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Moody’s Investors Service was something of a thorn in global policymakers’ sides in 2023. From Beijing to Washington, the ratings giant fired any number of shots across the bows of the biggest economies.
In mid-November, it lowered America’s credit outlook to “negative” from “stable”, pointing to political polarization in Congress as the US national debt topped US$34 trillion. Three weeks later, Moody’s cut its outlook for Chinese sovereign debt to “negative,” citing a slowing economy and a property sector crisis that Beijing has been slow to address.
Now, Moody’s is reminding Asia of the economic trauma 2024 may have in store as China’s slowdown imperils sovereign creditworthiness across the region.
Moody’s thinks the fallout from China’s property troubles on business and household confidence makes hopes for 5% economic growth in 2024 overly optimistic. It sees mainland gross domestic product (GDP) slowing to 4% this year and next.
For an economy at China’s level of development, such a downshift from the 6% growth averaged from 2014 to 2023 will set back living standards. And it will exacerbate the debt troubles Moody’s flagged last month, both among developers and local governments around the nation. It also may spark legitimacy problems for Xi Jinping’s Communist Party.
China’s slowdown “significantly influences” regional economic trajectories via supply chains, Moody’s says. “As these economies’ respective manufacturing bases are smaller in scale and less developed than China’s, the latter will remain at the center of many of the region’s supply chains and an important source of final demand in the near term.”
True, Moody’s argues that “against this backdrop, we expect companies to continue to diversify supply chains away from China to better manage risks around overarching geostrategic tensions, but also in response to longer-term structural trends.”
These “include population aging and policy risks in China – as illustrated in internet platforms and private education sector regulatory changes – as well as the rapid expansion of the middle class in India,” Moody’s says.
“The diversification trend,” Moody’s goes on, “has accelerated in recent years, boosting investment prospects in economies with large manufacturing bases and improving infrastructure such as India, Malaysia, Thailand and Vietnam.”
But such pivots take time to execute. Rerouting trade routes is complicated in the best of times and even more so in relatively tight global credit conditions.
In recent weeks, traders have dialed back expectations for US Federal Reserve interest rate cuts. The People’s Bank of China, meanwhile, has been far less generous about adding liquidity than most economists, analysts and investors expected.
In addition to the “lackluster situation in China,” says Moody’s analyst Christian De Guzman, tight credit conditions are an added headwind for the region.
“This,” De Guzman told CNBC, “is predicated on global liquidity conditions where we really don’t see the Fed easing until the middle of the year. And Asia-Pacific central banks – we don’t see much decoupling [from] global liquidity conditions there.”
It’s not just that China may be less of a global economic engine going forward. In 2023, Chinese imports contracted by 5.5% amid weak domestic demand. That means China’s 5.2% economic growth rate in 2023 didn’t generate much of a tailwind in Asia.
The bigger problem is how China’s financial risks may stress-test a region still dealing with the fallout from the Covid-19 era. In recent years, governments and companies borrowed aggressively to recover from the pandemic.
In its report, Moody’s warns that elevated global interest rates will worsen debt-servicing burdens. The upshot is that gaining access to international capital will become increasingly more difficult for lower-rated governments.
That will be a problem for China as much as anywhere, if not more. It’s sure to have a cooling effect on President Xi’s economy, notes Moody’s economist Harry Murphy Cruise.
“Real estate investment, dwelling prices and new dwelling sales are set to fall throughout 2024 before returning as a modest driver of growth in 2025,” he predicts.
Yet this could reflect wishful thinking if Xi’s team doesn’t act more forcefully this year to repair the property sector, including by creating a credible mechanism to get bad assets off balance sheets. A similar effort is needed to address the $9 trillion buildup of local government financing vehicle (LGFV) debt.
As these headwinds intensify, the Asia-Pacific region’s sovereign creditworthiness in general is deteriorating. These “tight international funding conditions will curb the region’s output,” Moody’s warns.
For its constellation of 25 sovereigns in the region, Moody’s sees GDP growth falling to an average 3.6% in 2024 from 4.2% last year. That, the rating agency’s analysts say, marks the “lowest rate of expansion in a non-pandemic year in at least two decades – reflecting a slowdown in China and broadly lackluster global economic conditions.”
Slower growth, Moody’s adds, will make it even harder for most governments to reduce Covid-era increases in public debt.
“Together with tight domestic labor markets, this will spur many APAC central banks to maintain tight monetary policy and mitigate currency depreciation risks,” Moody’s says. “International financing will remain difficult for lower-rated sovereigns, particularly frontier markets with large external payment needs.”
On Monday, China’s Premier Li Qiang called for more assertive steps to halt the plunge in mainland stocks, which are now at a five-year low. That’s easier said than done as global investors react to deepening deflationary pressures and a festering property crisis many economists compare to Japan’s banking debacle in the 1990s.
Even if the PBOC were to begin easing suddenly — something it’s avoided doing so far — the moves have already been priced in the market, says Eva Lee, head of Greater China equities at UBS Global Wealth Management. Only a much “punchier” monetary response might stabilize the situation, she adds.
Global “passive” funds are becoming far more assertive in hedging China risks. “Their recent selling did amplify the downside pressure,” says analyst Gilbert Wong at Morgan Stanley.
The reason is that “the Chinese government has not yet introduced effective measures to resolve the property turmoil and drive the economic recovery,” says strategist Ken Cheung at Mizuho Bank. This, he adds, has overseas investors continuing to “reduce their risk exposure” amid “bearish expectations” for China’s outlook.
Here, expectations versus reality are becoming a problem for investor sentiment. Generally, Premier Li has “doused” hopes for further support measures, notes Brian Martin, an analyst at ANZ Research.
As Li “trumpeted the nations’ ability to hit its 5% growth target without flooding the economy with massive stimulus,” investors were left fearing Beijing had lost the plot, he said.
Surely, Xi’s inner circle may have valid reasons to be confident about China’s 2024. It’s entirely possible that the economic dashboard Xi’s men are viewing suggests aggregate demand will bounce back sooner than most investors believe.
At the same time, Xi’s party is loath to squander progress made in financial system deleveraging. Beijing’s determination not to reward bad behavior and poor lending decisions is to be applauded. Still, if China’s trajectory is less dire than markets think, Xi’s team is doing a poor job spreading the news.
Even taking a glass-half-full approach to China’s 2023 performance requires an asterisk. “While the economy did beat the official target, it could have scored a higher grade through a more forceful response to the property meltdown and greater commitment to the private sector,” says Tianchen Xu, a senior economist at the Economist Intelligence Unit.
Downward pressure on the yuan also suggests the economy is less vibrant than Beijing’s spin would have investors believe. On Monday, Reuters reported that major state-owned banks are propping up the exchange rate. The rationale, Reuters notes, is to disincentivize traders from shorting China’s currency.
A deeper drop in the yuan might also add to default risks among distressed property developers and intensify selling of China’s A shares. So far this year, overseas funds have dumped upwards of $1.6 billion worth of Chinese equities.
“The PBOC has stepped up its efforts to restrain dollar-yuan through the daily fix lately, and this is keeping a lid on” the exchange rate “at the 7.20 level,” says Alvin Tan, head of Asia FX strategy at RBC Capital Markets. “But I think it should give way to the upside soon.”
In recent days, Tan notes, the PBOC and Beijing’s foreign exchange regulator stepped up to “strengthen market expectation guidance and take actions to correct pro-cyclical and one-way market behaviors when necessary.”
Julian Evans-Pritchard, head of China economics at Capital Economics, says the PBOC’s decision Monday to hold benchmark lending rates steady proves that policymakers “appear to harbor lingering concerns” about the yuan.
“A cut at this stage could trigger additional depreciation pressure, something the PBOC wants to avoid,” Evans-Pritchard says. “Therefore, it may stick to quantitative easing tools for now,” including supplementary lending efforts.
This, too, is part of Xi’s desire not to derail success in building trust in the yuan. A stable exchange rate remains key to making China Asia’s top financial power. As such, Xi appears to care more about a strong currency than rising stocks.
There are also geopolitical threats to consider as US voters choose a new president in November. As US President Joe Biden looks to outflank Republicans loyal to Donald Trump by being tough on China, new sanctions could emerge.
Tensions in the Red Sea and Russia intensifying its Ukraine war could boost energy prices and thus inflationary pressures in the year ahead.
All this puts sovereign ratings across Asia in harm’s way. A bigger trade war is a particular wildcard. As Washington and Beijing face off in the year ahead and related risks become “more prominent,” Moody’s warns, Asian governments will find it increasingly difficult to maintain financial balance.
Moody’s adds that “competition between China and the US is resulting in regionalization of trade and shifts in economic and financial influence” in the longer run. In the shorter run, though, such disruption is another reason for investors to worry about threats to sovereign ratings in 2024.
Follow William Pesek on X at @WilliamPesek
The state visit to Beijing by Philippine President Ferdinand Marcos Jr in January 2023 did not yield the momentum for bilateral ties that his predecessor’s trip in 2017 did. Barely one month after the state visit, there was a flareup in the South China Sea (SCS) with the Chinese coastguard’s lasing of its Philippine counterpart off Second Thomas Shoal.
The situation went downhill, especially after Manila publicized Beijing’s coercive behavior. There was the floating barrier incident in the Scarborough Shoal, though the focal point has centered on the Second Thomas Shoal where the Chinese and Filipinos faced off.
Chinese forces harassed the Philippine rotation and resupply missions to the outpost and fired water cannons at the latter — the first documented instance since 2021. 2023 was eventful for SCS disputes beyond incidents between Beijing and Manila. Other Southeast Asian parties in the SCS continued business as usual.
Malaysia and Vietnam continue to contend with regular Chinese forays into their exclusive economic zones. Hanoi silently strengthened its hold in the Spratlys through its land reclamation projects.
Extra-regional actors outside the SCS kept a constant presence. Japan is advancing defense and security links with Malaysia, the Philippines and Vietnam via its new Overseas Security Assistance framework.
The United States has elevated ties with Indonesia and Vietnam to comprehensive strategic partnerships. Australia and the United States commenced joint air and sea patrols with the Philippines in the SCS.
Within a month, the US Navy conducted three freedom of navigation operations which explicitly targeted Second Thomas Shoal. That might not have rolled back Beijing’s actions, but it plausibly deterred further escalatory moves against the Philippines given the risk of triggering the Mutual Defense Treaty in operation between Manila and Washington.
But 2023 was not all gloomy. In Jakarta, ASEAN and China adopted guidelines that envisaged the completion of negotiations on the proposed Code of Conduct in the SCS by 2026. In a sign of warming ties, a flurry of high-level meetings between China and the United States were held. These culminated in the Filoli summit between the two countries’ leaders in November.
With the two major powers on the cusp of reviving high-level military communications, there is a mutual desire to stabilize fractious bilateral relations and prevent tensions from ballooning into an armed conflict, not least in the SCS.
The paradox of gunboat diplomacy coexisting with softer diplomacy looks set to persist in 2024. But there are uncertainties, not least elections in the United States and Taiwan. China’s economic slowdown is projected to endure in 2024, despite some positive signs.
The country’s exports and domestic consumption remain lackluster. Local governments, property and shadow banking sectors continue to be fraught with debt problems. Some believe Beijing might externalize these domestic problems by seeking adventure in the SCS or around Taiwan’s coastline.
The contrarian view is that China is more likely to address its economic slowdown to restore the social compact that long underpinned the Communist Party’s political legitimacy. A major crisis that worsens the domestic situation is not desired, at least until China is in a more comfortable economic and technological position.
For now, Beijing seems content with a holding pattern in the SCS — to continue muscling its maritime sovereignty using existing forms of grey zone actions that fall short of lethal force.
“Horizontal” escalation is therefore possible — China may intensify current grey-zone actions while maintaining escalation below the threshold of using force.
The recent boat swarming in Whitsun Reef reflects the shrinking list of grey-zone options, short of vertical escalation into actions such as forcible boarding and inspection of rival claimants’ vessels which would be deemed incendiary. Despite domestic woes, Beijing might have calculated that it can comfortably play the long game in the SCS.
This state of affairs is enabled by other ASEAN parties in the SCS. Unlike Manila under Marcos Jr, other ASEAN parties have largely been silent or kept a low profile in their dealings with Beijing over the SCS issue.
Brunei, Indonesia, Malaysia and Vietnam all fall into this category, prioritizing economic engagements with China. Malaysia and Vietnam also took part in the China-hosted Exercise Aman Youyi 2023, reflecting their desire to maintain a balance between Beijing and other contending extra-regional actors. They believe that this approach has worked, and this looks likely to continue in 2024.
ASEAN and China envisage new gains from Code of Conduct negotiations. There are compelling reasons for both parties to do so. For ASEAN members, the code asserts the bloc’s centrality and relevance.
Beijing views the code as a demonstration of its willingness to “jaw-jaw, not war-war.” The code also underlines its narrative that SCS littorals themselves can manage their own differences without external interference.
That said, problems that existed before Covid-19, such as differences over the geographical scope and role of non-signatories, continued into the post-pandemic restart of Code of Conduct negotiations.
Complicating this is the degradation of mutual confidence and trust between China and some ASEAN parties because of SCS flare-ups since early 2020. Given this backdrop of strategic trust deficit, expectations on promulgating the code by 2026 must be tempered.
These uncertainties notwithstanding, SCS parties seem to be fully cognizant of the risks involved, especially in a premeditated conflict. They will continue to strengthen their positions in the SCS while remaining mindful of the dangers of inadvertent armed confrontation.
Collin Koh is Senior Fellow at the S Rajaratnam School of International Studies, Nanyang Technological University, Singapore.
This article was originally published by East Asia Forum and is republished under a Creative Commons license. This article is part of an EAF special feature series on 2023 in review and the year ahead.
MOE said while Outram Secondary is an “established school with strong educational programmes, the school is located in a mature area where demand for secondary school places is falling”.
Some alumni believe the school’s relocation is for the better.
Old Outramians’ Association Chairperson Erwin Tan, who is from the Class of 1996, said: “The cohort has been on a steady decline for the last decade. I was very worried about a merger or closure.
“So with this announcement that we will be relocating to Sengkang, I think it’s a good thing. The Outramian spirit will continue to live on. So I’m very glad about that.”
School Advisory Committee Chairperson Regina Chong, who is from the Class of 1993, added that it will be a new chapter for the school.
“This chapter will actually benefit the students who will be going to Outram Secondary School. Every generation of Outramians have their own chapter and fond memories of the school,” she added.
To minimise disruption to students, the school will not be admitting new Secondary 1 students in 2025. It will begin accepting new Secondary 1 students from 2026 at its Sengkang campus.
Outram Secondary will operate two campuses until 2027, when the last batch of Secondary 4 students at the York Hill campus graduates.
Before the school moves out of York Hill in two years’ time, teachers and students will open up a time capsule that was sealed in 2006 with items from the school’s rich history.
Former students who are now teachers at the school are optimistic about the move.
Teacher Dawa Sherpa, who is from the Class of 2001, said: “I think that the Outram spirit continues to live. Even though it’s in a different place, it can still stand on its own.”
Another teacher Ismath Banu, who graduated from the school in 2003, said: “The school reminded me that it’s never about individual success. Our success is really a result of the community helping us.”
The startling divergence between China’s 5.2% growth and cratering stock market is putting Asia’s biggest economy in global headlines for all the wrong reasons.
Given the chaos of 2023 — a massive property crisis, record youth unemployment, trade headwinds from Washington and deflationary pressures — China’s ability to top 5% growth year on year is impressive indeed. But the stock market continues to stumble, a rout that shows few signs of slowing.
So how bad could things get? In the first two weeks of 2024, global funds sold more than US$1.1 billion of mainland stocks. China’s CSI 300 index this week fell to its lowest levels since 2019, losing more than 25% over the last year. That’s the mirror image of the 24% rally in the S&P 500 over the same period.
China’s stock troubles have many causes. The most recent: disappointment that the People’s Bank of China didn’t loosen monetary rates this week. It left rates unchanged on its seven-day reverse repo and medium-term lending facility. Markets had been expecting cuts.
“The PBOC’s decision to hold rates is negative for market sentiment and economic growth, and suggests policymakers are not trying very hard to present a coordinated, strongly pro-growth message at the start of the year,” says Wei He, analyst at Gavekal Dragonomics.
Recent data show that China entered 2024 with a series of headaches undermining domestic demand and confidence. Property-related spending is sliding and home prices are the weakest since 2015.
Consumer prices have dropped for three consecutive months, suggesting the worst deflationary pressures since the 1997-98 Asian financial crisis.
Then there are the data trends that fuel “Japanification” chatter. That includes news that the historic decline in China’s population continues, with births falling to a record low in 2023, adding to Beijing’s longer-term demographic challenges.
It’s complicated, of course. As 2024 opens, Xi Jinping’s China finds itself at a transitional crossroads. President Xi’s team has been working to reduce China’s vulnerability to boom/bust cycles.
This means clamping down on runaway borrowing, reducing the role of state-owned enterprises, championing private-sector development and increasing innovation.
Deleveraging is a necessary ingredient to increasing the quality and productiveness of China’s gross domestic product (GDP). It means going easy on the kinds of stimulus Beijing would normally throw at a lethargic economy.
This can be seen in the PBOC’s reluctance to hit the monetary gas.
“We suspect the main reason the PBOC failed to deliver this time is a desire to avoid triggering renewed depreciation pressure on the renminbi,” economists at Capital Economics said in a note.
Along with hastened capital outflows, a weaker exchange rate would increase default risks among property developers already struggling to make offshore bond payments. It also might draw ire in Washington as the November presidential election heats up.
ANZ Bank analysts add that the “PBOC chose to hold despite strong deflation pressure. This likely reflects its concerns about bank profitability.” The rationale being that the lower rates go, the harder state-owned banking giants might find it to generate healthy returns.
Yet indications that China faces deflation buttress the case for additional monetary easing, says Commonwealth Bank of Australia strategist Joseph Capurso. “We judge the market has more or less priced in an imminent PBOC rate cut” in the near future, he notes.
Weak consumer demand is hardly helping to change the narrative among global investors. When it comes to spending, “sustainability is in doubt amid slowing economic recovery,” says Lillian Lou, analyst at Morgan Stanley.
Adding to the uncertainty at PBOC headquarters, Governor Pan Gongsheng has limited visibility into what the globe’s other top central banks are planning this year.
Bets that the US Federal Reserve would be cutting rates assertively are being reconsidered as the world’s biggest economy expands apace.
Top officials like Fed Board Governor Christopher Waller are signaling that rates will be lowered “methodically and carefully” at best.
Such comments suggest “there’s no reason to move as quickly as they have in the past, cuts should be methodical and careful,” says strategist Marc Chandler at Bannockburn Global Forex.
At Bank of Japan headquarters, officials are stepping away from plans to exit quantitative easing. Along with likely entering 2024 in recession, BOJ officials worry China’s slowdown will hit Japanese exports hard.
All this “means that the market no longer expects the Bank of Japan to raise interest rates at its late January board meeting,” says economist Richard Katz, who publishes the Japan Economy Watch newsletter.
“That, in turn, means the US-Japan interest rate gap will remain higher for longer than was previously expected, or grow even larger as it has over the past weeks,” Katz says. “If so, that means a weaker yen than previously expected.”
This dynamic could complicate the PBOC’s options for major steps to add liquidity. Gavekal’s He says that “policymakers are still likely to reduce policy rates later in the first quarter, meaning bond yields will probably remain at their current low levels.”
PBOC officials, He adds, “are unlikely to change the benchmark loan-prime rates later this month.”
“Commercial bank net interest margins remain at an all-time low, and it is hard to imagine that policymakers would exacerbate that squeeze by lowering bank lending rates but not their funding rates. Still, bond-market participants appear optimistic about an eventual rate cut,” He adds.
Thanks to looser liquidity conditions, lower deposit rates and rate-cut expectations, the 10-year China government bond yield has declined to about 2.5% from nearly 2.7% in early December.
Lower yields are narrowing the gap between the 10-year Chinese government bond yields and seven-day reverse repo rate, a measure of growth expectations.
“It is now nearly back to the average in 2022, when Covid lockdowns hammered the economy,” He notes. “The already low-level means room for further narrowing is probably limited, barring a substantial shock to growth.”
Speaking in Davos this week, Chinese Premier Li Qiang gave few hints that Xi’s inner circle expects major shocks. There, Li stuck to the line that Beijing isn’t about to announce “massive stimulus” moves to boost growth or combat deflation.
To be sure, China is mulling a special sovereign bond scheme to issue 1 trillion yuan ($139 billion) of new debt. The idea would be to sell ultra-long sovereign bonds to improve efficiency in sectors like energy, food, supply chains and urbanization planning.
But the real reasons so many global investors wonder if China is safe are an underdeveloped financial system and regulatory uncertainty.
As Bloomberg reports, SC Lowy Financial HK Ltd finds the “credit space uninvestable there” due to murky legal certainty and poor corporate disclosure. Thus, the investment firm has “very little exposure to China.”
At Davos this week, JPMorgan CEO Jamie Dimon told CNBC that the “risk-reward calculation” on China has “changed dramatically” despite Xi’s team being “very consistent” in opening up to financial services companies. That, he added, leaves global funds “a little worried.”
In the short run, Beijing is asking institutional investors not to dump large blocks of Shanghai or Shenzhen stocks. Regulators also are working to curtail big investors’ ability to be net sellers of shares on certain days.
As the Financial Times reports, this so-called “window guidance” is being pursued to calm nerves in both equity and debt markets. Yet this treats the symptoms of Chinese stock troubles, not the underlying causes.
The need for a clear and bold commitment to structural reforms was crystalized by a December 5 downgrade warning by Moody’s Investors Service.
It lowered Beijing’s credit outlook to negative from stable citing “structurally and persistently lower medium-term economic growth” and a cratering property sector. But also, because of China’s increasing financial volatility.
Xi and Li know what’s needed: greater government transparency; better corporate governance; more reliable surveillance mechanisms; a credible independent credit rating system; and a robust market infrastructure that keeps foreign investors engaged.
True, Moody’s noted that the “economy’s vast size and robust, albeit slowing, potential growth rate, supports its high shock-absorption capacity.”
Yet a bewildering array of headwinds slamming cash-strapped local governments and SOEs are “posing broad downside risks to China’s fiscal, economic and institutional strength.”
To its credit, China has made vital progress since 2016 to make its markets more hospitable to overseas investors. That was the year the PBOC secured a place for the yuan in the International Monetary Fund’s “special drawing rights” program.
The yuan’s inclusion in the IMF’s exclusive club of reserve currencies, joining the dollar, euro, yen and the pound, was a pivotal moment for Beijing’s financial ambitions.
In the years since, Xi’s team vastly increased the channels for foreign investors to tap mainland stock and bond markets. Shanghai stocks were added to the MSCI index, while government bonds were included in the FTSE Russell benchmark. among others.
As demand for the yuan and its global usage in trade and finance grows, China’s tolerance for a stronger currency has surprised markets.
Perhaps no policy lever would hasten Chinese growth faster or more convincingly than a weaker exchange rate. However, Xi’s Ministry of Finance has avoided engaging in a race to the bottom versus the Japanese yen, earning it points in market circles.
Yet the opacity that still pervades Beijing decision-making and Shanghai dealing remains a turnoff for all too many global punters.
Not all, of course. JP Morgan strategist Marko Kolanovic thinks the big drop in Chinese equities is “disconnected from fundamentals” and buying opportunities abound.
“We believe this is a good opportunity to add given an expected growth recovery, gradual Covid reopening, and monetary and fiscal stimulus,” Kolanovic says.
The odds are even greater, though, that China’s stock rout deepens further as Xi and Li navigate this transitional moment.
At some point, China will fix the property sector and build broader social safety nets to increase consumption. And its capital markets will one day be ready for global primetime. In the meantime, the CSI 300 could be in for quite a rocky ride.
Follow William Pesek on Twitter at @WilliamPesek
PUBLISHED : 18 Jan 2024 at 04:00
A House committee studying the promotion of peace in the deep South has voiced concerns over the Internal Security Operation Command (Isoc) Region 4’s decision to pursue legal action against nine young activists who participated in a peaceful event last year.
Chaturon Chaisang, head of the special panel, said legal action against the activists engaged in peaceful activities is not conducive to efforts to bring peace to the deep South and could hinder the process or even be used to instigate unrest or violence.
Mr Chaturon, a list-MP from the ruling Pheu Thai Party, said protecting freedom of expression and creating space for people to exchange their views are more favourable and should be encouraged.
The veteran politician was speaking after accepting a petition from one of the activists who attended the Civil Society Assembly for Peace (CAP) event at Wasukree Beach in Pattani’s Sai Buri district on May 4, 2022, and who now face charges of causing incitation and criminal association.
The activists claimed they face legal action because they wore a traditional Malay outfit, but the Fourth Army Region chief, Lt Gen Santi Sakuntanak, denied such a claim.
According to security officials, those who faced court summons were involved in activities aimed at promoting separatism and were displaying the symbol of the Barisan Revolusi Nasional Melayu-Patani (BRN) separatist movement.
Mr Chaturon said the committee would look into the case and make recommendations to the House of Representatives.
“We’d like to urge authorities to be careful in handling cases. They must have solid evidence and ensure charges fit the alleged offences, or such moves can hinder the peace process,” he said.
Fair Party list-MP Kannavee Suebsang raised the issue yesterday during the House meeting and called on Prime Minister Srettha Thavisin to ensure that laws are not abused to silence people.
Mr Kannavee said several human rights activists and humanitarian workers face charges and such treatment was a slap in the face for the House. Deputy House speaker Padipat Santipada yesterday wore a traditional Malay outfit to the House meeting.
Most Pacific Island countries claim the foreign policy of “friends to all and enemies to none” amid the mounting geopolitical disputes between the United States and China. But what does this foreign policy mean?
This policy seeks to identify short- and long-term national interests on an ad hoc basis with bilateral partners, including superpowers the United States and China. Many developing states profess this foreign policy to ensure they remain neutral during this period of intense rivalry.
Among the key issues discussed by Pacific Islands Forum (PIF) leaders including Australia and New Zealand during their recent 52nd meeting in Rarotonga, Cook Islands, was great-power competition, with the region increasingly being used as a geopolitical playground for hard power projection.
On geopolitics, the host of the PIF meeting, Cook Islands Prime Minister Mark Brown, stated that the Pacific region was seen as the focus of “heightened geo-strategic interest.”
Nevertheless, he said, the region would not shift attention away from the key issue of climate change, especially when dealing with the PIF’s 21 dialogue partners, which include the United States and China.
China has its footprint in the region through its Belt and Road Initiative, an infrastructure program largely funded by China’s Exim Bank in the form of loans to countries in the Pacific and developing countries in other regions of the world. However, recent studies indicate that the populations of a few countries in the Pacific already disapprove of the BRI because of debt risks.
China’s official development finances in the Pacific region have decreased significantly since 2016, according to the 2023 Pacific Aid Map launched by the Lowy Institute, but China maintains support in a few places, such as Solomon Islands and Kiribati. In 2019, Solomon Islands and Kiribati shifted their diplomatic ties from Taipei to Beijing.
China in 2022 solidified its diplomatic relationship Solomon Islands to a more comprehensive strategic standard by signing a security pact to improve Solomon Islands’ policing. This controversial pact triggered increased PIF engagement from the United States and its traditional allies, such as Australia.
Of course, Washington has long been regarded as a “Pacific power.” Now, for the first time since the end of World War II, the United States, under President Joe Biden’s administration, has hosted PIF leaders at the White House.
At those sessions in 2022 and 2023, Washington pledged more than half a billion dollars to address climate change, among other key issues in the region. (Solomon Islands Prime Minister Manaseh Sogavare was absent during the second meeting.)
At the PIF meeting, held on November 6-10, 2023, US Ambassador to the UN Linda Thomas-Greenfied said she wanted to “listen to better understand how the US can continue to support the region’s priorities.”
US support has immensely increased in the region this year, both economically and strategically. For instance, in May 2023, the United States signed a defense cooperation agreement with Papua New Guinea, the largest country in the region. The agreement allows unlimited access by US military personnel to six of PNG’s major ports, including sea, air, and land.
And in collaboration with Australia, Washington has already announced funding for a new undersea Internet cable initiative for Pacific Island countries, largely implemented by US tech giant Google.
Such economic and strategic support to the region is to ensure “a free and open rules-based order” in the Pacific and is the aim of the Biden administration’s 2022 Indo-Pacific Strategy, as the region stretching from the Indian to the Pacific Ocean is considered bedrock to global peace.
However, even with closer defense cooperation between the United States and PNG, island countries’ view of the great-power competition should still be thought of as neutral.
Furthermore, while both the United States and China are making moves to meet the Pacific region’s key development priorities, as envisaged in the 2050 Strategy for the Blue Pacific Continent, those two countries have also aroused the concern of region’s political leaders regarding great-power competition.
Speaking at the Pacific Islands Forum leaders’ summit in Fiji in 2022, Papua New Guinea Prime Minister James Marape stated that the foreign policy of “friends to all and enemies to none remains despite the current geopolitics in the region, where the bigger forces are at play. We have no intention of making enemies and our Pacific ways must pacify all forces and interests in our region.”
To ensure order and stability within the region and simultaneously address key emerging issues like maritime security, nuclear testing, cybersecurity and climate change will require commitment and regional cooperation from all PIF leaders. PIF states are among the world’s most aid-dependent countries and their 21 dialogue partners, including the United States and China, are seen as PIF development partners, multilaterally and bilaterally.
At the PIF summit this year, Fiji Prime Minister Sitiveni Rabuka proposed declaring the Pacific region a “zone of peace” because of current geopolitics. Rabuka’s proposal was accepted by Forum Leaders and a declaration will be made in Tonga in 2024 at the PIF’s 53rd meeting.
It must be similar to the Biketawa Declaration and the Boe Declaration, the two declarations that fully recognized forum members’ sovereignties and their values such as peace, harmony, security, social inclusion and prosperity underpinning the Framework for Pacific Regionalism.
Being friends to all and enemies to none under the Framework for Pacific Regionalism and the 2050 Strategy for the Blue Pacific Continent signifies peace, stability, and order.
As PIF states are small island developing countries, they will still need external assistance from development partners – including the United States and China – to achieve their development goals, even if great-power competition subsides.
In the meantime, while big powers have their own interests in the region, regional interest should be the key for PIF countries when engaging with their development partners, including the United States and China.
To maintain that foreign policy at the regional level necessitates solidarity from all forum members both at the present and in the future to ensure they remain neutral and to avoid any conflict within the region.
Moses Sakai ([email protected]) is a research fellow at the Papua New Guinea National Research Institute and is designated as a young leader of the Pacific Forum. He previously taught at the University of Papua New Guinea from 2018-2023.
This article was originally published by Pacific Forum and is republished with permission.
Nearly two years into the presidency of Yoon Suk Yeol, South Korea has made a geopolitical pivot of potentially historic proportions.
The Yoon administration has firmly rejected the prioritization of engagement with North Korea that had been a foundation of the previous president Moon Jae-in’s progressive government, embarking on an increasingly confrontational approach to the Pyongyang regime.
In a similarly significant reversal, the current government has successfully pursued a rapprochement with neighboring Japan. Seoul has eschewed a focus on wartime history issues in favor of normalization and a growing trilateral partnership on regional and global policy with Japan and the United States.
Yoon has also taken a less accommodating approach to China, even leaning toward joining steps to contain its rise.
These moves have been set on a foundation of a strengthened security alliance with the United States, embodied in steps by the US to provide greater assurance of extended deterrence and in South Korea’s willingness to align itself with US strategic interests.
While the pivot in South Korean foreign and security policy is clearly a product of the change in political leadership in 2022, it does reflect to some degree a shift in public opinion.
Three recent polls conducted by the East Asia Institute (EAI) confirm that support for the South Korea-US alliance remains deep, with almost three-quarters of South Koreans holding favorable views of the United States.
At the same time, these polls also show growing unfavorable views of China. Improvement of relations with Japan also garners increasing support, though this is mostly seen as a part of building ties to the US.
With North Korea, Yoon has unambiguously tied an improvement in relations to the cessation of its nuclear development program and clear steps toward denuclearization, in return for which he offered an “audacious initiative” of economic assistance.
In November 2022, Yoon joined US President Biden and Japanese Prime Minister Kishida Fumio in issuing a “Phnom Penh Statement” on trilateral partnership in the Indo-Pacific that pledged to “align our collective efforts in pursuit of a free and open Indo-Pacific.” It was the first time Seoul had embraced that framework.
In December 2022, the Yoon administration unveiled an Indo-Pacific strategy that reframed South Korea’s role as a “global pivotal state” with a regional and global approach to its security.
The Indo-Pacific strategy document marked a clear departure from South Korea’s previous security focus on North Korea and resistance to the use of Korean-based forces for regional security goals. Among other things, the statement called for cooperation on maritime security in the region, specifically mentioning the South China Sea and the Taiwan Strait.
But Seoul did try to avoid a confrontational approach toward China and identified it as a key partner, stressing the importance of trilateral cooperation between Seoul, Tokyo and Beijing. There is interest in resuming the trilateral leaders’ summits that have been interrupted since 2019.
As the EAI polls made clear, the public, along with the business community, is wary of following the United States into an economic war with China at the cost of South Korea’s own economic growth.
Yoon has relentlessly sought to improve relations with Japan, based on his understanding that a reversal in the downturn in relations with Tokyo was a predicate for the larger goal of solidifying security ties to the United States.
In March Yoon visited Tokyo, where he offered a unilateral solution to the forced wartime labor issue, a consequence of the failure to reach a diplomatic agreement with Japan.
That decision did lead to the reciprocal visit of Kishida to Korea and Yoon’s participation as a guest at the G7 Summit in Hiroshima in May, but it was hardly popular and it is being challenged in the courts. Japan’s refusal to contribute to a fund for compensation to former forced laborers threatens to undermine the progress already made.
The decision also opened the door to Yoon’s much-ballyhooed state visit to the United States in April, crowned by an address to Congress and a rare state dinner at the White House.
Yoon and Biden also issued the “Washington Declaration”, which crucially dampened talk of a South Korean nuclear option by reaffirming its commitment to the Nuclear Non-Proliferation Treaty while strengthening US extended deterrence guarantees.
In response to the heightened pace of North Korean missile testing, the two militaries have stepped up training and contingency planning to respond to possible nuclear use and to deepen counter-missile strategy, including trilateral missile defense exercises with Japan.
All these developments reached a culmination in the convening of the 18 August Camp David summit meeting of Biden, Yoon and Kishida, the first stand-alone trilateral summit among the three leaders.
The joint statement, “the Spirit of Camp David”, proclaimed the existence of shared stances on geopolitical competition — a thinly veiled reference to China, climate change, the Russian aggression against Ukraine and North Korea’s “nuclear provocations.”
While the Camp David meeting fell far short of what the Chinese saw as a new collective security system, the three leaders did agree on the creation of a mechanism of trilateral consultation in response to “regional challenges, provocations, and threats that affect our collective interests and security.”
The statement enumerated many of those threats, from maritime security to cybersecurity but also ranged towards cooperation on trilateral economic security issues such as supply chain resilience, technology security and advanced technology development. Officials from the three countries have also been meeting with growing regularity to implement these commitments.
The permanence of these shifts in South Korean foreign and security policy remains to be proven. But the longer they are in place, the more chance they have to become truly historic in nature.
Daniel Sneider is a lecturer on international policy and East Asian studies at Stanford University and a non-resident distinguished fellow at the Korea Economic Institute.
This article was originally published by the East Asia Forum. It is republished here under a Creative Commons license and the author’s permission.