close

ASIAN (H)

ASIAN (H)

WeChat ban a catch-22 for Chinese Australians

2015-02-16T120000Z_1393262988_MT1IMGCNPBU23515201_RTRMADP_3_CHINA-PROHIBIT-SEXUAL-CONTENT-ON-WECHAT-400×252.jpg


Author: Haiqing Yu, RMIT University

Chinese social media network WeChat is facing global scrutiny and possible bans due to its handling of user data privacy, its censorship and surveillance practices and the widespread misinformation and propaganda campaigns it hosts supposedly on behalf of the Chinese Communist Party. Yet members of the Chinese diaspora in Australia continue to use WeChat as their main social media platform, despite the availability of alternative social media networks that claim to protect privacy and freedom of expression.

A pedestrian looks at an advertisement for the mobile messaging app Weixin, or WeChat, of Tencent in Beijing, China, 16 February 2015 (Photo: Reuters/Wu Changqing).

Global scrutiny of Chinese digital platforms such as TikTok and WeChat has been front-page news since July 2020. These globally successful Chinese platforms are caught in the crossfire of geopolitical tensions between China and India, and China and the United States. They have been subjected to scrutiny over ‘security’, ‘surveillance’ and ‘influence’.

In July, India banned TikTok and WeChat along with 57 other Chinese apps amid military tensions along the India–China border, citing a threat to ‘sovereignty and integrity’. In August, US President Donald Trump weighed in on the debate by signing two executive orders banning any US transactions with WeChat operator Tencent and TikTok operator ByteDance citing ‘security concerns’. This came as ByteDance was pressured to ‘sell’ its US TikTok operations to a US company. Microsoft, followed by Oracle, entered into discussions about taking over the popular app.

In Australia, the same apps are also under increasing scrutiny from the Australian government and face the threat of being banned. At the end of July 2020, TikTok and other global social media companies fronted a Senate inquiry into foreign interference conducted on social media misinformation.

WeChat has been at the centre of controversy over surveillance and censorship on Chinese digital platforms for a long time. Public scrutiny intensified in Australia in the context of the potential WeChat ban in the United States. The Australian media has given extensive coverage to claims that a private WeChat group was inappropriately engaged by a staffer of New South Wales Legislative Council parliamentarian Shaoquett Moselmane. Two Chinese scholars in the same chat group had their Australian visas cancelled.

The potential ban in the United States has divided opinions into three camps. Those opposing the ban say they rely on WeChat to communicate with family and friends. The more neutral position supports the right of users to choose their own platform but dislikes WeChat’s censorship practices. Supporters of the ban believe WeChat infringes on freedom of expression.

Some members of the Chinese Australian community have created parallel chat groups on WhatsApp, Letstalk, Line or Telegram in case of a local WeChat ban. But they continue to be drawn back to WeChat as their main social media platform. Why do members of the Chinese diaspora choose to self-censor when they have many other options available? The answer may lie in platform affordances available in WeChat as well as techno-material features of the app that produce ‘habits’, engender ‘necessity’ and provide users with a sense of ‘vitality’.

People are attracted to the platform for its design. WeChat is the international version of Weixin, which has targeted the Chinese market since 2011. It has been continuously optimising, improving and adding features as its global market expands. It is now an influential platform, open to third-party developers and content creators for free. This openness in platform design has ensured its agility as an innovative super-platform. People are attracted to the platform for its all-in-one functionality. The super-app concept is now an industry standard and copied among digital start-ups elsewhere.

New Chinese migrants take their social media habits to their host countries, even when they use ‘Western’ or non-Chinese social media platforms alongside Chinese ones. Research has shown that the formation of a social media habit is an intentional and emotional process driven by conscious decision making as well as unconscious affective attachment.

WeChat is the only platform that allows members of the Chinese diaspora to connect with family and friends in China, where familiar ‘Western’ platforms are banned. Chinese Australians are caught in a catch-22. They feel it necessary to continue using WeChat even if they sympathise with accusations of the platform’s monopolistic practices and unfair competition in the global market.

While it is legitimate to raise security concerns over user data privacy and content censorship on WeChat, one should not overlook legitimate consumer choice. As Wanning Sun has argued, misconceptions about WeChat have the potential to undermine the diversity and vitality of political discussions. Sun suggests that there is a risk of underestimating the platform as a vehicle for robust political debate and civic participation in Australia.

Chinese Australians are not dupes of an unscrupulous authoritarian party-state which only intends to influence and interfere. They often exercise their own agency as informed consumers, despite being stuck between a rock and a hard place. They may unwittingly contribute to China’s censorship algorithms; they also resist Chinese government censorship on WeChat and create counter discourses that penetrate the porous boundary between WeChat and Weixin.

It is of vital importance that a distinction be made between WeChat as an instrument of Beijing’s propaganda and the user-generated content that it carries. Banning WeChat does not solve the problem of data security in Australia or the United States. Australia should take a more democratic approach through platform governance regulations applied equally to all international platforms irrespective of their country of origin. This includes implementing transparent user data privacy and protection frameworks to safeguard Australian citizens’ rights to freedom of expression.

Haiqing Yu is Associate Professor and Vice-Chancellor’s Principal Research Fellow in the School of Media and Communication, RMIT University.

The post WeChat ban a catch-22 for Chinese Australians first appeared on East Asia Forum.



Source link

read more
ASIAN (H)

The promise of public–private cybersecurity partnerships in the Philippines

2020-08-04T093123Z_2077819588_RC2X6I9HZ4QT_RTRMADP_3_HEALTH-CORONAVIRUS-PHILIPPINES-copy-400×267.jpg


Author: Mark Manantan, Pacific Forum

In 2019, the Philippines’ Department of Information and Communications Technology (DICT) formally launched the Cybersecurity Management System Project (CSMP). This is the country’s national cyber intelligence platform designed to conduct information-sharing, monitor threats and protect critical national infrastructure. It was a significant achievement born from the country’s first-ever National Cybersecurity Plan 2022. But after over a year of anticipation, the cyber monitoring system is yet to fully come online.

A cyclist looks on as traffic builds up at a checkpoint on the first day of the government's reimplementation of a stricter lockdown to curb coronavirus disease (COVID-19) infections, in Marikina City, Metro Manila, Philippines, 4 August, 2020 (Photo: Reuters/Eloisa Lopez)

 

As the Philippines remains a primary target of cyberattacks and the Duterte administration continues to relegate cybersecurity to the periphery of its national security agenda, an industry-led public–private partnership (PPP) in cybersecurity has emerged. But beneath the surface of this booming PPP are simmering national security concerns.

In principle, the government is in charge of realising the National Cybersecurity Plan. But its planned implementation is complicated. The plan is cloaked in normative and value-laden statements, lacking a clear-cut mandate on actual cybersecurity management. The Philippine government does not possess adequate technical expertise or fiscal resources to put the plan into practice.

The private sector is cognisant of the government’s budgetary and manpower limitations. It is grappling with potential economic losses associated with ransomware and data breaches amounting to approximately US$3.5 billion per year. This could affect business continuity, company reputation and the overall competitiveness of the Philippines in the emerging data-driven economy.

The Philippines’ PPP in cybersecurity is unique in the sense that the private sector goes beyond the protection of critical national infrastructure. It also augments the cybersecurity capabilities of the resource-poor Philippine military.

The recent launch of the cybersecurity partnership between the Philippine Air Force (PAF) and Philippine Long Distance Telecommunications (PLDT) Group demonstrates this industry-initiated PPP model. Through its Cyber Security Operations Group, the Philippine-based telco company will aid the PAF’s lagging cybersecurity capabilities on two fronts: workforce development and digital infrastructure.

The PLDT Group will train PAF cyberwarriors through combined lectures and hands-on experience in the ePLDT’s Security Operation Center. The PAF will also gain access to a cyber intelligence platform to protect its infrastructure from cyber threats.

Likewise, the PLDT Group will acquire relevant data from PAF on the types of attacks it encounters — particularly the tactics, techniques and procedures used by threat actors. Negotiations for possible engagement between the PLDT Group and the Armed Forces of the Philippines (AFP) Cyber Group are also underway.

Another PPP on the horizon is the memorandum of agreement (MOA) signed between ChinaTel-backed Dito Telecommunity Corporation (DITO) and the AFP. DITO will build microwave relay and base trans-receiver stations for mobile communications in AFP camps throughout the country. The agreement was met with public backlash citing the partnership as a potential Chinese backdoor for espionage, prompting a fresh round of Senate inquiries.

The PLDT–PAF and DITO–AFP partnerships are crucial test cases for an industry-led PPP in the Philippines. But the involvement of telco companies in government and military infrastructures will have national security implications — especially because defence institutions still lack a comprehensive risk-assessment and assurances certification strategy to assess external partners.

On the one hand, the Philippine military may benefit from the advanced capabilities and resources of these private companies. But in the long-term, it risks possible unwarranted physical and digital access to classified defence intelligence.

As the private sector and external contractors continue to play a significant role in augmenting the cybersecurity capability gap in the Philippine military, the following policy recommendations should be considered.

First, the Philippine government should establish an assurance certification scheme for external parties to safeguard classified information. Private contractors must not only satisfy the cybersecurity criteria but also establish a level of trust with the government concerning their owners and employees.

The Philippines can take cues from emerging accreditation or certification processes and tailor these to suit its own policy objectives. One possible model is Australia’s Defence Industry Security Program where controls are implemented to match the level of risk associated with a particular supplier. Similarly, the US Cybersecurity Maturity Model evaluates contractors on a graduated scale to determine their maturity process and cybersecurity practices. This protects sensitive information shared across their networks.

Second, the government should invest in the Philippines’ sovereign cybersecurity capabilities. The current Self-Reliant Defense Posture partnership between the Department of National Defense (DOD) and the Department of Science and Technology must add cybersecurity to its portfolio. Local talent from the start-up community could become vital assets in a coordinated cybersecurity capability framework.

Third, Philippine legislative bodies must revisit the country’s foreign ownership laws. Lawmakers must adopt a forward-leaning approach to enforce a ‘know your investor’ strategy. This will encourage greater scrutiny on all foreign direct investments and business ventures that could have long-term national security ramifications.

The DOD realigned its defence budget to help the Duterte administration fund its COVID-19 response. Cybersecurity will not take centre-stage very soon in the national security agenda. But this must not prevent the Philippine military from implementing a robust technical and risk-benefit assessment to regulate its cybersecurity partnerships and safeguard the country’s national security and economic interests in decades to come.

Mark Manantan is the Lloyd and Lilian Vasey Fellow at the Pacific Forum and a non-resident fellow at the Center for Southeast Asian Studies at National Chengchi University, Taiwan.

All views expressed are the author’s own.

The post The promise of public–private cybersecurity partnerships in the Philippines first appeared on East Asia Forum.



Source link

read more
ASIAN (H)

Deepening Japan’s cooperation with Papua New Guinea

121965645_3988902237811049_3204766451866992249_n-400×293.jpg


Author: Shane McLeod, Lowy Institute

A small but telling glimpse of Japan’s diplomatic approach in Papua New Guinea (PNG) was the soundtrack as world leaders gathered in Port Moresby in 2018 for the APEC leaders’ summit. The ability of the PNG Defence Force band to trumpet national anthems through the tropical heat was in no small part thanks to Japan which has been supporting the band since 2014 with training and instruments through its aid program.

Japan's Prime Minister Shinzo Abe shakes hands with Papua New Guinea's Prime Minister Peter O'Neill as he arrives for the APEC Summit, Port Moresby, Papua New Guinea 17 November 2018. (Photo: Reuters/David Gray)

It is an example of the low-profile but strategic support that the world’s third-largest economy is known for in its relationship with PNG.

Japan may be set to take a much more prominent role in PNG’s political and economic future as it pledges to help the country’s economy recovery from the coronavirus pandemic — with speculation that it may be central to a mooted IMF-managed bailout of the country’s government finances.

Japan’s presence in PNG since its independence is often understated. Japan is a generous development partner and regularly ranks as PNG’s third-largest bilateral aid donor. It is known for delivering aid projects with a focus on quality infrastructure. Recent examples include funding an upgrade of Port Moresby’s dilapidated sewerage treatment capability, improvements to electrical transmission networks in the Ramu grid that serves the industrial city of Lae, as well as the coming upgrade of that city’s airport to international standard.

Japanese companies are critical investors in PNG’s economy. They have been foundation investors in oil and gas projects including the massive PNG LNG project. Japan is also a major customer for the country’s resource outputs including oil, gas and copper. LNG supplies from PNG are reported to account for up to 5 per cent of Japan’s imports. There are also Japanese interests in PNG’s fisheries resources, and in non-pandemic times Japan is one of the largest sources of tourist visitors to PNG.

Japan’s relationship with PNG is built on a complicated history. During the Second World War, Japan’s military occupied much of the country. More than 200,000 Japanese soldiers died during the fighting and the remains of many lie in unmarked graves. There are Papua New Guineans today with memories of the occupation, like founding prime minister Sir Michael Somare who learnt to speak Japanese at elementary school in the 1940s.

Moving from its role as a generous donor to taking the lead in a financial bailout is a significant step for Japan. It would align Japan with the efforts of its allies in the region — particularly Australia and the United States — to reshape their approach to the Pacific in light of the growing role of China in the region.

To date, the most significant example of this is the PNG Electrification Partnership, an agreement signed on the sidelines of the 2018 APEC summit. Japan’s then-prime minister Shinzo Abe joined leaders from Australia, New Zealand and the United States to pledge support for PNG’s goal of lifting its electricity supply to 70 per cent of the country by 2030.

Like Australia with its new Australian Infrastructure Financing Facility for the Pacific, Japan appears to be looking for ways to strengthen its reputation as a partner of choice for countries in the Pacific. While previously it might have used its dominant role in the multilateral Asian Development Bank to do things like budget support, talk of a direct loan suggests a new nationally-branded approach to helping PNG.

Australia will likely welcome the presence of another major player. It has already converted what was supposed to be a short-term financing facility into a longer-term loan. Australia’s prominent role as PNG’s largest aid donor — and a multitude of complex bilateral interests from asylum seekers, trade, cross-border crime and health issues — can colour its efforts to take on more.

For Japan, stepping up to help in the Pacific also helps its goal of becoming a ‘normal’ country — one which wields international political influence to match its economic might.

When Japan’s Foreign Minister Toshimitsu Motegi visited Port Moresby in August 2020 as part of a series of visits around Southeast Asia, he pledged to help PNG deal with the economic consequences of COVID-19. Despite speculation of an announcement about Japanese funding for PNG’s budget challenges, the outcome was more benign — a statement of intent to further promote bilateral relations.

Whether a deal eventuates will not be clear for some time. PNG Treasurer Ian Ling-Stuckey outlined the scale of the challenge in parliament in September 2020 and said talks about financing will hopefully be resolved by the end of the year. The mooted IMF package is already generating political controversy, with former prime minister Peter O’Neill leading the criticism.

Japan could quickly find itself central to unpopular debates about currency devaluation, spending priorities and reform of financially troubled state-owned enterprises that are centres of political patronage.

Successfully negotiating that maelstrom will require deft engagement in the day-to-day affairs of PNG politics, with all its volatility, personalities and unpredictability — and a preparedness for tough talk and potential unpopularity.

It is a place where Japan has until now been largely invisible. So, in thinking about stepping in, its leaders must be certain they know what they are in for. PNG’s economic and fiscal challenges are large and it needs outside help to start dealing with them. If Japan is prepared for the complexities that will come, it can be a powerful force in PNG.

Shane McLeod is a research fellow for the Pacific Islands Program at the Lowy Institute, Sydney.

The post Deepening Japan’s cooperation with Papua New Guinea first appeared on East Asia Forum.



Source link

read more
ASIAN (H)

Kyrgyz electoral fiasco involves familiar faces

121701540_748467442402820_5966844694512850838_n-400×272.jpg


Author: Matteo Fumagalli, University of St Andrews

‘Revolution’, best understood in the Kyrgyzstani context as presidential replacement engineered through elite-led popular protests, typically in the wake of disputed elections, is starting to become the country’s modal form of leadership change.

Kyrgyzstan's Prime Minister Sadyr Japarov addresses supporters during a rally to demand the resignation of President Sooronbai Jeenbekov in Bishkek, Kyrgyzstan, 14 October 2020 (Photo: Reuters/Vladimir Pirogov).

But the events of October 2020 elections are unlike the Tulip Revolution of 2005, which marked former president Askar Akayev’s fall from power, or the unravelling of the state that went from former president Kurmanbek Bakiev’s fall in April 2010 to the Osh conflict of June 2010. This is a power grab by political, business and criminal networks.

Serving an 11-year sentence on kidnapping charges, nationalist politician Sadyr Japarov was still in jail on 6 October. He is now Kyrgyzstan’s prime minister and acting head of state following the resignation of president Sooronbai Jeenbekov on 15 October. Jeenbekov was president of Kyrgyzstan from 2017, having also served as prime minister between April 2016 and August 2017.

On 4 October the republic of 6 million people went to the polls to elect a new parliament. Amid reports of vote-buying, the elections returned a decisively pro-Jeenbekov parliament where only four of 16 parties cleared a 7 per cent electoral threshold. Three of these parties were seen as favouring the status quo.

In response, ordinary citizens and opposition parties took to the streets in Bishkek and across the country. Protesters seized the parliament and the presidential office, the White House.

On 6 October the Central Election Commission annulled the elections. A number of high-profile convicts were freed, including former president Almazbek Atambayev, former prime minister Sapar Isakov and Japarov himself.

The impasse appeared to favour the now-ousted president Jeenbekov, who sought to restore constitutional order by seeking the appointment of a new government and speaker of parliament, which could stand in should the president resign or be impeached.

The situation quickly transformed into a multi-player battle.

First, there are the supporters of the freed Japarov, organised and determined to have him installed as prime minister, and also evidently prone to resorting to street violence.

Second are the loyalists of the released former president Atambayev, who formed a tactical pact with former prime minister Omurbek Babanov, himself a former presidential contender and no friend of Atambayev.

Third, there is a coalition of opposition parties and social movements, including the Bir Bol, Ata Meken and Reforma parties. Many in this group felt uneasy about aligning with Atambayev, especially after protesters demanded a law preventing those with criminal convictions from participating in politics.

On 10 October Japarov was elected prime minister by 61 parliamentarians, though only 51 were allegedly present at the time of the vote. Jeenbekov declined to confirm the appointment, citing irregularities in the procedures that accompanied the vote, but on 14 October Japarov’s appointment was confirmed. A day later Jeenbekov resigned as president and reaffirmed his desire to avoid bloodshed in the face of protracted tensions.

Meanwhile, the new speaker of parliament Kanat Isaev refused to take up the function of acting president, concentrating power in the hands of Japarov.

A former policeman from the Issyk-kul region in eastern Kyrgyzstan, Japarov became a member of parliament after the 2005 revolution and rose up the ranks of the Bakiev regime (2005–2010), being appointed head of the anti-corruption agency. In 2010 he joined the nationalist Ata-Jurt party, led by Kamchybek Tashiev and staffed by loyalists of the old regime.

In 2012 Japarov and Tashiev were charged and arrested for allegedly attempting a coup. In 2013, as he campaigned for the nationalisation of the Kumtor gold mine, Japarov kidnapped a local politician. He fled the country before returning in 2017, when he was jailed.

The powerful figure behind Japarov is his long-time ally and nationalist firebrand Tashiev. Tashiev is now the leader of the nationalist party Mekenchil, which narrowly fell below the electoral threshold, receiving 6.99 per cent of the vote.

Four main considerations stand out in making sense of recent events.

First, against a backdrop of electoral fraud and real socio-economic grievances, the dispute represents a clash between competing networks of political, business and criminal groups in pursuit of state capture.

Second, although local politics is often explained in terms of divisions between northern and southern regions, both Jeenbekov and Japarov camps include southern groups or ‘clans’. Hailing from the east, Japarov is not a southerner, and his recent meeting with Issyk-kul crime boss Kamchy Kolbaev suggests the battle transcends a facile north–south reading of the situation.

Third, external powers have been conspicuously absent. Kyrgyzstan’s economic dependence on Beijing is frequently mentioned — including its $US1.8 billion in debt — but China’s response has so far been muted.

The Kremlin made an initial statement referring to the chaos in Kyrgyzstan, after which Russian President Vladimir Putin sent his emissary Dmitry Kozak to meet with Jeenbekov. Gambling on the losing horse, Russia finds itself with another volatile country on its periphery.

Fourth, Uzbek communities in the south are largely peripheral to this intra-Kyrgyz clash. Yet, the memory of how the involvement of Uzbek politician and businessman Kadyrjan Batyrov in favour of the interim authorities in the spring of 2010 was exploited by nationalists loyal to Bakiev is still fresh. Nobody in the community wants a repetition of that bloody conflict.

The events of October 2020 evoke a sense of deja vu, not because of their similarity to past revolutions, but because they returned politicians who were thought to have been consigned to history. One of Japarov’s first moves was the appointment of Tashiev to the position of Chairman of the State Committee for National Security.

The country that Japarov and his allies now control is mired in a public health crisis caused by the COVID-19 pandemic. Yet, as the nation teeters on the economic precipice, it remains led by someone who — by law — cannot run for president.

Matteo Fumagalli is a senior lecturer in the School of International Relations at the University of St Andrews.

The post Kyrgyz electoral fiasco involves familiar faces first appeared on East Asia Forum.



Source link

read more
ASIAN (H)

How COVID-19 may accelerate hukou reform in China

2015-02-13T120000Z_398750830_MT1IMGCNPBU23017609_RTRMADP_3_CHINA-MIGRANT-POPULATION-400×266.jpg


Author: Cai Fang, CASS

Hukou, the Chinese household registration system, is a legacy of the Chinese planned economy that, after over 40 years of reform, still serves as an institutional barrier preventing production factors from achieving efficient allocation and residents from attaining equal access to basic public services. Scholars and policymakers widely recognise the necessity and significance of hukou reform.

A Chinese migrant worker carries his luggage in a train as he heads back home for the Chinese Lunar New Year or Spring Festival at the Qingdao Railway Station in Qingdao City, east China's Shandong province, 13 February, 2015 (Reuters).

After the 13th Five-Year Plan was released in 2016, the central government announced reforms to legitimise migrants’ residential status in urban areas. The government raised specific objectives including increasing the proportion of the population registered as urban hukou, granting 100 million rural-to-urban migrants with urban local hukou status between 2014–2020 and eliminating the restriction of household registration in cities with a population of three million people or less.

Some progress has been made on these fronts. First, rural hukou holders now face no barriers to move, to get a job or to reside permanently in urban areas. Second, the gaps in access to public services between migrants and locals in cities have been narrowed as the entitlement to these services is now more tied to a residence permit, which is easier to apply for than hukou status. Third, a fraction of migrant workers have now successfully obtained urban hukou by fulfilling the criteria set by municipalities.

But reform is far from complete. In 2019, the urbanisation rate, or the proportion of permanent urban residents who have lived in cities for six months or longer, was 60.6 per cent. The total number of rural-to-urban migrant workers, or those who leave their home townships and live in cities for six months or longer, was 135 million.

While migrant workers are included in the new urbanisation statistics, they still do not have equal access to urban public services and are treated differently in the urban labour market since they do not have hukou status. Only 44.4 per cent of the Chinese population have urban hukou status. This means that around 16 per cent of the Chinese population are rural-to-urban migrants who live (and many work) in cities but do not have urban hukou status and are not entitled to the same public services as locals.

Abolishing the hukou system could benefit the Chinese people and the economy as a whole. From the supply side, scholars estimate that the reform will significantly increase China’s potential growth rate by increasing the labour supply in urban sectors and improving resource allocation efficiency. From the demand side, a survey on urban labour indicates that incorporating migrant workers into social security programs, which reasonably reduces their precautionary savings, can increase their consumption spending by as much as 27 per cent even without an increase in income. From a development and social perspective, equal provision of compulsory education, subsidised housing and other public services will enhance the overall welfare of Chinese people.

While provincial and municipal governments would have to bear most of the expenditure on subsidies of social security programs and other public services for urban hukou holders, they would not exclusively receive all the dividends from hukou reform. Not only does the incompatibility of incentives discourage local governments from implementing reform, but the lack of fiscal revenue also renders the provision of public services for all new urban residents infeasible. The central government, constrained by expenditure responsibility and fiscal capacity, has not provided sufficient financial support for the reform.

So there are two equations for the costs and benefits of hukou reform, one concerning the central government and another concerning the local governments. According to the logic of institutional change, if a significant increase in the net benefit of a reform can be expected, then the plausibility of the reform tends to increase.

An unexpected side-effect of COVID-19 may be that the Chinese central and local governments will be more willing to take responsibility to carry out hukou reform. The pandemic has increased both the benefit of implementing hukou reform and the cost of delaying the reform, especially while the economy is in the process of recovery.

The difficulties for migrants to return to urban work not only reduces their income but also impedes the full recovery of the Chinese economy. This manifests a negative externality of the hukou system caused by the separation of workplace from legal residence. The economic impact of the COVID-19 pandemic combines aspects of both demand and supply shocks. So a quick resumption of resident consumption, rather than conventional investment stimulus, is conducive to the recovery of economic growth, and hukou reform has an important role to play.

Cai Fang is Vice-President and Professor at the Chinese Academy of Social Sciences.

This article is part of an EAF special feature series on the novel coronavirus crisis and its impact.

The post How COVID-19 may accelerate hukou reform in China first appeared on East Asia Forum.



Source link

read more
ASIAN (H)

Can Bank Indonesia protect its independence?

2020-09-02T083932Z_1831916769_RC28QI99LHNI_RTRMADP_3_INDONESIA-MARKETS-min-400×252.jpg


Author: Peter McCawley, ANU

Indonesia’s central bank, Bank Indonesia, is currently caught up in a controversy. The Indonesian parliament, it seems, wants to cut back its monetary policy independence. There are various issues at stake, but two key concerns stand out — the risk of increasing political interference in Indonesian monetary policy and the impact on Indonesia’s reputation in global markets.

A man walks past Bank Indonesia headquarters in Jakarta, Indonesia, 2 September 2020. (Photo: Reuters/Ajeng Dinar Ulfiana).

There is a history to all of this, both in Indonesia and in many other countries. The current fuss about the role of Bank Indonesia, as well as several other financial agencies, reflects the long-standing antipathy towards Bank Indonesia harboured by Indonesian politicians for decades. There are various reasons for the difficult relationship between the central bank and the parliament, but the central issue is the independence Bank Indonesia has in setting monetary policy.

Antagonism towards central bank independence is hardly unique to Indonesia. There is a noisy lobby of Federal Reserve critics in the United States, many of whom resent the bank’s relatively independent control over monetary policy. Just a week ago the former treasurer and prime minister of Australia, Paul Keating, launched an extraordinary attack on Australia’s central bank by suggesting the Reserve Bank of Australia become more subservient to government policy.

A related and worrying issue is the view that there are no limits to the amount of money central banks can print during this COVID-19 recession. Proponents of so-called modern monetary theory argue that governments need to take bold fiscal measures in response to COVID-19 — and that central banks should print whatever money is required to fund governments deficits.

Against this backdrop, the confused situation in Indonesia arose from differences over financial sector reforms proposed by the government and those suggested by influential groups in parliament.

In late August, the Indonesian Minister of Finance Sri Mulyani announced that the government was considering a decree to reform the financial sector. Reforms are certainly needed but the minister’s announcement set the cat among the pigeons. Various parliamentarians proceeded to outline their preferred suggestions for reform, while some legislators openly called for increased control — both by the president and the parliament — over Bank Indonesia and other important financial institutions.

One key but controversial proposal was the suggestion that a new five-member Monetary Board — chaired by the minister of finance and not the governor of Bank Indonesia — be established above Bank Indonesia. Critics warned that the new Board would exert influence over Bank Indonesia and would, in effect, increase government control over monetary policy.

But supporters of the change pointed out that better coordination was needed between regulatory agencies in the financial sector and that a new Monetary Board would help liaise across the sector.

The reforms also controversially seem to draw Bank Indonesia into a wider, almost unlimited role, in funding government spending. Bank Indonesia might be required, if necessary, to make direct purchases of bonds issued by the government to print money to finance the budget deficit.

In the last few months, Bank Indonesia has already bowed to pressure from the government to make direct purchases of government bonds. The original idea was for Bank Indonesia to stand ready to purchase government bonds in the secondary market — not as a direct buyer.

This approach, with the Ministry of Finance issuing bonds, had the advantage of subjecting the government to the discipline of market forces. But this discipline will weaken once Bank Indonesia enters the bond market as a primary buyer.

Jakarta also took the step of setting an explicit funding target for Bank Indonesia. The central bank was instructed to fund around half of the budget deficit (around US$40 billion) through bond purchases. The bank has now entered an unusual ‘burden sharing’ arrangement with the Ministry of Finance to fund the government deficit.

The risk in this approach is that discipline over government spending becomes weak. Stephen Grenville and Roland Rajah, both experienced observers of Indonesian monetary policy, note that ‘free money’ encourages parliamentarians, and perhaps some members of government, to promote pet expenditure projects.

Fortunately, senior policy makers in the Ministry of Finance are sensitive of the need to maintain the confidence of financial markets. Official statements about the ‘burden sharing’ program have emphasised the temporary nature of the arrangement.

Policymakers claim that international investors sold large amounts of Indonesian government bonds in the early stages of the COVID-19 pandemic, meaning the temporary measures were introduced partially in response to the unexpected instability in Indonesian bond market earlier this year.

The fuss about the independence of Bank Indonesia might yet blow over, even if the political party that supports increased control over Bank Indonesia in the parliament, the Indonesian Democratic Party of Struggle (PDI-P), also supports President Jokowi.

But the proposed changes are still being debated in the corridors of parliament and the latest news is that there is now little support for the reforms among other political parties. Perhaps the whole affair will prove to be a storm in a teacup. Yet, controversies of this kind do not strengthen Indonesia’s reputation in global financial markets.

It is already relatively expensive for Indonesia to borrow in international financial markets. Uncertainty over the conduct of monetary policy and signs of increased political control over the central bank will not help build investor confidence in the management of economic policy in Indonesia.

Peter McCawley is Honorary Associate Professor in the Indonesia Project at the Crawford School of Public Policy, The Australian National University. He was formerly an Australian Executive Director on the Board of the Asian Development Bank, Manila.

The post Can Bank Indonesia protect its independence? first appeared on East Asia Forum.



Source link

read more
ASIAN (H)

Paying for a pandemic

2012-04-05T120000Z_1162106776_GM1E8451PE301_RTRMADP_3_CHINA-MYANMAR-400×267.jpg


Author: Editorial Board, ANU

‘Follow the money’ — that’s how political scandal was uncovered in the 1976 drama All the President’s Men. When it comes to the financial cost of COVID-19, following the money is just as revealing. Not only does it give insights into how best to address the health and economic fallout from COVID-19 in Asia, it also shows how COVID-19’s financial implications are shaping Asia’s geopolitics.

An employee counts Myanmar kyat banknotes in a bank in Yangon (Photo: Reuters/Minzayar).

In this week’s lead essay, Adam Triggs explores how Asia’s developing countries are paying for the COVID-19 pandemic. The results expose a stark divide across the region. While Asia’s developed countries are relying entirely on their central banks and finance ministries, Asia’s developing countries are, on average, relying on multilateral bodies and bilateral aid for almost 50 per cent of their financing of the economic fallout they face.

Where is this money coming from? Triggs finds that more than half of the external assistance to Asia’s developing countries ‘is coming from the Asian Development Bank, 20 per cent from the World Bank, 10 per cent from the Asian Infrastructure Investment Bank, 8 per cent from the IMF, and 5 per cent from bilateral aid (predominantly from the United States, Japan and Australia). The remainder is coming primarily from the Islamic Development Bank and the United Nations’.

These findings have big implications for Asia, not just for how to beat COVID-19 and strengthen the post-COVID-19 recovery, but also in how these financial developments are shaping Asia’s geopolitics.

The findings underscore the critical importance of multilateral and bilateral finance in beating the health and economic consequences of COVID-19. Any deficiencies in this external assistance translate directly into a less effective response to the health and economic impacts of COVID-19. Ultimately, in a highly interconnected region, this puts all countries at risk, developed and developing alike.

Developing countries have little option but to rely on external finance given their limited fiscal and monetary policy space. ‘Shallow and inefficient financial markets make monetary policy less effective’, notes Triggs, while ‘porous tax systems, foreign denominated debt and flighty foreign investors reduce fiscal firepower’. But the choice of where Asia’s economies are seeking assistance is just as telling.

Less than 8 per cent of assistance has come from the IMF — far lower than the support provided to other regions during the pandemic. The anti-IMF stigma in Asia is as strong as ever. Asia’s regional alternative — the Chiang Mai Initiative Multilaterlization — doesn’t offer a much better alternative. Despite facing the biggest downturn since the Great Depression, the CMIM is yet to have a single customer in its ten years of existence. ‘This confirms the concerns of many that the CMIM is unworkable’, says Triggs.

Behind all these decisions are big implications for Asia’s geopolitics. Asia’s developing countries have a preference for renminbi over dollars when it comes to getting financial support for COVID-19.

Triggs shows that the US-dominated IMF is being shunned in favour of the China-dominated Asian Infrastructure Investment Bank. The same is true for bilateral currency swap lines — where a central bank can swap its currency with that from another central bank to get much needed foreign exchange during times of stress. While the US Federal Reserve has shunned Asia’s developing economies by refusing to extend swap lines to them — a strategically foolish move — the People’s Bank of China has been happy to fill the gap.

Laos could be a test case. Laos is staring down a full-scale sovereign default as the combination of rising foreign denominated debts, a falling exchange rate, declining foreign exchange reserves and big repayments start to bite.

Much of Laos’ debt is with China. Will China bail out Laos through a bilateral swap line? Will China forgive its debts? What does this mean for the lending to Laos that has already taken place through the ADB, World Bank and the United Nations? And given the United States, Japan, Germany and others have already lent or given aid to Laos, what will they do in response?

Like an earthquake hitting buildings, COVID-19 has revealed the fault lines in economies and health systems around the world. It has also revealed the fault lines in Asia’s financial architecture. Improving access to external finance will require reforms at the global, regional and bilateral level, as Triggs argues.

As ever, the outcome of the US election will be key. ‘Asia’s response to COVID-19 should be wake-up call to Washington’, says Triggs. ‘Making the IMF relevant to Asia means ensuring Asia is represented in the IMF’s governance’.

President Trump’s deepening ‘America First’ rhetoric suggests little change from a re-elected Trump administration in its approach to international institutions. But an incoming Biden administration provides an opportunity for substantive IMF and World Bank reform to strengthen the role of Asia (including India) in those institutions, deflect regional alternatives and increase US-clout in the process.

‘But if the IMF can’t be made more inclusive of Asia’, notes Triggs, ‘the CMIM needs to be a credible alternative’. COVID-19 has revealed the CMIM as a still ineffective institution. Funding amounts are too low, the application process is too complicated and politicised, and any borrowing over 40 per cent of the country’s quota requires an IMF program anyway. The CMIM will not be a credible alternative until these problems are addressed.

None of these challenges — whether they relate to global institutions or regional bodies — can be addressed quickly. Given COVID-19 isn’t waiting, short-term measures will be required. This means a greater reliance on bilateral solutions to fill the gap. Asia’s developed economies need to clarify and expand their currency swap lines — clarify that they are available to countries facing balance of payments difficulties and expand them to the countries which are falling through the cracks —and be prepared to work cooperatively with China in filling the regional financial gap.

The fact is that the financial support from swap lines, bilateral loans and multilateral institutions has geopolitical implications and a big impact on how quickly and effectively Asia will defeat COVID-19. The faster we appreciate this, the better.

The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.

This article is part of an EAF special feature series on the novel coronavirus crisis and its impact.

The post Paying for a pandemic first appeared on East Asia Forum.



Source link

read more
ASIAN (H)

Asia won’t beat COVID-19 without international money

121480060_821994681890801_4138357615275754760_n-400×267.jpg


Author: Adam Triggs, ANU

AUD$2.5 trillion (US$1.8 trillion) — that’s how much Asia’s developing economies have spent so far in combating the health and economic impacts of the COVID-19 pandemic. On average they are spending the equivalent of 27 per cent of GDP, about the same as Asia’s developed economies when you add up government spending, tax cuts and central bank initiatives.

A monk withdraws money from an ATM in Vientiane, Laos (Photo: Reuters).

There is one thing that is very different between Asia’s developed and developing economies: where the money is coming from.

While Asia’s developed economies are relying on their central banks and finance ministries, data from the Asian Development Bank (ADB) shows that Asia’s developing economies are relying heavily on international and bilateral money.

This is a problem. Asia won’t beat COVID-19 without sufficient and reliable external finance, and there are plenty of things that need to be done to strengthen access to it.

On average, Asia’s developing economies are getting 49 per cent of their COVID-19 financing from external sources. This is not by choice — Asia’s developing countries rely on external finance because they lack the fiscal and monetary policy space enjoyed by developed economies to deal with the crisis. Shallow and inefficient financial markets make monetary policy less effective. Porous tax systems, foreign-denominated debt and flighty foreign investors reduce fiscal firepower.

Strengthening Asia’s health and economic response to COVID-19 means strengthening Asia’s access to multilateral financial resources. But multilateral resources are not all created equal. The primary international body to help countries facing financial stress is the Washington-based International Monetary Fund (IMF). The IMF is providing financial support to more than 100 countries around the world. Yet, when it comes to Asia the IMF is providing a mere 8 per cent of the total external support.

This is not surprising to those familiar with Asia’s financial history. The IMF’s self-confessed bungling of the Asian financial crisis — giving too little finance with too many (bad) reform conditionalities — means most Asian economies would rather go to the wall than go to Washington.

Asia’s deep disquiet about the IMF saw the creation of a US$240 billion regional alternative — the Chiang Mai Initiative Multilateralization (CMIM) — touted by its officials as being a fully operational alternative to the IMF. COVID-19 suggests otherwise. Despite the serious financial challenges facing Laos, Myanmar and other members, the CMIM has not had a single customer in the 10 years since its creation. With the biggest downturn since the Great Depression, this confirms the concerns of many: the CMIM is unworkable.

So where are Asia’s developing economies getting their money from? According to ADB data, almost 55 per cent is coming from the ADB, 20 per cent from the World Bank, 10 per cent from the Asian Infrastructure Investment Bank (AIIB), 8 per cent from the IMF and 5 per cent from bilateral aid (predominantly from the United States, Japan and Australia). The remainder is coming primarily from the Islamic Development Bank and the United Nations. While some institutions provide long-term development financing, it nevertheless frees up resources for short-term liquidity support and provides vital foreign exchange.

The United States should take note. Asia’s revealed preference is for the China-dominated AIIB over the US-dominated IMF. A rethink of its stubborn refusal to make the IMF’s governance more inclusive of Asia’s developing economies, including India, is in order.

The missing piece of the puzzle is bilateral currency swap lines. This is where one country’s central bank swaps its currency with that of another central bank on pre-agreed terms, providing rapid access to much needed foreign exchange during times of stress. We don’t know the full extent to which these facilities have been used during COVID-19, but we know that the countries that need them don’t have access to them.

Even when you exclude Japan’s unlimited swap line with the US Federal Reserve, more than 55 per cent of the available swap lines in Asia are for developed economies, not developing economies. Much like credit from a bank, the ones that need credit can’t get it.

Improving access to external finance will require reforms at the global, regional and bilateral level.

Globally, Asia’s response to COVID-19 should be a wake-up call to Washington. Making the IMF relevant to Asia means ensuring Asia is represented in the IMF’s governance. Should it eventuate, an incoming Biden administration should substantially increase IMF quotas, disproportionately favouring developing Asian economies while still preserving US dominance.

Regionally, COVID-19 has revealed the CMIM still to be an ineffective institution. Funding amounts are too low, the application process is too complicated and politicised, and any borrowing over 40 per cent of the country’s quota requires an IMF program anyway. If the IMF can’t be made more inclusive of Asia, the CMIM needs to be a credible alternative.

Bilaterally, swap lines are the fastest, easiest way to plug gaps in the global financial safety net. Too many countries who need them don’t have access to them, and many swap lines aren’t available during a crisis. Asia’s developed economies should collaborate. They need to make it clear that swap lines are available during a crisis and ensure countries that need them have them.

The global elimination of COVID-19 is a public good. But it is a weakest-link public good since our ability to eliminate it depends on the weakest links in the chain. Those weak links are the developing economies. Their success is our success, and they won’t succeed without international financial help.

Adam Triggs is Director of Research at the Asian Bureau of Economic Research (ABER), Crawford School of Public Policy, Australian National University, and non-resident fellow of the Global Economy and Development program at the Brookings Institution.

The post Asia won’t beat COVID-19 without international money first appeared on East Asia Forum.



Source link

read more
ASIAN (H)

Modernising the Royal Thai Navy

2010-09-10T120000Z_369840531_GM1E69A16ZR01_RTRMADP_3_THAILAND-400×288.jpg


Author: Hadrien T Saperstein, Asia Centre, Paris

The Royal Thai Navy’s (RTN) maritime and naval strategic thought has undergone a major shift. In 2008, it moved away from its blue-water navy ambitions — epitomised by the aircraft carrier Chakri Naruebet — towards a comprehensive approach focussed on maritime security cooperation, collective defence and non-traditional security threat management. The RTN adopted the 2015 Network Centric Warfare Plan, published the 2015–2021 National Maritime Security Plan, and reorganised the Thai-Maritime Enforcement Command Centre in 2017.

Royal Thai Navy seamen wave to their colleagues as they depart to the Gulf of Aden in Somalia from the Royal Thai Navy base, in Sattahip, Chonburi province, east of Bangkok, 10 September, 2010 (Reuters/Chaiwat Subprasom).

In the contemporary age of warfare, continental great sea power states located on Thailand’s geopolitical periphery — China, India and the United States — engage in a whole range of militarised and non-militarised maritime activities.These sea powers seek to achieve specific strategic objectives in the amorphous space of grey-zone conflict without ruinous escalation to high-intensity war. This presents a complicated challenge for defence forces beyond strategising to linear rather than multi-dimensional approaches.

The continental great sea power states have already begun the process of converging land and maritime domains through the ‘continentalisation’ or ‘infrastructuralisation’ of the littoral seas. This process effectively brings to bear a land-centric, multi-dimensional approach to strategy and applies it to the maritime domain.

In response a research report on Maritime Security was forwarded in 2016 to the Thai National Assembly. It concluded that the RTN was no longer capable of securing its five maritime interests: sovereignty, security, prosperity, sustainability and honour. It also recommended a more flexible approach to maritime strategy and a more responsive posture in view of real-world circumstances.

Subsequently issued national policy documents, including the 2018–2037 20-Year National Strategy and the 2019–2022 National Security Policy and Plan, point to the same emerging grey-zone security challenges. But in practice, the policies and strategic thought endorsed in these plans essentially preserves the army-dominated status quo.

Michael Handel counsels that warfare in the contemporary age is far too complicated for a single comprehensive strategy or concept of security. Still, the concept of Hybrid Maritime Warfare (HMW) could help the RTN upgrade its doctrines and adjust effectively to its new operating environment.

The HMW concept is likely to be viewed favourably by the Thai government. The departing commander-in-chief of the Royal Thai Army, General Apirat Kongsompong, chose to adopt a similar concept, Land Hybrid Warfare, for the army during his tenure. The RTN’s Commander-in-Chief Admiral Luechai Ruddit leveraged this precedent to ‘stop [with] the past, start [with] the new’, opening the door for the HMW concept. The incoming army and navy leadership — General Narongphan Jitkaewthae and Admiral Chatchai Sriworakhan — will likely continue these efforts.

Retired US Admiral James Stavridis proposes in Maritime Hybrid Warfare is Coming that the HMW concept offers four unique advantages. First, it allows for the destruction of an adversary’s capabilities without attribution, allowing for ‘greater latitude of activity’ to avoid criticism and international sanctions. Second, as the maritime domain is a more fluid environment, ‘it bestows the advantage of surprise’. Third, it gives agents ‘effective control of the tempo and timeline of events, given their inherent ambiguity’. Fourth, ‘it is much less expensive than building the massive and capital expensive platforms needed to conduct conventional littoral warfare’.

Another advantage of HMW is that it helps navies that subsist in a political context where governments lean towards land-centric strategic thought. As Wilfried A Herrmann observed in Naval Modernisation in South-East Asia, ‘the national strategy of Thailand, designed and promoted by the respective [Army-dominated] Royal Thai governments, is not essentially a maritime strategy, but quite continental in its core’.

This land-centric understanding of the national military strategy is anachronistic. Recent technological and political trends point to the convergence of land-centric and maritime strategic concepts in the littoral seas.

The RTN was once prevented from developing a robust sea power capability due to the dominance of the ‘core continental tendencies’, evident in Thailand’s army-formulated national strategy and policy documents. Yet this problem may finally be circumvented through application of the HMW concept. This will enable the RTN to leverage its ‘continental sea power’ identity to achieve its previously outlined maritime interests in the littoral seas, particularly the Gulf of Thailand and the Andaman Sea.

The COVID-19 crisis has accelerated the need for the RTN to adopt the HMW concept. Thailand’s government will be focussed on continental matters for the foreseeable future, seeing that the burgeoning student protests are intensifying the debate over Thailand’s democratisation process. And the threat of a COVID-19 second-wave and an economic crisis loom. These scenarios may thwart any lingering blue-water ambitions expressed through large naval procurement programs, such as the government’s planned procurement of Chinese-built submarines.

Hadrien T Saperstein is a researcher at Asia Centre, Paris.

The post Modernising the Royal Thai Navy first appeared on East Asia Forum.



Source link

read more
ASIAN (H)

China’s new Foreign Investment Law sticks to the script

121484709_389029628930867_5760316550589779284_n-400×267.jpg


Author: Atharva Deshmukh, LSE and Pranav Bafna, ILS Law College Pune

The old Chinese saying to cross the river by feeling the stones offers insight into China’s approach to foreign investment and the global economic system. Ever since the high tide of foreign investors hit China in the late 1980s, China has frequently ‘felt the stones’ of globalisation, adjusting its balance through its regulatory infrastructure, most recently changed with its new Foreign Investment Law.

 

A pedestrian walks past the Shanghai Free Trade Zone(the Shanghai FTZ) in Shanghai, China, 23 March 2019 (Photos:Reuters).

 

The late 1990s were dominated by negotiations over China’s accession to the World Trade Organization (WTO). The Chinese Communist Party’s (CCP) authority became subject to international legal scrutiny. The reformist faction of the CCP led by Jiang Zemin and Zhu Rongji saw the WTO as an opportunity for future reform and rallied to attract foreign investors, carefully retaining Deng Xiaoping’s vision of ‘socialism with Chinese characteristics’.

Chinese regulations evolved in response to this new political reality. The ‘Three Represents doctrine’ finally recognised the ‘productive forces’ of the market. The foundations of a modern commercial legal system were laid down through commercial statutes pertaining to contracts, companies, civil procedures and securities.

These reforms kicked off a legendary era of high growth. Real GDP growth rates were north of 10 per cent for five years. Between 2002 and 2007, exports grew at 30 per cent annually. The real estate market was booming fuelled by rising GNI per capita which grew from US$3500 in 2002 to US$6830 in 2007.

Foreign interest in China also surged. Foreign-owned enterprises accounted for 28 per cent of China’s national industrial output prior to the WTO accession. By 2003, this figure had increased to 36 per cent.

From the get-go, China’s primary objective behind attracting foreign direct investment (FDI) was generating employment. China expected its WTO accession would add roughly 10 million jobs to the Chinese economy if growth expanded by 2.9 per cent annually. Until the promulgation of the Labour Contract Law in 2008, there was bearish pressure on labour costs with firms saving 20–30 per cent on their labour bill by omitting social insurance payments.

A relatively unregulated labour market attracted FDI from the global manufacturing sector, accounting for more than 60 per cent of incoming FDI during this period.

China’s desire to attract and retain foreign technology drove the evolution of its market entry legislation. The Chinese government only recognised certain forms of commercial partnerships such as equity joint ventures, contractual joint ventures and wholly-owned foreign enterprises, with joint ventures (JVs) quickly becoming the mode of choice. These partnerships allowed investors to hedge their risk while benefitting from essential local expertise. By 2006, 49 per cent of foreign investors entered China through JVs.

The geographic spread of FDI has also changed over time. China’s coastal regions, home to its pioneering Special Economic Zones (SEZs), were the first and greatest benefactors of FDI. By 2011, SEZs in coastal areas accounted for 22 per cent of China’s GDP, 45 per cent of FDI and had generated 30 million jobs.

All these achievements adhered to China’s broader political vision — to attract foreign capital by offering lower production costs, and in doing so expand employment and access to technology.

Chinese leaders solidified their belief in the relative superiority of the ‘Chinese model’ by 2008. In 2012, Xi Jinping took over Chinese leadership from Hu Jintao. Xi Jinping has two political streaks: the reformist and the nationalist. The reformist accords great value to higher rates of innovation and technological progress. The nationalist is geared towards restoring China’s lost glory — his ‘Xi Jinping thoughttouts the ‘great rejuvenation’ of China’s economic might and military prowess.

China’s sprawling metropolises became a reflection of China’s progress after 2008. They housed a burgeoning middle class with rapidly rising incomes. Consumer goods sales grew from under US$2 trillion in 2008 to roughly US$5 trillion by 2019. Urban discretionary spending increased by 9 per cent between 2010–2014.

FDI consequently pivoted toward domestic demand as China’s comparative advantage became less entwined with lower production costs. This transformed the sectoral composition of foreign investment as manufacturing declined as a share of FDI, while technology, IT services, aerospace, transportation and financial services rose.

Today, sophisticated and bespoke legislation is needed to woo new kinds of foreign firms. The Shanghai Free Trade Zone experiment in 2013 served as a benchmark for providing a legal environment in sync with international regulatory standards. The revamped Company Law along with the Preferred Share Pilot Program reflected Beijing’s resolve to compete in global financial markets while the 2008 National IP Strategy indicated its determination to foster innovation.

Export-oriented and labour-intensive sectors now face pressure from rising production costs and stricter environmental regulations. As China moves up the value chain, the eastern coastline symbolises its new-found exuberance while the western and central regions have become the front line in the manufacturing value chain.

With saturated FDI growth, China introduced a new set of reforms this year. The 2020 Foreign Investment Law shifts foreign investors from a notional to national pedestal by consolidating three separate foreign investment laws for foreign-owned entities.

It bans forced technology transfers, giving multinational corporations hitherto unknown levels of policy certainty by extending legal safeguards. The changes also feed into China’s ambitions of nurturing innovation by promising intellectual property right protection and flexibility in cross-border restructuring.

In the future, as in the past, China’s investment regulations will respond to the level and nature of FDI, while investors navigate the regulations stipulated by the Chinese government. The Foreign Investment Law goes some way in ensuring this historical relationship continues.

Atharva Deshmukh is a postgraduate student at the London School of Economics.

Pranav Bafna is a graduate of the Indian Law Society Law College, Pune, Maharashtra.

The post China’s new Foreign Investment Law sticks to the script first appeared on East Asia Forum.



Source link

read more
1 2 3 372
Page 1 of 372