Category: International Political Economy

China-Solomon Islands: An overview of a brand new friendship

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Tanishka, Research Intern, ICS

  • China & Pacific Island Countries

The Asian superpower China, second-largest aid provider to the Pacific Island countries established diplomatic relations with the Solomon Islands in 2019. A country of just over half a million people, a low-income economy with more than three-fourth of its population living in small villages, is among the lesser developed countries of the South Pacific region. The Chinese offers of infrastructure projects, concessional loans along with aid-in-kind and Solomon Island’s rich timber, fish, and potential seabed resources facilitated the connection between the two countries. China’s other motive for establishing diplomatic relationships in the Pacific is limiting Taiwan’s international space. Solomon Islands switched allegiance from Taipei to Beijing, terminating its 36-year-old official relationship with Taiwan. Out of the fourteen Pacific Island states, China now has ten partners.

For the Solomon Islands, the decision to switch allegiance, came from the recommendations of a task-force deployed by Prime Minister Sogavare, which indicated the past action to establish ties with Taiwan, which was economically more active than China back then was bought by money power. The report pointed out that presently Taiwan has a limited economic capacity while China’s investments cover the entire globe; the switch thus, brings a large potential donor to Solomons. The report can be characterized as Idealistic towards the People’s Republic of China, it also asked an open-ended question —when was the last time the world saw China invade another country?

China assured funding for 2023 Pacific Games hosted by Solomon Islands in the form of grants and the main stadium would be a gift from Beijing. But, the infrastructure project will not provide local employment, as Chinese companies bring their own construction workers. In the future, maintenance of such infrastructure facilities will be a great challenge for the government of Solomon Islands, as it became for Vanuatu, which had no budget to maintain the Chinese-funded national convention centre.

There is an ongoing assessment by Solomons’  Finance Ministry regarding $US100 million loan offered through a Chinese broker[1]. Matters such as restrictions on the usage of loan money, determination of loan’s interest rate and the duration of loan which could be twenty years or more are not yet settled. Denton Rarawa, the previous governor of the Solomon Islands Central Bank showed displeasure over government proposals, warning this could land Solomon Islands in China’s debt trap. We may also note that the traditional donor, Australia imposes strict supervisions on aid programs and pays attention to economic and political reforms in the Pacific region, Chinese assistance, on the other hand insinuate a “no strings attached” strategy as a bait. Clearly, China seeks supremacy over other donor countries to advance its geostrategic interests.

The Solomon Islands has not yet accepted every Chinese offer on the table. During Prime Minister’s first official visit to China, he met with the leaders of Sam group, a state-connected enterprise, and invited them to the Solomon Islands.  But the Solomons rejected a deal that asked for the lease of Tulagi Island for 75 years. The Island is of strategic importance – it was the Solomons’ capital under British rule for forty-six years, then a Japanese base and an American base in World War II. In 1952, the capital shifted to Honiara. The government called the deal with Sam group illegal due to a lack of vital details and ordered its termination. 

This issue raised concerns over China’s intentions. Perhaps, it wanted to challenge the Western world by installing a military base there. Defence experts raised similar concerns a year ago, with Chinese-funded Vanuatu dockyard, which is too big for commercial use but a perfect location for visiting foreign navy ships –  such as a rapid Chinese move to become two-ocean navy. Located not too far from the Australian coastline, if these military bases come up, it can lead to military tensions in an ocean about which Australia did not have to worry since 1942. TheSolomon Islands showcases a desire to be on the right side of history and normalize relations with the People’s Republic of China. It is not the only Pacific Island country to establish diplomatic relations with China in 2019. Kiribati followed its trail. China’s intensified economic efforts could soon take away the four remaining Taiwan’s Pacific allies: Tuvalu, Nauru, Palau and the Marshall Islands. Taiwan has indicated that China has a desire to make the Pacific Ocean another South China Sea. These actions have been disapproved by the United States who itself switched recognition to China four decades ago. It also recently declined the Prime Minister Sogavare’s request for a meeting with the United States Vice President, and it has begun to reassess the aid it provides the Islands. Although China’s plan to install a military base remains a matter of speculation, its search for new markets and the untapped under-seabed resources remains the prime reason for its pursuits in the Solomon Islands and South Pacific region.

[1] The deal was reported by ABC News. The article mentioned a loan deal of $US100 billion instead of $US100 million. It is important to understand that the Solomon Islands is a small economy with a GDP of $US1.3 billion (ABC News. 2020. ‘Solomon Islands discussed $US100 billion loan from Chinese businessman, according to leaked letters’. February 21).

Amid the Covid-19 Pandemic: Assessing US-China Relations

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Mohd. Adnan, Research Intern, ICS

Before the outbreak of Covid-19 pandemic in the United States, Sino-US relations were seemed to be heading towards achieving a bit of normalcy through agreeing the ‘phase one’ trade deal in mid-January 2020. The trade deal was achieved after a round of heated negotiations lasting over a year, when the US formally announced the imposition of tariffs on Chinese imports, in March 2018. This partial trade deal was considered to be a beginning of the US-China collaboration and normalisation of their strained bilateral relations. However, the outbreak of COVID-19 in the US has prompted many in the US administration, specifically US President, to question the Chinese intentions and its handling of Covid-19 pandemic. In response, China questioned United States’ handling of the Covid-19 pandemic. A war of words has taken place from the both sides over the origin and handling of Covid-19 outbreak since early March. Amid the accusations and blame game from both sides, the relations between these two countries significantly deteriorated in the last two months. Amid the unfolding of COVID-19, this blog post explores whether the United States’ belligerent approach towards China in last two months is mere a tactic to gain domestic support regarding the upcoming election or Sino-US relations are, indeed, moving towards a new height of confrontations.

In late January-early February 2020, amid the backdrop of crucial signing of ‘phase-one’ trade deal, it seemed US-China bilateral relations were heading towards normalcy. While China was struggling to contain the Covid-19 outbreak, US President, Donald Trump, on multiple occasions, had praised China’s professionalism and transparency in handling the Covid-19 outbreak. However, in early March, all these changed, when the cases of Covid-19 started to increase in the US. The Trump administration started to question China’s handling of pandemic. There is little doubt that the pandemic had its origins in China and initially, there was cover up by Party-state at the level of Wuhan. But the criticisms on China’s non-transparency, which did cost the world, shouldn’t be seen as a free pass to the US. Even though the World Health Organisation (WHO) declared the outbreak a ‘Public Health Emergency of International Concern’ on 30 January, many countries including the US did not give the virus outbreak serious attention, delaying formulation of effective measures to contain it.

COVID-19 pandemic has inflicted significant human and economic costs to the US -at the time of writing this, around a million people have been infected and above seventy thousand have succumbed to death. Further, US economy has taken a serious hit and the real extent of this damage will only surface once the situations started to normalise, with many equating it with the Great Depression before the World War II. Unemployment rate in US has hit record high more than 22 million people have applied for financial aid as of mid-April. According to the ‘advance’ estimate data provided by Bureau of Economic Analysis, United States’ real  gross domestic product has contracted 4.8 per cent in the first-quarter of 2020 and it is expected the things will get worse before improving in the second half of the year. The US President’s repeated statements to open economic production at the earliest, indicates the desperation of the administration in an election year.

The approval rating of President Donald Trump has declined since the outbreak of Covid-19. In an article published by CNBC on 25 April, it was noted, ‘in January, (US president) Trump planned to run for re-election on the strength of a booming economy and a pledge to keep fighting the “deep state” government bureaucracy. But that all ended as soon as the coronavirus pandemic gained a foothold in the United States’. To augment this argument, on April 17, in a leaked report obtained by Politico, the National Republican Senatorial Committee sent a 57-page written Memo to its electoral candidates advising how to counter the candidates of the Democratic Party. In the short version of this Memo, Republican candidates have been advised to follow China-centric issues; like how China caused this pandemic by ‘lying’ and ‘covering it up’ and ‘hoarding of medical equipment’. Further, it also advised to present, China as an ‘adversary’ and the Democratic candidates, as ‘soft on China’, while Republicans were ‘tough’, being capable of confronting China. Moreover, on 29 April, in an interview with Reuters news agency, Trump directly accused China of seeking his loss in his re-election bid. It seems that the delicate predicament that emerged due to the COVID-19 has prompted the Trump administration to shift the blame towards China in the run up to the Presidential election in November 2020.

Moving on, the recent blame game and deteriorating relations between the US and China is not only limited to domestic compulsions but they are, indeed, moving towards a new height of confrontations. Along with the United States’ belligerent postures, China, too, has adopted an aggressive and assertive approach, which has not been seen in recent years. In the process of blaming each other, a war of information has taken place between the US and China. While Beijing was busy to burnish its image and enhance legitimacy – tarnished by its initial mishandling of the outbreak – by sending medical teams and equipment around the world to assist the fight against COVID-19, Washington DC used every opportunity to ratchet up tensions, starting with multiple accusations on China’s non-transparency and suppression of crucial information. In mid-April, President Trump even questioned the authenticity of Chinese data on the infected cases and reported deaths.

In retaliation, China accused that the US was unable to handle the pandemic therefore it is trying to shift the blame. Theories such as ‘Corona virus was brought by the US military in Wuhan’ and ‘Chinese model of governance is better than the democracy’ were also propagated. On 28 April, amid the accusations of ‘covering up’ and not being ‘transparent’, China’s Executive Vice Foreign Minister, Le Yucheng, in an interview with NBC questioned United States’ handling of the  outbreak and denied the accusations that China has ‘covered up’ and ‘under-reported’ the Covid-19 cases and deaths. He further added, ‘unfortunately, some political figures are politicizing this Covid-19. They are using this virus to stigmatize China. This is not something we are willing to see’. In this war of information to enhance one’s legitimacy and degrade the other, questions have also been raised over the role and authenticity of WHO; the US administration has even halted their funding to the WHO, accusing them of complicity in Beijing’s initial cover-up.

The US is targeting China’s State Owned Enterprises (SOE) – earlier in April, several US executive agencies urged the Federal Communications Commission (FCC) to revoke the license of operation of China Telecom in US territory, citing risks for national security. In this regard, the FCC sent a ‘show cause’ notice to three state-controlled Chinese telecommunications operators including China Telecom. The US is also planning to impose severe restrictions on its own companies from exporting certain technological products, especially the semiconductor production equipment, to companies related with Chinese military.

Amid the devastating effect of COVID-19, world’s reliance on China for essential supply has come into spotlight. The call to bring back home or relocate major US companies’ production units away from China in the height of trade confrontation has intensified. Earlier in April, Larry Kudlow, US National Economic Council Director, advocated the same by ‘paying moving costs’. Further, several US Senators have also been voicing the same in order to reduce dependency for essential supplies.

Issues such as South China Sea dispute, Hong Kong protests, Taiwan, and human rights have been flaring-up between these two states. The pandemic has not constrained China in being assertive in South China Sea – it placed the administrative jurisdictions of Spratly and Parcel Islands under the Sansha administrative unit – a city in the island of Hainan. Apart from that, China has also collided with other claimant countries in the disputed South China Sea. In early April, a Vietnamese fishing boat was drowned by a Chinese maritime vessel. Various other incidents have occurred where Chinese coastguard vessels have been seen posturing aggressively in the whole region including South China Sea. In response to this, the US has increased its maritime patrolling in the disputed area; US warships have sailed through the disputed areas on two separate occasions evoking harsh criticism from China.

The Taiwan issue has remained contentious in US-China relations. While, over the years, Beijing, has been trying to curb Taiwan’s remaining diplomatic relations. The US, on 26 March, enacted a law called as ‘The Taiwan Allies International Protection and Enhancement Initiative, which  requires the US, to assist Taiwan in acquiring memberships in international organisations where statehood is not a precondition and also proposes to take unspecified action against countries which ‘undermine the prosperity and security of Taiwan’. This move by the US, expectedly, drew severe criticism from China accusing the US of ‘interfering’ in its internal matters by ‘violating’ the principle of ‘One China’ Policy.

While it appears, to a large extent, that the recent anti-China rhetoric by the US administration is politically motivated by domestic electoral compulsions, there are factors that go beyond that. These recent developments only indicate the further deterioration of relations between both the countries. It may be surmised that the trade deal will not necessarily reduce the tensions. Until the US continues to perceive China as a challenger to its hegemony, it is unlikely that relations between them will be of mutual collaboration and cooperation.

Contemporary Dynamics of Sino-Japanese Relations

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Mohd. Adnan, Research Intern, ICS

Contemporary Sino-Japanese relations rested on the logic of economic competition and interdependence along with prevalent distrusts and territorial disputes, have become one of the most crucial bilateral relations in the world. Despite competing with each other over various overlapping economic and strategic interests, their increasing bilateral trade have inextricably bound to each other. World’s second and third largest economy China and Japan respectively, at one side, entangled in regional competition to gain influence and their confrontations over disputed Senkaku (Diaoyu) Islands situated in East China sea. On the other side, their indispensable economic interdependence has been the key aspect of their complex relationships. In 2012, the relations between them were severely strained over the confrontations on Senkaku islands. However, increasing economic interdependence and United States’ inward looking “America First” approach have provided an impetus for both states to pacify their relations. This paper intends to explore the contemporary dynamics of Sino-Japanese bilateral relationship.

Historically, Sino-Japanese relations have been of a competitive nature rather than mutual collaboration. Japanese aggression during the late nineteenth and first half of twentieth century has left a deep impact on contemporary Sino-Japanese relations. The relations between them got normalized in the beginning of 1970s and subsequently, they have signed the Treaty of Peace and Friendship in 1978. Japan has invested heavily in and provided much needed essential technologies to China for its development in the post-Mao era. As Kerry Brown in his 2016 article in The Diplomat, explained, without Japan’s assistance in form of ‘technology and knowledge’, China’s opening up and reforms would not have succeeded ‘as quickly and extensively’ as it happened.

The end of the Cold War and relative rise of China created an environment of competition between these two giants. In 2012, the relations between them hit a serious blow when Japanese government purchased three out of five Senkaku islands from their private owners in order to fully legitimize its claim over the disputed islands. China vehemently opposed this act and various anti-Japan protests erupted across mainland China. Japanese products were boycotted by public and relations between them were severely damaged.

The impasse between China and Japan remained intact until a surge of populism was witnessed in 2016 US presidential election. Consequently, the United States partially relinquished its previous neoliberal approach of leading free trade and open market and opted for an increasingly inward looking “America First” approach. This so called “America First” approach allows the US administration to renegotiate trade deals with its major trading partners and its adoption of protectionist approach to pressurise these partners by putting tariffs. This new development in the international market has unintentionally pushed China and Japan to step aside their differences and come to a cooperative platform. Amid US-China trade confrontation and its protectionist approach, first, Chinese Premier Li Keqiang visited Tokyo and a subsequent reciprocal visit by Japanese Prime Minister Shinjo Abe was witnessed in 2018. Since then both states maintained their complicated relationships despite competing and confronting with each other in many overlapping economic and strategic interests.

Contemporary Sino-Japanese economic relations revolve around two sets of notion. On the one hand, they are increasingly interdependent owing to the huge amounts of bilateral trade. According to the data provided by Japan’s foreign ministry in fiscal year 2019, China is by far the largest trading partner of Japan and bilateral trade between them well exceeds above US $ 300 billion. Further, China’s vast demography and rising middle class provides a lucrative market to export-led Japanese economy. While, witnessing the increasing rift between the United States and China, Japan’s importance to China has grown in many ways. Japan has been the major source of essential technology for China since its ‘opening up’ in late 1970s. At a time, when the US is barring Chinese companies from acquiring essential technology, China’s reliance on Japanese technology will only increase. Moreover, while the US is retaliating against its major trade partners including China and Japan, increasing economic engagement becomes a necessity for both states to reduce their dependence on the US markets.

The economic interdependence between China and Japan is expected to further increase once the Regional Economic Comprehensive Partnership (RCEP) is signed. RCEP is a trade agreement, which emphasises on reducing tariffs, between the ten member countries of Association of Southeast Asian Nations (ASEAN), China, Japan, India, South Korea, Australia, and New Zealand. Last year in November, these states signed text-based negotiations, in which India opted to exclude itself. However, a fissure has surfaced in RCEP because Japan seems reluctant to sign the deal without the inclusion of India. Japan fears without the involvement of India, RCEP will be dominated by China. Though, China is coaxing both Japan and India to get back in the fold of RCEP. It is expected that the Pact will be signed in the year 2020. According to a report published in Xinhua on 5 November, 2019, “once (RCEP) signed, it will form the largest free-trade agreement in Asia covering 47.4 percent of the world’s population, and accounting for 32.2 percent of global GDP, 29.1 percent of trade worldwide and 32.5 percent of global investment”.

On the other hand, since both states are largely export-led economy, they have been competing with each other in third party markets. China and Japan, in recent years, increasingly competed with each other in third party markets on trade, infrastructure projects, and investments, particularly in Southeast Asian countries. Such is the competition that Japan initially avoided to become part of China’s Belt and Road initiative (BRI) – a land-based and maritime infrastructure projects aimed to enhance China’s influence in and connectivity with the rest of Asia, Europe and Africa. And in 2015, Japan initiated its own policy known as ‘Partnership for Quality Infrastructure’ aimed to rival BRI through developing infrastructure projects in foreign countries.

However, in 2017, Japan agreed to cooperate with BRI under certain conditions. A year later, on June 26, 2018, during the Japanese Prime Minister’s visit to Beijing, the first ‘Third-Party Market Cooperation Forum’ was organised in which both states agreed to participate in conducting joint venture projects in third-party markets. According to a report published on the website of the State Council of China on 26 October, 2018, ‘At the (aforementioned) forum, more than 50 cooperation agreements were reached between local governments, financial institutions, and enterprises from the two sides, with the total amount exceeding $ 18 billion’. But conducting such projects is fraught with difficulties, given the competitive nature of this agreement and conditions placed by Japanese government on its enterprises while venturing on third-party projects with China. Further Japan’s insistence on quality and financial viability of targeted projects contrasts with China’s ignorance of these elements. For example, in 2018, a high speed rail project in Thailand was planned to be conducted by the companies from China and Japan but Japanese company abandon this project due to the financial risks involved.

From the strategic point of view, there has been a deep distrust and clash of interests between China and Japan. China’s growing assertiveness in East and South China seas and its claim over Senkaku (Diaoyu) islands and South China Sea increasingly discomforts Tokyo. Further, China’s insistence to ignore International Laws such as Permanent Courts of Arbitration’s July 2016 decisions nullifying its claims in South China Sea contrasts the principles and interests of Japan. To counter Chinese interests and claims, in 2015, Japan introduced the vague concept of ‘Free and Open Indo-Pacific’. Vague in the sense, it does not have a coherent policy and over the years various elements have been added and removed. As the name indicates, it promulgates for an open and free Indian and Pacific Ocean contrasts to China’s claim over South China Sea and its growing influence in Indo-Pacific Ocean. Apart from that, this vague policy also emphasises over freedom of navigation and acceptance of international norms and laws.Through propagation of ‘Free and Open Indo-Pacific’ approach, Japan seeks to mould China in the Western-led International Laws and Treaties, and at the same time, Japan also wants to constrain China’s assertiveness in the region detrimental to its interests.

Further, China’s growing military power and its assertive nature in the region creates a sense of insecurity in Japan. It is a common notion in Japan along with other regional states that China seeks dominance and hegemony in Asian continent. To counter it, Japan propagates a multi-polar order in Asia and adopted a policy of building alliances with like-minded countries, which share the same views and are worried with China’s relative rise. Japan has historical military alliance with the US since the end of Second World War. Recently these two states along with Australia and India have revived the Quadrilateral Security Dialogue initiative, which earlier, in 2007, came into existence but faded away amid China’s opposition. Quad initiative similar to ‘Free and Open Indo-Pacific’ policy but differ in the sense that it has four member state seeking to counter-check China’s growing influence in the Asia-Pacific region.

Along with the territorial dispute, Japan’s close association with the United States and its opposition to Chinese assertiveness in the region have been contrary to China’s interests. It is widely held belief in China that through the revival of Quadrilateral strategic alliance, the US is trying to contain Chinese influence in the region. Japan’s participation in this alliance is perceived by China as a step to limit its growing influence in the region and taking side in a broader Sino-US rivalry. In other words, China sees itself as a major power capable of dominating Asian Continent and feasible challenger to the US led World Order. It expects from Japan along with other regional actors to conform to its interests and do not take side with the US in the broader Sino-US rivalry.

The relations between China and Japan are one of the most complex bilateral relations in the world. Despite competing and clashing with each other in myriad of overlapping interests and prevalent distrust, their economy is well integrated and bilateral trade have continuously been increasing.  Their bilateral relations, which were severed in 2012 over Japan’s nationalization of Senkaku (Diaoyu) islands, have been steaming up again owing to relative decline of the US in the region and it’s America First’ approach. Both states have been continuously propagating for increasing engagement and cooperation. However, structural and political differences between China and Japan remained intact as they were three years ago before their rapprochement.