No negotiations, no peace, but what about NATO? – Asia Times

Political member and Vice President Kamala Harris says she did not speak to Russian President Vladimir Putin without Ukrainian President Vladimir Zelensky.

Ukraine’s battle, which is NATO’s conflict, is going badly. NATO’s prospect is in question.

Meanwhile, Volodymyr Zelensky, who was just forced to cancel a forthcoming “peace summit ” ( officially postponed to a future time ) because no one wanted to come, has made it clear he will not negotiate with Moscow under any  situation.    

Zelensky understands that any agreement he might render to Russia may be dangerous for him.   As his military is beginning to dissolve, Zelensky is relying on the Azov Brigade, an elite system that some say is trying to wipe clear a neo-Nazi intellectual stain from its predecessor unit’s story. Because Zelensky is unlikely to move, various “peace formulas ” being floated in Europe won’t change anything or influence the outcome.

The standard Euro-idea is to try and freeze the conflict, recognize that Russia will continue to occupy parts of Ukraine for now and take Ukraine into NATO – or, if that is n’t possible, provide some other sort of security guarantees for the future.

Under this method, Ukraine could recover its defense, gets its business back on track, and confront the Russians some years in the future when the leads are healthier.

The Russians don’t had to accept the latest thought that, owing to Zelensky, it is dead on appearance.   Of course that won’t prevent Europe and some in Washington from pushing the proposal  anyway,   while shoveling more arms to Ukraine, hoping the Ukrainians may hold out until well after the US elections.  

If Ukraine go chest up before the end of October, it would be panic for the Democrats in the US and also may likely crumble the German government, perhaps even the weak French regime. Most professionals don’t think that will happen.   But most specialists usually are bad.

However, for their part the Russians won’t take a peace in place since it offers them everything.   The Russians clearly want Ukraine to be demilitarized and neutral, and they probably won’t accept NATO-led security guarantees ( although Russian public statements are ambiguous ). Officially Russia wants Luhansk, Donbas, Zaphorize, and the Crimea recognized ( all have been annexed to Russia ), and it demands protection of Russian-speakers in Ukraine.

There is little or no possibility that Russia’s needs will be met, both by the recent Russian state or by most NATO states.   For that reason, the Zelensky difficult line, so long as it lasts, guarantees that Russia’s actual goal will be to remove Ukraine’s government immediately with one suitable to Russia and willing to agree to Moscow ’s says.

If the Russians you pull it off, then NATO will have to decamp, something it may do anyways if the empire is to keep any credibility.   However, despite a lot of bravado, the chance to revive NATO as a military alliance does not seem appealing.  

There are tremendous causes why NATO is floundering, despite images.   The biggest reason of all is that NATO has been expanding without paying attention to its need to be a reliable defense empire.

Ukraine is part of that expansion, and under US and EU force, the growth is spreading to the South Caucasus, as far as Armenia.

A greater NATO is an ally without reasonable territories, as is extremely clear. That is why Ukraine is getting chewed up, despite Northern arsenals having been emptied in the work to save it. The Russians won’t abuse the South Caucasus including Armenia when the day comes

It is unfortunate that NATO has talked itself into this disaster. NATO now is about growth, no defense.   When it comes to defence, NATO is wholly reliant on the United States and the determination to take the US Army, Air Force and Navy to support NATO expansion.

NATO enlargement as a plan requires substantial military commitments by America’s supporters.   That won’t arise.   It is fair to ask: What does the US get by supporting an interventionist NATO policy?   There is growing discomfort in the United States about the hundreds of billions wasted on Ukraine, with no settlement nowadays possible.   At some point that plan will result in a big walk-back from the NATO ally, and from any responsibility to protect Europe when it really does little to protect itself.

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The future is nickel in Indonesia – Asia Times

Indonesia’s metal economy is booming. The global adoption of electric vehicles ( EV ) is driving demand for the metal, which is a key element in many EV batteries.

In 2023, Indonesia produced a large 40. 2 % of the world’s source, sparking hopes the country can utilize its copper reserves as a foundation to build a regional Volt industry.

At the same time, the metal surge has courted controversy. In September, the US Department of Labor reported that forced labour was being used in the Indonesian nickel market. Nickel firms have also faced accusations of ecological damage and pollution.

Geopolitics is also at enjoy. Foreign technical skills, funding and businesses have been central to the development of the Indonesian economy.

National business plan in the form of the Inflation Reduction Act has aimed squarely at Chinese supremacy of supply stores for natural materials – limiting the access of Chinese-made products to US businesses.

Meanwhile, technological changes like the mass adoption of cheaper lithium iron phosphate ( LFP ) batteries for EVs– which use no nickel – pose further challenges.

In a wide-ranging interview with Asia Times contributor Joseph Rachman, Indonesia’s Deputy of Investment and Mining Coordination to the Coordinating Minister for Maritime Affairs and Investments Septian Hario  Seto, the government’s point person on nickel policy, made the case for optimism and the nation’s plan to become a battery-making powerhouse.

AT: Where next for Indonesia’s nickel industry?

SHS: The next step, I think it ’s to build an ecosystem for electric vehicles. So not only talking about nickel. We’re talking about cobalt and manganese. We’re talking about LFP ( lithium iron phosphate ). We’re developing an LFP factory in Indonesia. We develop copper, aluminum.

AT: How far along are you with this?

SHS: Our first pCAM [precusor material for battery cathodes ] factory was commissioned this September, last month. We’ve built now two lithium refineries in Indonesia. I think they will be completed end of this year or early next year.

Even though we don’t have the lithium mine, we import it from Australia and Africa. And, even some from Latin America. We’ve already built the copper foil factory for the battery – built and operated already next to the Freeport smelter in Gresik. So it ’s already done. I’m not just talking about a plan. This factory is already in commercial operation.

We already have anodes. If you look at the market landscape now the biggest players in the world – number one, two, and three – are Chinese companies. So, we have this anode factory now in Java. I think if you remember, in early August, President Jokowi inaugurated this factory.

So, there’s only a few remaining processes we need to attract. And with anodes this is very fundamental. If you ( have ) LFP- or nickel-based batteries the anode is the same. So, if you already have the anode this ecosystem will be easier to attract. So, if you ask me outside of China, we now have the biggest capacity for battery materials in the world.

China, America and geopolitical risk

AT: Why is China so central to Indonesia’s nickel industry? Does this pose a problem?

SHS: You need to understand on this, [in ] nickel processing no-one beats China. Can you name me one Western company that has been very successful in developing this nickel technology?

AT: Maybe Japan’s Sumitomo?

SHS: Yes, but the ( high-pressure acid leaching ) HPAL that they built was so many years ago. They tried to build HPAL with Vale but failed.

[Vale signed an agreement to open a nickel processing plant in Indonesia in partnership with China ’s Huayou Cobalt and America’s Ford in 2023. ]

So, I think this is the problem. So how do you deal with this situation? So, what you see now is now a lot of non-Chinese firms are getting a partner or a Chinese technology provider. I’m talking specifically about HPAL.

So, we have one project, which I think will start commercial operation this quarter, where the Chinese only control less than 25 %. It’s about 20 % if I’m not mistaken. The Indonesian shareholder controls 60 % the South Koreans will control about 20 %. So, you will see this type of investment is happening more and more.

[America’s IRA regulation bans subsidies for electric vehicles which use too many materials produced by companies which are more than 25 % owned by a “foreign entity of concern. ” Exact definitions can be vague, but this is widely seen as including any Chinese company. ]

I think this the issue of familiarity and comfort. Because when these projects start only the Chinese know, only the Chinese understand the risks. But as one, two, three, four projects have been successful the Indonesian companies – especially the Indonesian who own the mines – of course they want to take a bigger a role. You will see this is going to be the trend.

AT: There’s been talk of restructuring existing partnerships to get Chinese ownership below these thresholds?

SHS: I think it ’s going to be mostly new investments. The ones that are already in operation that ’s going to depend on a B2B ( business to business ) basis.

I think one thing that you need to remember is that in the market now – you can check all these nickel buyers all these MHP buyers – there’s no IRA premium. The nickel that you sell to the US, Europe, China, South Korea, Japan, it ’s the same price.

AT: You say there’s no IRA premium. But, America is still a big market with a lot of growth potential. Are you still working towards a Critical Mineral Agreement with the US, which could help make Indonesian nickel eligible for IRA subsidies?

SHS: It’s [a Critical Mineral Agreement ] very important. We’ll see what happens with the election. We just finished our election. And, now we’re still during the transition in the US with the election in November and maybe the new Cabinet will be set up in February. So we’ll see. We need to wait.

But, I think what’s important for us is the CMA is part of our diversification strategy. Now the US, we know Indonesia nickel is flowing into the US. Even without the IRA, still we can sell to the US.

AT: How does it still get in?

SHS: There’s a lot of requirements in the IRA like the car price can’t exceed$ 80,000. So, for premium cars, trucks, for commercial cars, they’re going to use this nickel.

So, let’s see what’s going to happen with this CMA. We still, of course, expect we can get this CMA, but this also really depends on the US election.

AT: Can Indonesia reduce dependence on foreign expertise?

SHS: The problem in Indonesia is that before we focused on mining engineers. Meanwhile, smelters and HPALs are about metallurgy and material sciences. Do you know how many graduates we have every year in this area? It’s only 350.

So, this is the area we need to encourage. We opened several new faculties specifically for metallurgy and material sciences to increase the number of graduates. So that ’s first.

The second thing is we send people with undergraduate degrees to get a master’s degree in China. Now we have four batches already sent to China. Once they are graduated, they can come back and operate all these HPAL factories.

The third step we already did. About a month ago, we inaugurated the first HPAL hydrometallurgy lab in ITB Bandung. This HPAL lab is donated by one of these Chinese companies. It’s worth about$ 30 to$ 35 million. I think this the biggest hydrometallurgy lab, the biggest HPAL lab, in the world. Even bigger than what China has.

So, in Indonesia we can study this technology. I’m very confident that in the next two-three years we can introduce patents for this nickel processing technology.

On alleged labor and environmental abuses

SHS: With forced labor, obviously, we are quite surprised with the announcement. I don’t think we got consultation from the US about this. You see how many people are working in IMIP right? Can you do forced labor with so many people?

AT: With Chinese workers on the site, we’ve had reports of confiscated passports, limited ability to leave the industrial sites, use of debt for control.

SHS: Yes, of course, for these Chinese workers we don’t know how is the arrangement. But, I guess if you see the Chinese working over there, I think it ’s good, has good conditions. I’ve checked the dormitory and everything.

But, for the Indonesians. Can you employ so many people doing forced labor? It’s impossible. There are more than six labor unions there. So I think there’s proof these claims are not correct.

And then you see the wealth impact as well. So, I think several months ago the ILO ( International Labor Organization ) sent a mission. And, we discussed with them what are their findings. And they said there is no issue on … getting lower wages and everything. They did not find this in Morowali. What they gave us input on is the urban planning. And we need that. That’s the issue we need to handle.

Because we did n’t think when we started this Morowali ( Industrial Park ) we would have lots of people working over there. You see Morowali, before this IMIP, maybe there were only a few motorcycles. If you go to Weda Bay, the conditions are much better. The company built more housing, dormitories, inside to absorb the workers. So this is the feedback we got from the ILO, nothing about this forced labor and everything.

Because so many people, it attracts thousands of people. You have labor unions. You have free speech and everything over there. So I think forced labor is not a big issue. So that ’s first.

The second is on the ESG ( environmental, social and governance ) you mentioned. So, two things that we are now implementing.

The first one is actually regarding traceability of nickel. So you remember on July 22, Pak Luhut, Ibu Sri Mulyani, several other ministers launched the Simbara System. This is the traceability system we developed.

We already implemented it in coal. So that you know for every ton of the commodity that you produce – so every ton of coal we produce we know who is the producer, who is the buyer, what is the name of the vessel that transports this coal, when is the shipment date, are they paying the royalty.

So if there is any regulation violation made by the company, we can block the company so their shipment cannot leave Indonesia. Practically we ban the mining company making the violation from selling the product. And this system cannot be manually overridden so you have to resolve this issue if you want to take off the blocking system.

So it will be implemented the same for nickel and tin. We are not only including the mining company but also the smelter. So we can see the material balance. How much nickel ore that you produce, how much nickel ore you consume, how many products, what kind of product … So it ’s the same thing. Before, if the nickel company made a violation, we can block the system so there is no buyer of the nickel ore.

Number two, is that 75 % of the nickel reserve in Indonesia is controlled by not more than 10 companies. Weda Bay Nickel, Vale Indonesia, Aneka Tambang, Harita, Cheria, and then you have Merdeka Battery Materials. So, all these companies now we encourage them to actually participate in independent international ESG certification.

The IRMA, the RCMM, RMI and everything. So they have to ensure that their ESG practice is meeting the standards accepted internationally. With all these smelters, the buyer is actually doing their own due diligence to make sure the nickel is actually acceptable.

AT: What about unsafe working conditions? In addition to the explosion that killed 21 workers last year, we’ve had other fatal accidents since.

SHS: Well, I think first we take very firm action. You see during the accident late last year when many people died because of the accident in this smelter. You know what happened, we take action not using labor law.

We used a criminal prosecution to bring three Chinese people, who are the managers and the head of the smelting operation to court. For them to face more severe punishment. Because if we are using the labor law the punishment is light. So I think this is very important to set the precedent.

Yes, we understand there is a problem with health and safety in this area. So one thing is we are already in discussions with the Chinese government for them to send their experts to ensure the practice is … Because this is basically a Chinese technology. If you send maybe a Western consultant they might not fully understand how this is going to work and fit together. So we asked the Chinese government to send their people to help us on reviewing these practices.

First of all, I think in terms of the casualties even in the US I think they have this many people die. But, what for us is important is this smelter – especially on RKEF – is purely developed by the Chinese. So that ’s why I think we need to hire and get the help from the people who actually understand this thing.

AT: Having talked to workers in the industry, I think they would be skeptical. In their opinion the company ’s only priority is production. And – rightly or wrongly – they often see this as working culture imported from China.

SHS: You know if that kind of thing… Why we decided to talk to the Chinese government? Because, you know, of course, the Chinese government does n’t want their reputation to have a problem internationally because of all of these incidents.

So yeah, let’s see. Of course, you can be skeptical. But, I think if the Chinese government steps in reviewing and helping us with this, I’m carefully optimistic. I think we can fix the problem.

What we found out in this last accident, which made several people die late last year. Because, they are bypassing several standard operating procedures. This is why we decide to take this to criminal prosecution because this is something we don’t take likely. So let’s see, lah.

AT: There’s been reporting that poverty levels have risen in provinces with major nickel processing sites.

SHS: If you see on the provincial level aggregate in terms of the poverty and everything, there might be a slight rise, especially after Covid. You have to be careful. If you take the data after Covid all Indonesia sees poverty increasing. So I have the data until 2023 showing the numbers [poverty statistics ] are starting to decline.

So, if you see in Morowali specifically, in Central Halmahera, you see clearly the poverty rate is declining. But, if you take the provincial level data, I don’t think that will be representative.

I’ve given these statistics to so many journalists because they tend to see aggregates from different statistics. But if you see clearly in IMIP, Morowali, Central Halmahera, and Konawe you see the poverty rate and Gini ratio, it ’s clearly showing a decline.

[Data from Indonesia’s Central Statistical Body shows poverty rates have declined since 2015 in the three regencies named. However, rates have risen somewhat in Konawe since 2022. ]

AT: A new president ( Prabowo Subianto ) will be sworn in on October 20. He has promised to continue the nickel policy. But are you confident the new government will have the expertise to pull it off?

SHS: I’m pretty confident because the industry involves a lot of stakeholders now. A lot of local companies have participated in the downstream industry. So obviously, they can also give input and feedback for the next administration.

I think the challenge is different in the next five years. In the previous five years, we focused still on the upstream part, smelting, refining, process the nickel ore into MHP and nickel pig iron.

But, the challenge in the next five years is how to attract more for the midstream and the downstream – the battery cell, the battery pack, etc. How you actually find new innovation in processing the nickel. This is a different challenge. But with the stakeholders and ecosystem we have today, I’m pretty optimistic.

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No China stimulus? Time to buy – Asia Times

It’s a wonderful time

Clouds falls, you feel like

It’s a wonderful time

Don’t let it get ahead

– U2

Do not get Taiwanese companies because you think a big fiscal stimulus is coming. Get Chinese shares because a big fiscal signal is not needed.

The bull situation for Chinese stocks is not that stimulus may save the economy. The bull event for Chinese stocks is that homeowners are sitting on US$ 20 trillion in payments with nowhere to go.

The managed destruction of the property market is ongoing. Authorities have curtailed money management products and their inherent guarantees.

Money controls prevent easy access to foreign goods. And the coming storm of high-tech technology companies in clean power, semiconductors, aviation, robotics and biotech will have a lively equity market to get off the ground.          

China ’s economic transformation will be ill-served by flood-the-zone stimulus which – if we recall – is what got us the real estate bubble and subsequent “three red lines ” credit limits in the first place. What China ’s economic transition needs is better execution of “establish the new before abolishing the old. ”

What if we generate of China ’s new stimulus methods? The grab bag of goodies – reserve requirement ratio ( RRR ) cut, lowered interest/mortgage rates, special local bond sales, cash for clunker programs– are all bullets pointing in the same direction. But the power falls well short of a bazooka.

Trillions of renminbi ( RMB) in fiscal stimulus have been dangled but apparently withheld given the non-meeting held by the National Development and Reform Commission ( NDRC ) after the holidays. What has been offered will help China achieve 5 % gross domestic product ( GDP ) growth this year, hardly a lofty goal.

The only interesting policy is the People’s Bank of China ’s ( PBOC ) unexpected support for equity markets through 1 ) a collateral replacement scheme to increase risk assets at institutional investors and 2 ) a program to encourage bank lending for share buybacks.

While some ascribe this to an effort to drink consumer confidence, the likelier inspiration is an effort by the PBoC to redeploy some of China ’s$ 20 trillion in family bank deposits.

China ’s roaring property market in the past couple of weeks has given the box of laws a vote of confidence. Note that private marketplaces are behaving far more sensibly than global markets.

China ’s markets took one year off from October 1-7for National Day breaks – enough time for global markets to roll wild and unrestrained thoughts about fiscal stimulus of RMB2 trillion, RMB4 trillion, RMB6 trillion and RMB10 trillion.

The following pain in Chinese stocks traded in Hong Kong and through global ETFs occurred in Shanghai and Shenzhen after industry reopened.

Properly attributing local business confidence is of course unthinkable. Low prices from beaten down shares provide a healthy surface.

The NDRC non-meeting may include lanced the cook of huge trigger expectations. The business has good determined that China is severe about utilizing capital markets. What it needs to figure out then is that China ’s financial woes are not as grave as made out to be.

How well has President Xi Jinping managed China ’s market? Much of the company hit is predicting Japan-style stagnation, if no inevitable decline. That, of course, has been the situation for years.

According to one famous China-based economist’s 2015 forecast, President Xi’s financial performance may have earned him God Emperor standing in the mythology of China ’s socialist officials:

My assumption is that, under President Xi’s name, 2013-2023, common growth rates are unlikely to reach 3-4 %. That’s not my prediction, that ’s the upper limit of my prediction… I think that if President Xi is able to pull off average growth rates of 3-4 % during his 10 years in office, he will have accomplished something that we should really be astonished. It would be truly impressive, almost on par with what Deng Xiaoping did in the 1980’s …

In President Xi’s first two conditions, China ’s economy grew at a 6. 2 % compound average growth rate ( CAGR ), nearly double the upper limit of said predictions. China substantially outgrew all major markets except India. Somehow, our analyst was hardly twice as dismayed.

Perhaps it was President Xi’s personal problem, extending his time in office past the usual two five-year words. Alternatively of graduating with double starred first accolades from our scholar, Xi has only extended his experiments trying to earn an extraordinary triple or even a double starred second.

Graphic: Asia Times

Han Feizi’s assessment of President Xi’s economic performance is considerably less generous. Economic growth of 6. 2 % CAGR in Xi’s first two terms is not at all astonishing; it was, in fact, modestly below expectations ( Covid 2000 to 2022, what can you do? ).

Han Feizi did not and does not share our Beijing economist’s bleak assessment of the economy that Xi inherited and thus cannot grant bonus points for outperformance:

[President Xi] inherited a much more difficult economy than we think. There’s a huge amount of debt. There’s a huge amount of unrecognized bad debt.                

While China did take on a lot of debt and take it on quickly, Han Feizi fundamentally disagrees that the amount of debt and the quality of the debt is all that problematic.

It has been his correspondent’s contention that the size of China ’s economy is significantly understated compared to OECD national accounts ( see here ).

China ’s debt-to-GDP ratio is, thus, closer to ~125-200 % instead of the often quoted ~300 %. Moreover, this debt largely financed housing and infrastructure – long-lived assets with relatively low maintenance capital – able to generate value for decades.

China still has 15-20 % of the population to urbanize. Given urbanization of 1 % of the population per year, overbuilt housing should naturally resolve itself by kicking the can down the road.

As such, China ’s debt is nowhere near capacity. Xi inherited an economy headed in the wrong direction, not an economy out of runway. With property investment hobbled by redline credit limits in 2020, China nonetheless continued to grow 5 % by redirecting lending to advanced manufacturing.

A sentiment that Han Feizi might share with our Beijing economist is that Xi’s record is incomplete. No marks can be given until he sees things through. Things being another transformation of China ’s economy and society, which Han Feizi has written about before ( see here ):

China wants America’s Silicon Valley but regulated, Japan’s car companies but electrified, Germany ’s Mittelstand but scalable and Korea’s Chaebols but without political capture. It wants to lead the world in science and technology but without cram schools. A thriving economy but with common prosperity. Industry without air pollution. Digital lifestyles without gaming addiction. Material plenty without hedonism. Modernity without its ills. This is, of course, a wish-list and unrealistically ambitious. But these mad scientists sure as hell are going to try. They’ve developed a taste for it.

Various pieces of this transformation have started to take shape. The anti-corruption campaign under Xi’s tenure has been unyielding and dare we say transformative. China ’s once low-trust and loutish public of the Jiang Zemin and Hu Jintao eras is now unrecognizable, able to sustain high-trust business models like shared bikes and take-only-what-you-paid-for vending machines ( see here ).

The professional environment for China ’s young grads is surely far less treacherous than the get-rich-quick-at-any-cost mentality of the go-go days.

Output from the “new three” industries – solar, batteries and EVs – are surging, although capacity appears to be growing even faster. Deflation across multiple sectors has set off alarm bells. Although not ideal, China ’s deflation is fundamentally different from Japan’s in its lost decades.

Simplistically, deflation caused by decreasing consumption ( demand curve shifting in ) is bad; deflation caused by increasing production ( supply curve shifting out ) is good.

Unlike Japan, which suffered two recessions in the 1990s, demand in China is still growing, if weaker than optimal. Japan’s deflation started when Tokyo was the most expensive city in the world with cantaloupes selling for$ 100 each. This is not the same deflation China is currently dealing with.

China ’s real disposable household income grew 6. 1 % in 2023. In recent years, regulators have crimped the income of previously high-flying professionals in finance, tech and real estate. Upper-tier income growth has stalled while lower-tier income growth has been robust.

Economist Simon Kuznets ’s prediction that inequality would rise in the early stages of economic development before peaking and falling as wealth increases is playing out perfectly in China while it confounds expectations in more capitalist economies.      

Graphic: Asia Times

And, of course, Han Feizi does not believe China ’s economy is egregiously unbalanced ( perhaps not even unbalanced at all ) and thus has no need for massive consumption stimulus.

This is the key reason Han Feizi was not “astonished ” by China ’s ability to maintain growth over 6 % in Xi’s first two terms. There is no need for consumption to outgrow investment to signal economic health ( see here ) and thus no need for massive consumption stimulus.

China ’s regulators and anti-corruption investigators have ransacked the nation’s banks and brokerages and detained high-profile bankers, attempting to put a leash on an industry with a natural tendency to run amok. The PBoC’s support for equity markets may signal confidence in the clean-up work recently performed.

So yes, buy Chinese stocks. Valuations are still cheap, and$ 20 trillion of savings has nowhere to go. Equity markets are being prepared for China ’s high-tech future.

Growth is more sustainable in a high-trust and more equal society. No there will not be a massive consumer stimulus. But that is precisely why you should buy, not sell, China.

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The World Bank isn’t buying China’s stimulus talk – Asia Times

To anyone who hopes 2025 will be a less terrible season for China’s economy, the World Bank has some bad news for you.

The international lender anticipates that Asia’s largest economy’s growth will decline also further next year, creating new headwinds for the region. This is in spite of Beijing’s current moves to boost economic growth in response to negative pressures and an initial global investor response that was at least initially passionate.

” Just signaled fiscal support may raise short-term progress, but longer-term development will depend on deeper structural measures”, the World Bank said on October 8. For three years, it said,” China’s expansion has spilled over advantageously to its companions, but the size of that motivation is today diminishing”.

The World Bank might be misinterpreting China’s efforts to resurrect its financial situation. It&nbsp, cut borrowing costs, slashed businesses ‘ supply need numbers, reduced loan rates and unveiled market-support resources to put a floor under share costs. In Beijing, stronger macroeconomic stimulus measures are also being considered.

If the world’s house crisis is allowed to enhance, furthering negative forces, some economists worry about a lighter course. The uncertainty issue is demonstrated by the extreme volatility in Chinese shares over the past ten days.

When the World Bank mentions the need for “deeper architectural changes,” plunging house prices are at the top of their record. Yet&nbsp, Chinese leader Xi Jinping appears to think period is on Beijing’s part in repairing the critical business. It might not be, as Japan has demonstrated over the years, &nbsp, some economists say.

China’s existing real estate troubles and Japan’s negative loan problems of the 1990s are n’t essentially analogous. The important resemblance is a critical driver of economic growth stalling out indefinitely, triggering bad knock-on implications in different industries.

In China’s situation, this likewise means municipal governments around the country. Provincial leaders have relied on area sales and tax revenues from sizable construction projects for many years.

” China’s boom-and-bust housing market is largely driven by local governments ‘ heavy reliance on expanding the real estate business to provide a major source of income”, said Tianlei Huang, an analyst at the Peterson Institute for International Economics, a Washington-based think tank.

Since 2022, Huang added,” the decline in the housing market has hurt native state funds and exposed a&nbsp, prone system&nbsp, in need of reform”.

It’s a portrait of what ails China. And still, Xi’s Communist Party continues to treat the signs of financial issues, not the underlying problems themselves. The longer they fester, the stronger the resulting headwinds.

Rather than the 4.8 % the World Bank sees China’s economy growing this year, it sees the nation expanding at just 4.3 % in 2025. Both readings are below Beijing’s current 5 % target.

Of course, for an economy at China’s level of development, 4.3 % is effectively recession territory. And if Xi’s team does n’t act boldly and expeditiously to revive growth, that figure could prove too optimistic.

One wildcard is the&nbsp, November 5&nbsp, US election. The upcoming trade wars would disproportionately hit China if Donald Trump were to win.

During his first presidency from 2027 to 2021, Trump imposed harsh tariffs on China. Xi’s government has n’t seen anything yet if Trump comes back to power. Trump has already predicted a generalized global levy on all imports into the US and a 60 % tax on all Chinese goods.

” With higher US tariffs, a number of highly open economies in the Asia-Pacific are at risk of GDP falling below their baselines”, said Deborah Tan, an analyst at Moody’s Ratings. Along with China, they include Malaysia, Singapore, South Korea, Taiwan and Thailand.

According to Tan,” these are primarily economies with high participation in global value chains and high exposure to US and Chinese intermediate goods supply and final goods demand.”

Vietnam, for example, has a high export share of gross domestic product ( GDP ) with strong linkages with&nbsp, Chinese manufacturing&nbsp, supply chains. ” Our simulation shows that within Vietnam, the high-tech goods sector will take the largest hit to output”, Tan said. ” China, similarly, the high-tech goods sector takes the largest hit to output followed by the low-tech goods sector”.

As this threat percolates, Xi’s team in Beijing risks losing even more trust among global investors.

One thing is to discredit them on the stimulus front. The slower pace of fixing the housing sector, strengthening local government balance sheets, and establishing social safety nets so that households save less and spend more are the bigger issues.

However, these measures “do not replace the more thorough structural reforms that are required to promote longer-term growth,” according to World Bank economist Aaditya Mattoo. The majority of the measures and bond proceeds will carry over into the following fiscal year given the lead time for implementation of the policy.

Mattoo notes that “even then, consumers may be reluctant to splurge because a one-time transfer would not boost longer-term incomes or address concerns about aging, illness and unemployment”.

In the interim, billionaire Ray Dalio sees this as Xi’s party’s “do what it takes” to change the gloomy narrative that may be evoking global investor sentiment. Draghi’s 2012 declaration as head of the European Central Bank is referenced here.

Last week “was a big week” ,&nbsp, said Dalio, founder of Bridgewater Associates. ” In fact, I think that it was such a big week that&nbsp, it could go down in the market-economic history books as comparable to the week Draghi said that he and the ECB would ‘ do whatever it takes,’ if China’s policymakers, in fact, do what it takes, which will require a lot more than what was announced”.

A long-time China bull, Dalio is increasingly vocal about his worries Beijing is sleepwalking into a&nbsp, Japan-like funk&nbsp, that history shows is challenging to exit. It’s taken Tokyo 25 years to begin exiting quantitative easing and its zero-interest-rate policies, and even that is proving challenging for the Bank of Japan.

To avoid it, one must devise a “beautiful deleveraging” strategy that balances printing enough yuan to support growth without causing inflation to rise too quickly while restructuring the entire economy. ” Doing these things starts to rekindle’ bottom fishing ‘ ]in stocks ] and ‘ animal spirits,'” he said. ” That is clearly happening right now,” he says.

Any new deleveraging efforts by Xi and Premier Li Qiang, Dalio said, will undoubtedly disorient and likely lead to more wealth destruction. That, it follows, will require considerable political courage, with Xi and Li having to decide where the costs and fallout of debt losses will be concentrated.

To Dalio, it all depends on “how well China’s domestic debt-money-economy challenges will be handled”.

At the same time, demographics are complicating the deleveraging process. The numerous moving parts that Xi and Li are struggling to manage are given a unique dimension by China’s aging population and shrinking working-age population. &nbsp,

” While last week saw some amazing actions and words that I’m certain will be followed by highly stimulative policies that will greatly boost asset prices,” Dalio said.” I think there are several important other things to keep an eye on to see how well China’s domestic debt-money issues will be handled,”

That’s not to say there are n’t some reform wins that Xi and Li can tout. As Sherry Zhao, analyst at&nbsp, Fitch Ratings, pointed out, refinancing risks for China’s local-government financing vehicles ( LGFVs ) have “reduced in the short term following government debt-relief measures and policy support, which will limit systemic risk”.

Provincial governments, Zhao said, continue to issue special refinancing bonds to swap “hidden debt”. The central government, meanwhile, has increased transfers to shoulder more infrastructure spending.

However, Zhao stressed,” we believe those support measures focus on the prevention of short-term&nbsp, systemic risk rather than a full-scale bailout. There continue to be longer-term risks associated with&nbsp, LGFVs ‘ debt burdens, and their resolution will hinge on China’s overall economic and fiscal strength”.

The Third Plenum meeting in July made it clear that local and regional governments may have more revenue flexibility to better accommodate their expenditure demands. ” The credit effects”, Zhao said,” will depend on how the changes are implemented, and on local governments ‘ willingness to use any additional revenue-raising powers given to them”.

The official Fitch view is that overall&nbsp, LGFV&nbsp, debt growth will be curbed as local governments tighten control of new debt, especially in regions that Beijing views as a priority for debt resolution.

The danger, however, is that these regions ‘ long-term debt default risk “remains and may even rise because of imbalances in economic and debt growth, as well as the potential inability of local governments to generate sustainable revenue for debt service.”

There are encouraging indications that China is currently developing a plan to stabilize the financial system and lessen risks.

Zheng Shanjie, the head of the National Development and Reform Commission, told reporters on October 8 that Beijing is developing” comprehensive policy measures to help stop the decline in the real estate market.” Shanjie said this in response to the National Development and Reform Commission’s announcement to stop housing sales and prices.

Zheng added that” we will take a number of potent and effective measures to try to boost the capital market in response to volatility and declines in the stock market.”

Even so, many economists and investors were disappointed that more short-term stimulus is n’t being deployed. ” Tuesday’s press briefing from China’s top economic planner … was supposed to be the big moment, the one where Beijing unleashed a&nbsp, stimulus bazooka“, said economist Stephen Innes at SPI Asset Management. ” Instead, it was more of a pop gun”.

Innes added that” Beijing’s reluctance to roll out a bigger package is seriously questioned about the viability of this rally” in stocks.

James Sullivan, head of Asia-Pacific equity research at JPMorgan, told CNBC that” the million-dollar question in China right now is, does the stimulus only flow into the supply side of the equation, or does it ultimately flow through into consumer demand? That’s not our expectation right now”.

Follow William Pesek on X at @WilliamPesek

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AI underpinned by developing world tech worker ‘slavery’ – Asia Times

Millions of people sit at servers tediously labeling data in dusty companies, cramped internet cafe, and wooden house offices all over the world.

The burgeoning artificial intelligence ( AI ) industry’s lifeblood is composed of these workers. Without them, materials like ChatGPT would undoubtedly not occur. That’s because the information they label helps Artificial techniques “learn”.

The people who make up this workforce are mostly invisible and usually exploited despite their significant contribution to an business projected to be worth US$ 407 billion by 2027.

Nearly 100 Kenyan files labelers and AI professionals who work for companies like Facebook, Scale AI, and OpenAI wrote an open letter to US President Joe Biden earlier this year.

Our working problems are present slavery.

Business and institutions must urgently address this issue to ensure that AI supply chains are honest. But the important issue is: how?

Data naming is the process of identifying fresh data in the form of annotations, such as pictures, videos, or word, but that AI systems can identify patterns and make predictions.

Self-driving cars, for instance, rely on labeled video images to identify commuters from street signs. Big language models like ChatGPT rely on labeled word to comprehend human speech.

These data with labels are the essence of AI models. Without them, AI techniques would be unable to function properly.

Tech companies like Meta, Google, OpenAI and Microsoft outsource much of this function to data labeling companies in states such as the Philippines, Kenya, India, Pakistan, Venezuela and Colombia. China is even gaining a new world center for information labeling.

Outsourced firms that facilitate this job include Scale AI, iMerit, and Samasource. These are incredibly huge businesses of their own making. For example, Scale AI, which is headquartered in California, is now worth$ 14 billion.

Cutting walls

Major technology firms like Alphabet ( the parent firm of Google ), Amazon, Microsoft, Nvidia and Meta have poured billions into AI system, from computing power and data backup to emerging computing solutions.

Large-scale AI types can be trained for tens of millions of dollars. When deployed, maintaining these models requires steady investment in data tagging, refinement and real-world screening.

But while AI funding is important, earnings have not always met objectives. Many businesses still view AI jobs as being empirical and with no clear-cut profits.

In response, many corporations are cutting expenses which affect those at the very middle of the AI supply ring who are often very vulnerable: information labelers.

Low pay, harmful operating conditions

Companies involved in the Artificial offer network try to reduce costs by employing a sizable number of data labelers in nations like the Philippines, Venezuela, Kenya, and India. These nations ‘ employees are paying stagnant or declining income.

For instance, the weekly rate for AI files labelers in Venezuela ranges from between&nbsp, 90 percent and$ 2. In comparison, in the United States, this rate is between$ 10 to$ 25 per hour.

Employees labeling data for multi-billion money businesses like Scale AI frequently make far below the minimum salary in the Philippines. Some labeling companies yet resort to&nbsp, baby labor&nbsp, for labeling purposes.

However, there are many other labor troubles in the supply chain for AI.

Some data labelers work in crowded and filthy environments, which pose a significant health risk. They also often operate as independent contractors, lacking access to privileges such as health care or settlement.

The emotional toll of data labeling work is also important, with repetitive tasks, tight deadlines and firm quality controls. Data labelers are occasionally asked to read and brand hate speech or other offensive language or fabric that has been shown to have harmful psychological consequences.

Mistakes can result in job loss or pay cuts. However, label makers frequently experience a lack of accountability in how their job is evaluated. They are frequently denied access to efficiency information, which makes it difficult for them to change or challenge their choices.

Making Artificial supply chains social

The need for social AI supply chains is essential as business needs to maximize profits and Iot development becomes more complicated.

Employing a mortal right-centered design, consideration, and oversight approach to the whole Artificial supply chain is one way that businesses can contribute to this. They must implement fair pay practices to ensure that data labelers are paid living wages that reflect the value of their efforts.

By embedding human rights into the supply chain, AI companies can develop a more social, green industry, ensuring that both workers ‘ rights and commercial responsibility align with long-term success.

Governments should also create new regulations mandating these practices, encouraging fairness and transparency. This includes transparency in the processing of personal data, allowing employees to understand how their performance is evaluated, and to challenge any errors.

Workers will be treated fairly by transparent payment practices and recourse mechanisms. Businesses should support the formation of digital labor unions or cooperatives rather than systematically destroying unions, as Scale AI did in Kenya in 2024. This will give employees the opportunity to speak out against better working conditions.

As users of AI products, we can all support ethical practices by supporting businesses that are transparent about their supply chains and pledge to treat employees fairly.

We can push for change by choosing digital services or apps for our smartphones that abide by human rights standards, promoting ethical brands on social media, and voting with our dollars for tech giants ‘ accountability on a daily basis. Just as we reward producers of physical goods that are green and fair trade.

We can all make informed decisions, helping the AI industry adopt more ethical practices.

Ganna Pogrebna is executive director at the AI and Cyber Futures Institute, Charles Sturt University

This article was republished from The Conversation under a Creative Commons license. Read the original article.

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US, China in a tit-for-tat military basing battle – Asia Times

China’s ostensibly expanding military appearance at Cambodia’s revamped Ream Naval Base is once more alarming Washington, a creation that was first revealed as a covert agreement two years after Phnom Penh canceled Angkor Sentinel military activities with US troops.

China’s military’s exposure to Cambodia’s port could give it a proper southern side in the South China Sea, which could be used in any conflict with the US, including Taiwan. Cambodia has consistently denied that it has allowed Chinese troops to place there entirely, which is against the law in the country’s constitution.

The most recent uproar over Cambodia comes as a result of America’s provocative deployment of a Existing missile system in the Philippines, which gives Manila the fresh capability to attack targets on the Chinese mainland in any conflict situation.

This quarter, BBC reported on Chinese naval ships being stationed at Cambodia’s Ream Naval Base, which raised questions in the US about China’s alleged expansion of military presence there. BBC says the two Model A56 ships, visible from telescope imagery, are docked at a new Chinese-built jetty alongside another Chinese-constructed services.

The Thai government claims that the foundation is for training and is, in fact, available to all pleasant navies. However, it claims that the US is cautious, citing China’s desire to become a global military power, including by leveraging Belt and Road Initiative ( BRI ) investments in ports and other infrastructure with dual military uses that might give China privileged access in a conflict scenario.

Addressing US problems, Cambodia’s Deputy Prime Minister Sun Chanthol announced that the US Navy may be welcome to visit the Ream Naval Base once its rise, funded by China, is completed, Reuters reported.

Sun emphasized at a think tank celebration in Washington that China and any other foreign government are not permitted to use the base solely for Cambodia’s national protection. He assured that any military could use the harbor for charitable, disaster recovery or joint military activities.

The US has urged Cambodia to avoid any foreign state from having unique access to the center, while Chinese vessels have been training the Thai Navy there since December 2023, according to Reuters. Ream, which was earlier used for the US-Cambodia naval exercises, was shut down in 2020 due to its US-built service.

In a September 2024 article on Channel News Asia, it was stated that Cambodia benefits from improvements to the Ream Naval Base because it lacks the full military capacity to make use of them. BBC says while Ream does not considerably improve China’s energy projection, it may help in cleverness gathering.

Regarding the base’s impact on Cambodia’s sovereignty, according to BBC, a long-term Foreign presence at Ream may not be in violation of the country’s constitution because it is not fully leased to China and Chinese troops could operate there on a rotating base, similar to the US’s Visiting Forces Agreement (VFA ) with the Philippines.

In April 2023, Asia Times reported that China’s formation at Ream Naval Foundation has the ability to counteract, control, or possibly assume the presence of US naval forces near Singapore, which often accommodates the circular deployment of US Littoral Combat Ships (LCS) and P-8 Poseidon maritime patrol aircraft.

China may even make use of the Ream Naval Foundation and its current southern naval bases to circle Vietnam in the South China Sea, expanding the capability of Vietnam’s Navy and Maritime Law Enforcement organizations. In the South China Sea, China and Vietnam have a number of regional problems. &nbsp,

Also, the&nbsp, Ream Naval Base may help Chinese actions near Indonesia’s Natuna Islands. China has acknowledged Indonesia’s possession of the Natuna Islands, but it has claimed that the waters that surround them are part of its” standard fishing areas,” which causes conflict between the two countries.

Cambodia may interpret China’s presence at the Ream Naval Center as a shield from Thailand and Vietnam, two of its more powerful neighbors. In exchange for security guarantees and financial advantages, Cambodia does had backed China’s interests due to this circumstance.

China’s increased presence at Ream and Ream is a part of a larger tit-for-tat with the US, as both superpowers aim to bolster their positions in key areas that can act as forth operating outposts against one another in a conflict scenario. &nbsp,

Asia Times reported in September 2024 that US-China tensions in the Pacific were considerably aggravated by the US’s endless implementation of the Mod weapon program in the Philippines. &nbsp,

First brought in for joint exercises in April 2024, the Typhon program, which is capable of launching Tomahawk and Standard Missile-6 weapons with spectrum to reach mainland China, may be in the north Philippines, according to US and Philippine officials.

China has harshly criticized this move, which aims to bolster regional deterrence and has warned that the deployment will cause a regional war.

The deployment complies with the extended deterrence strategy and DMO concept, which disperses forces to improve survivability and lethality. However, the Philippines ‘ lack of air and missile defense assets could pose operational challenges, potentially requiring more US assets for protection.

The political landscape in the Philippines, marked by divisions between pro-US and pro-China factions, adds another layer of complexity, with future US defense initiatives potentially hanging in the balance as the&nbsp, Philippines ‘ mid-term elections approach next year.

The US is n’t the only one involved in contentious, sensitive operations and deployments on the doorstep of its adversaries, despite the fact that the Philippines ‘ deployment of Typhon missiles may have confounded China.

Asia Times reported in July 2024 that China has significantly increased its intelligence-gathering capabilities by setting up multiple spy bases in Cuba.

These facilities, strategically located in Bejucal, El Salao, Wajay and Calabazar, are designed to monitor sensitive communications and activities along the US southeastern seaboard, which hosts numerous military bases and space launch centers.

The largest site, near Bejucal, has a Cold War history while the El Salao site features a large circularly disposed antenna array ( CDAA ) for enhanced surveillance. The Cuban outposts underscore China’s ambition to expand its global intelligence footprint, including near US shores.

The development has sparked concerns among US policymakers and regional partners regarding the long-term strategic implications, particularly in light of a potential US-China conflict over Taiwan.

Before any conflict, China may send military personnel to its Latin American partners, such as Cuba, to gather intelligence and support special operations.

These individuals have the potential to disrupt crucial US facilities, observe military operations, or even organize attacks against the US mainland. In addition, China might employ its personnel to trigger regional crises that might affect the US, such as scuffle supply chains or incite political unrest in US partner nations before an attack on Taiwan.

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Split on science spending, Trump & Harris agree on tech war – Asia Times

For the first time in British history, a member mentioned quantum computing during a national debate on September 10, 2024. After Vice President Kamala Harris brought up classical systems, she and former US President Donald Trump engaged in heated exchanges regarding Chinese semiconductor manufacturing and American chipmaking.

In the election year, policies in science and technology typically take a backseat to issues like immigration, the business, and health care. What’s changed for 2024?

From Covid-19 to climate change and from ChatGPT to, yes, classical servers, science-related problems are on the heads of American politicians and voters alike. To address these issues and many others, the federal government invests roughly US$ 200 billion annually in scientific research and development. Leaders and Congress, nevertheless, rarely agree on how – and how much – money should be spent on technology.

A closer examination of Trump and Harris ‘ information on science and technology plan might give an idea of how each would approach these issues if elected this fall as president with the public’s attention growing to the global competitiveness, the climate crisis, and artificial intelligence.

Two different approaches to financing science

US science and technology plan can be compared to the R&amp, D annual budget process, which allows for the assessment of differences between the Trump and Biden-Harris governments.

In his first budget ask to Congress, in 2017, Trump spurned decades of law, proposing traditional cuts across almost every national research company. Trump specifically targeted the Environmental Protection Agency, the National Oceanic and Atmospheric Administration, and the Department of Energy.

Trump’s fiscal policy took a website from Reagan-era traditional dogma, prioritizing military spending. Unlike Reagan, but, Trump likewise took aim at fundamental analysis money, an area with long-standing bipartisan support in Congress. His three successive resources proposals were not different: across-the-board reductions to national study programs, while pushing for increases to protection technology development and demonstration projects.

Trump received criticism from Congress for almost all of his demands. Rather, it passed some of the largest increases to national R&amp, D courses in US history, perhaps before accounting for emergency spending plans funded as part of the president’s epidemic response.

In comparison, the Biden-Harris administration’s earlier policy priorities included science and innovation, with budgets that matched. Biden and Harris used the sluggish Democratic majority to pass three important expenses into rules: the CHIPS and Science Act, the Inflation Reduction Act, and the Infrastructure Investment and Jobs Act. These laws contain significant R&amp, D requirements that are geared toward environmental initiatives ( IIJA ), clean energy ( IRA ), and American semiconductor manufacturing ( CHIPS).

In order to promote National production, CHIPS established plans within the National Science Foundation and the Department of Commerce. The work also established ambitious revenue goals for national research organizations, particularly NSF, by requiring a budget double from$ 9 billion to over$ 18 billion over the course of five times.

The Biden-Harris administration’s last two budget proposals restricted technology to much less than it initially proposed for R&D. A cloud of budget poverty is cast over Congress by years of deficit spending and a new Democratic majority in the House. The NSF experienced an 8 % increases in fiscal year 2024, its largest reduction in more than three decades, as opposed to doubling its resources. For FY2025, which runs from Oct. 1, 2024, through Sept. 30, 2025, Biden and Harris requested a small 3 % increase for NSF, billions of dollars quick of CHIPS-enacted saving rates.

A general opinion of China is emerging.

On systems plan, Biden and Harris communicate much with Trump.

They have increased tariffs on Chinese goods and heavily restricted China’s access to American-made system bits and semiconductor manufacturing equipment, following Trump’s example.

Additionally, Biden and Harris have increased their efforts to safeguard Chinese ideas and innovations for study security. Trump attempted to stop the Chinese authorities from stealing British studies by initiating the China Initiative. The Biden-Harris leadership ended the system in 2022, but parts of it still exist. The decline in academic collaborations between the US and China continues, putting strain on the country’s leadership in science.

The Biden-Harris leadership has even drawn from Trump-era scheme to enhance America’s leadership in “industries of the future“. The word, coined by Trump’s then-chief research assistant Kelvin Droegemeier, refers to five emerging technologies areas: AI, quantum technology, advanced production, advanced communications and biotechnology. This language was edited by the Biden-Harris administration as part of its analysis of American manufacturing and throughout Harris ‘ campaign, including during the debate.

In summary, both candidates agree with the emerging bipartisan consensus in Washington regarding China: innovation policy at home and strategic decoupling abroad.

Science advice not welcome

Trump’s disapproval of and occasionally outright contempt for scientific consensus is well documented. From” Sharpiegate“, when he mapped his own projected path for Hurricane Dorian, to pulling out of the Paris climate agreement, the World Health Organization and the Iran nuclear deal, Trump has demonstrated an unwillingness to accept any advice, let alone from scientists.

Indeed, Trump hired Droegemeier as director of the White House Office of Science and Technology Policy, or OSTP, in less than two years, surpassing previous records for the length of a president’s presidency without a scientific adviser. This absence was no doubt reflected in Trump’s short-on-science budget requests to Congress, especially during the beginning of his administration.

On the other hand, the Biden-Harris administration’s overall policy agenda includes promoting science and innovation. Biden is the first president to name his science adviser, a position held by Arati Prabhakar, to his Cabinet, which is elevated.

By law, the president is required to appoint an OSTP director. However, the president is free to decide how and when to rely on the director’s recommendations. The science adviser will have to fight for it if the new White House wants the United States to continue to be a global leader in R&D.

At Rice University’s Baker Institute for Public Policy, Kenneth Evans studies science and technology policy.

This article was republished from The Conversation under a Creative Commons license. Read the original article.

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Debt forces Maldives to pivot back to India from China – Asia Times

The Maldives, known for breathtaking resorts and serene beaches, is battling an escalating debt crisis and attempting a delicate balancing act between its two largest creditors: India and China. As the island nation braced for an impending debt default, President Mohamed Muizzu’s leadership will be tested by how he steers his country through this turbulent economic and geopolitical landscape.

As of August 2024, the Maldives’ foreign currency reserves totaled $437 million, which could cover only about a month and a half of import bills. The country is projected to arrange $600-$700 million of debt service expenses in 2025 and more than $1 billion in 2026. The island nation owes China about $1.3 billion and India about $130 million.

Against this backdrop, the Maldives president met Indian Prime Minister Narendra Modi in New Delhi on October 7, in a bid to secure much-needed financial assistance, amid fears that the island nation may default on a crucial $25 million bond payment. Reuters reported that India approved a $400 million currency swap agreement, a much needed lifeline for the debt strapped country of half a million people in terms of accessing short-term liquidity.

Maldives debt troubles are related to Sukuk bonds. Sukok is a special type of financial instrument that is often referred to as an Islamic bond, which operates quite differently from conventional bonds in order to comply with Islamic principles, particularly the prohibition of interest.

Unlike traditional bonds, which are debt instruments setting out that investors have lent money in exchange for interest payments, Sukuk represents ownership in a tangible asset or a pool of assets. Investors receive returns not from interest but from the revenue generated by the asset. If Maldives default on its Sukuk debt, that will be the first such event of sovereign default for Sukuk.

Absent much needed financial rescue from the likes of India, the ramifications of Maldives missing its Sukuk payment would be devastating: it could block access to international capital markets, shake investor confidence, and tip the Maldives into deeper economic turmoil.

While the Maldives with the latest assurances of help from India may have avoided an immediate default on its Sukuk debt, the country’s broader economic troubles remain unresolved, with significant debt payments looming in the coming years.

Geopolitical rivalries, structural weaknesses

The Maldives’ economic distress is deeply intertwined with the geopolitical rivalry between two major players in the region, India and China. Over the past decade, the country has borrowed extensively from both nations, but the two offer assistance with different goals in mind.

China’s loans have largely funded infrastructure projects tied to its Belt and Road Initiative, helping Beijing expand its strategic footprint in the Indian Ocean. India, on the other hand, sees the Maldives as a critical part of its regional security and has provided financial aid to counter China’s growing influence.

President Muizzu in his ‘India Out’ T-shirt. Photo: X

Muizzu’s rise to power in 2023 was underpinned by an “India Out” campaign, aimed at reducing the Maldives’ reliance on New Delhi and drawing the country closer to Beijing.

On his way to electoral victory, Muizzu promised that, once elected, he would expel Indian soldiers who were deployed in the Maldives on humanitarian assistance engagements.

Bowing down to such political pressure, India replaced dozens of its soldiers – exchanging them with civilian experts. However, as Maldives continued its plunge towards a debt crisis, shortly after coming to power, President Muizzu’s government caved in to pragmatism and softened its stance toward India, recognizing that Maldives’ immediate survival hinges on securing financial support from both China and India.

Maldives’ real challenges lie in its unsustainable debt burden and the structural vulnerabilities that underpin its economy. The country is overwhelmingly dependent on tourism, an industry highly susceptible to global economic shocks, as evidenced by the downturn following the Covid-19 pandemic. Furthermore, Maldives imports most of its essential goods – and rising global commodity prices have compounded its financial woes, draining foreign reserves and making it even harder to service debt.

This situation places the Maldives in a precarious position between the two competing powers. India and China both have significant economic and strategic interests in the Maldives, and their financial aid comes with expectations.

For China, the Maldives is an important link in its maritime strategy, while for India, the Maldives represents a key part of its efforts to counterbalance Chinese influence in the region. As President Muizzu navigates these tricky diplomatic waters, he must find a way to secure financial support without compromising the country’s sovereignty.

As for India, there are strong incentives to take President Muizzu into its fold, given that India sustained a series of diplomatic setbacks as several pro-India governments lost power in South Asia recently.

In Sri Lanka, a marxist politician, Anura Kumara Dissanayake, became president. In Bangladesh, Prime Minister Sheikh Hasina, arguably the most Pro-Indian Prime Minister in Bangladesh’s history, fled to India after being forced to resign by student-led protests. In Nepal, K.P. Sharma Oli, a pro-China politician, was elected as prime minister.

Reversing any of the recent diplomatic failures in India’s backyard will be viewed as a political victory for Indian Prime Minister Modi.

The goal: long-term solutions that leave sovereignty intact

The Maldives’ economic problems are structural, and addressing them will require more than temporary currency swaps and loans. The country needs a comprehensive strategy to diversify its economy away from tourism and reduce its dependency on imports, but such changes will take time – and political will.

The Maldives’ government has proposed several measures to address the crisis, including tax reforms, budget cuts and the restructuring of state-owned enterprises. These proposals aim to improve fiscal discipline and reduce the reliance on external borrowing. Yet, implementing these reforms will be a daunting task. Austerity measures such as tax increases and public service cuts have historically triggered protests in the Maldives, and Muizzu’s government may face significant resistance to these changes.

The question of whether the Maldives will turn to the International Monetary Fund (IMF) for a bailout also looms large. Although the government has thus far resisted this option, citing the temporary nature of its financial difficulties, many experts believe that an IMF intervention may be inevitable if the debt crisis worsens. However, an IMF bailout would come with stringent conditions including further austerity measures that could exacerbate social unrest and hurt the economy in the short term.

Unlikely to have a long term solution ready at hand, the Maldives will continue to depend heavily on India and China for financial support. But this dependence will come at a cost as both these regional powers are likely to use their financial leverage to push for greater political influence in the country.

India may seek to use its financial assistance as a way to reassert its strategic interests in the region, while China could leverage its economic investments to secure long-term control over key infrastructure projects.

The danger of this approach is that it could undermine the Maldives’ sovereignty. While financial support from India and China may help the Maldives avoid an immediate default, it risks entangling the country in the broader geopolitical rivalry between the two powers – thus endangering its own security. The delicate balancing act necessary to handle this geopolitical quicksand will require President Muizzu to be both a shrewd diplomat and a careful economic planner, as the stakes could not be higher.

A template for other small nations to follow?

The Maldives’ debt crisis is a cautionary tale for small nations that rely heavily on foreign loans and single industries such as tourism. Without a long-term plan for economic diversification and debt restructuring, the country will remain vulnerable to financial instability and external shocks.

President Muizzu’s recent mending of ties with India in exchange for accessing capital reliefs offers only a temporary solution, as it is not a substitute for the broader reforms that are needed to stabilize the economy.

The political cost of these reforms could be significant, but the alternative – continued dependence on foreign loans and increasing debt – is far more dangerous. To prevent a deeper crisis, the Maldives will need to enact tough but necessary reforms, build its foreign reserves and explore new sectors for economic growth.

President Muizzu must know that bold actions are needed at this critical juncture of his country’s national history. It is his time to take decisive actions to secure its financial future or risk being drawn deeper into the geopolitical currents that threaten to pull it under.

In a region marked by rising competition between India and China, the Maldives’ next moves could set a precedent for how small, debt-ridden nations handle the delicate balance between economic necessity and political independence.

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French brandy makers sacrificial lambs in China-EU trade war – Asia Times

After the bloc voted in favor of a 7.8-35.3 % tariff on Chinese electric vehicles, China has made the decision to impose a provisional anti-dumping tariff on brandy imported from the European Union. &nbsp,

The Chinese Ministry of Commerce announced in a speech on Tuesday that it had determined, at a preliminary stage, that the EU brandy goods were being dumping on the Chinese industry, putting a serious risk to the local economy. &nbsp,

Beginning on Friday, the new taxes will take the form of cash reserves. Between 30.6 % and 39 % are the deposit rates set.

It emphasized that the decision was made after it conducted an anti-dumping investigation against the EU’s brandy in accordance with Chinese laws and regulations as well as the World Trade Organization ( WTO ) rules.

Additionally, it stated that the EU’s anti-dumping and anti-subsidy investigations are still being conducted. After the studies, it stated that it would make an objective and honest assessment to ensure that all parties ‘ interests are thoroughly protected. &nbsp,

European brands from Hennessy to Remy Martin are anticipated to be hit by China’s new interim tariffs. &nbsp,

In 2023, France exported 165.3 million bottles of cognac to the US and 61.5 million bottles to China, according to the Bureau National Interprofessionnel du Cognac ( BNIC ), France’s Cognac governing body.

On Tuesday, the BNIC announced that France would work with the Union to protest China’s vodka taxes at the World Trade Organization. &nbsp,

On August 29, the Taiwanese government had announced that it would not impose interim duties on EU cognac. Beijing suggested raising the prices of its EVs to settle the disputes at the time when Chinese and European officials were in last discussions regarding the EV tax problem. &nbsp,

However, last week it was discovered that Beijing’s efforts to halt the Electric tariffs were unsuccessful.

Blaming France

On October 4, five EU member countries, including Germany and Hungary, voted against the taxes imposed by the German Commission on Chinese EVs, AFP reported, citing some unknown Western officials. &nbsp,

Twelve nations, including Spain and Sweden, and ten member states, including France, Italy, and Poland, voted against the Electric tariffs.

The tariffs on Chinese EVs, according to Hildegard Mueller, president of the German Association of the Automotive Industry (VDA ), represent a backseat to international cooperation. He urged China and the Euro to maintain their discussions to stop further increase and potential business disputes. &nbsp,

He praised the German authorities for abstaining from the Electric taxes and vehemently defended the rights of Europe and the European automotive industry. &nbsp,

” French auto firms such as Peugeot, Citroën and Renault had glory days in the Chinese market but now they only have a less than 1 % market share in China”, a Jiangsu-based columnist using the pseudonym” Jianshiyijin” says in an article. &nbsp, &nbsp,

He claims that the government and French automakers want to promote the EV industry and offer 800,000 vehicles every by 2027. That implies that someone will gain market shares. That’s why China has become a scapegoat”.

He suggests that China might consider imposing additional tariffs on a wide range of European goods, including agricultural and corner goods like red wines. ” France’s luxury items such as purses, fragrance and clothings should also be targeted”.

Tried all implies

” China has previously tried all methods to avert a price war with the EU”, a Zhejiang-based contributor says in an essay. ” We do n’t need to wallow in sadness and disappointment. It’s time to discover how we can respond when the EU fired the first shot at us.

He says the 10 EU member states that voted for the Electric levies may become targeted by China’s retribution, particularly France. &nbsp,

He claims that France had a significant role in the approval of the EV taxes suggested by the German Commission. ” As the saying goes,’ It’s better to cut off one hand of an army than to injure his ten hands.’ Our retribution if targeted France and demand that it give a high price for its actions.

He says China may acquire imposing tariffs on French items including aircraft and relevant parts, red wines, cheese and meat products, makeup, cases and bags, jewelry, clothes and watches.

He claims that China should also retaliate against the abstaining EU members because they refused to join forces and halt the EV tariffs. He urges China to give up hope that the EU will continue to be free of the influence of the US, which has already imposed a 100 % tariff on Chinese electric vehicles.

According to the United Nations Comtrade database on international trade, France’s total exports to China increased by 6 % to US$ 26.6 billion last year from US$ 25 billion in 2022. &nbsp,

Big engines

Germany may not be able to escape Beijing’s retaliatory measures despite voting against the EV tariffs China was given. &nbsp, &nbsp,

On Tuesday, the Chinese Ministry of Commerce announced that it is considering imposing higher tariffs on imports of large-engined vehicles from the EU. China pledged to take all necessary steps to firmly protect the interests of China’s businesses and industries.

Engines with displacement, or size of the combustion chambers, equal to or greater than 3, 000 cubic centimeters or three liters are considered big engines.

German automakers will be hit, according to some observers, if China imposes tariffs on European vehicles with large engines.

Read: EU-China in last gasp bid to avoid EV-driven trade war

Follow Jeff Pao on X: &nbsp, @jeffpao3

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Trump’s economic program would weaken the US – and Australia – Asia Times

It’s time to take Donald Trump seriously. Betting markets say it’s as likely as not he will be elected US president in four weeks.

And unlike in 2016 when his program wasn’t clearly defined, he has set out plainly what he intends to do. Which means it’s possible to model the consequences.

The three Trump promises with the greatest economic impact are

  • the deportation of millions of US residents
  • steep restrictions on imports, especially from China
  • presidential influence over interest rates.

The best way to model the consequences is with an established model of the kind used by the International Monetary Fund and central banks around the world rather than one set up for the purpose that could be seen as designed to favor or not favor Trump.

The Washington-based Peterson Institute for International Economics has just done that, noting that during Trump’s first term as president he “by and large” did what he said he would do.

It finds

ironically, despite his “make the foreigners pay” rhetoric, Trump’s package of policies does more damage to the US economy than to any other in the world.

No other country in the world would be hurt by Trump’s program as much as the US – not even China – although several US allies would suffer, including Australia, which would be the fourth-worst hit by the most extreme version of what Trump is proposing.

Mass deportations

Trump has repeatedly promised the “largest domestic deportation operation in American history,” targeting up to 20 million unauthorized immigrants, including about 8.3 million thought to be in the workforce.

He says his model is Operation Wetback – a 1956 Eisenhower administration program that used military-style tactics to deport 1.3 million Mexicans.

The institute says Eisenhower’s success makes it easy to believe Trump could remove 1.3 million immigrant workers. It has modeled two scenarios: removing 1.3 million and 8.3 million, both over two years in 2025 and 2026.

Both slash employment, including the employment of non-immigrants, both push up inflation, which eventually is brought under control, and both make the US a less attractive place to invest, which benefits much of the rest of the world.

The institute says the low and high scenarios differ “only by the degree of damage inflicted on people, households, firms and the overall economy”.

Huge tariff hikes

Trump wants to increase every tariff on goods imported to the US by 10 percentage points, including where there is at present no tariff. And he wants at least a 60% tariff on imports from China. The institute has modelled both, with and without retaliatory tariffs from China and the rest of the world.

It finds, unsurprisingly, that extra tariffs push up the price of US imports and the prices of US-produced goods that compete with imports. Many are used as inputs in manufacturing, which means US manufacturing suffers (which is probably not what Trump had in mind).

Fewer imports mean less demand for foreign exchange within the US, which means a higher US dollar which makes US exports less competitive. The US economy is weaker as a result, although China’s is weaker still and Australia’s is weakened as much as the US given its role in providing resources to China.

Tampering with the Fed

Trump has raised the prospect of more presidential influence over interest rates, saying he thinks he has “a better instinct than, in many cases” the board of US Federal Reserve. This could be achieved by requiring the president to be consulted on rate decisions or by appointing a compliant chair.

However it’s done, the institute’s “conservative” assumption based on what happens in developing countries with less central bank independence is that it will push inflation two percentage points higher.

The modeled result is capital flight. While the US economy is initially stronger than it would have been because of the Fed’s willingness to tolerate higher inflation, after a few years it is weaker and every other economy is stronger.

When all the measures are combined, under the extreme scenarios the US economy is 6.7% weaker than it would have been by 2035 and Australia’s is 0.2% weaker. Under the more modest scenarios, the US economy is 1.6% weaker and Australia’s is 0.06% weaker.

Why not examine Harris?

Despite a history of non-partisanship, the Peterson Institute is prepared for criticism. It points out that the economic model it used is regarded as the best in the world for scenario planning and is Australian, built by Warwick McKibbin of the Australian National University.

And it says it has modeled the Trump policies rather than the Harris policies because only Trump’s represent a departure from business as usual.

As the Institute’s president, Adam Posen, put it in Washington last month, the Harris campaign has said it will not impose across-the-board tariffs, will not engage in mass deportations and will not interfere with the independence of the US Federal Reserve.

The Trump campaign has indicated it will do all three.

It’s entirely possible that in office Trump wouldn’t do everything he proposed while campaigning, and it’s entirely possible that he would change course if what was doing damaged the US in the way the modeling suggests.

But there’s something to be said for taking people at their word, at least to get an idea of what we could be in store for after a knife-edge election.

Peter Martin is a visiting fellow at the Crawford School of Public Policy, Australian National University.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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