing’s attempt to gain greater control over Hong Kong. Beijing accused the US, Britain, Canada, Germany, and the EU, of being the “black hands” behind the turmoil.

US political counsellor in Hong Kong, Judith Gadeh, was recently photographed meeting protest organisers like Joshua Wong and Nathan Law. But the protests are not popular at all. Beijing warned the US “to stop playing with fire”, or get burnt.

In July 2019, the EU Parliament called on its members and other states to investigate export controls “to deny China, in particular, Hong Kong, access to technologies that could be used to violate human rights”.

Beijing rejected the EU statement as “unwarranted interference in China’s internal affairs”. This is a reference to Western imperialism against China in the 19th and 20th centuries.

Implications

Hong Kong’s turmoil is in its fifth month, the longest on record. Carrie Lam’s government needs to focus quickly on the causes of the turmoil and resolutely tackle the wealth inequality, housing crisis, and the high costs of living. If not, Hong Kong faces a dismal future.

Singapore can expect to benefit from the unrest in Hong Kong. It has a reputation for good governance, stability, and strongly pro-growth policies. This is the case for rich Hong Kongers with assets of about US$15 million. It will enhance Singapore’s role as a global private banking centre.

However, big firms still prefer Hong Kong, as it has very good connections with other global financial hubs. Singapore, however, is careful not to be seen as profiting from Hong Kong’s plight.

Singapore’s asset management industry is growing very fast: it currently manages S$2.4 trillion in funds. Singapore is one of the largest fund management centres in the world.

About the Author

KB Teo is a former diplomat who had served in the Singapore Embassy in Cairo. He obtained a Masters’ degree (International Relations) from the Australian National University and a PhD from the National University of Singapore. He contributed this to RSIS Commentary.

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Xi-Modi 2019 Summit:
How Far Will They Go? By KB Teo

SYNOPSIS In the 1950s, when China-India ties were close, Delhi was among the first states to recognise Mao's new China. All this changed with the 1962 border war. The recent Xi-Modi summit in India was aimed at ushering in a new prosperous “Chindia” century. How successful has it been?

COMMENTARY The 1950s were the heyday of cordial Sino-Indian relations. In June 1954, Premier Zhou En-Lai visited New Delhi. The two sides signed a joint statement on the five principles of peaceful coexistence.

This included respect for territorial integrity, non-aggression, non-interference in internal affairs, and peaceful coexistence. This 1950s entente was epitomised by the popular Hindi slogan "Hindi Chini Bhai-Bhai" ("Indians/Chinese are brothers").

Border WarsChina and India share a 4,000 km border. The October 1962 border war was caused by their dispute over the Aksai Chin and Arunachal Pradesh regions. Aksai Chin lies between the Indian state of Kashmir and China's Tibet province. China conducts its nuclear testing at Lop Nor, Xinjiang. They also clashed at the Doklam plateau (Sino-Bhutanese border).

China's influence in the Indian sub-continent is rising. Beijing has long-standing ties with Pakistan. India sees Beijing as intruding into its traditional sphere-of-influence. This notwithstanding, both countries have rebuilt friendly relations since the 1980s.

In 2008, China became India's largest trading partner. In 2018, bilateral trade hit US$95.5 billion. India suffers from a huge trade deficit of $57 billion with China, the largest that India has with any country.

Issues in China-India TiesThe first issue affecting China-India ties is trade. India has repeatedly demanded greater access to China's markets. Pressure has grown because India suffers from a huge trade deficit of $57 billion with China. As a result, Modi's government faces strong domestic pressures.

The second is the battle over telecoms giant Huawei. India is one of the key countries where Huawei wants to establish its 5G technology. Huawei is a major player in India's smartphone market.

The third issue is Kashmir. In August 2019, India-China tensions rose after New Delhi's move to revoke the autonomy of Jammu and Kashmir. The two rivals also have a border dispute in Ladakh, a strategic Buddhist-dominated region within Kashmir.

India has also been a vocal critic of China's Belt and Road global infrastructure programme that includes a key project through Pakistan-administered Kashmir.

Fourth, border clashes. Besides Ladakh, India and China also have a decades-old dispute over Arunachal Pradesh, an Indian state bordering Tibet. China still claims about 90,000 sq km of territory. It is currently under New Delhi's control.

China is competing with India for influence across South Asia. India worries about Beijing’s initiatives such as the Belt and Road project. This has boosted New Delhi's support for the US-led Quadrilateral Security Dialogue to counter China's assertive expansionism.

New Level, New Era? Notwithstanding their latent rivalry, China and India seem keen to take their ties to a new level, as seen on at least three fronts.

One, President Xi said China is ready to reduce the $57 billion trade deficit. China is India’s largest trading partner while India is China's 11th largest trading partner. But India has a much weaker hand. Its economy is much smaller. China is a major investor in Indian energy and telecoms projects.

About 13,000 Indian students are studying in Chinese schools and universities. Two, India has concerns about the Regional Comprehensive Economic Partnership (RCEP). Modi said that a deal should be equitable, while Xi said he would look into India's concerns.

Three, both sides are prepared to enhance defence cooperation. Currently, defence cooperation between the two Asian giants is limited to training and joint exercises. Four, both sides also agree to fight terrorism. Xi called for building strategic mutual trust.

He said that the only choice is for the "Chinese dragon" and "Indian elephant" to “dance together to serve their mutual interests”. Xi also called for efforts to raise the level of military exchanges and security cooperation to enhance mutual trust.

Significance

The positive results of the summit show that China and India are keen to fully normalise and boost mutually-beneficial cooperation. For China, improved ties with India would considerably strengthen its South Asian flank.

This would enable Beijing to deal more effectively against President Trump's containment Policy. India hopes that its improved ties with Beijing would lessen China's strategic links with its arch-rival Pakistan.

It would also reduce the impact of US trade protectionism on their economies. The normalisation of China-India relations portends an easing of tension and a more collaborative Chindia era.

Implications for Singapore

Improving China-India ties are good for Singapore. They are Singapore's major trade partners. China is Singapore's largest trading partner while Singapore is China's largest foreign investor.

Singapore is also the largest investor in India among the ASEAN countries. India and Singapore have robust economic and military ties. Singapore was among the first to respond to Modi's "Look East" policy of expanding economic and strategic ties in Southeast Asia.

While India is strengthening its standing as a regional power, China is continuing its rise for dominance in the Asia-Pacific region. The future relationship between the two Asian powers will still be subject to the fluidity of the ongoing international power play.

KB Teo is a former diplomat with the Singapore Ministry of Foreign Affairs who had covered Southeast Asia, Egypt as well as the Eastern Europe/Soviet desks. He had also attended the UN General Assembly as part of the MFA delegation.

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North Korea:
Why it is Unlikely to Denuclearise

KB Teo

SYNOPSIS

After two summits with Trump, there are reasons to believe that North Korea’s leader Kim Jong-Un is having the last laugh on the American president. It is unlikely that Kim will denuclearise as Trump wants.

COMMENTARY

IT IS very unlikely that North Korea will denuclearise. There are three factors: the persistence of the US threat to North Korea's survival; Pyongyang's failure to keep its promises to denuclearise; and the serious weakening of North Korea by more than three decades of US economic sanctions.

The first factor is what Pyongyang regards as the persistence of the US threat to North Korea's survival. Since the US intervention in the Korean War (1950-53), North Korea sees Washington as hostile. The US has a string of military bases in East Asia, targetting North Korea and China.

The US as a Threat

The US also has 30,000 troops in South Korea under the September 1953 ROK-US Mutual Defence Treaty. Additionally, under the October 1951 Japan-US Mutual Security Treaty, the US stations 80,000 troops in Okinawa.

In April 2019, Kim Jong Un, just 36 years old, said that Pyongyang must deliver "serious blows" to those imposing economic sanctions. It was the first time that Kim stated North Korea's position after the Hanoi Summit's collapse in February 2019.

Pyongyang's commitment to the "denuclearisation of the Korean Peninsula" includes "eliminating the US nuclear threat to North Korea". North Korea says the US threat has forced it to strengthen its defences: Pyongyang spends an estimated 25% of its GDP on the military. In contrast, most states spend about 5%.

Different Interpretations of Denuclearisation

Kim's understanding of "denuclearisation" is different from that of President Donald Trump. The US wants the "Complete, Irreversible, Verifiable, Disarmament" of Pyongyang's nuclear arsenal, held under UN auspices. At the Singapore Summit in June 2018, Kim reiterated a vague commitment to denuclearisation.

He warned in his January 2019 New Year Day's address that he would change course if Washington continued its sanctions. Two months after the Hanoi Summit's failure in February 2019, North Korea tested an improved short-range missile with a 500-km range and rebuilt the nuclear testing facilities at Tongchang-ri.

In July 2019, North Korea again tested short-range missiles which can hit South Korea and Japan. Instead of denuclearisation, it is clear that Kim is enhancing his nuclear capability. During the Kim-Putin summit in Vladivostok on 25 April 2019, Kim reiterated he wanted "security guarantees".

Bargaining Chip

The second factor is that North Korea had promised many times over the past 25 years to denuclearise but did not carry them out. Nuclear weapons are North Korea's only bargaining chip: Pyongyang has spent a lot of resources, time, and effort to acquire a nuclear deterrent. They would not be given up easily, if at all.

From Kim's viewpoint, having nuclear weapons makes good sense. First, regime survival. Second, national pride. Third, coercive diplomacy to get benefits from Washington, especially diplomatic recognition and financial aid.

Fourth, undermining the US-ROK Security Alliance, by sowing doubt that Washington would come to Seoul's defence once the US itself is under threat of Pyongyang's nuclear missiles.

North Korea has an estimated 60 nuclear missiles. The US has more than 7,000 nuclear missiles. In November 2017, North Korea tested a Hwasong-15 ICBM missile: it has a 13,000-km range and can hit the continental US.

It would show to Washington that North Korea is not easily toppled by outside powers, unlike Libya (Gaddafi), Iraq (Saddam Hussein), or the Balkans (Slobodan Milosevic).

Spurring Economic Growth

The third factor is that Kim wants faster economic growth for North Korea. Between 2010 and 2016, the economy stagnated at 0.5% growth p.a. In 2018, the North Korean economy shrank 4.1%, the slowest growth in 20 years. With a GDP per capita of less than US$2,000 per annum, North Korea is one of the poorest countries on earth.

An estimated 20% of North Korean children are malnourished. Faster economic growth would boost Kim's political legitimacy. In 2013, Kim announced his "Byungjin" policy of both nuclear development and economic growth.

Since taking power in 2012, Kim has focused on reviving the economy. Between 2012 and 2015, North Korea grew at an average of 1.8% p.a. It slowed to 1.7% in 2017.

China's Role in the Korean Peninsula

The China-North Korea relationship has been marked by ups and downs. Under the 1961 Sino-North Korea Mutual Aid and Cooperation Friendship Treaty, Beijing is committed to helping North Korea if an outside attack occurred.

North Korea is China's backyard. Beijing has also strengthened its ties with South Korea. China was South Korea's largest trading partner in 2018, and the destination for 75% of Seoul's exports.

North Korea is economically very dependent on China: China is North Korea's largest trading, accounting for 90% of its external trade. North Korea exports almost all of its coal and textiles to China. Bilateral China-North Korea trade increased ten-fold between 2010 and 2017. China is North Korea's largest trading partner, especially food, machinery, and oil.

President Xi Jinping made his first official visit to North Kora in June 2019, ahead of the G20 Osaka Summit. It restored warmer Sino-North Korean relations. The Korean Peninsula has become an intense diplomatic battleground in the strategic rivalry between Beijing and Washington.

China’s Worry of Regime Collapse

Beijing supports a stable and peaceful North Korea. But China is ambivalent about a nuclear-armed North Korea: it is worried about regime collapse in North Korea and a massive refugee influx if war breaks out between Washington and Pyongyang. A reunified Korea would mean the presence of US troops just outside China's border. This is unacceptable to Beijing.

Kim is seeking more Belt and Road Initiative (BRI) investments from China. But Kim is careful not to become too dependent on Beijing, amid fears of 'debt traps' experienced by other states. Kim visited Russia in April 2019, for his first meeting with President Vladimir Putin.

In making this move, Kim showed his desire to lessen his unhealthy dependence on Beijing. For Putin, it showed that a resolution of the North Korean issue requires the Kremlin's participation.

Kim is concerned with the poor state of the North Korean economy. He is considering setting up South Korean-style industrial conglomerates, or 'chaebols'. With more capitalist-style economic reforms, North Korea could become the next "Asian tiger economy'.

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KB Teo is a former diplomat who served in the Singapore Embassy in Cairo. He obtained a Masters' degree (International Relations) from the Australian National University and a PhD from the National University of Singapore in 2010.

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Synopsis

Tensions in the South China Sea (SCS) have somewhat abated but the latent flashpoint remains. In mid-October 2018, a near collision took place between an American and Chinese warship. The US has attacked Beijing's expansionism. In September 2018, Japan conducted its first-ever submarine drills in the waters. If the dispute escalates, ASEAN will not be able to avoid the negative fallout.

Commentary

Despite protests from China to the 2016 international arbitral ruling against its territorial claim, tensions in the SCS have been somewhat abating. But the SCS waters remains a flashpoint. In mid-October 2018, a near collision took place between the USS Decatur and the Chinese warship (the Lanzhou). The Decatur was conducting a Freedom of Navigation Operation (FONOP), asserting the right of free passage through international waterways. The Lanzhou was asserting Beijing's sovereignty claim over the SCS. In a speech at the Hudson Institute on 4 October 2018, US Vice President Mike Pence launched a ferocious attack against Beijing's foreign policy of "authoritarian expansion" and "intimidation".

Assessing the Powers’ Influence over SCS

The overarching dominant actors influencing the state of peace and tensions in the SCS are China and the United States. Japan, a regional power, is emerging to be a player as well given Tokyo’s concern for its economic lifeline being affected by tensions in the regional waters.

What are the goals of these three players in the South China Sea?

China’s Game

China's goal is to gain dominance of the SCS. This would give it two advantages. One, control over the vast oil, gas, and fisheries resources there. This would help to boost China's annual economic growth rate, which has slowed from 10% (after Deng Xiaoping's Open Door Policy 40 years ago) to the current 6.5%. An estimated one-third of annual global shipping passes through the SCS. Two, it would restrict other rival powers' access to the South China Sea. Since 2005, Beijing has been unilaterally "militarizing the islands" in the Sea: placing long-range warplanes and missiles. President Xi appears to see the SCS as a "core interest" of China, as in the cases of Taiwan, Xinjiang, and Tibet.

In June 2018, President Xi told visiting US Defence Secretary Jim Mattis that China would not "withdraw even one inch from its ancestral land". In effect, Beijing has formulated an Asian "Monroe Doctrine". It is part of President Xi Jinping's 2013 "China Dream", which called for the "great rejuvenation of the Chinese nation".

Xi’s Muscle Flexing?

Xi has repeatedly exhorted the military to be ready “to fight and win wars under modern conditions”. This is a reference to Beijing’s memories of China's "Century of Humiliation" (1839-1949).

Xi sees Washington as trying to contain China's rise: the US has encircled China with its ring of alliances in Japan, South Korea, and the Philippines. China is keen to have good relations with the United States. Speaking at the November 2018 Canton Trade Fair, President Xi said that China would open up more for imports. A similar statement was made by Vice President Wang Qisan during his visit to Singapore in early November 2018.

In November 2018, China and the US resumed high-level talks, ahead of the East Asia Summit (EAS) in Singapore, which concluded last week. Xi and PresidentTrump met at the G20 Summit in Argentina in early-December 2018. While they huddled over their trade dispute, the South China Sea did not seem to have featured in their talks.

Japan’s Growing Interest

Tokyo has no claim over the SCS. But Japan is deeply concerned about China's behaviour in the SCS. In November 2014, Beijing had unilaterally declared an Area Defence Identification Zone (ADIZ) over the East China Sea.

All of Japan's oil and gas imports pass through the South China Sea and the Malacca Strait. Chinese control of the South China Sea would threaten Japan's economic lifeline.

This is clearly unacceptable to Tokyo. There is a growing strategic rivalry between Japan and China. They have a maritime territorial dispute over the Senkakus/Diaoyus in the East China Sea.

Japan has sold Coast Guard patrol ships to Vietnam and the Philippines. In October 2018, Japan sent its destroyers and conducted submarine drills in the South China Sea for the first time ever − to send a message to Beijing about its right of passage through international waterways. This is the same that Washington has been sending out to Beijing.

But amid their growing economic interdependence, Japan and China are also keen to limit their rivalry. PM Shinzo Abe visited China in October 2018 to boost bilateral ties. It was the first such high-level visit in seven years.

The US Getting Tougher?

Washington is strongly opposed to Beijing's claim over the SCS. In 2017, President Trump called China a "rival", and a "peer competitor".

Defence Secretary Jim Mattis, speaking at the Shangri-La Dialogue in Singapore in June 2018, demanded that Beijing stopped the militarisation of the South China Sea. He warned Beijing of unspecified "severe consequences".

Admiral Philip S. Davidson (Chief, Pacific Command) told the US Congress in October 2018 that the US had lost control of the South China Sea, short of war with China.

Implications: The Makings of a New Cold War?

China has taken a tough but pragmatic approach to the SCS disputes. There are no signs that Beijing would give up its claim.

The result is a new Cold War between the two largest economies in the world.

At the just-concluded 33rd ASEAN Summit held in Singapore, the SCS conflict was discussed. PM Lee Hsien Loong was keen to work with both China and the US. He hoped that China-US relations would remain stable. China and the US are the two biggest trading partners of ASEAN. But if Beijing and Washington escalate their conflict, ASEAN would not be able to escape the negative fallout: "When two elephants fight, the grass gets trampled".

At the APEC Summit that followed in PNG, China-US differences on trade were again displayed: it ended without a formal leaders' statement for the first time due to China-US division over trade. But it is not just about trade. China and the US are engaged in a struggle for global supremacy. The US sees Beijing as trying to establish a Pax Sinica, to replace the existing Pax Americana.

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China-US Relations:

A new Cold War?

KB Teo

SYNOPSIS

China-US relations are becoming more conflictual. The two superpowers are involved in an escalating trade war. Washington opposes China’s attempt to become the global hegemon. This could mean a new Cold War.

COMMENTARY

Issues

1 Trade War

The Trump administration is increasingly seeing China as an adversarial “peer-competitor”. China’s rise is steadily leading to a balance of power in Beijing’s favour. Some analysts believe this would lead to a new Cold War between the two superpowers. Others argue that Beijing and Washington would settle for a pragmatic but uneasy coexistence. In 2010, China became the world’s second-largest economy. It is likely to overtake the US as the world’s largest economy by 2049, the 100th anniversary of the coming to power by the Chinese Communist Party. The US suffered a trade deficit of US$273 billion (2010). This ballooned to US$419.2 billion (2018). President Donald Trump said that the trade deficit with Beijing is unsustainable. In August 2018, the US levied a 10% tariff rate on US$200 billion of Chinese goods. Trump threatened to impose a 25% tariff on an additional US$325 billion of Chinese goods. He clearly expects President Xi Jinping to back down. This is unlikely to happen. For domestic reasons, Xi cannot afford to cave-in to American “bullying”. He would not be able to survive politically. The bilateral trade talks are protracted. The tit-for-tat trade retaliation has unnerved financial markets. It is also threatening to cause a global recession.

2 South China Sea conflict

This is one of the busiest waterways in the world. In 2016, US$3.4 trillion of global trade transit the South China Sea. In 2017, 40% of the global LNG trade passed through it. Since 2013, Beijing has built 3,200 acres of land there, with military facilities. It is believed to contain huge oil, gas, and other natural resources. Together with the Straits of Malacca, it is a strategic chokepoint. Counter-claims have been made by Vietnam, Malaysia, Brunei, the Philippines, and Taiwan. The US is strongly challenging China’s claim. It continues to conduct “Freedom of Navigation” operations. British, French, and the Australian navies have conducted similar patrols. In August 2019, the US and ASEAN held their first-ever joint naval exercises near the South China Sea. Beijing, as expected, protested about intrusions into its “sovereign territory”. In November 2011, US Secretary of State Hillary Clinton outlined the “Pivot to Asia” plans. Its aims are to reinforce American hegemony and counter China’s growing influence. President Obama, for a start, deployed 2500 marines to Australia. This prompted a strong protest from Beijing. China sees it as part of a hostile encirclement policy. As China gets richer, it is rapidly expanding its navy and air-force to enforce its territorial claims. In May 2018, Beijing built its second aircraft carrier and two new Type 055-class cruisers. China is building powerful warships at the fastest pace in the world. President Xi has called on the Chinese military to “prepare to fight and win wars”. China is also establishing more overseas military bases (Djibouti, Tajikistan, Afghanistan, Cambodia), much like what the US has done around the world.

3 Human Rights

The US is using human rights as a political tool against Beijing. On Tibet and Xinjiang, Washington condemned Beijing’s harsh policy, including detentions in “re-education camps”, as a serious violation of international law. On the current Hong Kong turmoil, Trump called on President Xi Jinping to talk with protest leaders to find a peaceful solution. Beijing sharply rebuffed Trump, condemning it is an unwarranted interference in China’s internal affairs.

4 North Korea Denuclearisation

Both China and the US want North Korea to denuclearise. But their preferred methods of achieving this goal are very different. Trump wants the “complete, irreversible, verifiable, disarmament” of North Korea. Beijing, however, is ambivalent. China fears that a regime collapse in Pyongyang would result in a US-dominated Korea. US troops would then be stationed next to the Yalu River. China would find this situation to be unacceptable. During the Korean War (1950-1953), US/UN intervention under General Douglas MacArthur led to a strong military response by Beijing. An estimated 60,000 US troops were killed in the Korean War. Chinese casualties are estimated at 180,000.

5 Arctic Ocean Rivalry

China is 8,7000 km from the Arctic Ocean. Its strong interest in a region so far from home is a clear indication that Beijing sees itself as a Great Power. Now, 40 years after its economic reforms, China defines its national interests in global terms. Beijing has observer status on the Arctic Council (Canada, Denmark, Finland, Iceland, Norway, Russia, and the US).

6 Strategic Rivalry

The recent warming in Sino-Russian ties is a clear trend. President Xi Jinping and his Russian counterpart Vladimir Putin have close personal ties. In fact, Sino-Russian ties are at their most cordial since their 1969 border military clashes over disputed islands in the Ussuri River. Washington sees the growing Sino-Russian partnership as hostile. Recently, Moscow approved the installation of a 5G network in Russia by the Chinese telecoms giant, Huawei. Many Western states are suspicious of Huawei because of its alleged close links with the ruling Chinese Communist Party.

7 Taiwan

Beijing regards Taiwan as a renegade province, waiting to be re-integrated with “the motherland”. China says it is seeking peaceful reunification. But Beijing has not ruled out the use of force. Under the 1979 Taiwan Relations Act, the US maintains unofficial ties with Taiwan. Washington continues to sell advanced weaponry to Taiwan. In August 2019, the US sold $8bn of 66 F-16V sophisticated warplanes to Taiwan. Beijing lodged strong protests.

8 Rivalry to influence ASEAN

China and the US are engaged in a strong rivalry to gain greater influence with the Association of Southeast Asian Nations. Both Beijing and Washington are also ASEAN’s Dialogue Partners. At the mid-August 2019 ASEAN Foreign Ministers’ Summit in Bangkok, Beijing signed a Code of Conduct to help safeguard regional maritime shipping. Foreign Minister Wang Yi described it as “new, major progress”.

China is rapidly spreading its clout throughout the world. It has become the largest trading partner of more than 120 states. President Xi said that his flagship “Belt and Road Initiative” is to strengthen global order, not replace it. Despite their substantial geopolitical differences, Beijing and Washington realise they also share many common interests: international peacekeeping, counter-terrorism, climate change, Iran, and global public health. Sino-American relations are characterised by cooperation and competition. But their struggle for global supremacy need not be zero-sum. A new Cold War is clearly not in their national interests.

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(4) Japan-South Korea Tensions:

Reconciliation Soon?

KB Teo

SYNOPSIS

The current Japan-South Korea tensions are related to historical grievances and trade conflicts. There are no winners in a trade war. Seoul, wisely, has a keen interest to end the dispute quickly.

COMMENTARY

Loss of Trust

The recent Japan-South Korea tensions arose due to a loss of mutual trust over an October 2018 South Korean Supreme Court ruling ordering three Japanese firms to compensate South Korean "comfort women" for “forced labour” (sexual slavery) during World War Two. These firms are Mitsubishi Heavy Industries, Nippon Steel, and the Nachi-Fujikoshi Corporation. Tokyo strongly condemned the court ruling. In 1965 when Japan and South Korea normalized their relations, Tokyo had paid US$2.4 trillion in Japanese loans and aid. Japan said the bilateral normalization treaty settled the compensation issue. But Seoul disagrees, arguing that individual South Korean women had the right to seek justice on their own.

In early-August 2019, President Moon Jae-in and US Defense Secretary Mark Esper agreed to maintain the 2016 Seoul-Tokyo intelligence-sharing pact. This shares vital information on North Korea, especially its nuclear missile program. It is up for renewal in November 2019. However, in late-August 2019 South Korea decided to end it, raising tensions. Japan imposed export controls in July 2019 on materials for South Korea's semiconductor industry. Tokyo said that these strategic materials were illegally sent to North Korea, where they could be used to build nuclear weapons. The Korea Economic Research Institute said a 30% curb on components from Japan would result in a US$35 billion loss to South Korea's GDP.

Japan and South Korea also have a bitter territorial dispute over the Takeshima/Dokdo islands in the East Sea. Officials are scheduled to meet in Guam in late-August 2019 for negotiations. South Korea complained to the WTO and lobbied ASEAN. But few countries, not surprisingly, are keen to get involved. Japan and South Korea are both ASEAN’s major trading partners. In November 2018, President Moon unveiled a new “Southern Policy” aimed at deepening ties with ASEAN. In 2018, ASEAN was South Korea’s second-largest trading partner, after China.

South Korea's growing economic problems

South Korea's economy grew only 1% in 4Q of 2018. Since 2001, South Korea is Japan's third-largest trading partner. In 2018, their bilateral trade hit a record US$89 billion. In 2018, Japan had a US$24 billion trade surplus with South Korea. Japan had huge investments of US$4.9 billion (2018) in South Korea compared with Seoul’s investments of US$2 billion in Japan. Seoul has much to lose if tensions persist.

President Moon strongly encouraged South Korean firms to develop the ability to produce the goods restricted by Japan. President Moon accused Japan of trying to destroy South Korea’s export-led economy. It is a wake-up call to Seoul to reduce its economic dependence on Japan. But history is a big obstacle: an estimated 75% of Japanese and South Koreans reportedly mistrust one another.

Strategic Differences

Japan and South Korea have major differences on East Asian affairs. On North Korean denuclearisation, President Moon supports the easing of economic sanctions. The South Korean leader strongly supports Inter-Korean reconciliation. He called for Korean Reunification by 2045. But Japan insists, like President Trump, on maintaining a tough policy unless Pyongyang first denuclearises. On China, Moon sees an opportunity for warmer economic and political ties with Beijing. Since 2004, China has overtaken the US and Japan to become South Korea's largest trading partner.

The US is caught in a dilemma. South Korea and Japan are treaty allies of Washington. Mediation efforts by American Secretary of State Mike Pompeo so far have failed. The US fear is that the Japan-South Korea dispute could lead to a weaker front against North Korea in the near term and China in the future. The Inter-Korean Dialogue is making good progress. President Moon and Chairman Kim Jong-Un have already met several times. They are developing closer personal ties. South Korea is also seeking to intensify cooperation with Beijing.

In 2017, South Korea had agreed to the deployment of US-made THAAD (Terminal High Altitude Aerial Defense) missile defence system which can monitor Chinese missile tests. It led to strong Chinese economic retaliation against Seoul. South Korea is unlikely to want a repeat of the Chinese retaliation.

China will be the main beneficiary

Beijing will the main beneficiary of the Japan-South Korea tensions. In August 2019, Foreign Minister Wang Yi adroitly called on Tokyo and Seoul to hold peaceful negotiations. As the lead partner in the trilateral framework, the US would be the major loser if Tokyo-Seoul ties worsen. But the Japan-South Korea tensions could also dash Beijing's hopes for a trilateral trade deal with Japan and South Korea. Economically, China, Japan, and South Korea are highly interdependent. Together, they account for 24% of global GDP. This is more than the European Union, and second only to the trade grouping of the US, Canada, and Mexico.

Implications

As G7 industrialised states, Japan and South Korea are vital to the health of the global economy. Despite their current differences, the fundamentals of Japan-South Korea relations are sound. They share vital common interests in helping to maintain peace and stability in East Asia. South Korean chaebol conglomerates are keen to end the tensions with Japan. In mid-August 2019, President Moon called for talks. The Guam talks are key to reconciliation.

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SYNOPSIS

As Hong Kong’s political crisis deepens, what are the options open to Beijing and what are the priority issues for the Hong Kong leadership?

COMMENTARY

Fear over China’s Growing Control

Hong Kong’s per-capita income used to be 35 times higher than China’s. Now it is five times higher. As China’s economy continues to expand, it will become richer and leave Hong Kong behind.

Fear of Erosion of “Freedoms and Autonomy”

Extremist protestors desecrated Hong Kong’s parliament building (LegCo) and China’s Liaison Office. Many advocated Hong Kong independence, carrying American and British flags.

It would allow for the transfer of criminals to China to face justice. Many Hong Kongers say they do not trust China’s politicised judicial system.

Beijing’s Options

Beijing has at least four options to respond to the Hong Kong crisis.

It has used terms like “terrorism”, and “secession” to describe the violence. Beijing is clearly setting the stage for a more forceful response if the violence and turmoil continues.

Other notable tycoons are the Kwok brothers (Sun Hung Kai Properties), Cheng Yu-Tung (property, services, infrastructure), Liu Chee-Woo (casinos, entertainment), and Stanley Ho (casinos).

Housing Crisis

Western Interference

Beijing rejected the EU statement as “unwarranted interference in China’s internal affairs”. This is a reference to Western imperialism against China in the 19th and 20th centuries.

Implications

However, big firms still prefer Hong Kong, as it has very good connections with other global financial hubs. Singapore, however, is careful not to be seen as profiting from Hong Kong’s plight.

Singapore’s asset management industry is growing very fast: it currently manages S$2.4 trillion in funds. Singapore is one of the largest fund management centres in the world.

About the Author

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(6) Xi-Modi 2019 Summit:

Start of a New Era?

KB Teo

SYNOPSIS

In the 1950s, China-India ties were close. India was among the first states to recognize Mao's new China.

All this changed with the 1962 border war. The summit is aimed at ushering in a new prosperous

Chindia century.

COMMENTARY

The 1950s were the heyday of cordial Sino-Indian relations. In June 1954, Premier Zhou En-Lai visited

New Delhi. The two sides signed a joint statement on the five principles of peaceful coexistence.

This included respect for territorial integrity, non-aggression, non-interference in internal affairs, and

peaceful coexistence. This 1950s entente was epitomized by the popular Hindi slogan

"Hindi Chini Bhai-Bhai" ("Indians/Chinese are brothers").

Border Wars

China and India share a 2,500-mile border. The October 1962 border war was caused by their

dispute over the Aksai Chin and Arunachal Pradesh regions. Aksai Chin lies between the Indian

state of Kashmir and China's Tibet province. China conducts its nuclear testing at Lop Nor, Xinjiang. They also clashed at the Doklam plateau (Sino-Bhutanese border).

China's influence in the Indian sub-continent is rising. Beijing has long-standing ties with Pakistan.

India sees Beijing as intruding into its traditional sphere-of-influence. Since the 1980s, both

countries have rebuilt friendly relations. In 2008, China became India's largest trading partner.

In 2018, bilateral trade hit US$95.5 billion. India suffers from a huge trade deficit of

US$57 billion with China, the largest that India has with any country.

Issues

The first issue is trade. India has repeatedly demanded greater access to China's markets.

Pressure has grown because India suffers from a huge trade deficit of US$57 billion with China.

As a result, Modi's government faces strong domestic pressures.

Two, the battle over telecoms giant Huawei. India is one of the key countries where Huawei wants

to establish its 5G technology. Huawei is a major player in India's smartphone market.

The third issue is Kashmir. In August 2019, India-China tensions rose after New Delhi's move to

revoke the autonomy of Jammu and Kashmir. The two rivals also have a border dispute in Ladakh,

a strategic Buddhist-dominated region within Kashmir. India has also been a vocal critic of China's

Belt and Road global infrastructure program that includes a key project through

Pakistan-administered Kashmir.

Four, border clashes. Besides Ladakh, India and China also have a decades-old dispute over

Arunachal Pradesh, an Indian state bordering Tibet. China still claims about 90,000 sq km of

territory. It is currently under New Delhi's control.

China is competing with India for influence across South Asia. India worries about Beijing’s

initiatives such as the Belt and Road project. This has boosted New Delhi's support for the US-led

Quadrilateral Security Dialogue to counter China's assertive expansionism.

Results

One, President Xi said China is ready to reduce the US$57 billion trade deficit. China is India’s

largest trading partner while India is China's 11th largest trading partner. But India has a much

weaker hand. Its economy is much smaller. China is a major investor in Indian energy and

telecoms projects. About 13,000 Indian students are studying in Chinese schools and universities.

Two, India has concerns about the Regional Comprehensive Economic Partnership (RCEP).

Modi said that a deal should be equitable. President Xi said he would look into India's concerns.

Three, enhancing defence cooperation. Currently, defence cooperation between the two Asian

giants is limited to training and joint exercises. Four, an agreement to fight terrorism.

President Xi called for building strategic mutual trust. He said that the only choice is for the

"Chinese dragon" and "Indian elephant" to “dance together to serve their mutual interests”.

President Xi also called for efforts to raise the level of military exchanges and security cooperation

to enhance mutual trust.

Significance

The positive results of the summit show that China and India are very keen to fully normalise

and boost mutually-beneficial cooperation. For China, improved ties with India would considerably

strengthen its South Asian flank. This would enable Beijing to deal more effectively against

President Trump's Containment Policy. India hopes that its improved ties with Beijing would lessen

China's strategic links with its arch-rival Pakistan. It would also reduce the impact of US trade

protectionism on their economies. The normalisation of China-India relations portends a bright

and prosperous Chindia era.

Implications for Singapore

Improving China-India ties are good for Singapore. They are Singapore's major trade partners.

China is Singapore's largest trading partner. Singapore is China's largest foreign investor.

Singapore is the largest investor in India among the ASEAN countries. India and Singapore have

robust economic and military ties. Singapore was among the first to respond to

PM Modi's "Look East" policy of expanding economic and strategic ties in Southeast Asia.

This helps India to strengthen its standing as a regional power.

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(7) Tensions in the South China Sea

Synopsis

Tensions in the South China Sea (SCS) have somewhat abated but the latent flashpoint remains. In mid-October 2018, a near collision took place between an American and Chinese warship. The US has attacked Beijing’s expansionism. In September 2018, Japan conducted its first-ever submarine drills in the waters. If the dispute escalates, ASEAN will not be able to avoid the negative fallout.

Commentary

DESPITE PROTESTS from China to the 2016 international arbitral ruling against its territorial claim, tensions in the South China Sea have been somewhat abating. But the South China Sea waters remain a flashpoint. In mid-October 2018, a near collision took place between the USS Decatur and the Chinese warship the Lanzhou.

The Decatur was conducting a Freedom of Navigation Operation (FONOP), asserting the right of free passage through international waterways. The Lanzhou was asserting Beijing’s sovereignty claim over the South China Sea. In a speech at the Hudson Institute on 4 October 2018, US Vice President Mike Pence launched a ferocious attack against Beijing’s foreign policy of “authoritarian expansion” and “intimidation”.

Assessing the Powers’ Influence over SCS

The overarching dominant actors influencing the state of peace and tensions in the South China Sea are China and the United States. Japan, a regional power, is emerging to be a player as well given Tokyo’s concern for its economic lifeline being affected by tensions in the regional waters.

What are the goals of these three players in the South China Sea?

China’s Game

China’s goal is to gain dominance of the South China Sea. This would give it two advantages. One, control over the vast oil, gas, and fisheries resources there. This would help to boost China’s annual economic growth rate, which has slowed from 10% (after Deng Xiaoping’s Open Door Policy 40 years ago) to the current 6.5%. An estimated one-third of annual global shipping passes through the South China Sea.

Two, it would restrict other rival powers’ access to the South China Sea. Since 2005, Beijing has been unilaterally “militarizing the islands” in the Sea: placing long-range warplanes and missiles. President Xi appears to see the South China Sea as a “core interest” of China, as in the cases of Taiwan, Xinjiang and Tibet.

In June 2018, President Xi told visiting US Defence Secretary Jim Mattis that China would not “withdraw even one inch from its ancestral land”. In effect, Beijing has formulated an Asian “Monroe Doctrine”. It is part of President Xi Jinping’s 2013 “China Dream”, which called for the “great rejuvenation of the Chinese nation”.

Xi’s Muscle Flexing?

Xi has repeatedly exhorted the military to be ready “to fight and win wars under modern conditions”. This is a reference to Beijing’s memories of China’s “Century of Humiliation” (1839-1949).

Xi sees Washington as trying to contain China’s rise: the US has encircled China with its ring of alliances in Japan, South Korea, and the Philippines. China is keen to have good relations with the United States. Speaking at the November 2018 Canton Trade Fair, President Xi said that China would open up more for imports. A similar statement was made by Vice President Wang Qisan during his visit to Singapore in early November 2018.

In November 2018, China and the US resumed high-level talks, ahead of the East Asia Summit (EAS) in Singapore, which concluded last week. Xi and President Trump met at the G20 Summit in Argentina in early-December 2018. While they huddled over their trade dispute, the South China Sea did not seem to have featured in their talks.

Japan’s Growing Interest

Tokyo has no claim over the South China Sea. But Japan is deeply concerned about China’s behaviour in the waters. In November 2014, Beijing had unilaterally declared an Area Defence Identification Zone (ADIZ) over the East China Sea.

All of Japan’s oil and gas imports pass through the South China Sea and the Malacca Strait. Chinese control of the South China Sea would threaten Japan’s economic lifeline. This is clearly unacceptable to Tokyo. There is a growing strategic rivalry between Japan and China. They have a maritime territorial dispute over the Senkakus/Diaoyus in the East China Sea.

The US Getting Tougher?

Washington is strongly opposed to Beijing’s claim over the South China Sea. In 2017, President Trump called China a “rival”, and a “peer competitor”. The US would not tolerate Beijing seeking hegemony. Defence Secretary Jim Mattis, speaking at the Shangri-La Dialogue in Singapore in June 2018, had demanded that Beijing stopped the militarisation of the South China Sea.

He warned Beijing of unspecified “severe consequences”. Admiral Philip S. Davidson (Chief, Pacific Command) told the US Congress in October 2018 that the US had lost control of the South China Sea, short of war with China.

Implications: The Makings of a New Cold War?

China has taken a tough but pragmatic approach to the South China Sea disputes. There are no signs that Beijing would give up its claim. The result is a new Cold War between the two largest economies in the world.

At the just-concluded 33rd ASEAN Summit in Singapore, the South China Sea disputes were discussed. Prime Minister Lee Hsien Loong hoped that China-US relations would remain stable. ASEAN does not want to choose between the two superpowers.

China and the US are the two biggest trading partners of the ASEAN states. But if Beijing and Washington escalate their conflict, ASEAN would not be able to escape the negative fallout: “When two elephants fight, the grass gets trampled”.

At the just-ended APEC Summit that followed in Papua New Guinea, China-US differences on trade and security were again on display. The APEC Summit ended without a formal leaders’ statement due to China-US division over trade. But it is not just about trade. The US sees Beijing as trying to establish a Pax Sinica, to replace the existing Pax Americana. The result could be more than a new Cold War.

----------------------------------------------------------------------------------------------------------------------------------------About the Author

KB Teo is a former diplomat who had previously served in the Singapore Embassy in Cairo and had worked in the private sector in banking. He graduated with a PhD in International Relations from the National University of Singapore.

APAC-One (AsiaPacific Security)

Friday 10 May 2019

Articles (International Relations)

Hong Kong’s 2019 Turmoil: A Dismal Future?

SYNOPSIS

COMMENTARY

Fear over China’s Growing Control

Fear of Erosion of “Freedoms and Autonomy”

Beijing’s Options

Housing Crisis

Western Interference

Implications

About the Author

(5)

SYNOPSIS

COMMENTARY

Fear over China’s Growing Control

Fear of Erosion of “Freedoms and Autonomy”

Beijing’s Options

Housing Crisis

Western Interference

Implications

About the Author

Synopsis

Commentary

Assessing the Powers’ Influence over SCS

Implications: The Makings of a New Cold War?

About Me