Analysis: Democracy champion to new face of conservatives – how Pheu Thai’s moves to regain power could shape Thai politics

A MATHEMATICAL CHALLENGE

First, here’s the mathematical challenge confronting Pheu Thai in its quest to form and lead the next government.

After parting ways with Move Forward, Pheu Thai has been pushing for its candidate Srettha Thavisin to become Thailand’s 30th prime minister – an onerous task that requires the approval of at least 375 parliamentarians or more than half of the national assembly.

The condition is stipulated in the current constitution, written by a military-appointed committee after a coup d’etat in 2014. 

Designed to extend the establishment’s political control, the law is a legacy of incumbent Prime Minister Prayut Chan-o-cha, a general-turned-politician who deposed Pheu Thai’s previous government nine years ago. 

It gives power to the military-controlled Senate, whose five-year term ends May 11 next year, to jointly select the prime minister with the House of Representatives.

This means that without the Senate’s support, the political stalemate could drag on till then. And in the event that none of the listed candidates can be appointed for any reason, the constitution allows a process that could bring in an “outsider prime minister”.

The Pheu Thai-led coalition currently commands 238 votes and still needs 137 more to secure the premiership for Mr Srettha. 

On Tuesday, Move Forward declared it will not vote for Pheu Thai’s prime ministerial candidate, adding more obstacles and dilemmas to its quest for power. 

With Move Forward out of the equation, Pheu Thai does not have other options but to ally itself with military-linked parties Palang Pracharat and United Thai Nation.

The first belongs to Gen Prawit Wongsuwon, Thailand’s incumbent deputy prime minister and former army chief, who played a key role in the Prayut junta. The latter was led by the coup maker himself until his resignation last month.

Their combined 76 votes and influence on 249 senators could give Pheu Thai a final push to form the government when parliament reconvenes on Aug 22 to select the prime minister. 

SECURING THAKSIN’S RETURN

Pheu Thai’s race to form the government coincides with an expected return of Mr Thaksin, who was ousted from power in a military coup in 2006. 

The Shinawatra family has close ties with Pheu Thai, which is a reincarnation of Mr Thaksin’s old political group Thai Rak Thai. His youngest daughter Paetongtarn Shinawatra is in fact one of the party’s prime ministerial candidates.

Currently living in exile in Dubai, United Arab Emirates, the ex-prime minister initially planned to come home on Aug 10 but later postponed his trip, citing medical appointments. For political observers, however, the delay was caused by the fact that Pheu Thai had not secured the premiership just yet.

“The prime ministerial post is the most important thing,” said Dr Thanaporn Sriyakul, president of the Political Science Association of Kasetsart University.

He believes Pheu Thai is doing everything it can to win the country’s top job, even though it means going against its campaign rhetoric and promise not to work with the military-affiliated parties.

Pheu Thai’s alliance with military-linked parties could also ensure a safe homecoming of its fugitive patron Thaksin. Despite speculation that Pheu Thai may offer the premiership to Gen Prawit from Palang Pracharat in exchange for Mr Thaksin’s return, some analysts disagree.

“People may think that giving the premiership to Prawit would get Thaksin home but how can Pheu Thai be sure that if it doesn’t get to lead the government, Thaksin will be able to return safely?” said Dr Siripan.

Continue Reading

A new Central Asian triad?

In my July 31 article in Asia Times, I discussed Central Asian regional dynamics, with a focus on the opposition between Kazakhstan and Kyrgyzstan.

In that context, I mentioned Kazakhstan’s efforts to halt smuggling of dual-use goods into Russia and pointed out that as a result, “a clandestine corridor has been established, passing through Kyrgyzstan and Uzbekistan, across Turkmenistan, and finally across the Caspian Sea before reaching Russia.”

When I wrote that, it had not been officially announced that Tajik President Emomali Rahmon, Turkmen President Serdar Berdimuhamedov, and Uzbek President Shavkat Mirziyoyev would hold a summit meeting in Ashgabat on August 4.

This is the first time such a summit has taken place with representation limited to these three countries. The absence of Kazakh President Kassym-Jomart Tokayev and Kyrgyzstan’s Sadyr Japarov was likely due to their mutual differences over questions of regional development and cooperation. At the same time, their absence meant that the trilateral summit could not be comprehensive or make significant decisions.

None of the three participants in the summit has explained the reason for that, although the meeting did produce a joint declaration. That statement mentioned attempts to cooperate on problems in the areas of water, electricity and gas, but it remained vague concerning specific measures.

Regional transportation

However, it would be a severe omission if the three sides did not also discuss – in the context of cooperation in the political, trade and economic spheres – the construction of transport infrastructure.

For example, the trans-Afghan railway project was highly likely discussed, since all three countries border Afghanistan, where the ruling Taliban regime is a pariah to much of the international community. Railways from Uzbekistan could connect to Pakistan’s rail network through Afghanistan, although such a project would require participation by representatives not only from Afghanistan but also from Russia.

According to unofficial reports, the three countries did nevertheless discuss joint activities in logistics and transit, with special attention to the creation of a multimodal transportation route along the Tajikistan-Uzbekistan-Turkmenistan corridor. Such a corridor would facilitate circumvention of international sanctions imposed against Russia for its war against Ukraine.

Russia also continues to depend on Armenia in that connection. The European Union has recently included Armenian entities on the list of sanctions against entities “directly supporting Russia’s military and industrial complex in its war of aggression against Ukraine.”

According to data from the United Nations, in 2022 the US and the European Union exported 16 times the worth of integrated circuits to Armenia thaat they did in 2021. Armenia’s exports of ICs to Russia jumped to US$13 million in 2022 from less than $2,000 (two thousand dollars) in 2021.

Evading sanctions

A client state of Russia and an ally of Iran since independence in 1991, Armenia has, like the three Central Asian countries, in effect become a transport and logistics hub through which dual-use goods pass into Russia.

Unlike the three Central Asian countries, Armenia is a member of the Russian-led Eurasian Economic Union (EAEU). Besides Russia, the others are Belarus, Kazakhstan and Kyrgyzstan. Uzbekistan is an official observer and, like Tajikistan, has a free-trade-zone agreement with the EAEU.

Russia has been depending on other EAEU members and partners for re-export of goods prohibited by sanctions. Considering Kazakhstan’s moves to limit transit across its territory, Russia certainly welcomes the trilateral cooperation of the region’s “southern tier.”

Official Moscow appears ready to make decisions in their favor, as it has done in the case of Armenia, in exchange for maintenance of this Central Asian and trans-Caspian channel for delivery of sanctioned goods.

The Tajikistan-Uzbekistan-Turkmenistan route, which the Russian press has christened as the “Southern Transport Corridor” (STC), would avoid obstacles created by Kazakhstan’s new regime of customs verification on its border with Russia.

It would also increase the cargo (coming across the Caspian Sea from Turkmenistan) to Russia’s port at the city of Astrakhan, where Moscow has been augmenting the infrastructure over the last several years while also transferring some of its former capacity to Makhachkala in the Russian Federation’s Republic of Dagestan Republic, which is situated in the central section of the Caspian Sea’s western shore, immediately north of Azerbaijan.

Like Kyrgyzstan, with which it shares a border, Tajikistan also borders China. Dual-use goods could flow into the STC either directly from China or via Kyrgyzstan. The mountainous terrain in the region is broken by the fertile Fergana Valley, which is divided among Kyrgyzstan, Tajikistan and Uzbekistan.

Goods could also flow from northwestern Tajikistan across southern Uzbekistan directly into Turkmenistan for transit to the Caspian Sea coast, whence again to Russia.

The STC is not necessarily altogether a negative geopolitical development, however, if shippers shift its destination from Astrakhan to Azerbaijan’s port of Alat, just south of Baku.

Kazakhstan and Azerbaijan have been working for some time, and not without success, to develop such a trans-Caspian “Middle Corridor” for onward shipment of goods to European countries. China has not yet substantially supported this Middle Corridor, which is sometimes in the West mistakenly assumed to be part of Beijing’s Belt and Road Initiative (BRI).

China may yet choose to weaken Russian influence in Central Asia further, by sponsoring or at least by utilizing such a route. Large quantities of Chinese goods already pass through Kazakhstan.

An STC terminus at Azerbaijan’s Port of Alat rather than at Russia’s Astrakhan would redistribute that traffic. It would also contribute to the stabilization of peace in the South Caucasus, especially if Armenia could be persuaded to participate in the cooperation.

Continue Reading

Georgia on my mind

Dear readers: Like it or not, it’s time for us to resume the exclusive, occasional coverage of politics in the US state of Georgia that Asia Times was offering in election year 2020.

Georgia is a long way from Asia, you might say – but try telling that to the enormous Asian diaspora communities in the Atlanta suburbs. Asia Times is an Asia-based and Asia-focused digital newspaper, yes, but we do not neglect the farther reaches of the planet.

Which brings me to one fascinating sidelight of the latest round of criminal charges against Donald Trump by the Fulton County, Georgia, prosecutor: If Trump is convicted, not only can he not pardon himself but he can’t demand that the Republican governor pardon him.

What’s the background of that? Here’s part of what the website of the state’s Board of Pardons and Paroles has to say, very gingerly:

In the early 1940s there were serious questions raised about the handling of pardons by some governors’ offices.

Careful readers of Asia Times may recall that you know something about those 1940s “serious questions.”

It was crooked Governor Eugene Talmadge whose abuses of power caused Judge Harold Hawkins and others to crusade against him in the 1940s. In the process, the power of pardon was taken away from the governor. Photo: New Georgia Encyclopedia

As I reported for Asia Times on December 11, 2020, in an article entitled “The Devil went down to Georgia: From Judge Hawkins’s Sunday School class to a purple, less Trumpish Georgia”:

When I was growing up in the 1950s in my home town, Marietta, there were still hardly any signs of Republicans.

Local Democrats were said to be divided, though, between the regular Democrats – the Talmadge faction – and a more moderate faction centered on State Supreme Court Justice J Harold Hawkins.

The Hawkins dislike of the Talmadge faction was cemented in the early 1940s when Governor Eugene Talmadge pardoned a convicted murderer at whose lengthy Superior Court trial Hawkins as a Superior Court judge had presided. 

Like others, Hawkins believed that Talmadge, who was unabashedly corrupt, had taken a bribe from the killer’s influential father. In a biography, Hawkins is quoted as having complained about “the amount of effort to bring murderers to justice only to have them pardoned by a corrupt governor.”

Helping to establish its upright, straight-arrow image, the Hawkins faction in Marietta was better known, at least to some of us who attended the church, as the First Baptist Party. Hawkins was himself the church’s Sunday school superintendent and conducted a men’s “class” just across Church Street on the premises of a gas station, closed on Sundays, where the guys stood around, drank Cokes and smoked cigars while they plotted political moves.

My dad, a church deacon and cigar smoker, could sometimes be found among the group. I encountered them myself whenever a couple of friends and I left Sunday school and sneaked over to the Marietta Square to emulate them by buying our own cigars at Dunaway Drug Store.

Judge Hawkins died in June 1961 as I finished my freshman year away in college. Some part, at least, of the First Baptist faction came under the sway of an extreme social conservative, kitchen cabinet company owner Barney P Nunn.

But the judge and his forces long since had backed and seen to completion a major (and some of us would say positive) change in state law. Here’s more from the Board of Pardons and Paroles:

Public concern led the General Assembly to enact legislation, signed into law in February 1943, which created the State Board of Pardons and Paroles as an independent agency to administer executive clemency.

In August 1943 Georgia voters ratified, by a ratio of four and a half to one, a landmark amendment to the State Constitution. It established in that document the Parole Board’s authority to grant paroles, pardons, and reprieves, to commute sentences, including death sentences, to remit sentences, and to remove disabilities imposed by law. It was given a staff of parole officers to investigate cases and supervise persons granted parole.

The Constitution provided that the Governor would appoint the Board members to seven-year terms subject to confirmation by the State Senate. Once confirmed, members would be insulated from political pressures by the fact that no one official could remove them from office until they completed their terms. Their autonomy was enhanced by their right to elect their own chairman annually.

Now you know about that. Stay tuned for more news, background and analysis from the Peach State.

Asia Times Associate Editor Bradley Martin grew up in Marietta, Georgia. While attending Atlanta’s Emory University Law School in the 1960s, he worked in the election campaigns of US Representative James A Mackay and Atlanta Mayor Maynard Jackson.

Continue Reading

China tech giants offer upside surprises

As Chinese Communist Party leaders gathered at the beach resort of Beidaihe in recent days, the many storm clouds on the horizon were impossible to ignore.

Between an economic slowdown, deflationary forces, new property market distress and ongoing hostilities with the West, Chinese leader Xi Jinping has a full slate of headwinds with which to contend.

Yet it’s worth noting key areas where Beijing is picking up potentially powerful tailwinds, too. Despite the various sources of turbulence, Chinese tech earnings are racking up some impressive gains.

From Ant Group making a net profit of 13.37 billion yuan (US$1.85 billion) in the three months to March 31, a 17.5% year-on-year jump, to Huawei reporting 2.2% year-on-year growth in consumer business revenue for the first half of the year, there’s reason for optimism that the worst may be over for China’s battered tech giants.

Such signs of hope are badly needed at a moment when US President Joe Biden’s White House is cranking up the punitive pressure on China’s tech firms, nominally in the name of US national security.

Last week, Team Biden banned US investors from investing in sections of China’s chips, quantum computing and artificial intelligence (AI) industries. The step could upend efforts to lift Sino-US ties from their historic lows. Team Xi might retaliate anew.

One interesting wrinkle surrounding this year’s Beidaihe confab is the theme of scientific and tech self-sufficiency.

To amplify the point, invites were extended to a large number of semiconductor and AI experts — at least 57 — on the “forefront of domestic technology.” Such invitations tend to shed light on the concerns that Beijing views as most urgent.

The official Xinhua news agency quoted Xi’s chief of staff Cai Qi saying “We hope all experts … make new and greater contributions to achieving high-level scientific and technological self-reliance.”

On the ground, though, there are myriad signs that China Inc is coming out the other side of the last few years of regulatory crackdowns on tech platforms — and showing convincing signs of life.

Take Alibaba Group reporting a 14% year-on-year jump in quarterly sales in the April-June period despite sputtering mainland economic growth.

Back in fashion?: Jack Ma playing to the crowd during a 20th anniversary event for Alibaba in Hangzhou. Photo: Asia Times Files / AFP / Strigner

All of the key business units of the e-commerce colossus Jack Ma built are returning to life and buttressing the argument that Xi’s wealth and confidence destroying clampdown is in the rearview mirror.

“Big tech earnings may show continued recovery, with profits expected to rise 10.4% year-on-year in 2Q,” says Marvin Chen, an analyst at Bloomberg Intelligence.

This was the pledge that Premier Li Qiang made in March when he became Xi’s No 2 official and financial reform enforcer.

News that the domestic commerce unit of Alibaba — ground zero of Xi’s tech clampdown in late 2020 — is now producing about $16 billion in revenue, a 12% rise year on year in Q2, seems indication enough that China’s Big Tech may be ready to shift into higher gear.

The bold corporate overhaul Alibaba announced in March is by all indications off to a solid start. China’s online commerce leader announced plans to split its $220 billion empire into six business units, a major restructuring that promises to yield several initial public offerings (IPOs).

The breakup frees up Alibaba’s main divisions from e-commerce and media to the cloud to operate with far more autonomy, laying the foundation for future spinoffs and market debuts that create fresh wealth and jobs.

The maneuver also offers a blueprint for other tech giants to navigate around regulators’ efforts to curb monopolistic behavior among internet platforms. As Neo Wang, analyst at Evercore ISI, puts it, the six-way split-up could “serve as a template for Alibaba’s peers.”

Since November 2020, when regulators clamped down on Ma’s empire, Baidu, Meituan, Tencent and a who’s-who of Big Tech names have felt the monopoly-curbing, regulatory heat.

Yet it was Ma’s Ant that bore the initial brunt of the market-shaking putsch. Beijing regulators pounced in particular on Ma’s plans to take his fintech unit public, a planned $37 billion IPO that would have been history’s biggest.

Rather than listing in New York, as Alibaba did in 2014, Ant was to sell shares in Shanghai and Hong Kong. The IPO had promised to raise the Greater China region’s status as a tech and finance superpower.

Now, as economic growth stalls and property woes dangerously fester, Team Xi needs to lean into these tech green shoots to strengthen the tailwinds coursing through the economy.

Since March, Premier Li has been linearly focused on catalyzing more scientific and technological innovation and affording the private sector more space to grow and create well-paid jobs.

According to Li’s plans, Beijing regulators are going easier on tech giants and supporting the development of micro, small and medium-sized enterprises (MSME) to address record youth unemployment, which hit a record 21.3% in June, without relying on large-scale stimulus.

Chinese Premier Li Qiang wants more private sector-led economic growth. Photo: Pool

China cut interest rates this week in a move that surprised many analysts and underscored the deepening depths of China’s economic troubles.

“The market was expecting the People’s Bank of China to wait until September before easing again, and [recent] cuts suggest that the authorities’ concern about the state of the macroeconomy is mounting,” says Robert Carnell, head of Asia-Pacific research at ING Bank, said.

A big piece of the economic revival puzzle is reversing Xi’s efforts to maintain the dominance of state-owned enterprises (SOEs). In the years since 2015, the year when Shanghai stocks collapsed, Xi’s response has been to support SOEs to boost economic growth.

Li’s charge now is to diversify the economy away from exports and smokestack industries, which ultimately means incentivizing greater private sector innovation and productivity.

The key will be for Xi to give Li the latitude to get his reform plans dating back to 2013 back on track. A decade ago, Xi pledged to let market forces play a “decisive” role in Beijing’s decision-making.

Since then, though, China has become less, not more, transparent, withholding key data needed for efficient market mechanisms. Indeed, Xi’s recent regulatory crackdowns and other restrictions on private business have made it harder and harder for outside credit ratings companies to assess where China Inc is headed.

Last month, Li said the government is stepping up efforts to normalize China’s regulatory environment. The goal, Li has said, is to “reduce the costs of compliance and promote the healthy development of industry.” He said that “on the journey of building a modern socialist country, the platform economy has great potential.”

In a speech in mid-July, Li told tech chieftains in the audience – including officials from Alibaba Group, TikTok owner ByteDance and food delivery group Meituan – to “push to increase their international competitiveness and dare to compete on the global stage.”

To analyst Kelvin Wong at OANDA, the latest rhetoric from the top man on China’s State Council is “likely to boost positive animal spirits in the short-term at least.”

But Team Xi also must work harder to pull in more foreign capital. “Inbound investment has fallen despite Premier Li’s best efforts to roll out the welcome mat for foreign executives and local government officials crisscrossing the globe in search of new sources of capital,” the Eurasia Group consultancy wrote in a note.

Eurasia Group points out that “multiple factors” have contributed to China’s failure to boost FDI.

“Cash-strapped local governments are unable to offer the generous subsidies and access to free land that they once did. The nationwide push for a ‘unified market’ increasingly discourages preferential treatment or discriminatory policies at the local and provincial levels,” the Eurasia Group report said.  

“Domestic firms are becoming formidable competitors in industries such as automaking, narrowing the opportunities for foreign firms in sectors that have attracted a large share of FDI in the past,” the same report said.

“Hawkish signals from Beijing over national security” – including a revised anti-espionage law that went into effect on 1 July – a crackdown on the activities of foreign consultancies and due diligence firms operating in the country, are also denting new FDI, the Eurasia Group said.

That, and other recent moves targeting select multinationals, “have contributed to a deepening anxiety among foreign companies, many of which are weighing China opportunities against third country alternatives as they try to ‘de-risk’ their supply chains in the face of rising geopolitical tensions,” the report said.

Yet recent signals from China’s top tech companies suggest better days lie ahead. Team Xi just needs to accelerate efforts to ensure the virtuous cycle continues.

Follow William Pesek on X, formerly known as Twitter, at @WilliamPesek

Continue Reading

Philippines cuts China hotline as sea tensions spike

MANILA – In the latest sign of escalating tensions in the disputed South China Sea, the Philippine Coast Guard (PCG) has suspended a “hotline” with its Chinese counterpart. The move comes amid China’s de facto blockage of a Philippine marine detachment at the disputed Second Thomas Shoal, the latest flash point between the two rival claimants.  

“We’re no longer using the PCG-CCG (Chinese Coast Guard) hotline…It no longer exists…It hasn’t provided so much benefits for us. We didn’t gain anything from this,” declared Commodore Jay Tarriela, spokesperson of the PCG. 

“I would say that for all maritime incidents [with China] that happened in the past six years even in the past [Duterte] administration, this hotline was attempted to be used. Unfortunately, it never really gave us a positive chance to talk” he added in a mixture of Filipino and English. 

The bilateral coast guard hotline was established under a memorandum of understanding signed during former President Rodrigo Duterte’s much-vaunted visit to Beijing in 2016. 

Despite welcoming a “new golden age” of bilateral ties with China, the Ferdinand Marcos Jr administration has flipped the script on Duterte’s accommodative stance by taking an increasingly defiant position on the sea disputes amid warming defense ties with the United States and its allies. 

Encouraged by Marcos’ tough stance, Philippine officials and experts are now contemplating even more radical moves to fortify the Southeast Asian nation’s South China Sea claims. 

In particular, Marcos Jr is coming under growing pressure to greenlight the full refurbishment of the grounded World War II-era vessel BRP Sierra Madre in the contested Second Thomas Shoal, where a detachment of Philippine marines has been asserting de facto control since 1999. 

The Sierra Madre, the grounded ship used by the Phillippines as a guard station on Second Thomas Shoal, is falling apart. Photo: US Naval Institute

There are growing calls on allies, especially the US, to either escort resupply missions that China has harassed, if not directly help construction activities in the area. 

Meanwhile, some Philippine officials have gone so far as to suggest that Marcos Jr offer its key bases in the area, particularly on Thitu Island, as a potential site for American troops under an expanded Enhanced Defense Cooperation Agreement (EDCA). 

Meet halfway 

At the heart of rising tensions in recent days is the Chinese Coast Guard’s use of water cannons to disrupt Philippine resupply missions on the Second Thomas Shoal, also known as Ayungin Shoal. 

“The [Department of Foreign Affairs] also expressed our disappointment that the Department was unable to reach its counterpart through the maritime communication mechanism for several hours while the incident was occurring,” Philippine Foreign Affairs spokesperson Teresita Daza said.

During a recent forum in Manila organized by Beijing-friendly elements in the Philippines, the Chinese Embassy’s deputy chief of mission Zhou Zhiyong called on the Marcos administration to “meet [China] half-way” and honor an alleged past promise to withdraw the grounded vessel from the shoal.

The Chinese official claimed that his country “has repeatedly expressed its willingness to resolve differences with the Philippines through bilateral dialogues. We hope that the Philippines side will abide by the existing consensus and cherish the hard-won situation in our bilateral relations. Meet the Chinese side halfway and find an effective way of managing the situation on the sea through diplomatic consultations.” 

“The Philippine side… made explicit commitments to do so. The representations were put on record and well documented…It’s been 24 years and the Philippines side has yet to honor its commitment,” Zhou claimed without providing any evidence of such a bilateral agreement.

“The Chinese side, however, has always exerted the utmost restraint, with a view to maintaining the relations with the Philippines and safeguarding regional peace and stability,” he added, flanked by Beijing-friendly journalists in a high-profile forum in Manila. 

But China’s claims were roundly dismissed by Philippine officials. Last week, Marcos Jr categorically denied that the Philippine government had ever made such promises to China, reiterating his opposition to any compromise on the disputed feature, which falls within the Philippines’ exclusive economic zone. 

China and its impresarios have claimed that the former Joseph Estrada administration (1998-2001) offered to withdraw the vessel not long after grounding it to assert the Philippines’ claim in the area. Just a few years earlier, China forcibly seized the nearby Mischief Reef, sparking panic and fury in Manila. 

Estrada’s two sons in the Philippine Senate, however, emphatically denied the existence of any such agreement. 

“During my phone conversation today with former senator and former defense secretary Orly Mercado, who held the position of defense secretary during my father’s tenure, he confirmed that there was no agreement or promise whatsoever made to the Chinese government,” Senator Joseph “Jingoy” Estrada Jr said when asked about his father’s policy.

The senator, who heads the national defense committee in the upper chamber, dismissed Beijing’s claims as “hearsay” in the absence of any clear evidence. 

“This is only hearsay. The Chinese government had made press releases that was made verbally – this will not stand even in court because these are all hearsay. Name names, because we’re also at a loss on who really made the promise,” he added in a mixture of Filipino and English. 

Raising the stakes

With the rusty, dilapidated vessel expected to give way in the near future, there is growing pressure on the Marcos Jr administration to make more assertive moves in tandem with allies. 

“We can have joint patrols with the US at the same time [as the next resupply mission to the Second Thomas Shoal]. We can calibrate it,” former senior associate justice Antonio Carpio said in a forum. 

“They sent their Navy together with the survey ship and the drilling ship, and, at the same time, the US and Australia conducted naval drills in the same area – that’s for Malaysia. For Indonesia, the US aircraft carrier Ronald Reagan happened to pass by,” he said, referring to joint US-Australian patrols when Malaysia began challenging China’s unilateral oil exploration activities in contested sea areas. 

A Philippine naval officer stands guard during the arrival of American missile destroyer USS Chung Hoon before US-Philippine joint naval military exercises in a file photo. Photo: AFP / Noel Celis / Getty Images

Earlier, Carpio also suggested that Manila take the ongoing disputes to the United Nations General Assembly in order to rally global pressure on China. 

Dindo Manhit, a leading Filipino policy analyst, echoed a similar line, arguing that the Philippines should “maximize joint patrols and be shepherded by allies and friends during the resupply. Not to cause war but simply to exercise our own rights based on international law. Our military facility is within our exclusive economic zone.”

Others, however, have gone further by suggesting the Marcos Jr administration place its occupied islands in the South China Sea under America’s security umbrella. 

Earlier this year, Cagayan de Oro City Representative Rufus Rodriguez publicly called for the inclusion of the Thitu Island, the second-biggest naturally-formed land feature in the Spratlys under full Philippine control since the 1970s, on the list of EDCA sites where US troops have rotational access rights. 

“It is in our national interest to pursue and expand our defense partnership with the US to deter further aggression from China in the West Philippine Sea and possible Chinese seizure of islets that belong to us under international law,” he said in a statement.

“The expanded EDCA should be further broadened. More sites along our western seaboard, where Chinese aggression and harassment of our fishermen have been taking place, should be covered,” he added.

Although the Marcos Jr administration will likely shun such radical proposals since even the US might have second thoughts about directly assisting Philippine control over contested features, many in Manila are hoping that stronger military ties with allies would enhance the country’s deterrence vis-à-vis China. 

With or without that US commitment, a moment of reckoning appears to be approaching in the disputed waters. 

Follow Richard Javad Heydarian on Twitter at @Richeydarian

Continue Reading

Experts weigh in on charting Asean’s future

Experts weigh in on charting Asean's future
Assoc Prof Jittipat Poonkham, Associate Dean for Academic and International Affairs of the Political Science Faculty at Thammasat University.

The Association of Southeast Asian Nations (Asean) should work on carefully crafting their foreign policy amid a Sino-American competition in the region while equipping the younger generation with the essential skills needed to cope with future uncertainties, experts said.

Assoc Prof Jittipat Poonkham, Associate Dean for Academic and International Affairs of the Political Science Faculty at Thammasat University, said the rising tensions between two major powers will eventually force Asean, including Thailand, to take sides.

He was speaking during a recent panel discussion on “Asean and Thai Foreign Policy” to mark Asean Day on Aug 8 at the Foreign Affairs Ministry.

He said that Asean members are facing the same situation that occurred during the Cold War. Today, there is a rise of two major powers, putting an emphasis on geopolitics, he added. At the same time, he noted, Asean, including Thailand, faces a dilemma of who to side with.

Asean member states should instead stay and move forward together as a team, he said.

He likened Thailand’s foreign policy to bamboo that bends with the wind. In this sense, policies are adaptable, balanced and pragmatic, he said.

To develop Thailand’s foreign policy under the Asean context, Thailand should balance relations between the two powers and choose paths best for the country, he said.

“Thailand must have vision, political will and support to know where the wind will blow and where the powers will be,” he said.

Meanwhile, Asean should “lead from the middle”, meaning member states should focus on being a middle power to balance the two superpower countries, he said, adding collective leadership is required to revitalise Asean centrality.

When Asean moves as a pack, it will have strong political leverage, he said. At the same time, he said the pack is required to initiate regional political advocacy focused on reducing strategic uncertainty amid the competition between the two superpowers.

Piti Srisangnam, Asean Foundation Executive Director, said Asean is at a crossroads and must move forward and look 20 years beyond its Asean Community Vision 2025, which will end in two years.

In 2045, he said Asean is expected to be a community of youths and children. He said that while other countries may face becoming ageing societies, Asean, aside from Thailand and Singapore, will not have such problems.

In 2045, he said there will be more than 250 million Asean people aged between 15 and 35, or one-third of the entire population, which may exceed 800 million in the next two decades.

He said Asean should prepare the future generations.

The younger generation must develop empathy, strategic communication and the spirit of friendship, while youths should be equipped with digital technology, entrepreneurial, lifelong learning, language and industry-specific skills, he said.

“We have to bring ourselves to the year 2045 and think [of] what we want to have and consider what we should prepare,” he said. “The four things we should consider to make Asean prosper are people, time, budget and knowledge.”

“We are an emerging economy, so we should have a certain amount of budget to make our region go forward. However, people and knowledge are very important, and we still have many things to do to ensure the readiness of the people in our region,” he added.

Soontorn Chaiyindeepoom, Thailand Representative on the High-Level Task Force for Asean Community Vision of Post 2025, explained that to prepare for the future, Asean had to set up a high-level task force to draft the next Asean vision.

After discussions over the past 1.5 years, the task force now agrees to include the goals of Asean Community Vision 2025, he said. These include Asean unity, cohesion, resilience and becoming a rules-based community that is responsive and adaptive to current and future challenges, he said.

“We also agreed on making Asean a nuclear-weapons-free region and to contribute to global efforts on proliferation issues, protecting human rights and fundamental freedoms,” he said.

“We agree to enhance economic resilience and competitiveness while promoting social inclusivity,” he added.

Continue Reading

Talking to the Taliban: Right or wrong?

Taliban fighters stand at a checkpoint in Kabul, September 2022

Two years since the Taliban swept into power in Afghanistan, not a single country has formally recognised their rule.

Even engaging with the Taliban government remains deeply controversial. Some say talking with them will help bring about change, others insist the Taliban will never change so there’s no point in talking.

And as the world struggles to decide how to deal with Afghanistan’s new rulers, women’s rights – even their beauty salons – have become frontlines in political battles.

Beautician Sakina – in a dimly lit room, curtains tightly drawn, alongside bunches of lip pencils and gleaming palettes of eye shadow – reflects on why she feels women like her have become a bargaining chip.

“The Taliban are putting pressure on women because they want to push the international community to recognise their rule,” she says in her new secret salon in Kabul.

She was forced underground two weeks ago after the government ordered all women’s beauty parlours to shut. It is the latest in a seemingly endless raft of decrees restricting the lives and liberties of Afghan women and girls.

Sakina is uncertain what approach to the Taliban will work.

“If the Taliban are accepted as the government, they might remove restrictions on us, or they could impose even more,” she says, with the kind of uncertainty and anxiety that plagues this huge, sensitive political issue.

The Taliban insist issues like women’s rights are none of the world’s business.

“Focusing on this one issue is just an excuse” says Zabihullah Mujahid, spokesman for the Taliban.

Speaking to the BBC from the Afghan city of Kandahar – home to the Taliban’s supreme leader Haibatullah Akhundzada – he insists that “the current government should have been recognised long ago. We have made progress in some areas and we will also sort this issue.”

Whether to talk or not to the Taliban government sharply splits many communities with a stake in Afghanistan’s future.

This includes a deeply embittered and still shaken Afghan diaspora, forced to flee their own country when the Taliban swept into power – for a second time – on 15 August 2021.

“Saying don’t talk is easy,” says Fatima Gailani, one of four women who were on the Afghan team that tried to negotiate with the Taliban right up to the moment they seized power.

“If you don’t talk, then what do you do?”

Since the collapse of the last government, she’s been involved in backchannel initiatives.

“We don’t need another war”, she emphasises, in a nod to voices, including former military commanders and old warlords, who still harbour hopes of eventually toppling the current order by force.

A woman in a burqa reaches out for a loaf of bread. Photo taken in Nov 22

Others in the diaspora are calling for greater pressure, including more sanctions and additional travel bans, to intensify the isolation.

“What is the point of engagement?” demands Zahra Nader, editor-in-chief and founder of Zan Times, a women-led newsroom in exile. “They have shown who they are and what kind of society they want to build.”

Diplomats involved in dialogue emphasise that engagement is not recognition, and concede there is little to show so far.

But signs of dissatisfaction, even among senior Taliban leaders, with the most extreme edicts imposed by the ageing ultra-conservative supreme leader, keep kindling faint hope.

“If we don’t engage Afghans who want to engage, in the smartest possible way, we’ll give free reign to those who want to keep a large part of the population essentially imprisoned,” says a Western diplomat involved in recent meetings with mid-level Taliban representatives.

Sources point to a recent unprecedented meeting between the reclusive Akhundzada with Qatar’s Prime Minister Mohammed bin Abdulrahman Al Thani – the supreme leader’s first with a foreign official. Diplomats briefed on the discussions say they confirmed wide gaps, especially when it comes to education and women’s rights, but also indicated a possibility to find a way forward, however slowly.

Discussions are tough – it’s hard to find common ground.

“There’s a lot of distrust, even disdain, between sides who fought each other for years,” says Kate Clark of the Afghanistan Analysts Network. “The Taliban think the West still wants to corrupt their nation and the West doesn’t like the Taliban policy on women’s rights and their authoritarian rule.”

Ms Clark highlights a fundamental disconnect: “The West may see issues like recognition as concessions, but the Taliban see it as their right, a God-given right to rule after they defeated the US superpower and returned to power, for a second time.”

Outside powers balance criticism with praise for progress, such as a crackdown on corruption which boosted revenue collection, and some efforts to tackle security threats posed by the Islamic State group. And Western powers look to Islamic countries and scholars to take the lead on shared concerns over the Taliban’s extreme interpretations of Islam.

But there is also a toughening of tactics.

Even the UN now speaks of “gender apartheid” as the Taliban tighten the vice around women by even banning them from public parks, women’s gyms and beauty parlours. Moves are now underway to develop a legal case for “crimes against humanity”.

A female mannequin wearing a hijab with its face covered crudely by alfoil.

Despite some mixed messaging and occasional friction between regional and Western countries, so far there’s a rare meeting of minds among world powers, including Russia and China on some red lines, including recognition.

The impasse has devastating consequences for ordinary Afghans.

The UN’s latest report highlights, in bold letters, that their humanitarian appeal is only a quarter funded as of the end of July, as donors turn away. More and more Afghans are going to bed hungry.

Some 84% of households are now borrowing money just to buy food, the UN says.

And there is concern too that the footprint of Islamist groups like Islamic State is growing.

The Taliban government paints a rosy picture. And, even without recognition, their envoys – in signature traditional turbans and tunics – are among the world’s most frequent flyers, jetting to meetings in many capitals.

The acting Foreign Minister Amir Khan Muttaqi receives delegations in Kabul almost daily, with all the usual protocol, including flags and official photographs set in elegant rooms.

Western embassies in Kabul remain shuttered, except for a small European Union and a Japanese mission. Discussion goes on about whether diplomats now based in the Gulf state of Qatar should at least be in Kabul if they want to exercise any influence at all.

There’s no appetite, in any of the world’s capitals, for another bloody chapter in this 40-year war.

And despite any discord among Taliban leaders, their unity remains a goal which matters above all else.

There are no quick or easy solutions.

“The only thing I could say from my heart is that we are really suffering,” says the beautician Sakina.

“Maybe those who are not among us don’t understand it, but it’s really painful.”

Continue Reading

China’s game of Ukrainian chess

Last weekend, Saudi Arabia hosted a two-day summit in Jeddah dedicated to ending the war in Ukraine. Nearly 40 countries attended, including the United States, India, and dozens across Europe. But it was the presence of one nation that raised expectations for a breakthrough – China.

Because China had rejected a similar meeting in Copenhagen in late June, many interpreted its participation this time as evidence Beijing was ready to play a more active role. But an examination of the context surrounding the Jeddah summit suggests a different motivation for China’s involvement. Simply put, peace wasn’t Beijing’s primary concern.

Since the beginning of the Ukraine war in February 2022, Beijing has avoided anything that would compromise its neutrality or force it explicitly to take a side. This principle of neutrality made it impossible for China to attend the June meeting, given that Denmark is a member of the North Atlantic Treaty Organization. 

Also read: The reality of China’s influence in the Middle East

Although NATO isn’t directly at war with Russia, its military support to Ukraine gives the Kremlin ammunition to claim NATO involvement. For China, attending the Copenhagen meeting without Russian participation would have tarnished Beijing’s image of objectivity.

By comparison, Saudi Arabia, one of the leading middle powers in the Global South, was a more acceptable host from the Chinese perspective.

Saudi Arabia has voted in favor of several UN General Assembly resolutions condemning Russia and demanding an end to the war. But it also abstained from a 2022 vote to suspend Russia from the UN Human Rights Council, and the two countries have been on a more coordinated path recently over oil production and global crude-oil supply.

This more nuanced position has made the kingdom a more natural partner for Beijing. 

But image concerns aside, what’s driving China’s involvement now? 

Importance of China-Saudi ties

For starters, participating in the Jeddah summit was more about China’s desire to continue sweetening ties with Saudi Arabia than any intention to condemn or force Russia’s hand in Ukraine.

China and Saudi Arabia have an important bilateral relationship driven by politics, energy and trade. Thus Chinese leaders believe they can endear themselves to the kingdom by supporting Riyadh’s diplomatic efforts on Ukraine.

Even if that calculation is wrong, attending talks costs China nothing. A summit is only an agreement to discuss, not a pact to act. Even if a consensus among participating countries had been reached – it wasn’t – neither Saudi Arabia nor its guests could have imposed their will on Russia (which was excluded from the discussion).

In that sense, the Jeddah summit positions Saudi Arabia as a peace mediator but doesn’t bring fundamental damage to China’s bottom line. 

For Beijing, any “neutral” efforts to pursue peace and stability must be honored. This month’s summit could be framed as one such effort given the diverse participation and views represented. Now that China has lent its support to the Saudi endeavor, it wouldn’t be surprising for Beijing to demand reciprocity from Riyadh for its own peace initiative down the road.

Second, China’s participation in peace talks was facilitated by a recent thaw in the US-China relationship. Chinese President Xi Jinping is expected to visit San Francisco in November, which would be one of his most important foreign-policy activities of the year. The two countries are trying to rebuild bilateral relations before expected turbulence in 2024, when presidential elections will be held in both Taiwan and the US. 

Finally, Beijing has been a bit more cooperative with the West’s efforts to squeeze Russia over its conduct in Ukraine. Recent moves in this regard are subtle but clear. In July, Beijing imposed new export control measures on Chinese drones, parts and technologies, dual-use supplies that Russia had been receiving from China directly or via subsidiaries in Iran. 

In a thinly veiled criticism of Russia, China also urged the resumption of grain exports from Ukraine after Moscow backed out of the Black Sea grain deal, which had allowed Ukraine to export wheat, barley, and other staples.

Most recently, in a rare public display of displeasure, the Chinese Embassy in Russia criticized local authorities for mistreating Chinese citizens

The key question in all of this is whether China has fundamentally changed its position on the war. The answer, so far, is no. None of the actions China has taken in recent months have imposed critical damage on Russia’s war capability or induced meaningful changes to Russian behavior. 

In fact, given the long-term nature of US-China competition, Beijing is unlikely to abandon Moscow as a strategic partner, even if Russia is weakened in Ukraine. For China, Ukraine – and even Saudi Arabia – is part of a grand political chess match that Beijing has no intention of losing.

This article was provided by Syndication Bureau, which holds copyright.

Yun Sun is director of the China program and co-director of the East Asia program at the Stimson Center in Washington, DC. 

Continue Reading

China’s default drama cries out for faster reforms

Seeing “China Evergrande Group” trending on global search engines is the last thing Xi Jinping needs as 2023 goes awry for Asia’s biggest economy.

News that exports plunged 14.5% in July year on year was the latest blow to China’s hopes of growing its targeted 5% this year. It’s the biggest drop since February 2020, when Covid-19 was sledgehammering trade and production worldwide.

Yet the default drama at Country Garden Holdings is a reminder that the call for help is coming from inside China’s economy.

This week, Country Garden was trending in cyberspace as it faced liquidity troubles akin to those of the humbled China Evergrande in 2021. 

The whiff of trouble that tantalized markets in recent weeks proved true amid reports noteholders failed to receive coupon payments due on August 7.

That has global investors worried about an Evergrande-like domino effect. “If Country Garden, the biggest privately owned developer in China, goes down, that could trigger a crisis in confidence for the property sector,” says Edward Moya, senior market analyst for Oanda.

Analyst Sandra Chow at advisory firm CreditSights notes that “with China’s total home sales in the first half of 2023 down year-on-year, falling home prices month-on-month across the past few months and faltering economic growth, another developer default – and an extremely large one, at that – is perhaps the last thing the Chinese authorities need right now.”

The risk is slamming investor sentiment toward China. And it spotlights the urgent need for Chinese leader Xi and Premier Li Qiang to repair the shaky property sector and accelerate state-owned enterprise (SOE) reform.

A more vibrant and resilient property market is crucial to China’s economic recovery in the short run and reducing the frequency of boom-bust cycles in the longer run. The sector, if running smoothly, can generate as much as one-third of China’s gross domestic product.

Earlier this month, Li pledged to “adjust and optimize” Beijing’s approach to building a healthier, more stable property market. Li has urged major cities to devise measures to stabilize markets in their own jurisdictions. 

Chinese President Xi Jinping (L) and Premier Li Qiang (R) face economic troubles. Image: NTV / Screengrab

That followed a pledge by the People’s Bank of China (PBOC) to provide developers with 12 additional months to repay their outstanding loans due this year.

This week’s default chatter raised the stakes. On August 3, Moody’s Investors Service slashed Country Garden’s credit rating to B1, putting it in the “high risk” category. 

“This downgrade reflects our expectation that Country Garden’s credit metrics and liquidity buffer will weaken due to its declining contracted sales, still-constrained funding access and sizable maturing debt over the next 12 to 18 months,” says Moody’s analyst Kaven Tsang.

Country Garden’s stock has cratered over the last week after the company’s warning of an unaudited net loss for the first six months of 2023. Clearly, Country Garden has been grappling with liquidity chaos for some time. 

As the company noted in a July 31 exchange filing, it “will actively consider taking various countermeasures to ensure the security of cash flow. Meanwhile, it will actively seek guidance and support from the government and regulatory authorities.”

A day later, Country Garden reportedly canceled an attempt to raise US$300 million by selling new shares. 

As analysts at Nomura wrote in a note, “recent signals from top policymakers… suggest Beijing is getting increasingly worried about growth and have clearly recognized the need to bolster the faltering property sector. They are starting a new round of property easing and may introduce some stimulus to redevelop old districts of large cities.”

More important, though, is for Xi and Li to tackle the underlying cracks in the financial system. The sector’s troubles are structural, not cyclical.

Thanks partly to slowing urbanization and an aging and shrinking population, demand for new housing is on the wane. When economists worry about a Japan-like “lost decade” in China, the unfolding property crisis is Exhibit A.

The more that already massive oversupply increases, the more difficult it’s becoming for Beijing’s stimulus to flow through to construction activity. 

And the more the property sector acts like a giant weight around the economy’s ankles, the more China’s financial woes look like Japan’s bad-loan crisis.

China’s beleaguered property market is dragging down the wider economy. Photo: AFP / Noel Celis

This dynamic is a clear and present danger to China’s ability to surpass the US in GDP terms, a changing of the economic guard many thought might happen as soon as the early 2030s. Yet so is the slow pace of SOE reform as China’s economic model shows growing signs of trouble.

Xi and Li clearly understand the urgency. In recent months, Xi’s Communist Party set out to help boost the valuations of SOE stocks, which represent a huge share of China’s overall market. 

According to Goldman Sachs Group, SOEs in sectors from banking to steel to ports account for half the Chinese stock market universe. Yet Xi’s talk of creating a “valuation system with Chinese characteristics” is a work in progress, at best.

The SOE conundrum is a microcosm of Xi’s challenge to balance increasing the role of market forces and boosting investment in listed state companies, while also pulling more international capital China’s way.

In his second term in power, from 2018 to 2023, Xi more often than not tightened his grip on the economy at the expense of private sector development and dynamism. 

The most drastic example was a tech sector crackdown that began in late 2020. It started with Alibaba Group founder Jack Ma and quickly spread across the internet platform space.

Since then, global money managers have grown increasingly more cautious about investing in Chinese assets. This, along with a steady flow of disappointing economic data, is undermining Chinese stocks, which are among the worst-performing anywhere this year. 

That has given Xi and Li all the more reason to ensure that the practices of China’s largest state-owned giants come into better alignment with global investors’ interests and expectations.

China needs a huge increase in global investment to realize its vision for a 5G-driven technological revolution. Monetary stimulus can’t get China Inc there any more than Bank of Japan stimulus can revive Japan’s animal spirits.

Given the fallout from Covid-19 and crackdowns of recent years, China’s biggest tech companies are no longer cash rich or self-supporting. And the transition from SOE-driven to private sector-led growth has become increasingly muddled.

“If SOEs are able to pick and integrate the right targets, control risk effectively and promote innovation, outcomes should be credit-positive for the firms involved and beneficial for China’s growth,” says analyst Wang Ying at Fitch Ratings.

The global environment hardly helps, as evidenced by recent declines in export activity. US efforts to contain China’s rise – whether one calls it “decoupling” or de-risking” – is an intensifying headwind.

On August 9, US President Joe Biden detailed new plans to curb American investments in Chinese companies involved in perceived as sensitive technologies such as quantum computing and artificial intelligence. 

Chinese leader Xi Jinping and US President Joe Biden are at loggerheads on tech issues. Photo: Pool / Twitter / Screengrab

Though nominally aimed at preventing US capital and expertise from flowing into mainland technologies that could facilitate Beijing’s military modernization, the limits are sure to have an added chilling effect on market sentiment.

Lingering pandemic fallout hardly helps. Adam Posen, president of the Peterson Institute for International Economics, a Washington-based think tank, argues that China is suffering “economic long Covid” that could mean its condition is even weaker than global markets realize.

In a recent article in Foreign Affairs, Posen said that “China’s body economic has not regained its vitality and remains sluggish even now that the acute phase – three years of exceedingly strict and costly zero-Covid lockdown measures – has ended. 

He warns that the “condition is systemic, and the only reliable cure – credibly assuring ordinary Chinese people and companies that there are limits on the government’s intrusion into economic life – can’t be delivered.”

Xi is, of course, trying. The campaign, which recently fueled a jump of over 50% in some SOE stocks, is accompanied by a slogan of buying into a “valuation system with Chinese characteristics.”

Last month, Chinese Vice Premier Zhang Guoqing said the government is redoubling efforts to deepen and hasten SOE reform. 

Zhang, a member of the Political Bureau of the Communist Party of China Central Committee, said the aim is to boost core competitiveness and prod SOEs to innovate, achieve greater self-reliance and raise their science and technology games.

More recently, Liu Shijin, a former vice minister and research Fellow of the Development Research Center, said government agencies must begin viewing entrepreneurs not as “exploiters” but as growth drivers.

But pulling off a transition toward private sector-driven growth would be much easier to pull off if China’s underlying financial system was more stable. The biggest risks start with the property sector.

“The problems of China’s property developers are only getting more severe,” says economist Rosealea Yao at Gavekal Dragonomics. 

“The sales downturn is likely to throw many more private-sector developers into financial distress — a risk underscored by Country Garden’s recent missed bond payments. Unless sales can be stabilized, developers will be trapped in a downward spiral.”

Yao cites three reasons why a continued downturn in sales could push many private sector property developers into financial distress. 

First, private developers have been mostly shut out of capital markets and thus unable to roll over maturing bonds since late 2021, when China Evergrande fueled investor concerns that other highly leveraged private sector developers would also be unable to repay their debts.

“Private sector developer issuance in the onshore bond market is now minimal, and has collapsed in the offshore market as well,” Yao says. “Companies with state ownership, by contrast, still mostly retain the faith of onshore bonds with bondholders demonstrating that they are not entirely risk-free. 

“The combination of both weak revenues and lack of refinancing ability has led many firms to default or negotiate repayment extensions since the start of 2022, and the number of defaults and extensions remains elevated this year.”

A worker at the construction site of Raffles City Chongqing in southwest China’s Chongqing Municipality. Photo: Asia Times Files / AFP / Wang Zhao

 Two, cash liquidity positions of private sector developers are deteriorating. According to the annual reports of 86 non-state-owned developers, she notes, short-term liabilities exceeded cash on hand by 725 billion yuan ($100 billion) in 2022, compared to a shortfall of 171 billion yuan ($23 billion) in 2021.

“This,” Yao says, “suggests that the firms may have insufficient liquidity to repay their maturing debts – though Country Garden boasted more cash on hand than its short-term liabilities at the end of 2022, suggesting this measure could understate the problem, as developer reserves may be shrinking rapidly this year.”

Third, many private-sector developers are not just illiquid – they are getting closer to insolvency. That is mostly due to rising impairment charges as the companies are forced to recognize that assets on their balance sheets have declined in value, often under pressure from auditors. 

“Such charges deplete the asset side of companies’ balance sheets, pushing them closer to a situation in which the value of their liabilities could exceed the value of their assets — similar to the more traditional path to insolvency through negative net profits reducing equity,” she adds.

Again, Xi and Li clearly know what needs to be done to put China on more solid economic and financial ground. They just need to accelerate badly needed reform moves – before more indebted property developers like Country Garden hit investor confidence in the country’s prospects and direction. 

Follow William Pesek on Twitter at @WilliamPesek

Continue Reading