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The rebellion in Hong Kong and its geopolitical effects

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The rebellion in Hong Kong is more complex and politically relevant than we may think, both nationally and internationally.

In the elections held on last September in the former British colony, as many as eight openly pro-independence representatives were elected who, at the first meeting, shouted hate phrases against the People’s Republic of China and expressed clear rejection of its specific sovereignty.

The “students” and the other participants in the protests immediately attacked  police stations and then closed the main tunnel that connects the island of Hong Kong with the rest of the former British colony’s territory. Finally ,in Wanchai’s Golden Bauhinia Square – a magnet for tourists from other parts of China – they spray-painted palaces and a statue with provocative statements such as “Heaven will destroy the Communist Party” and “Liberate Hong Kong”.

The operation, organization, stability and continuity of the rebellion, as well as the control and cohesion of its ranks, the elimination of undercovers, the military quality of the “students’ operation”, the excellent publicity and recruitment ability make us think that this rebellion is so well organized that it certainly has points of reference, sponsors and supporters abroad.

Who? Certainly, the United States – with its foundations for the globalization of democracy – which thinks of exploiting Hong Kong to destabilize China, especially given the proximity of Shenzen, one of the largest developing areas of Chinese economy and technology that could easily be “infected” by the rebellion.

Certainly, China’s current dilemma about its next military reaction and its impact on the world public is already a serious damage to Chinese national and foreign policy.

The United States has every interest in causing at least China’s global defamation before and after the Hong Kong rebellion, precisely pending the clash over duties and tariffs for the import and export of Chinese goods.

There is also Taiwan that, thanks to the large echo of the Hong Kong rebellion, is trying to publicize its idea of independence from China, as well as of reaction against China’s latest adverse actions against the Nationalist Island.

The countries interested in the destabilization of the link between Hong Kong and China may also include Japan, which is interested in weakening the Chinese strategic projection eastwards, and finally even Britain which -fallen prey to the retro dream characterizing the current phase of Brexit – could think of recovering the old colony or even merely taking revenge against China.

It all began with a major demonstration in late April against the extradition bill, which facilitated the transfer from Hong Kong to mainland China of Chinese people found guilty according to local regulations, as well as of Chinese criminals who could be protected by Hong Kong’s autonomy.

The rebellion has already forced Carrie Lam, the current Chief Executive and President of Hong Kong’ Special Administrative Region, to drop the extradition bill. But now it is too late to stop the rebellion.

One of the protesters’ objectives is also to “raise awareness” among the many Chinese tourists of their demands and claims, which have been magnified by the current crisis of the local economy.

Also the choice of this type of propaganda makes us think of an influence by Westerners. Indeed, a not casual influence.

Certainly one of the rebellion goals is also the attempt to radicalize and destabilize the Chinese areas on the border with the former British colony, which is the reason why President Xi Jinping has created a “cordon sanitaire” for the news coming from Hong Kong.

The longer the rebellion lasts, the more the goal – rather unrealistic but rational, considering the current political equilibria – is precisely that of “infecting” the most modern and productive areas of Southern China.

Overseas and in Asia, there are those who dream of even “disintegrating China”, by stirring up the major minorities present in the People’s Republic of China, and by destabilizing the centres of greatest industrial concentration in the South, as well as by infecting the areas of most difficult communication with the political Centre and with Beijing.

Three concurrent and simultaneous projects for destabilizing China, which have already been underway for some time.

With or without the Hong Kong rebellion, which – in any case – is currently strategic for the splitting up of the People’s Republic of China.

Otherwise, those who oppose the growth of China as a great power may think about strengthening the Islamist insurgency in Xinjiang and in Tibet or triggering another insurgency by one of the 56 recognized minorities of the People’s Republic of China, namely the Miao, the Dong, the Yao or the Koreans.

This is what really lies behind the idea of the “Hong Kong Nation” that is spreading among the leaders of the current rebellion.

The independence issue, however, still accounts for 20-25% of voters in the old British colony – and all this has nothing to do with “nostalgia” for Great Britain.

Hong Kong is an area of great importance for China: since the British takeover of the island in 1977, Beijing has always privileged relations with the powerful financial and industrial elites of Hong Kong.

Exactly in the phase of the Four Modernizations, this enabled China to actually have one of the major financial hubs in the world.

Goodness knows how important this was for the further and subsequent growth of China.

But the former British promontory is very important also from the geopolitical viewpoint.

Indeed, it is the fifth most important port in the world.

For years China has already been implementing the “Great Bay” project that will unite Hong Kong with China, both in fact and in law.

Moreover, there is already the project of putting Hong Kong in communication with Macau and Zhihai, but the promontory is also already a member of the Asian Infrastructure Investment Bank and will hence play a remarkable role in the New Silk Road.

It should also be recalled that when control over Hong Kong returned to China in 1977, under Deng Xiaoping, the leader of the Four Modernizations (and of the repression of Tiananmen Square), the former British colony accounted for over a quarter of the GDP of the entire People’s Republic of China.

Hence the issue was not only strictly economic, but also strategic in nature.

For President Xi Jinping, however, the main issue is to avoid – both in Hong Kong and in China – what now appears to be an obvious “colour revolution”, similar to the Georgian and Ukrainian ones, and to the various Arab Springs that spread the jihad to a large part of the Maghreb region.

Currently the dilemma for China is radical and very hard to solve.

Should it come to terms and – as some Chinese leaders are envisaging –accept to meet some demands from the Hong Kong insurgents who, however, deeply hate China?

Or should it do the same as in Tiananmen Square? A likely, but still dangerous option – mainly for its international effects.

Chief Executive Carrie Lam will probably be held in power by China to avoid a new “election” by the Hong Kong Election Committee, a body of 12,000 members in a city of over 7 million people.

Moreover, 1.3 million of them live in deep poverty but, for the time being, the “rebellion” is entirely organized by the middle class – like the European protests of 1968, the best operation of destabilization in recent history that has many fathers.

Nevertheless, unlike the European protests of 1968, the Hong Kong rebellion still lacks official leaders. While, at the same time as the democratic and pro-Western “rebellion” is developing, the pro-China insurgency tries to invade the streets against the struggle of the “autonomists”.

We should not forget this part of the issue either.

The maximum pressure of the “rebels” will certainly last until October 1, the day on which the anniversary of the founding of the People’s Republic of China is celebrated.

In my opinion, this seems to be the key date beyond which a Chinese intervention could have the greatest political and economic impact.

After all, there are two real reasons underlying the autonomist and anti-Chinese “rebellion” in the city-State: the clear mistrust vis-à-vis China, on the one hand, and, on the other, the total distrust also vis-à-vis the current government in Hong Kong which is still – almost more than the Chinese power – the current objective of the civil war now underway.

China could still separate the two objectives of the rebels, thus sparking off a crisis in the local government and then reacting militarily against the rest of the “students”.

The rebels are aged 25, on average, and are equally distributed by gender.

Most of them come from the educated middle class, especially the part that already votes for the “pan-democratic” parties, those that have long been opposing the pro-Chinese government in Hong Kong.

The rebels even accuse the poor population of supporting China. According to them, the poor are not “true Hongkongers” – and this says a lot about the social nature of the rebellion.

The “movement” is also very decentralized. It publishes good magazines and it is even said that its cameras frighten the police.

None of the local universities, however, officially supports the “rebellion”.

There is not yet workers’ clear solidarity for the “rebellion” – not even by the many migrant workers.

For the current rebels in Hong Kong, the word “democracy” does not concern the creation of an electoral system with universal suffrage that, indeed, already exists – albeit to a limited extent – but it is a sort of universal “system”, without repression, restrictions and controls – and hence it will be difficult to face similar demands by simply extending political representation.

However, most of the citizens living in the city-peninsula still do not support the rebels – not even superficially.

With specific reference to the international support for the rebellion, certainly the United States views it favourably, but we should also mention the now known direct commitment of the NGO National Endowment for Democracy, linked to the CIA, while the Chinese press underlines that the bill that triggered the revolt was inevitable, otherwise the already judged and convicted Chinese criminals could have fled to Hong Kong, thus becoming untouchable.

Furthermore, seventy NGOs have already signed an open letter to stop the extradition bill, including Amnesty International, Human Rights Watch and Red Cross International.

Too many not to think badly. Moreover, the rebels’ slogans and messages seem to be produced with purely Western techniques and methods.

Many of them are already written in English, instead of Chinese, and Hong Kong has always been one of the main places of CIA’s action against China.

Moreover, the aforementioned NGO, namely National Endowment for Democracy, already operates mainly through the Hong Kong Journalists Association, the Civic Party, the Labour Party and the Democratic Party of Hong Kong.

There is also the cryptocurrency created by an obscure supporter of the rebellion, who calls himself “Dr. Dragon”, who has recently devised a “coin” to be distributed among the rebels to encourage and fund their actions.

As already said, Taiwan is certainly endeavoring to influence the rebels in Hong Kong.

There is also the Chinese Triads’ presence during the repression of the rebellion in the various cities of Hong Kong.

The Triads are essential to understand the economy of both Hong Kong and Macau.

Hong Kong is the traditional home of China’s major criminal organizations.

For example, the 14K, Wo Shin Wo and Sun Yee On Triads are essential in the entire world crime economy.

There are over 50 minor Triads in Hong Kong. Every economic activity in the former British colony is subject to bribery.

The major legal and illegal activities controlled by the Triads are gambling, prostitution, drug trafficking and dealing, as well as the counterfeiting of all kinds of products, ranging from drugs to toys.

Nevertheless, there is an economic sector in Hong Kong that is almost entirely in the Triads’ hands, namely the movie industry – mainly the genre related to martial arts and pornography.

Probably it is not by chance that the “rebels” often quote the old films of Bruce Lee, who was born in San Francisco but died in Hong Kong, and was a decisive figure in the martial arts movie sector.

Macau is the world capital of gambling. The city has five times the players of Las Vegas.

Moreover, as is well known, gambling is the main channel for money laundering.

While in China and Hong Kong gambling is forbidden – at least officially – the huge crowd of Chinese players goes to Macau for gambling. Also 47% of government officials and executives of Chinese state-owned enterprises go there for gambling and this allows to possibly blackmail a significant number of Chinese (and Hong Kong) bureaucrats.

However, there are also strong ties between the Triads and the Chinese government.

The activity of finding important civilian and military technologies is often “commissioned” to the Triads by the Department of the Chinese Intelligence Services, namely the Guoangbu.

The Chinese espionage relating to the World Trade Organization (WTO) is often carried out by the Sun Ye On Triad.

As part of the mutual assistance relations with the Chinese government, the Triads control and repress much of the petty crime in both China and Hong Kong.

Therefore, in all likelihood, there will also be the collaboration of some Triads in the future Chinese repression of the “rebellion” in Hong Kong.

Advisory Board Co-chair Honoris Causa Professor Giancarlo Elia Valori is an eminent Italian economist and businessman. He holds prestigious academic distinctions and national orders. Mr. Valori has lectured on international affairs and economics at the world’s leading universities such as Peking University, the Hebrew University of Jerusalem and the Yeshiva University in New York. He currently chairs “International World Group”, he is also the honorary president of Huawei Italy, economic adviser to the Chinese giant HNA Group. In 1992 he was appointed Officier de la Légion d’Honneur de la République Francaise, with this motivation: “A man who can see across borders to understand the world” and in 2002 he received the title “Honorable” of the Académie des Sciences de l’Institut de France. “

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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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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.

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