Marcos Jr in US with money, guns and China on his mind

MANILA- A significant incident occurred in the fiercely contested South China Sea just days after the original Foreign Foreign Minister Qin Gang arrived in Manila to resolve increasingly tense diplomatic relations.

On April 23, during a routine” sovereignty patrol” near the Second Thomas Shoal, two Chinese Coast Guard( CCG ) ships reportedly intercepted their ships. According to a PCG statement regarding the incident, the CCG” exhibited angry tactics” and” engaged in harmful manoeuvres.” & nbsp,

As the original Ferdinand Marcos Jr leadership turned back to traditional allies, including the US, the event marked at least the fifth such incident in the previous year only. Additionally, it happened just days before the president of the Philippines, who recently attended sizable US-Philippines more, arrives in the White House as new diplomatic military ties are beginning to take shape.

Marcos Jr. has emphasized that trade and investment, not geopolitics, will be the main focus of his five-day trip to Washington, where he is scheduled to meet with US President Joe Biden, top business figures in Congress, and give a speech at the influential Center for Strategic and International Studies( CSIS ) think tank.

On April 30, Marcos Jr. made his second trip to the country since taking office the previous years. The positive outlook on US relations stands in stark contrast to Manila’s current interactions with Beijing. & nbsp,

Foreign Minister Qin’s hosts in the Philippines paid him a rather tepid visit during his first trip to Manila in his capacity as the new diplomatic leader of China.

The days of cordial relations between top Chinese and Filipino diplomats, particularly during the early years of the pro-Beijing Rodrigo Duterte presidency( 2016 – 2022 ), are long gone. & nbsp,

The trip, according to the Chinese Foreign Ministry, was intended to” produce mutual trust” and” properly handle differences” between the parties. In a press briefing last month, the Chinese foreign ministry added,” China looks forward to strengthening communication with the & nbsp, Philippines, through this visit.”

On April 23, Manila, President Ferdinand Marcos Jr. and Chinese Foreign Minister Qin Gang shared an uncomfortable embrace. Picture: Handout

The Philippine Department of Foreign Affairs ( DFA ) also emphasized the necessity of continuing ongoing negotiations to increase bilateral trade and investment as well as the need for diplomatic solutions to”r ] egional security issues of mutual concern.”

Marcos Jr. secured new investment pledges totaling more than$ 22 billion during his January trip to Beijing. However, there are growing concerns that China may not keep its word, particularly as the Philippines strengthens America’s military presence there as a result of an expanded Enhanced Defense Cooperation Agreement( EDCA ), particularly close to the South China Sea and the southern shores of Taiwan.

According to all indications, the Chinese foreign leader’s troubleshooting visit, which took place at the same time as significant US-Philippines wargames close to the South China Sea, was ineffective. The two legs were only able to agree on the necessity of establishing” more lines of connections” during his brief journey to Manila.

However, recent history, including the” beautiful era” of diplomatic relations under pro-Bachin Duterte, demonstrates that even courteous diplomatic ties frequently fall short of preventing serious escalation in the South China Sea. This was most notably demonstrated during the 2019 Reed Bank crisis, when a suspected Chinese military vessel sank an Indonesian fishing vessel there.

Marcos Jr. became the first Filipino chairman in recent memory to physically attend the Balikatan( shoulder to shoulder) exercises between the US and the Philippines not long after the Chinese envoy left. A report 17,600 soldiers and personnel, including those from Australia and Japan, took part in this year’s drills, which mimicked the falling of a hostile vehicle.

The Filipino president” witnessed the live-fire sea training involving the falling of an elderly Philippines Navy ship, hoping the land may benefit from enhanced cooperation with the United States ,” according to the Malacaang Palace.

China’s response can be seen in the event involving the seacoast police on April 23. During US Secretary of Defense Lloyd Austin’s view in February of last year, just one week after Manila announced the full application of EDCA, a Chinese ship aimed its military-grade light at an American coast guard ship.

On February 6, 2023, a cargo belonging to the Chinese Coast Guard fired lasers at sailor from the Philippines in the South China Sea. Philippine Coast Guard / Handout Image

From Manila’s approach, Beijing appears to be more interested in undermining the rapidly growing security partnership between the South Asian country and the US by using intimidation tactics rather than making actual concessions. As a result, Marcos Jr. ‘ s visit to the White House this week— the first in almost ten years— is particularly significant.

The need for the Philippine-US bond to” evolve” in accordance with the demands of the time has been emphasized by the president of Philippines.

Even days before taking off for Washington, DC, Marcos said in a mix of English and Tagalog,” We have to develop it because it is evolving, and we need to alter it. The environment we are facing in the South China Sea, the environment in Taiwan, North Korea are evolving.

Ma Teresita Daza, the spokesperson for foreign affairs, emphasized the” desire for collaborations not only with the United States to develop and it is critical because the conditions are changing” during a pre-departure presentation, emphasizing Manila’s growing sense of anxiety. There are many new difficulties that must be overcome for any agreement to be effective.

Given that the expanded EDCA gives the Pentagon access to local facilities in the north Philippines, tensions over Taiwan’s neighbor will undoubtedly be a hot topic. The Armed Forces of the Philippines( AFP ) has made it clear that, should the need arise, EDCA may be expanded even further. & nbsp,

Colonel Medel Aguilar, & nbsp, the AFP’s spokesperson, stated to the media last week that” we need a 360-degree protection capability for the[ AFP ]] if we are to protect our sovereignty and territorial integrity, including the protection of maritime resources that should be enjoyed by our people.”

The AFP spokesman continued,” Moderization also entails acquiring facilities, such as airports, camp for our soldiers, and places to store supplies in times of crisis.” We are the ones who actually gain from EDCA services in the end.

At the White House last week, Marcos Jr. and US counterpart Joe Biden may discuss Taiwan-related tensions, but the discussions will center on trade and investment, according to a renowned Filipino diplomat.

On October 10, 2019, the Philippine and US Marines participated in a surface-to-air weapon model as part of the Kamandag combined train. Image: Lance Cpl. US Marine Corps’ Brenda Tuck

Despite a century-old bond, the Philippines and the US have rather low trade ties with their neighbors, including communist Vietnam, which is currently the seventh-largest trading partner of the United States.

The Philippines only exported$ 11 billion worth of goods to the US last year, compared to ten times that amount from a number of its neighbors. In a similar vein, US companies invested tens of billions in other Asian economies, while US foreign direct investment ( FDI ) stock in the Philippines reached$ 5.2 billion in 2020.

In order to increase America’s investment and trade footprint in Asia, Marcos Jr. will therefore argue that either a bilateral free trade agreement or further substantiation of the Indo-Pacific Economic Framework ( IPEF ) is necessary.

We usually return to trade, not help, in our relationships with the US, as the Filipino leader stated shortly after winning the presidency last year.

In reference to his choice to add the US-sponsored IPEF, he added,” We have to open as much of the market as we can to industry, and that’s where this kind of agreement will come in.”

At @ Richeydarian, follow Richard Javad Heydari on Twitter.

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Japan’s grand plan to power into the EV fast lane

Japanese businesses have a long history of falling behind in the electric vehicle( EV ) market, but plans to quicken vehicle assembly and the production of batteries, motors, and electronic components could quickly catch up.

Japan Inc. ‘ s action should increase the pressure on EV prices, hasten the switch away from internal combustion engines, and generally benefit consumers.

Toyota currently has the highest number of car sales of any other company in the world, while Honda and Nissan already hold strong positions in international rating. Nissan, however, is the only Japanese company that is listed among the top 15 EV producers thanks to the Renault – Nissan-Mitse Alliance.

With less than one-fifth the efficiency of industry leader BYD, the Alliance ranked 10th in 2022. Toyota and Honda may turn their sizable worldwide franchises and consumer popularity into significant EV market shares if they want to continue leading the auto industry.

Furthermore, neither should be incapable of reaching EV speeds.

Honda announced on April 26 that by 2040, all of its car models will be fuel cell electric vehicles ( EVs ). The company intends to produce more than two million Batteries annually by 2030 in order to achieve this goal. Many objectives include:

  • In the US, two EV models that were co-developed with GM and one that used Honda’s inner electric vehicle platform were introduced in 2024 and 2025, respectively. GM’s acquisition of chargers and the creation of a joint venture with LG Energy Solution to produce chargers.
  • 10 EV models will be introduced in China by 2027, and 100 % of the market will have sold by 2030. greater cooperation with power producer CATL.
  • By 2026, four EV models will be available in Japan, along with home and social paying services. purchase of batteries from Envision AESC, a Japanese-founded business that is now 80 % owned by Nissan and 20 % by China’s ENvision Group.
  • For entry in the next half of the century, solid-state batteries were being developed. Continue working with US battery R & amp, D company SES.

Honda, GS Yuasa, and Japan’s Ministry of Economy, Trade and Industry ( METI ) announced joint plans on April 28 to invest 434 billion yen( US$ 3.2 billion ) in a new lithium-ion battery factory in Japan, with government subsidies covering more than 35 % of the cost.

The start of construction is expected in 2027. The Chinese government declared chargers to be a tactical device in December of last year.

Honda and North Korean steel producer POSCO announced plans to work together on the present and recycling of battery materials as well as the mass production of EV motor steel earlier this month.

In the meantime, Toyota intends to launch 10 different battery-powered EV models and increase monthly supply from 1.5 million models by 2026 to 3.5 million by 2030.

Within the same time frame, Prime Planet Energy & amp, Solutions, the company’s battery supplier in Japan, intends to increase production. Prime Planet produces batteries for Tesla and is owned by Toyota 51 % and Panasonic 49 %, respectively. Toyota in China receives chargers from CTL and BYD.

In the financial year ending March 2023, 27 % of Toyota’s unit prices were hybrid vehicles, but the majority of them were full hybrids, which continue to use internal combustion engines.

Some plug-in hybrid used a device as their primary source of power. The information underlying the EV Unit Production map above includes plug-in hybrids and battery-powered electric vehicles, but not full ones.

( See The high, high cost of Toyota’s EV blunder by William Pesek for a more dubious view of its switch to electric vehicles. )

Toyota is attempting to catch up to the EV market. Twitter look

The price cuts by Tesla and the announcement of an EV with a cut-rate of$ 11,400 by BYD are proof that the auto industry has entered an age of value. However, the trend toward lower EV costs has been clear for a while.

The$ 4,500 Hongguang Mini EV from China and Suzuki Motor’s intention to introduce a 1 million yen minicar in Japan by 2025 both garnered attention in 2021. The Hongguang Mini was the wave of the future, according to Shigenobu Nagamori, president of EV machine manufacturer Nidec, who spoke to the media that same year.

The price market in EVs will be more intense, just like in home appliances, he predicted, with new competitors entering the market from outside the vehicle industry.

The psychological equivalent of a$ 10, 000 price point in the US is one million yen($ 7, 500 ). It was already a yardstick two years ago.

Falling price made it impossible for smaller and less wealthy manufacturers to develop their own vehicles, so Nidec entered the EV engine markets in 2018 with the intention of building up huge economies of scale and capturing a sizable portion of the market. The application of this strategy is well under way.

Nidec sold 949,000 of its E-Axle systems( electric traction motor and related components ) in the fiscal year that ended on March 31, 2023, with 86 % of them in China and 14 % in Europe. Over the past three decades, the number of ships has increased by nearly 20 years and by 2.8 years from the previous year.

Nidec anticipates selling 1.7 million elements and breaking even this fiscal years. It intends to sell more than 3 million elements in financial 2025 and 10 million by 2030. According to Nidec’s management, that would give the business a 26 % market share globally.

The competition for EV motors is undoubtedly crowded. Aisin, a Hitachi and Toyota advertising in Japan, Bosch, Continental, and Daimler in Germany, Borg-Warner and Dana in the US; BYD, Shaanxi Automobile and Hepu Power in China; and numerous other international rivals compete with Nidec.

Economy of scale is essential for survival as a result of the ongoing worldwide competition that has driven both EV and machine costs down. Nidec manufactures EV actuators in China and Europe and is constructing a shop in Mexico for this reason, as well as to be close to its customers and prevent trade resistance.

15 different models made by a dozen automakers, including Guangzhou Auto Group Co, Ltd ( GAC ) and its joint ventures with Toyota, Honda, Mitsubishi Motors, Geely, and Smart Automobile, have so far used Nidec’s EV motors and E-Axle systems.

Tunnel Magneto-Resist ( TMR ) sensor production will be doubled at the Asama Techno Factory in Nagano, according to plans made by Japanese electronic parts manufacturer TDK on April 27. The increase in production ought to start in the first half of 2025.

TMR sensors have increased precision, dependability, and lower power consumption thanks to the company’s core magnetic and thin-film technologies.

In terms of EV-related detectors, TDK is in the lead. TDK, Twitter, and Screengrab images

They are also used in robots and other commercial machinery and are highly sought after by the car business for e-axle and power wheel motor control, in braking systems, and as active sensors for power control.

Temperature and pressure detectors, accelerometers, device systems, rechargeable batteries, power supplies, and silent components are also provided by TDK to the automotive and other industries.

Due in large part to engine electricity, including ADAS and EV formation, which is increasing the number of parts per vehicle, TDK’s prices increased by 15 % in the fiscal year ended March 2023.

Due to its high reliance on smartphone demand and relatively low gear to the car industry, Murata, the largest exporter of batteries and other quiet parts in Japan and the entire world, reported a 7 % decline in sales in the year to March.

Follow this author on Twitter at @ ScottFo83517667.

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Thai Union signs pledge to reduce ocean bycatch

Barcelona: The largest shrimp company in the world, Thai Union Group, has been the first to ratify the Sustainable Fisheries Partnership’s pledge to protect ocean animals.

Finding fisheries with the highest risk of endangered, threatened, and protected ( ETP ) bycatch and lowering those risks through widespread adoption of best practices, 100 % observer coverage, support for innovation and science, ongoing supply chain improvement, as well as public reporting are some of the new commitments.

” We are pleased to be the first business to sign the pledge, and we kindly request that other seafood businesses do the same.” We will only achieve the outcomes and overall objectives in protecting and restoring our endangered marine life through the attempts of leaders in our economy, according to Adam Brennan, class producer of ecology at Thai Union.

Thai Union vowed in March 2023 to just source seafood from ships adhering to best practices for preventing bycatch of marine life.

This commitment was based on an analysis of Thai Union’s tuna fishery improvement projects as well as research by the Sustainable Fisheries Partnership( SFP ) on the dangers to sharks, sea birds, turtles and other marine wildlife in the fisheries that supply the company. You can read the assessment of Thai Union online.

The movement is being started by Thai Union, which is good, but the industry as a whole won’t be able to reduce fishery in commercial fisheries until it does, according to Kathryn Novak, SFP’s biodiversity and nature director.

” We extend an invitation to many businesses to sign the toast.” In fact, we’re aiming to sign up 10 more businesses by June’s World Oceans Day.

The” bycatch audit” by the Thai Union was carried out as part of the SFP’s Protecting Ocean Wildlife initiative, an international, business-driven initiative to address marine wildlife bycutt.

SFP encourages shellfish producers to find out more about minimizing sea overfishing. SFP, a marine conservation organization, was established in 2006 with the goal of transforming the shrimp industry into something more lasting.

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Thailand: Southeast Asia’s ‘weed wonderland’

A view of the Wonderland marijuana outlet on Bangkok's Sukhumvit road. In the metropolitan area of Bangkok 1995 marijuana dispensaries/shops, have opened, and in downtown Bangkok 533 have opened since June 9, 2022.Getty Images

A new symbol has appeared in the kaleidoscopic jumble of neon signs that light up Sukhumvit Road, Bangkok’s most international street. The sudden ubiquity of the five-pointed marijuana leaf, in lurid green, announces the spectacular boom there has been in weed-related businesses in Thailand since cannabis was decriminalised last June.

Walk two kilometres east of the BBC office in Bangkok, and you pass more than 40 dispensaries, selling potent marijuana flower buds and all the paraphernalia needed to smoke them.

Travel in the opposite direction, to the famous backpacker hangout of Khao San Road, and there is an entire marijuana-themed shopping mall, Plantopia, its shops half-hidden behind the haze of smoke created by customers trying out the product. The website Weed in Thailand lists more than 4,000 businesses across the country selling cannabis and its derivatives.

And this is Thailand, where until last June you could be jailed for five years just for possessing marijuana, up to 15 years for producing it; where other drug offences get the death penalty. The pace of change has been breathtaking.

“It is messy, but then this is Thailand, and without this sudden liberalisation I don’t think it would have happened at all,” says Kitty Chopaka, founder of Elevated Estate, a company that offers advice on the marijuana industry, and has been a part of the parliamentary committee trying to get the new regulations passed.

But this is not the kind of liberalisation long-term campaigners like her dreamed of.

“We need regulation. Spelling out what you can and cannot do,” Ms Chopaka says. “It is causing a lot of confusion, a lot of people not knowing what they can do, what they can put money behind.”

Kitty Chopaka, a long-time advocate and campaigner for the legalisation of cannabis

Lulu Luo/BBC

There are some rules in this apparent free-for-all, but they are being enforced haphazardly, if at all. Not all dispensaries have a licence, which they are required to have, and they are supposed to record the provenance of all their cannabis flowers and the personal details of every customer.

No products aside from the unprocessed flower are supposed to have more than 0.2 percent THC, the psychotropic chemical in cannabis, nor can they be sold online. Yet you can find suppliers offering potent weed brownies and gummies with high THC content online, with delivery to your door within an hour. Cannabis cannot be sold to anyone under 20 years old, but who is to know if the product is simply delivered by a motorbike courier?

There are restaurants serving marijuana-laced dishes, you can get marijuana tea, and marijuana ice-cream. Convenience stores are even selling weed-tinged drinking water. The police have admitted that they are so unsure of what is and is not legal they are enforcing very few rules around marijuana.

The new cannabis regime is a bit of a political accident. Anutin Charnvirakul, head of one of Thailand’s larger political parties, made decriminalisation part of his manifesto for the 2019 election. It proved a vote-winner, mostly on the as-yet untested notion that cannabis could be a profitable alternative cash crop for poor farmers. As health minister in the new government, Mr Anutin prioritised getting it taken off the banned narcotics list as soon as possible to fulfil his election pledge.

But Thailand’s parliament, a cauldron of competing interest groups, moves slowly. Cannabis was decriminalised before anyone had been able to write regulations to control the new business. And the planned new laws got bogged down by inter-party bickering. With another general election taking place in May, there is little chance of the law getting through the parliament before the end of the year. Already rival parties are warning of the dangers of unregulated weed, and threatening to re-criminalise it if they take power.

A street in Bangkok

Lulu Luo/BBC

The future of this free-wheeling new industry is uncertain.

Tukta, a 21-year-old university student, jumped on the marijuana bandwagon last year, sinking more than one million baht ($30,000; £23,500) into a dispensary and coffee shop called The Herb Club in Bangkok’s Klong Toei district. She sells 16 different grades of the cured flower, ranging from $10 to $80 a gram, but she worries about possible changes in the law. With so much competition from the many other dispensaries nearby, she says business is neither bad nor good.

“The price is falling because there’s a glut of marijuana,” Ms Chopaka says.

“There are a lot of illegal imports. We are growing strains from overseas, which need air-conditioning and lighting. We should look into developing strains that work for our climate to lower costs.

“We really need to go back to our old heritage, our old cultures. Because cannabis and Thais, Thailand, are very interwoven with each other.”

For many Thais, who have grown up in a country which viewed all narcotics as a dangerous social evil, the dramatic flowering of the weed business since last year is bewildering. Yet the unforgiving official view of drugs is a relatively recent development.

Up until the late 1970s marijuana was widely cultivated by the hill tribes in northern Thailand, in the border area known as the Golden Triangle, which also used to be the source of much of the world’s opium. Marijuana had also been used extensively as a herb and cooking ingredient in north-eastern Thailand.

When US soldiers arrived in the 1960s on “rest and recreation” breaks from fighting in the Vietnam War they discovered Thai stick, locally made from cured marijuana buds wrapped in leaves around a bamboo stick, like a fat cigar. The soldiers began shipping Thai marijuana back home in large quantities; along with Golden Triangle heroin it made up much of the narcotics flow going into the United States.

Weed vendors in Thailand

Lulu Luo/BBC

As the Vietnam War wound down, the US put pressure on Thailand to curb drug production. In 1979 Thailand passed a sweeping Narcotics Act, mandating harsh penalties for using and selling drugs, including the death sentence.

This coincided with a conservative backlash across South East Asia against permissive 1960s attitudes to drugs and sex, a reaction to the ganja-smoking backpackers travelling east along the “hippie trail”. Thailand, Singapore and Malaysia all instructed their immigration officers to look out for hippies and bar them entry. At Singapore airport those with long hair were given a choice of a trip to the barber or being turned around. In Malaysia anyone with sufficiently suspect attributes would have the letters SHIT – suspected hippie in transit – stamped in their passports before being deported.

The Thai government was especially wary of alternative youth culture after it crushed a leftist student movement, killing dozens at Bangkok’s Thammasat University in October 1976. Conservatives feared they might support a communist takeover in Thailand, as had just happened in neighbouring Laos, Cambodia and Vietnam.

Meanwhile a series of royally-sponsored crop substitution projects persuaded most hill tribes to stop cultivating opium and marijuana, and try coffee or macadamia nuts instead.

Since the 1990s cheap methamphetamines have poured into Thailand from war-torn areas of Myanmar. The ruinous social impact of meth addiction turned the Thai public even more firmly against drugs, and led to a brutal anti-drug campaign in 2003, in which at least 1,400 suspected users and dealers were gunned down.

It was the dire overcrowding in Thailand’s prisons – three-quarters of them in for drug offences, many quite minor – that finally persuaded Thai officials to rethink their hardline approach, along with the realisation that marijuana’s medicinal and therapeutic applications might be a valuable complement to the country’s successful medical tourism industry. It was not much of a leap from that to see the potential in recreational marijuana too.

Tom Kruesopon is known in Thailand as 'Mr Weed' for his role in getting the drug laws liberalised

Lulu Luo/BB

“Welcome to Amsterdam on steroids,” booms Tom Kruesopon, the Thai entrepreneur known here as “Mr Weed” for his role in getting the drug laws liberalised, to a group of German tourists just off the plane, who cannot quite believe what they are seeing. Mr Kruesopon has opened a branch of the US cannabis store Cookies in Bangkok, and runs through the different strains of locally-grown marijuana, each in its own illuminated jar. Weed-themed underwear, slippers and t-shirts are on the shelves.

Perhaps it’s the familiar tales of hapless Westerners locked up for decades in the Bangkok Hilton that make the visitors seem a bit hesitant. But Mr Kruesopon assures them they can no longer be arrested for buying and consuming any part of the marijuana plant in Thailand, though he does not allow smoking in his shop. He believes the business will continue to grow. “You’re going to have a few billion-dollar companies here – I guarantee it.” But he also accepts that better regulation is essential “otherwise you’re going to kill the golden goose”.

Outside of parliament public debate about cannabis is surprisingly muted.

“It’s not ok. It’s still like narcotics to me… Only the youngsters are using it more and those who have used it before are using it again,” says a 32-year-old street vendor. But an older motorcycle taxi driver says legalising marijuana has neither helped nor harmed him: “We’re not paying attention because we haven’t been smoking pot. It doesn’t matter to us anyway.”

Some doctors have warned of the dangers of cannabis addiction, but for most Thais it pales beside the long-standing methamphetamine crisis. Dispensaries in central Bangkok say most of their customers are foreign tourists, not Thais. The most enthusiastic supporters of the new regime are the not insignificant numbers of people in Thailand who were already using marijuana regularly.

Amanda

Lulu Luo/BBC

Self-styled “stoner” Amanda is one of them. She is happy to be able to cultivate the kinds of strains she likes at home, without fearing a knock on the door from the police. She has turned her small apartment into something like a shrine to the wonder-weed, filling her little bedroom balcony with reflective tents and powerful lights where she carefully tends seven plants. Her cat is no longer allowed in the bedroom.

“It was difficult at first. I had a lot to learn. I didn’t get the temperature right at first, and using air-conditioning 24 hours a day, I need a humidifier. But it is so awesome this happened in Thailand. There are thousands of farms and dispensaries now, so many interesting people in the business.”

For all the talk in Thai political parties of re-criminalising marijuana, or trying to restrict it to medical, rather than recreational use – a distinction those in the business say is almost impossible to make – it seems unlikely that after the last, crazy nine months the cork can be put back in the bottle. But where Thailand’s free-wheeling marijuana industry goes from here is anybody’s guess.

Read more of our coverage of South East Asia

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Decoupling or not, China still opening wide its economy

The private sector and foreign investors have become increasingly skeptical about doing business in China since Covid-19. The risks of shutdowns, travel restrictions, disruptions to normal operation and supply chains, and liquidity shortages resulting from China’s zero-Covid policy have significantly shaken their confidence.

China has engaged in a multi-pronged regulatory crackdown on a wide range of sectors, from platform economy to online finance to real estate. The crackdown signals that Beijing values loyalty from the private sector and financial stability over growth and access to capital. Beijing’s advocation for “common prosperity” and opposition to “unconstrained economic growth” has only heightened business concerns regarding China’s aggressive redistribution policies.

The increasing antagonism and decoupling between China and the West as well as China’s decision to develop “self-reliance in technology and science” have created enormous uncertainties for business operations and lowered companies’ confidence. Many have questioned whether China is adopting a state-centric and inward-facing economic development strategy and whether the reform and opening-up era has come to an end.

With the termination of China’s zero-Covid policy at the end of 2022 and the recent announcement of a new line-up of top government leaders, 2023 is a crucial year for China to restore business confidence. China will need to demonstrate to the world that it still places a premium on opening up and pro-business policies, particularly for the private sector, in the post-pandemic era.

Chinese leaders have reiterated their determination to open the country up. The 2022 report of the 20th National Party Congress of the Chinese Communist Party emphasizes that China will remain “committed to reform and opening up”, “promote high-standard opening up” and “facilitate the healthy development of the non-public sector.”

During the first plenary session of the State Council’s new term, the new Chinese Premier Li Qiang told his colleagues that advancing opening up, empowering private sectors and attracting more foreign investment are their top priorities.

Li highlighted the importance of the private sector in upgrading China’s manufacturing by visiting the facilities of Build Your Dreams, one of the country’s largest electric vehicle makers and a private company, on his first trip out of Beijing after he became the premier.

China’s newly-elected Premier Li Qiang takes an oath after being elected during the fourth plenary session of the National People’s Congress (NPC) at the Great Hall of the People in Beijing, China on March 11, 2023. Image: Pool / Twitter / Screengrab

During this trip, he also met with a number of heads of big enterprises. Among these heads was the CEO of Xiaomi, one of China’s largest smartphone manufacturers and a privately held company in China.

During the meeting, Li promised to create a business-friendly environment. In addition to sending a message to the domestic private sector, the Chinese government has used international conferences to reassure foreign investors. For instance, Chinese President Xi Jinping sent an unprecedented congratulatory letter to this year’s China Development Forum, reiterating that opening up is China’s fundamental national policy.

During the Forum, both Li and Chinese Vice President Han Zheng met with CEOs of numerous multinational corporations and promised to promote high-quality opening up. Li clearly stated in his opening remarks at the Boao Forum of Asia’s annual meeting that China will continue to increase market access with new measures and improve the business climate for state-owned enterprises (SOEs), private Chinese firms and foreign businesses.

China has taken a whole-of-government approach to addressing the concerns of the private sector. Xi emphasizes that the operation of SOEs must follow the market. This could be interpreted to mean that SOEs should not enjoy privileges and should compete in the market. The central government has taken steps to ease up on the regulatory crackdowns on businesses.

For instance, it granted publishing licenses to 44 foreign games for domestic release and approved over one hundred new video game licenses for domestic companies and Didi Chuxing, a domestic ride-hailing company, has been allowed to register new users.

Ministries of the Central government and local governments have taken steps to promote the development of the domestic private sector and expand opening up. In collaboration with provincial governments, the Ministry of Commerce has launched “The Year of Investment in China” to attract more foreign investment through exhibitions and forums.

The provincial governments of Hebei, Shaanxi, Hainan and Hunan have issued policy measures to support the development of the private economy. Their measures include reducing government intervention in the operation of the private sector, providing financial and credit support to private companies through multiple channels and awarding cash to outstanding private companies.

A Chinese worker at a spinning factory in Xingtai City, Hebei province. Photo: Xinhua

Provincial leaders have also traveled abroad to entice foreign investment and broaden the opening of their respective provinces. Guangxi Party Secretary Liu Ning, for instance, traveled to Vietnam, Singapore and Malaysia in March and April 2023, signing contracts with a total value of 89.1 billion RMB (US$12.9 billion).

The Chinese government has sent a clear message that it is fully committed to opening up and improving the business environment, especially for the private sector. In the post-pandemic era, it is nearly impossible for China to overthrow its opening up and support for the private sector.

It would be unfeasibly expensive for Chinese leaders to retract their support for the private sector after making statements at high-profile international events. The path-dependence of China’s outward-looking economy also means that any actions against opening up or the development of private sectors would have enormous negative effects not only in economics but also in politics and society.

Xirui Li is a PhD candidate at the S Rajaratnam School of International Studies, Nanyang Technological University, and a Research Fellow at the Intellisia Institute, Guangzhou.

This article was originally published by East Asia Forum and is republished under a Creative Commons license.

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US officials scramble to slow China’s advances

It was the ultimate chip war that never was: German officials denied that Berlin planned to stop exporting specialty chemicals for chip fabrication, Reuters reported on April 27 – a day after Bloomberg News claimed that the government of Olaf Scholz “was in talks” on the subject, presumably under prodding from Washington.

The stock prices of BASF and Solvay, the largest makers of the specialty products, plunged on Thursday after the Bloomberg report appeared but recovered sharply on Friday after the government’s denial.

More than a dozen chemicals including acids, bases and solvents are indispensable to etching microcircuits onto silicon wafers, and an interruption of supplies would cripple China’s fabrication capacity. Restricting these chemicals would escalate the chip war far beyond the scope of the Biden Administration’s October 7 controls on semiconductor equipment and design software for the most advanced chips, used in high-end smartphones, servers and artificial intelligence applications. The target would include all chips including so-called mature processes.

In related news, US Commerce Secretary Gina Raimondo announced on April 26 that the US will consider banning exports to Chinese cloud-computing companies, including Alibaba as well as Huawei. Raimondo responded to a letter from a group of Senators led by Bill Hagerty (R-TN) warning that Chinese cloud computing threatens US “national security and economic security.”

The Biden Administration is also expected to ban US investments in yet-to-be-announced high-tech industries in China.

Republicans on the House Foreign Affairs Committee meanwhile are wrapping up a three-month investigation of the Commerce Department’s enforcement of chip controls and have offered legislation that would give the Defense Department responsibility for enforcing the ban. Gregory Allen of the Center for Strategic and International Studies argued in congressional testimony April 13 that “China’s export control evasion activities are significant and growing. My primary recommendation is that Congress focus on concrete strategies to tighten this enforcement and shore up remaining gaps that risk allowing China to close the AI gap.”

Washington is scrambling to restore credibility to its effort to contain China after a streak of Chinese diplomatic victories, including the Beijing-mediated restoration of diplomatic relations between Iran and Saudi Arabia, French President Emmanuel Macron’s visit to Beijing in a show of independence from Washington and the visits of Brazilian President Lula and Malaysian President Anwar Ibrahim.

Ukraine President Zelensky’s telephone call with Xi Jinping and the dispatch of a special Chinese envoy to Ukraine, moreover, raise the prospect that China will pick up the pieces in Ukraine, after a drumbeat of damaging Pentagon leaks revealed how badly America stumbled.

In the advent of the 2024 presidential election, the Democratic administration is sensitive to Republican claims that it is too easygoing towards China.

China’s economic success in the Global South threatens to lure key countries out of the American orbit. As of March, China’s exports to ASEAN countries rose 35% year-on-year and exports to Central Asia (including Turkey and Iran) rose 55%, Asia Times reported April 25. China now exports more to the Global South than it does to developed markets.

Washington’s controls on the export of high-end chips and chip-making technology to China, announced October 7, 2022, were intended to deny China access to cutting-edge hardware that supported the most advanced AI applications. By contrast, the Commerce Department has shown flexibility in allowing semiconductor equipment manufacturers to ship machines that produce mature chips.

The Biden Administration adapted its strategy from a September 2022 report by the Special Competitive Studies Project, chaired by former Google CEO Eric Schmidt. This offered a response to China’s growing military power as imagined by Silicon Valley software venture capitalists: An “Offset-X strategy” including “distributed and networked operations, human-machine collaboration, human-machine teaming, primacy in software-centric warfare, resilience and greater technological interoperability and interchangeability and partners.”

Eric Schmidt speaks during a National Security Commission on Artificial Intelligence (NSCAI) conference November 5, 2019, in Washington, DC. Photo: Asia Times files/ Alex Wong / Getty Images via AFP

That was a Silicon Valley futurist’s view of warfare, unrelated to military technology that will prevail for the foreseeable future. Both the US and Chinese military use older-generation chips for sensing, targeting and processing information. The older chips are more robust and easier to harden, as a February 2022 Rand Corporation study explained.

The Biden Administration gravely underestimated the power and importance of mature chip technologies (14 nanometers and higher), which comprise 95% of the global chips market and power 5G infrastructure, industrial productivity applications, and other so-called Fourth Industrial Revolution technologies. Semiconductor fabricators depend on mature chips for most of their revenues, and China’s massive investment in a domestic supply chain threatens to erode the financial base of the whole Western chip industry, as Dimitri Alperovitch of Silverado Incubator has observed.

One problem is that cutting off the Chinese market may have devastating consequences for the revenues of Western high-tech companies. The Atlantic Council warned in a March 2023 report, “While the steps taken by the Biden administration to constrain China’s progress in producing cutting-edge semiconductors appear calibrated to avoid widespread industry disruption, the policy has painful consequences that cannot be downplayed….the bottom-line impact may be felt in terms of what the industry terms a ‘significant loss of scale’ that could yield fewer resources for R&D and new investments…. It is essential that the semiconductor industry – and US allies, as discussed below – have a voice in assessing the potential impact of additional proposed constraints. Communication is essential to avoid unintended consequences.”

To make matters worse, American sanctions on the sale of high-end chips to China are extremely difficult to enforce. To comply with sanctions Nvidia reduced the clock speed on a variant of its GPUs, the standard for high-end servers, while selling substantially the same product to China.

In addition, the global market in chips is so complex and opaque that Chinese companies can buy whatever they want on the gray market, and the enforcement capacity of the Commerce Department is woefully inadequate to prevent this, Allen stated. Chinese sources say that high-end GPUs are freely available at a 10% premium to the going price.

Chinese commentators compare the chip war to China’s civil war. By concentrating on low-end chips, and undercutting the prices of Western manufacturers, “Observer” columnist Chen Feng says, China will “encircle the cities from the countryside,” a reference to Mao’s successful military strategy during the Civil War of the 1940s. The United States “can only go to Menglainggu [the site of a decisive 1947 Communist victory) by relying on high-end chips.” As noted, analysts like Alperovitch have already flagged the danger.

On March 27, Huawei announced that it had developed its own chip design software for 14 nanometer and wider mature nodes; if true, that would represent a major step towards Chinese independence from US design firms Cadence and Synopsis, which have had a near monopoly on the technology.

As the Atlantic Council suggested, the Biden Administration appears to have given US firms considerable leeway in exports to China. LAM Research, a leading US manufacturer of semiconductor equipment, predicted an increase in sales to China during the remainder of 2023, after receiving “clarification” of export rules from the Biden Administration. The Dutch chip lithography giant ASML also projected an increase in Chinese sales this year, and its CEO Peter Wennink stated that “the mature semiconductor space is very important and needs to grow. And this is where China is very strong.”

The reported Berlin ban on semiconductor chemicals might have misfired, but it was the first salvo of what will be a long tech war of attrition.

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