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The Comparison of China and US Strategies in South China Sea

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Globalization has also played a vital role in integrating the world and economic dependence of countries. For instance, in case of Sino-US they are dependent upon each other in economic sector. They avoid direct confrontation with each other. They have experienced period of good and bad relations and the distrust is major cause of conflict between the two parties. The high diplomatic visits in 1960s reduced the tension between Sino-US relations and marked beginning of new chapter of good relations. US is not ignorant about the growing role of China in global politics especially within in Asia-Pacific region. This research focuses on Sino-US rivalry over South China Sea; the comparison of strategies of both and how they have developed overlapping interests in Asia-pacific region. Usually states have good or bad relations with each other, but in this case what is unique to note is that they (Sino-China relations) had phases of cordial and strained relations. As a consequence, they keep check on each other power to safeguard their area of influence in the world by using military, economic and political means.

This paper is divided into five main parts. The first one deals with the historical background of conflictual relations between US and China. Second section concerns with the significance of South China Sea in Asia Pacific Region. Third section is about Chinese strategies over South China Sea. Fourth section explains the strategies of USA in the Asia Pacific region. Fifth section is mainly a comparative analysis of their strategies which seems to be influenced or derived from offensive and defensive realism. Last and sixth section deals with conclusion and recommendation to resolve this conflict in an effective manner.

Background

It is believed that the rivalry between US and China is not a current phenomenon. It has its roots that can be traced back since the inception of PRC. The US initial reluctance to recognize the communist China is often quoted as one of the major impediment that laid the very foundation of strained relations from the beginning. Furthermore, China remained suspicious of US true intentions as they have been deceptive in their policies especially towards China and their increasing economic growth. Similarly, US support for nationalist against PRC proved to be another obstacle that tarnished the relations between China and US until Nixon came to power in US during 1960s; this paved the path in normalizing relation with China in form of various confidence building measures.

Open policy towards rest of world can be safely called as one of the most defining moment for the future of China that was envisaged by Deng Xiaoping. Basically, Deng’s policy involved a drastic shift from an Isolationist policy of Communist China to more of an open system that embraced the changes of the modern world. The policy of openness has helped to change the fate of China from an internally conservative and weak state to a leading economic power of the Asia Pacific region.

Significance of South China Sea

South China Sea basically consists of four groups of islands. First, the Pratas Islands are (located 200 miles to southwest of Hong Kong) claimed by both China and Taiwan. Second, although the Parcels Islands are located in the northern part of the South China Sea and near from the coastlines of Vietnam and China (Hainan), however, these islands are claimed by China, Vietnam and Taiwan. On the other hand, China took control of Paracels in 1974, by using the means of force from South Vietnamese troops. It is a main reason of conflict between China and Vietnam. Fourth, Saparatly Islands (are located in the centre of the South China Sea. to the north of the island of Borneo [which comprises Brunei Darussalam and the east Malaysian States of Sarawak and Sabah]. The east of Viet Nam, and west of the Philippines and south of Hainan) are claimed in their entirety by China, Taiwan, and Vietnam, while some islands and other features are claimed by Malaysia and the Philippines. Brunei has established a maritime zone that overlaps a southern reef, but it has not made any formal claim.  Therefore, the intense competition among states has become a main source of concern and even potential conflict as it consists of cluster of small islands that have distributed claims by almost all ASEAN states.

United Nations Convention on the Law of the Sea

UNCLOS provided a framework in 1982 on how to use oceans that came into force on 1994. It was ratified by China, Vietnam, Malaysia, Philippines and Brunei except for Taiwan as it was not recognized as a state. It is a convention related to laws of sea, navigation, fishery and using natural resources for energy production in form of hydrocarbons.

(UNCLOS) establishes a legal framework to govern all uses of the oceans. UNCLOS was adopted in 1982 after nine years of negotiations. It entered into force in 1994 and has been almost universally accepted. China, Vietnam, Malaysia, Philippines and Brunei are all parties are signatory of UNCLOS. Taiwan is not able to ratify UNCLOS because it is not recognized as a state by the United Nations, but it has taken steps to bring its domestic legislation into conformity with UNCLOS.

Chinese Strategies for South China Sea

Delay Strategy

In Deng view, China always pursued a policy of delay to respond to any foreign stimulus. The application of this policy can also be seen in implementation processes of the final choices or decision. Since the policy of delay is all about concealment of China’s true intentions to prevent any kind of escalation and stresses the maintenance of a cooperative policy with rest of the world. As a result, it helps to accelerate the development and prosperity of China in term of utilizing economic means to the fullest.

Politics of claims and counter claims

South China Sea had been one of the most contentious areas of world. Most of the states involved in this area claim certain area, while rest declares their open claims on the other part in Asia –Pacific region. The policy of claims and counter claims is the main source of conflict. Despite many efforts of ASEAN and regional players, the South China region continues to be matter of contention and a major impediment in bringing peace and stability in the region.

Military means

Although the nature of warfare has changed to a large extent, however, the significance of military means cannot be denied in contemporary world. For instance, the defense budget of countries has increased from 1980s to 1990s in accordance with the technological advances and revolutionaries in weapons. The military agreements between US and Taiwan and US and Japan in Guam is another example that established military buildup against Chinese expansion in the region to secure an array of states from any potential Chinese attack. According to Andrew Erickson, China is also increasing its defense budget to secure its territory of East and South China seas and their airspace above this area. This implies that the reliance of states on traditional means or military continues to play an important role in providing security to states.

US Strategies for South China Sea

The term pivot was coined by Leon Panetta, who is US secretary of defense. He had used the term to explain the adversarial interactions between rising and falling power. In this context, a rising power refers to a potential power that is China in this paper and falling power is an entity that confronts challenges to maintain its power. So, US can safely be claimed as a state falling in the latter category. Theoretically speaking, offensive realism most appropriately explains the US policy behavior in South China Sea, their attempts to undermine the Chinese potential hegemonic power in the Asia-Pacific is a proof of that. As per offensive realism, a hegemonic power cannot stand any rising power. It further explains the inevitability for two hegemonic powers to co-exist with each other that can be seen in case of US and China rivalry over South China Sea. Although offensive realism is presented by John Mearsheimer, but contribution of Organski and Gilpin cannot be ignored. Similarly, Chinese strategy can be understood with the help of defensive realism that concerns with increase of power to secure the interests from any threat or foreign intervention that is often taken as offence by US. Consequently, it results in security dilemma that leads to a never ending game of power politics

Generally speaking, USA National Strategy for South China Sea consists of five main points. First deals with their official stance over South China Sea. Second one is about legality of the nine-dash line claim of China. Third one concerns with freedom of navigation in South China Sea and fifth deals with supporting Philippines in their arbitration case against China. The United States developed a policy document—a National Strategy for the South China Sea (NSSCS)—that contains:

An official position regarding the nature of the disputed land features in the SCS;

A legal memorandum concerning U.S. military activities in the SCS, including military surveys;

An opinion on the legality of China’s “nine-dash line” claim;

An affirmation of U.S. “freedom of navigation” operations in the SCS; and

A statement of support for the Philippines in its arbitration case against China

In 2010, the Obama administration declared what was then referred to as the “US pivot to Asia,” that consists of multi-faceted strategy of US policy in the Asia pacific region. It includes shift of 60% of the United States naval assets to the pacific region reversing a policy that had been exercised in Europe since the Second World War. In November 2011, US president Barrack Obama announced in his speech to the rotational stationing in the Australian city of Darwin in front of 2,000 marines. The strategy was supposed to go beyond the military means. The Obama administration began to define its non-military aspects. These included an emphasis on the trans-pacific partnership (TPP), a club of high-performing economies in the region intended to push economic agenda beyond the pace set by the Asia pacific economic cooperation (APEC).

Support of Arbitration cases against China

The United States reluctance to remain merely an observer in the arbitration case filed by the Philippines against China is evident and a matter of their interest. Since arbitration in favor of the Philippines can play a vital role in discrediting the nine-dash line that is of utmost significance to China. Similarly, US pressurize other states in South East Asia, for example, Vietnam, Malaysia, Brunei, Indonesia to support Philippines arbitration request against China. The main purpose of this pressure is to undermine the power of China as per UNCLOS that encourages states to resolve disputes by peaceful means and prohibits use of force.

The United States Official Stance in 2011

In 2011, Hilary Clinton believed that US policy towards South East Asia is not limited, but it is multifaceted policy that includes six main issue areas namely; bilateral security alliances, involving international organizations, expanding trade, providing military assistance, promoting human rights and democratic values. According to my understanding initially US used the pretext of war on terrorism to shift their attention towards Asia-Pacific region by announcing and diverting all their efforts and resources to secure South East Asia from potential threat of terrorism and providing security to region. Alongside they made military agreements with countries especially with Taiwan and Japan .US attempts to exploit the grievances of countries against China for the sake of undermining Chinese power within the region cannot be denied either. The security umbrella to weak states against any potential attack from China is one of the many examples; however, the shift of policy towards efficient utilization of both means (force and flexible measures) to accommodate the concern of china is evident in American policy.

It also reflects in President Obama’s long-held view, expressed even before his election, that the “center of gravity in this world is shifting Towards Asia,” requiring the U.S. to “look east” and “take a more active role,” as well as his identity as “America’s first Pacific president.” Obama in his election campaign expressed that attention of world is diverting to Asia-Pacific region.

Pentagon has adopted an Air-Sea Battle (ASB) strategy. Its main purpose was to restore the ability of the US to provide security to its allies in the region and to the international order (including freedom of navigation), and maintenance of status as the world power. ASB explains that, in case of conflict with China. American forces will attack on the Chinese mainland to neutralize the A2/AD weapon systems that is, an escalation to total war. It involves a coordinated attack using bombing, missile and cyber-attacks, and space weapons among others.

On the contrary, skeptics are of the view that use of force in form of ASB strategy (Air-Sea Battle), support of allies in region by US and counter attacks against Chinese aggressive policies over South China on the principle of collective security would be a mistake, because both states (US and China) are nuclear and any miscalculation or overestimation could lead to escalation or war in the worst case scenario. Therefore, there is a need to exhaust diplomatic means to resolve matters related to South China Sea and myriad of other issues between two states.

Overview of US policy

In my understanding, US is pursuing a policy of ‘smart diplomacy’. In simple words, smart diplomacy entails the effective utilization or use of force along with  economic means to keep a firm check on Chinese potentials capability to challenge United States hegemony in three main aspects;  economic, military and political spheres. Although China and US are economically depended upon each other, both continues to have a clash over the South China Sea.

The two main questions that emerge from this research are; can the rivalry between US and China continue and can it transform in a beginning of a new cold war? Can China rise peacefully without any conflict with US? First off, it would be implausible to say that it is a start of new cold war as the conditions and scenarios ware quite different during cold war between USA and Soviet Union. They were not economically integrated as US and China is in the contemporary times. Second, cold war was more of power rivalry that had not much to do with economic ties. During cold war, USA and Soviet Union were two states having different ideologies. US were a capitalist state that believed in free trade. On the hand USSR was a socialist state that advocated nationalist economy under the government control. One can say it was clash of ideologies between two powers. It was more about acquiring more territory to increase their sphere of influence in global politics and becoming sole power of world. On the other hand, the conflict between China and US cannot be equated to cold war between US and USSR. Since the rise of USSR was not peaceful, it was attained by Stalin expansionist policies; whereas China’s rise was not only peaceful, but it took time to become a potential power of the world.

Theoretical explanation

According to offensive realism, states acquire hegemony to dominate the rest of world and prevent the emergence of any potential power to share their superiority in the world politics.  Defensive realist assert that a state cannot lead to conflict as state try to increase power to provide or ensure security to state instead of dominating the world or becoming a hegemon.

According defensive realist, states try to maintain status quo and ensure their security instead of direct confrontation that would make them vulnerable and expose their weaknesses. In case of Sino- US conflict, China pursues a policy of non- confrontation, but it is often considered to be an offence by others states in the region. In this paper, Chinese defensive policies are taken as offensive by US and they try to limit their power in region and at global level. US on the other hand, pursues a policy of an offensive realist that curtails a rising power from emerging in terms of any compromise or tolerance to competition or sharing of the power as it would undermine their hegemony and their status of  sole power in global politics.

Conclusion

According to offensive realist, the conflict between US and China would eventually lead to a complex scenario as hegemonic power cannot co-exist peacefully together. The aim of hegemonic power is to curtail potential power from rising by use of economic, military and all available or possible means. Therefore, it would be safe to claim that US is following a policy of offensive realism to suppress China’s growing power in form of exploiting the countries in Asia Pacific who have resentment and envious attitude against China. This implies that the main aim of American policies is to limit Chinese ever increasing power especially their economic growth.

On the other hand, China is hesitating to declare its policy for coming years over South China Sea and in Asia-Pacific region. In my understanding, it is yet to be seen if or whether China employs military means or force to tackle the issues with other states within region, especially, with Taiwan and Japan or to predict the future of Asia-pacific region and outcome of the conflict between US and China.

Recommendations

1-Global institutions can help them to bridge the gap between US and China by promoting cooperation

2-Engagement in a dialogue process can help to reduce the tension between the two states (US and China)

4-Chinese perspective should be projected equally in global arena.

5-US should not involve herself in to the regional politics, rather china should be given adequate time to sort out their issues themselves.

6-In case of war like situation, US should encourage the role of global institutions rather than indulging into conflict unilaterally.

7-China should focus on building and strengthening good relations with its neighbors and with international community to minimize chances of conflict or escalation of conflict in the region or at the global level.

Mehwish Akram holds masters degree in International Relations and currently doing M Phil in Political Science. Her areas of interest are Democracy, Political theory and Environmental politics .

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A brief history of Sino-Australian political relations from 1949 to 2020

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Former prime minister Malcolm Turnbull and Mr Xi met for a bilateral talk during the G20 Forum in Hangzhou.(Supplied: Twitter)

To understand what is happening now requires an understanding of history. The recent Sino-Australian relations have been like a roller coaster ride, which needs to date back to history at least from 1949.

There are several characteristics worth mentioning in Sino-Australian relations. First, there have been diplomatic ups-and-downs between the two governments due to the divergence of the two countries’ political systems and ideology. Second, by comparison, bilateral ties have generally been improving for decades due to the reciprocal economic complementarities and cooperation despite the recent trade disputes. Third, Sino-Australian relations “has become more unequal with the passage of time” due to China’s rise. Fourth, the influence of the US on the foreign policy of Australia cannot be underestimated. In terms of structure, this part will be divided into four periods, posited on the founding of the People’s Republic of China in 1949, the establishment of diplomatic relations in 1972, the outbreak of Tiananmen Incident in 1989 and the recent decline of bilateral relations starting from 2015 with additional illustration of the influence of the US in Australian foreign policy.

The Pre-recognition politicial relations from 1949 to 1971

Graeme Dobell argues, “China has always loomed in the Australian consciousness”, possibly because Australia is geographically located in the Asia Pacific and surrounded by Asian countries with a significant number of ethnic Chinese. Historically, China was viewed in Australia as a threat, namely, “Yellow Peril”. The notion is a color-metaphor, full of racism. East Asians, especially the ethnic Chinese, are an existential hazard to other countries as immigrants.  Professor Gina Marchetti argues that

the rooted in medieval fears of Genghis Khan and Mongolian invasions of Europe, the yellow peril combines racist terrors of alien cultures, sexual anxieties, and the belief that the West will be overpowered and enveloped by the irresistible, dark, occult forces of the east.

In Australia, as a Western country located away from the West,  its Immigration Restriction Act of 1901, infamous as the White Australia Policy, was designed to prohibit Chinese settlers. “Fear of China and hostility to the Chinese immigrants were factors” that supported the Federation of Australia, and both factors existed for decades. The federating of Australia was the process by which the sixBritish colonies consented to unite and become the Commonwealth of Australia. Liberal Prime Minister Harold Holt formally abolished the White Australia Policy in 1966 with the introduction of the Migration Act 1966. By legislating legal equality among European and non-European migrants, this new Act has opened a new immigration history era. It has been the most crucial step in forminga multicultural society in Australia.

However, Australia’s unique geographic location and huge disparity of population between Australia and China have decided that the natural insecurity of Australia as a nation, for that linguistically, historically and intellectually, Australian ancestry originates from Europe, and its vital economic partner and most crucial military ally is the United States, both far away from Australia. Furthermore, Gyngell argues there is always “fear of abandonment” in Australian foreign policy. Likewise, former Australian Minister for Foreign Affairs Gareth Evans and former Australian diplomat Bruce Grant confirm that

the evolution of Australian foreign policy needs to be assessed against a background in Australian politics of persistent anxiety about a threat from Asia: sometimes vague and undifferentiated, sometimes specific, but always there.

In this period, China was viewed in Australia as a threat, namely, the aforementioned “Yellow Peril” and “Red Menace”. Arguably, the Red Menace has always existed in the Australian society and the government until now,which is a term applied during the Cold War for describing a nation that faces the increasing authoritarian threat of communism. This term was used to refer to the Soviet Union, while nowadays, it has been employed to mean Communist China. Besides, the difference of scare only reflects the extent to which the Australian government fears the Chinese Communist Party. From 1949 to 1972, especially when Australian and Chinese troops participated in the Korean War as rivals and later the Cultural Revolution was launched in China, Sino-Australian relations were hostile to each other due to the fact they were both subordinated to different political and ideological camps: USSR-led communism and the United Stated-led capitalism.

The steady development of Sino-Australian political relations from 1972 to 1989

During this period, Sino-Australian relations encountered the most drastic ups and downs the bilateral ties have ever experienced. In 1972, the Whitlam Labor government’s election marked the most radical turning point in Sino-Australian history by establishing diplomatic relations with China in December of the same year. Despite the endeavor, Whitlam made, this new chapter of the bilateral relations is mainly dependent on the change of  China Policy from the strongest ally of Australia, the United States. More concretely, in the early 1970s, the American army was withdrawn from Vietnam, indirectly ending the military collisions with the People’s Liberation Army.At the beginning of 1972, Nixon has his dramatic visit to Beijing and Shanghai.

From 1972 to 1989, the bilateral relations were at the stage of steady development. Partly, the positive Sino-Australian relations can be attributed to the same view of opposing the Soviet threat, which facilitated the Sino-Australian cooperation. More specifically, in July 1973, the first Sino-Australian trade agreement was signed by the Chinese government and the Whitlam government. The visit of Whitlam to Beijing in late 1973 culminated in a joint communique, concurring with the promotion of views exchanges among the Sino-Australian officials. In 1976, during the period of the Coalition-led Fraser government, “the Australian Parliament even stood in silence in the honor” of Mao Zedong, when Mao passed away. In 1978, the Australia-China Council was built by the Coalition-led Fraser government to facilitate bilateral relations.

Furthermore, in the 1980s, with the economic reform of Deng Xiaoping and the incrementally frequent visits of Sino-Australian senior leaders, the Australian government saw the economic opportunities China may bring, and the Chinese government also realized the Chinese modernization might benefit from the support of Australia. Mackerras argues that “the mid-1980s saw the relationship reach a peak”. In 1984, the ALP-led Hawke government launched the China Action Plan, “an overall economic program towards China”, aiming to deepen bilateral economic cooperation. In 1985, Hawke told the Australian parliament that a ‘special relationship’ between the two countries was forming.

The realistic Sino-Australian political relations from 1990 to 2015

The outbreak of the Tiananmen Incident in 1989 was a devastating turnaround in Sino-Australian relations, bringing the vigorous relations to a sudden stop. To some extent, Deng’s economic reform gave Australia and the Western world an illusion that China tried to become more Western. Contrariwise, the Incident shattered misapprehension of the special relationship between the two countries and has pushed human rights to one of the central issues that needs to be addressed in the bilateral agenda until now. It is noteworthy that the negative influence of the Tiananmen Incident was in all domains. Antagonized by the Australian broadcasting of violence in Beijing, the Australian people, including politicians, business people, scholars and religious figures, unanimously condemned Beijing. All aspects of Sino-Australian relations were affected at varying levels.

Arguably, after the Tiananmen Incident, the attitudes of the Australian government has changed to be more pragmatic and national-interest-driven. Wang argues that  the reassessment of Sino-Australian relations “did not lead to a fundamental policy shift” in Canberra “and human rights were not emphasized to the detriment of Australia’s economic interests”. In 1993, as the first Australian Prime Minister after the Incident, Keating visited China, breaking the diplomatic ice, partly because he needed to push wool exports to China.

Noticeably, from 1989 to 2015, China and the comparison of world powers experienced earthshaking changes. The hazards of the Asian Financial Crisis in 1998 and the Global Financial Crisis in 2008 lead to the economic meltdown of some Southeastern countries and the relative decline of the West. Bearing the two Crises, China has benefited enormously, even the most, from joining the WTO and other regional and global economic organizations as a member of economic globalization. At the end of 2010, China surpassed Japan and has become the second-biggest global economy, indicating that the global economic center has gradually transferred to East Asia. During this period, Hong Kong and Macao were subsequently handed over to China, enhancing China’s confidence. There is no doubt that bilateral relations have been increasingly asymmetrical during this time, leading to the concept of equal partners less possible.

From 1989 to 2015, facing China’s economic rise, on the one hand, the Australian government and business took advantage of the historical opportunities and have been more engaged in the Chinese economy. For instance, the Coalition-led Howard government was a firm“ supporter for China’s accession to the WTO” to share better Chinese economic growth. In 2014, the Coalition-led Abbott government and the Chinese government started to portray the bilateral relations as a “comprehensive strategic partnership” due to the incremental and robust trade relations and more frequent communication between top leaders of the two sides. On the other hand, due to the different political ideologies and systems, and the gradually widening disparity of the two countries, there have been strong concerns in the Australian government that China may leverage trade over Australia. Foot  indicates the sense of uncertainty and insecurity in Canberra that

Has Beijing worked to support the dominant norms of the international order, or has it striven to overturn them? Has it ever deserved to be called “responsible power”, a term defined by the dominant states, or has it acted irresponsibly? To place these questions more explicitly within an international relations framework, has China shown itself since 1949, and more especially during the period of reform and opening since 1979, as capable of be socialized into supporting global norms? Or, as realists would predict, have there been signs that its rising power over the past two decades has generated new tensions in the international system? Looking more to the future, what kind challenge does its enhanced capabilities pose to the status quo?

Despite the dilemma that the Australian government has to face and the political ups and downs between the two countries during this period, “the growing sense of independence in formulating Australia’s policy towards China, as well as the increasing saliency of trade considerations in implementing such policy, has transcended political and inter-administration divides”. Thus, to some extent, although there were still ups and downs during this period from the ALP-led Hawke government to the Coalition-led Abbott government in 2015, the bilateral relations “appears to have become less uncertain” and matured. Arguably, the Australian government started to view China either without unjustified fear as they had before 1972, or super optimism as they had before 1989.

In fact, the differences may only exist in the style of how different administrations approach China. For instance, the first Mandarin-speaking Prime Minister Kevin Rudd introduced a concept called “Zhengyou in Chinese that means to voice different opinions to benefit the Chinese leadership. By comparison, another Prime Minister John Howard preferred to deal with China on more practical issues.

The increasingly strained bilateral political relations from 2016 to 2020

Bilateral relations have deteriorated since the exacerbation of territorial disputes in the South China Sea in 2016. The Australian government criticized China for not abiding by the South China Sea Arbitration, a joint statement with Japan and the US. In response, the Chinese government expressed its strong displeasure through its state-owned media the Global Times, denouncing Australia as a “paper cat”. Currently, the Australian government is concerned that Chinese activity in the South China Sea may threaten Asia pacific security, thus influencing Australian sovereignty and security.

More importantly, Australia’s closest and strongest ally, the US, initiated a trade war with China at the beginning of 2018.  Since Australia often follows American foreign policy, the increasingly intense Sino-American relations have negatively affected Sino-Australian relations. In the same year, Sino-Australian ties soured further when Australia became the first country to officially ban China’s Huawei from its 5G network. A similar prohibition on Huawei was later executed in the US in 2019.

In terms of domestic politics, there are continuously more negative speeches about China.Australian politician Andrew Hastie urges urged the Australian government and public to realistically recognize the unprecedented democratic conviction and security threat from China. He even goes “as far as to compare the Western tolerance of China’s rise with the appeasement of Nazi Germany”. Hamilton argues Chinese infiltration in Australia is a “silent invasion”. The Minister for Home Affairs Peter Dutton, one of most senior officers in the Liberal-Coalition-led Morrison administration, condemned China’s interference and cyber hacks in Australia and claimed that the policies of the CCP are incompatible with Australian values.

2020 may have been the most turbulent year for Sino-Australian relations so far. Facing the once-a-century Covid-19 pandemic, Beijing has taken trade actions against a series of Australian goods such as barley, cattle, wine, cotton and coal after the Morrison administration advocated an independent Covid-19 inquiry without consulting Beijing first.

The tension also extended to people-to-people exchange. Canberra has warned its residents against arbitrary arrest in China. In contrast, Beijing has cautioned against studying and visiting Australia due to purportedly increasing racism and discrimination against people of Chinese and Asian descent. At the end of 2020, Morrison reacted furiously and demanded an apology from Beijing to an image tweeted by a Chinese diplomat showing an Australian soldier holding a knife to an Afghan child’s throat, which has further shadowed current and future relations.

Meanwhile, despite the global pandemic, there is increasing scrutiny in Australian media, including of the Hong Kong anti-extradition bill, the Xinjiang re-education camp, and China’s political donation to Australian political parties, Chinese spy students, the fight between Hong Kong and Chinese students in Australia, the defection of Wang Liqiang, Huawei backdoor suspicion and the detention of Cheng Lei and Yang Hengjun. According to the Lowy Institute poll in 2019, Australians’s trust in China to ‘act responsibly’ has dropped to 32 %, a 20-point decline from 2018. In 2020, trust in China has deteriorated to 23%, the lowest point in the Poll’s history.

Whatever, if any, evidence underpins these narratives or not, they seem to point out one reality: the plummeting state of Sino-Australian relations. Geoff Raby, former Australian Ambassador to China, even argues that Sino-Australian relations are at their lowest ebb since 1972.It may be controversial to argue that the current bilateral relations are worse than the relations in 1989, but it is appropriate to point out the reality that the Sino-Australian relations have been incrementally damaged. The Australian government’s dilemma is the overreliance of the Australian trade upon China and the exacerbated political disagreement. Jonathan Pearlman argues that “security and economics are tugging Canberra in different directions, as are its values and its interests”.

The Influence of the United States in Australian foreign policy

Undoubtedly, the Australian foreign policy has been influenced by the American government, as Australia has been called the “fifty-first state” of the US. Australia and the US have the same language background, similar European ancestry, similar political systems and strong economic ties. More importantly, in 1951, Canberra and Washington agreed on the Australia, New Zealand and United States Security Treaty (ANZUS), regulating that “an attack on either country’s armed forces or territory in the Pacific area” means “common danger” for the three countries. Since the US abolished its responsibilities to New Zealand due to the disputes of nuclear-armed ships, the ANZUS has become a bilateral treaty between Australia and the US and, separately, between Australia and New Zealand.

Given the American economic and military power around the world and the substantial disparity of Australia-American strengths, it is easy to argue that the ANZUS is the cornerstone of Australian security, and the US is the most important ally of Australia. In fact, Australia followed the US’s leadership through the UN, in the Korean War in 1950, the Vietnam War in 1962, the Afghanistan War in 2001 and the Iraq War in 2003 and recognized the PRC after the Nixon government had changed its China policy. To underpin the above view, Tow and Albinski affirm that the “ANZUS alliance remains Australia’s primary security relationship”. The former Australian diplomat Dr.Alison Broinowski argue that

Australia uncritically and voluntarily imitates its major ally (the United States) and its minor ally (the United Kingdom) in most things, yet lacks the capacity to do them well and the independence to do them differently. Having taken the drug of dependence from birth, Australia seems allied and addicted to it.

Thus, it is easy to question how independent Australia’s foreign policy is, especially its China policy, and argue that Australia does generally imitate the US’s foreign policy. As for the recent downturn of bilateral relations, Geoff Raby, an insider of Australia politics, believes that Canberra has developed policies to push back China’s rise in that the US started regarding China as a strategic competitor.

However, there is some policy flexibility in the Australian government, mainly economic-interests-motivated. To cite an instance, despite the opposition of the US, Australia participated in the China-led Asian Infrastructure Investment Bank in 2015 and leased the Port of Darwin to a Chinese company in the same year. Australia took the position as an outsider in terms of the Sino-American trade war, suggesting the two sides to end the fight to avoid the risks of collateral damage to Australia. Even in the 1950s and 1960s, when the Australian government adopted a hostile attitude towards China, the wheat trade between China and Australia“reached a significant level”.

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The Economic Revival of Japan

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Photo: Jezael Melgoza/ Unsplash

Amidst the uncertainty weaved by the pandemic, the stock markets around the world have shunned the preconceived notions associated to their functionality over the past year. While some sophisticated economies are suffering turmoil at the ensue of new Covid variants, deviant vaccination drives, and resumption of state-wide lockdowns, some of the countries are outright negating the educated forecasts made by seasoned financial experts all over the globe. China stands as a flag-bearer of such reality-defying markets: bagging GDP growth unlike any in the world whilst simultaneously controlling the virus strain in Beijing. Recent to the tally, however, is the quaint nation of Japan that despite being head-to-head with another gruesome wave of Coronavirus, still manages to consistently outperform the hailed champions of the global financial markets.

The 3rd biggest economy in the world astonished the financial gurus when Nikkei 225, Japan’s core stock market Index, soared up steadily over the last few weeks. With a 1.9% hike at the week’s opening on Monday, 15th February, Nikkei 225 Index surpassed the coveted 30000-point threshold after more than three decades. The economic rebound is associated to the export sector picking up the pace after a sluggish performance last year. The country still wrestles with the throttle of the pandemic; confirming over 1000 Covid-positive patients since November 16th and adding the cumulative death toll of 7056; surpassing the 7000 deaths mark in just under two weeks.

The positive effect, however, dawns since the daily confirmed cases are showing a steady drop; below 1000 daily-confirmed cases in over 4 months. This occurrence is in tandem to the global fall in the Covid cases. Moreover, Japan’s approval of the Covid vaccine produced by Pfizer Inc. is reflecting the recovery in the health condition of the country, especially a lucrative news amidst the second health emergency recently imposed in Tokyo.

Standing at the 30393.13-point mark, Nikkei 225 is expected to follow the bullish trend heavily over the following week as well. According to the measured forecasts, the bourse is optimally headed to strike the 33000-point mark after crossing the milestone of triple decades. This is due to the positive economic outlook in tandem to the rebooting of the global economy which would ultimately enable the export-reliant country. With Japan announcing a 12.7% GDP growth trailing from the recovery of the last quarter of 2020, followed by a hefty government stimulus to prompt domestic consumption, the Japanese bourse is expected to inflate by up to 30% by the end of the first quarter of 2021 in March, presumably speculating a record surge to bypass the highest ever figure of 38915.87-point, posted by Nikkei 225 back in 1989 before being subsequently floored by the notorious price bubble crash.

However, the economic recovery much less a record shattering surge in the market is heavily dependent on some of the core facets. The debacle of the nationalisation of vaccines is evident in Europe and ironically is the crisis posing more of a serious threat than the pandemic itself. Japan’s economic stability would only be possible given the vaccinations are administered effectively and timely with minimal resistance. As Japan still finds it hard to evade the emergency measures introduced in multiple regions, a vaccine crisis could intensify the emergency precautions and lockdowns may even gear into effect. This could seriously undermine the production capabilities of the country which ultimately could carry forward as an element hampering the blooming investor confidence in Japan.

Much to the global conformity of economic peril last year, Japan’s economy also contracted by 4.8% in 2020. The steep contraction, despite being of a greater extent relative to the 3.5% annualised shrinkage in the US economy, was still much controlled than the forecasted 5.3% fall projected by the International Monetary Fund (IMF). However, unlike some of the regional economies, the pandemic-induced decline lasted only for a short span of time before Japan waded through and rallied. Posting a 3% growth in the 4th quarter of 2020, when major economies like Germany and US grappled with recession, Japan steadily made surface.

Now as the pessimism looms in Europe and the political divide worsens in US, Investors are pouring confidence in Japanese equities which provide a solid foundation to the already surging Japanese Indices. This shift in perspective could be gauged by the purview of global stock positions taken by the active equity investors throughout the globe; pouring investments unlike the sceptical position adopted since January. The increasing investor confidence coupled by the improving economic and social health of Japan has proved monumental on the financial charts; despite being in the highs of a heavy stimulus, S&P 500 continues to be outperformed by Nikkei 225, sometimes even falling short by colossal margins to the returns added by the Japanese Index.

Which way the markets would turn and how Japan could sustain the whelming economic recovery depends largely on how Japan deals with Covid and how efficiently it regulates the vaccination drives. Moreover, Japan’s success may be upped the ante by any new misery that might befall on US or Europe that could ultimately drive more confidence and flare to the 3rdlargest economy of the world.

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East Asia

Mongolia-World Bank Group Partnership: Three Decades of Partnering for Prosperity

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It all began exactly thirty years ago. On February 14, 1991, the eve of Tsagaan Sar, Mongolia joined the World Bank Group[1]. This was the period when the country had just gotten on the path of democracy, free market, and openness to the outside world.  Mongolia rightly took pride in this transition but, at the same time, it presented enormous challenges, including a sharp economic contraction. Following the cut of external aid, the hardship was felt by Mongolians every day. Long lines were visible on every street corner for rationed food.

The World Bank’s support was quick to arrive. By the end of 1991, the first project of $30 million was already signed to help rehabilitate production in key sectors such as agriculture, energy and transport. The World Bank also carried out a comprehensive macroeconomic analysis, zooming in on the immediate challenges of runaway inflation and falling output.

Since these early days three decades ago, the World Bank Group (WBG) has accompanied Mongolia’s strong recovery and development, culminating in the country’s graduation from the International Development Association (IDA) – the WBG’s lending window for low income countries – last year. Mongolia’s economy has expanded significantly over this period, with GDP per capita rising more than fourfold from $1,072 in 1991 to $4,339 in 2019. But growth has been volatile. Like many other resource-rich countries in the world, Mongolia experienced persistent boom-and-bust cycles. Economic diversification remains critical to generate productive jobs, especially for the young. People’s living standards have improved, but growth did not not generate shared prosperity for all. Mongolian citizens expect their government to deliver quality education and health services, and provide for a clean and safe living environment. Their aspirations have not yet been fully realized.

Through good and difficult times, the WBG has remained a steadfast partner of Mongolia. Our budget support operations helped Mongolia restore macroeconomic stability and lay the foundations for inclusive growth. Our investments contributed to economic development in both mining and non-mining sectors, improving people’s livelihoods, and addressing environment and climate challenges. A total of $1.28 billion World Bank financing has been committed to Mongolia for these years. The WBG’s private sector arms—the International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA)—have also been active in supporting private investments.

The investments have helped improve people’s livelihoods across the country. In the energy sector, we supported electricity access to over 100,000 rural and herder families providing them with portable solar panels in the 2000s. In the early 2000s, the World Bank telecommunications project helped all 360 soums in Mongolia gain access to modern phone and internet services. To help herders mitigate natural disaster risks, we supported the world’s first index-based livestock insurance system in Mongolia. To improve governance, we helped revamp the statistical system in Mongolia to match international standards to inform decision making, and empowered citizens to make their voice heard on public expenditure allocations at local levels. IFC financed Mongolia’s first utility-scale windfarm for the country and supported reforms to increase access to finance for SMEs through enabling movable collateral.   

Most recently, in the face of the COVID-19 pandemic, the WBG quickly mobilized over $60 million to support the relief and stimulus measures for saving lives, protecting the poor and vulnerable, and ensuring sustainability of businesses and jobs. These resources are being invested for the most essential medical and diagnostic equipment in three tertiary hospitals, nine district hospitals of the capital city and 21 aimags, personal protective equipment for frontline health workers, and training for medical staff. A new project, which would finance the vaccination of about 60 percent of Mongolians has just been approved. The Bank is also financing the temporary relief of social insurance contribution for over 120,000 self-employed workers including 72,000 women and around 150,000 workers employed by 18,000 firms affected by COVID-19. Bank support has also benefited approximately 1.19 million children through the top-up payments to the government’s Child Money Program.

After thirty years of partnership with the World Bank Group, Mongolia has become a lower-middle-income country and its vision is to become by 2050 a high-income country with high levels of human development, better quality of life, a diversified economy, and good governance. This is an aspiration we will continue to support. To turn it into reality will be challenging. The first step will be to gradually phase out short-term relief measures and return to the important agenda of structural reforms which are needed to rekindle growth and make it sustainable and inclusive. Over the medium-term, Mongolia will have to contend with the growing risks associated with climate change, and the challenges this will bring to the structure of its economy. And it will need to offer its youth the perspective of productive, well-paying jobs, to retain the country’s talents at home.

The WBG is honored to have been Mongolia’s trusted partner over the past thirty years. We are confident that our partnership will continue and further strengthen in the decades ahead, rain or shine.

 [1] Mongolia joined the International Bank for Reconstruction and Development (IBRD), International Development Association (IDA), the International Finance Corporation (IFC), and International Centre for Settlement of Investment Disputes (ICSID) in 1991; and Multilateral Investment Guarantee Agency (MIGA) in 1999.  All these organizations together known as the World Bank Group.

World Bank

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