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South Korea’s economic growth offers slowed significantly since the 1997 Asian financial crisis. The five-year average GDP growth rate was 7.9 percent during 1991–95, but dropped substantially to Four.5 percent for 2001–05 and then Three.8 percent in 2006–10. This slowdown closely links to that in domestic need. After the burst of the credit card lending boom from 1999–Two thousand and two, growth in domestic demand has already been close to zero and has even dropped into the negative. These facts suggest that since then, the export sector has been driving South Korea’s economic growth.

Growth in exports has been high for the past 30 years, on average more than 10 percent per year, confirming the widespread view that exports underpin South Korea’s economic development. More importantly, the contribution associated with exports to GDP growth hasn’t changed much since 1980. The five-year average of the contribution associated with exports to GDP was Three.9 percentage points through 1991–95, 3.6 percentage points during 2001–05 and 3.8 percentage points during 2006–Ten. This indicates that the slowdown in both GDP growth and domestic demand growth is because the actual spillover effects from the export sector have dampened. Why has this happened?

A clue lies in the proportion of domestic value-added components of exports, which has been trending down from around 76 % in 1995 to roughly 60 percent in 2009. This suggests the contribution of South Japanese export firms to household production has declined because those firms have been usually outsourcing to foreign supply chains. This phenomenon is not limited to South Korea. Most OECD states have reported decreasing amounts of domestic value-added components because the mid-1990s, a result of the widespread use of worldwide value chains. If domestic export firms extensively use global value chains, the actual contribution of domestic value-added components to gross exports is likely to drop.

But the decrease in the proportion of domestic value-added components of exports within South Korea is also related to some other factors, distinguishable from other OECD people, which significantly decrease the spillover effects of export growth.

First, there has been a substantial decline in the contribution associated with small and medium-sized enterprises (SMEs) to exports, relative to large-sized firms. This downward pattern is a result of the relative labour productivity of each firm dimension. The ratio of value added per worker in SMEs to those in large-sized firms during 2002–06 was about 39.4 percent, further lowering to around 34.5 percent throughout 2007–10. This implies that large-sized Southern Korean exporting firms purchase foreign intermediate inputs for his or her final export goods due to the low productivity of nearby SMEs.

Second, the relative labour efficiency of the service sector to the manufacturing sector has been decreasing, from 62 percent within 2002 to 47 % in 2012. In addition, the service value-added components of manufacturing exports are much reduced South Korea than the rest of the OECD. This particular lower productivity means firms in the service sector fail to exploit the benefits from engaging in global value chains, which dampens the spillover effects from large-sized firms’ exports.

The share of the service sector in total employment has been growing, from 62.3 percent in 1993 to 74.1 percent in 2012. SMEs account for about 80 percent of output and 90 percent of employment in the service field. This suggests that the productivity space between the two sectors closely links to the productivity gap between SMEs and large-sized firms.

The reason for this particular relative productivity gap between SMEs and large firms is in the architectural problems of the South Japanese economy. After the Asian economic crisis, large-sized firms restructured, shedding labour and investing abroad, in order to regain competitiveness. But SMEs dropped behind. And the regulatory environment discouraged the growth of new industries and the service sector.

Labour marketplace segmentation due to the widespread use of short-term contracts may have negatively impacted firms’ total factor productivity (TFP). One good reason could be that as long term workers become more costly to end, firms are less likely to transform temporary workers to permanent ones and are more likely to reduce investment in on-the-job-training for temporary employees. Knowing this, temporary workers tend to make less of an effort. This can decrease a firm’s TFP (which combines the productivity of each temporary and permanent employees). Because the share of short-term workers is larger in SMEs than in larger firms, the work market segmentation may also contribute to the productivity gap.

These structural problems have curtailed any positive spillover effects from export development — mainly driven by large-sized firms — across key dimensions of the actual South Korean economy. Although large-sized firms have substantially elevated their sales in international markets, they have also substantially increased their usage of foreign elements. This, and the productivity space between SMEs and large-sized firms, reveals the economy’s inherent weaknesses. Future policymakers must conquer this challenge in order to ensure continued as well as equitable growth across the economy.

South Korea must confront structural problems in the economy is republished along with permission from East Asian countries Forum

As South-East Asian countries gear up for their ASEAN Economic Community, coming into effect by the end of this year, Indonesia should look into setting up special economic zones together with bordering countries.

These special zones are in line using the ASEAN Economic Community’s blueprint to support local businesses and allow people and goods to move freely between states. Having countries collectively set up economic hubs in border areas can minimise territorial disputes, reduce cross-border crimes, and improve the lives of people living in remote outposts.

Special zones in edge areas

Economists call these areas Special Border Economic Zones (SBEZs). It’s a variation of Special Financial Zones (SEZs), a dedicated area exactly where businesses receive tax breaks along with other regulatory incentives to produce as well as distribute goods.

A Special Border Economic Zone is an area set up by bordering countries to support businesses and promote trade and tourism at the border.

Malaysia and Thailand have a handful of these hubs and intend to have at least eight between them. The Greater Mekong Sub-region, which covers Vietnam, Thailand, Laos, Cambodia and Myanmar plus China, will have 60 SBEZs by the end of 2015. Some 54 of these tend to be between the borders of Laos as well as Cambodia.

However, Indonesia, which shares property borders with Malaysia, Papua New Guinea, as well as Timor Leste, has yet to join the crowd.

Most Indonesians living in border areas are poor. Far from the centre of government and business, the roads and schools in these remote areas are in poor condition. Human traffickers and medication smugglers often use unsupervised edges to move their victims and illegal cargo.

Border economic areas may be a solution to these problems. SBEZ isn’t a one-size-fits-all solution to stop these crimes. It is a way to minimise them.

These shared economic zones in border areas increase neighborhood and government presence, which may reduce the areas' vulnerability to illegal activities. By creating work, border economic zones may also reduce welfare problems during these areas.

Success stories

Indonesia can look at different models between Thailand and Malaysia, the countries in the Greater Mekong Sub-region, and the Oresund area between Sweden and Denmark, because case studies.

The Narathiwat-Rantau Panjang zone between Thailand and Malaysia is an incubator for small and medium businesses. It produces traditional snacks and has a shared market that can attract tourists.

The two countries also share Rubberized City, an industrial zone that produces rubber and products from the material, between Thailand’s Ban Prakob and Malaysia’s Durian Burung. It has an inland interface and Thailand and Malaysia are planning to build a border town with colleges, hotels, a convention center, health facilities, and public transportation.

Meanwhile, through a Cross-Border Transport Facilitation Agreement, countries in the Greater Mekong Sub-region agreed to build economic zones around the borders. Countries set up joint facilities to inspect people and items going through the borders. Similar to SBEZs in between Malaysia and Thailand, these border financial zones provide jobs and promote trade and tourism.

The Oresund region between Denmark and Norway is far more advanced. It is an area of more than 2 million hectares – more than two times the size of Melbourne – where Swedes as well as Danes share a space to work, trade, and live.

Developing SBEZs in Indonesia

To develop SBEZs, Indonesia should arrange the relevant regulations and policies with neighbouring countries. These areas will need an intergovernmental body with regard to oversight.

Indonesia may consider doing a more comprehensive study to find out potential areas that could take advantage of SBEZs and start talks with neighbouring countries on this basis.

Indonesia encounters many problems in its edge areas, from human trafficking as well as smuggling to activities of separatist teams. It should not deal with these issues only through a defence and protection approach.

If Indonesia would like to enhance control of its borders as well as retain its sovereignty, it should additionally improve the wellbeing of people residing there.

Ahead of ASEAN Economic Neighborhood, Indonesia should consider economic zones at her borders is republished with permission from The Conversation

Largely ignoring problems over the decades, Myanmar has a long record of electoral corruption and fraud. Electoral corruption undermines the domestic legitimacy and authority of Myanmar’s government authorities and governance. Therefore, authorities should act as quickly as possible to regulate corruption to manage the actual negative externalities arising from elections in Myanmar.

Myanmar’s Union Election Commission (UEC) holds the 2015 election in November. Citizens can anticipate a very high risk of electoral corruption, election rigging and changing, regulation adjustment, voter intimidation, ballot box stuffing, electoral malfeasance and electoral fraud. If the 2015 election is to be characterised by integrity and accountability, Myanmar must mitigate the risk of election corruption.

Elections within Myanmar have become a moneymaking business, instead of one that focuses on increasing the quality of elected public officials. The problem is that cronies-turned-politicians are attaining power with financial as well as monetary assistance. Only two political figures have asserted that government policy must tackle corruption — Opposition Leader Aung San Suu Kyi and Speaker of the Upper House Khin Aung Myint. But the most of members of parliament are not accountable and accessible to the people, as they have been handpicked by corrupt elections. The election system itself is damaged; Myanmar cannot expect self-respect, ethics and integrity from the candidates as well as politicians chosen by the program.

There have been few debates upon national strategy and coverage priorities regarding election problem. Instead, political parties as well as opportunistic politicians have been approaching cronies for financing, and playing the religion card — a doubtful action in a secular democracy.

Worldwide, there are a variety of anti-corruption techniques to manage electoral corruption and fraud, and Myanmar’s authorities should use them to reply to electoral corruption effectively.

Myanmar needs to expose a leadership code package, which would use regulation to avoid the abuse of public power. Electing contenders as well as candidates in transparent as well as accountable ways is essential. Foundation the code on a social contract between the ruler and the ruled. If there is a responsive leadership code, do not force the people to sacrifice their rights to rulers who declare that they are the country’s leaders.

Myanmar must improve the quality of guideline of law and to boost the integrity of the UEC. The legal and technical systems from the UEC should be reliable and respected. As of 2015, the people are losing trust and confidence in the UEC due to Myanmar’s problematic legal and judicial system. Myanmar must reinvent the UEC being an organisation that respects civilians, business leaders and non-military staff. The legal system, and the regulations of the UEC, must have higher requirements of morality and ethics. They have to be trustworthy within the eyes of both the citizenry and the international community.

Regulate the revenue and expenditure aspects of campaign financing transparently. As it presently stands, Myanmar’s political shareholders and donors can purchase ballots and influence voters. Declare political party revenues; and corporate, foreign and anonymous funding for elections must be limited, if not banned. Candidates should be required to record their expenditure, including marketing, personal expenses and the quantity of election money used. Applicants and donors should declare all payments, names and addresses to increase transparency. Further, independent external audits must examine candidates’ expenditure and revenue in addition to political parties’ financing and funds. The UEC must disclose election funding for all contenders and chosen candidates to the country.

The UEC ought to further enhance the integrity and impartiality of the 2015 election by inviting international election monitoring groups and observers (such as the United nations Electoral Assistance Division) to observe all processes of the election. Installing an impartial election monitoring system will provide a tool for controlling electoral fraud and corruption within Myanmar. They should invite observers and advisory missions from market democracies who’ve the technical expertise, know-how as well as experience. They can help ensure impartiality in election process, such as voter registration, rules and legislation, voter education and fairness associated with campaign financing.

Finally, independent media (particularly research-oriented press and surveillance journalism) should be encouraged as an effective anti-corruption measure. Myanmar’s media can enjoy a key role in monitoring and educating the public regarding electoral corruption. They can then investigate cases of corrupt officials as well as election fraud.

Election corruption in Myanmar is neither a demand–supply problem nor a principal–agent problem. It is a triangle of corruption between political parties, contenders and their cronies and funders. There are a variety of ways to reduce the high rates of electoral corruption in Myanmar. To ensure integrity and accountability for the 2015 election, Myanmar needs to introduce a smart regulatory framework with adequate legal enforcement that guarantees all stakeholders must play by the rules.

Myanmar’s elections need a fraud-free makeover is actually republished with permission from Eastern Asia Forum

Former president Mahinda Rajapaksa’s failed bid to return to power as Sri Lanka’utes prime minister is seen by many like a major blow for Beijing’utes growing influence in the country and the region. The outcome of August’utes parliamentary elections, which followed Rajapaksa’s ouster within January, seems to signal a return to Sri Lanka’s more traditional international policy orbit: balancing India’s security sensitivities with its pursuit of other relationships, including with China.

Since independence, Sri Lanka has been both fearful of Indian hegemony and usually realistic regarding its options. The country has to face the difficult actuality of dealing with its giant, nervous and sometimes overbearing neighbour. This forces Colombo to perform a delicate balancing act: it must try to create a few space for itself through limited relationships with extra-regional powers, whilst constantly reassuring New Delhi that it will not threaten India’s regional dominance.

This delicate balance long reflects Colombo’s external relationships with major powers, including with Britain, the United States and China. In addition, although Brand new Delhi usually grudgingly tolerates Colombo’s flirtations, there are real limits.

Colombo knows nicely the consequences of provoking India’s ire. In the early 1980s, New Delhi mistakenly convinced itself that Sri Lanka was going to allow the United States to build a signals intelligence facility and even a naval base on the island. The content for Colombo was clear: there were red lines that Sri Lanka should not cross in its relationships with extra-regional powers.

These events led a few to talk about the so-called ‘Finlandisation’ of Sri Lanka: a good implicit understanding that Colombo would steer clear of security relationships with other forces, while India would refrain from interfering in Sri Lanka’s domestic affairs. This idea does not do rights to the intricacies of the connection, but it does express an uncomfortable truth — that small nations with large and anxious neighbours may find it in their pursuits to limit the physical exercise of their sovereignty. Not that Sri Lanka has ever been a client state of India. Indeed, Colombo has often shown by itself to be adept at calibrating its strategic distance from India — keeping New Delhi on its toes and leveraging potential advantages of its neighbour.

But this fragile balance came unstuck over the last few years under Rajapaksa’s increasingly authoritarian and corrupt rule — and a bath of Chinese money. Rajapaksa not just seemed to favour Chinese opportunities but he also began to flirt with a limited Chinese protection presence on the island. Brand new Chinese-built ports at Hambantota and Colombo became symbols of Beijing’s presence in the area, fuelling claims of a ‘String of Pearls’ across the Indian Ocean. China built a satellite train station and there were rumours of a possible air force presence.

The turning point came in September 2014 when a Chinese submarine and minder created an unexpected visit to Colombo only times before the visit of Chinese President Xi Jinping to New Delhi. This seemed that Beijing was trying to send a awkward message to India. New Delhi summoned the Sri Lankan foreign minister to suggest that there should be no further appointments of Chinese submarines. When Rajapaksa sanctioned a return visit of the sub in November, many took this as an explicit signal that Sri Lanka was abandoning it’s longstanding balancing act and possibly slanting to China.

This, apparently, was a step too far. Only few weeks later, Maithripala Sirisena, then a minister within Rajapaksa’s government announced that he would stand against Rajapaksa because president. By January, Rajapaksa’utes regime, which looked permanently cemented into power, vanished. The full extent of India’s involvement in the Sri Lankan elections in January 2015 and again in August 2015 remains unclear, but there is little doubt that New Delhi was at minimum able to unite Tamil groups towards Rajapaksa, no doubt lubricated with plenty of money.

Where does that leave Sri Lanka’s foreign policy? It seems like it will move back towards a long-term balancing act. Colombo will not be beholden to Indian, but it will certainly pay much more attention to New Delhi’s protection sensitivities while pursuing a more cordial relationship with the Western. There may not be any further visits of Chinese submarines any time soon, however Sri Lanka will continue to court Chinese expense to develop Sri Lanka’s infrastructure and manufacturing base. But it may also be careful to ensure that other investors, including from Japan and India, are given investment opportunities on the island. Sri Lanka could have bright economic prospects as a new ‘Bengal Tiger’ economy and China will play an important role in that.

Beijing’s Worldwide Times contends that: ‘Even though partisan politics may have a particular effect on bilateral ties … No matter which celebration takes power, it will maintain a good relationship with China’. That is certainly true, but at the same time, nov the Rajapaksa regime does represent a significant setback for China’utes hopes to develop a greater protection presence in the Indian Ocean to support its economic interests. Seen alongside moves through Myanmar’s regime to range itself from Beijing, it’s a reminder of the risks of counting on authoritarian leaders for friends.

Sri Lanka tilts back again from China is republished with permission from East Asian countries Forum

Greece leaving the euro is old news. Since the former Greek Prime Minister, Alexis Tsipras, agreed to a third bailout in July, the perception of Grexit as an immediate threat has subsided – or at least disappeared from comments.

Nonetheless, while appetite for Grexit outdoors Greece has abated, the distressing seven months of wrangling over its bailout with Europe created a significant domestic demand for coming back to the national currency.

Polls suggest that a quarter of the electorate is likely to select Grexit-favouring parties including Popular Unity (the Syriza splinter group), Golden Dawn, and KKE (the communist celebration). While the allure is there, the Greek exit from the Eu is unmistakably a bad idea.

Drachma drama

Riding the influx of popular discontent galvanised by the No (OXI) campaign in the referendum more than Greece’s bailout, drachma advocates argue that trembling off the shackles of the euro will allow for an end to austerity and for nationwide self-determination. Echos of former Prime Minister, Andreas Papandreou –- who campaigned in 1981 for national independence, popular sovereignty, as well as social liberation – permeate a population oppressed by five years of economic dislocation.

However, how can a return to the national currency enable Greece to offer the dual aim of reviving its depressed economy and regaining sovereignty? Here, despite its face value appeal, the argument becomes less clear.

One of the key “advantages” of rejecting the bailout and leaving the euro is the chance of defaulting on Greece’s debt, broadly regarded as unmanageable and not sustainable. A claim is that a comprehensive fall behind on external debt will ease pressure on the government, which will then be able to recapitalise banks and inject liquidity into the economy via borrowing in the newly freed Bank associated with Greece (effectively printing money).

While everyone agrees (even Germany) that some type of debt relief is needed for Greece, defaulting leaves a great problem. Cancelling sovereign debt does not mean that the government and private events will not have ongoing payment responsibilities denominated in foreign currencies. Even scrapping all sovereign bonds, how will the government purchase goods and services from abroad? Having the Bank of Greece print money only works in an entirely closed economy.

As the actual Greek state lacks foreign currency reserves, it will need to prop up a new currency and the worth of the drachma would drop like a rock. There is no evidence of acceptance as payment abroad. Additionally, what about private parties who’ve external obligations? How will manufacturers buy materials (denominated in bucks or euros) with drachma which counter-parties are unlikely to accept?

The best way a new drachma could find its feet would be via loans in difficult currency, probably from the IMF. Consequently, German finance minister Wolfgang Schäuble’s plan for a temporary Grexit (with generous support) is a better prospect compared to any unilateral exit plan. The path to the drachma with Relief assistance and some support for that re-introduced currency (a la Schäuble) would help ameliorate some of the dangers of Grexit.

Otherwise, the post-euro Greek finance minister could be begging for loans soon after defaulting on external obligations. Oh, and let us not forget that while this would all be happening, the value of deposits in Greek banking institutions would be massively reduced in tangible terms through the re-denomination to drachma.

Attempting in order to overturn austerity

Austerity is the other big issue for Grexit advocates. They reason that leaving the euro would allow for a more “progressive” development plan that is not dependent on the slashes needed to balance Greece’s fiscal deficit. The plan relies on changing foreign imports with domestic manufacturing. In addition, in a way, this would be the inevitable result of a return to the drachma. As imports will soar within price and trade systems will be disrupted, native reduced skill manufacturing may substitute some imports.

However, this would be limited to low-skill, low-value production. High-tech, high-value, complex manufacturing relies on substantial capital investment that no private party would be willing to supply to Greek firms in the medium term. The government will not be able to finance the proclaimed large investment projects for the same lack of capital explained over. Therefore, the conclusion is this: Indeed, there is capacity in Greece for industrial development and domestic production. However, this occurs at the bottom end of the production level and it will generate employment and wages worse compared to Bulgarian standards.

There is opportunity for development in the Greek economy and large opportunity for improvements in efficiency. Nonetheless, all of these are dependant on developing and liberalising the private sector.

If the basis for a drachma development plan’s on state spending ultimately, unchecked monetary expansion may lead to runaway inflation. A South Korea-style national industrialisation plan is difficult in 21st-century Greece.

The sad summary is this: a return to the nationwide currency could lead to growth ultimately, but it will entail a severe drop in living standards, financial dislocation unlike anything experienced to date and (most probably) high levels of borrowing at disadvantageous rates. If, accepting these constraints, the actual Greeks want to choose the “freedom” of the drachma; they are entitled to do so. However, a return to the national currency seems less a solution and more a Chimera.

Why leaving the euro has returned on the agenda in the Ancient greek election is republished with permission from The Conversation

China’s next Five-Year Plan is due for formal approval through the National People’s Congress within March 2016.  One of the areas of focus is the role of China’utes State-Owned Enterprises, generally viewed with suspicion by the West and seen within China because bloated and in need of a cleanup.

The Five-Year Plans have become a flexible political tool in the hands of central leaders seeking to shape the behaviour and priorities of varied ministries and local governments.  China’s Cupboard recently released the latest document in what will be a cascading number of plans and guidelines feeding into China’s policy settings between now and 2020.

The State-Owned Enterprise (SOE) Guidelines are part of tackling China’utes larger economic reform challenge. This requires shifting the overall macroeconomic development model from domestic expense (mostly infrastructure) and a concentrate on exports, to one of growth brought by domestic consumption as well as an expanded services sector.

The recommendations are the latest stage of the SOE reform process underway because the 1990s, as the Chinese state-controlled economy has made way for a growing rapidly private economy sector.

The present state of SOEs in China

The words typically used to describe the actual SOE sector in China are “inefficient,” “bloated,” and “cumbersome.”

The sector has been slimmed down a lot over the past decades.  Still, this comprises 110 conglomerates. SOEs account for about 60% of total revenue and the central government’s State Owned Assets Supervision and Administration Commission oversees them. Additionally, between 25,000 – A hundred and fifty,000 SOEs (depending on which meaning of “state-ownership” is used) are controlled and managed by provincial, municipal, and lower levels of government.

The larger SOEs maintain monopolies over key sectors from the economy (energy, mining, as well as infrastructure) and smaller SOEs are characterised by low efficiency and high debt levels. A lot of the problems and inefficiencies originate from the fact that the interests managing SOE behaviour do not align along with those of the wider economic climate or society.

Time for a clean out

Authorities have been consolidating and “cleaning up” SOEs for better resource percentage for a while now. China’s two major bullet train manufacturers completed consolidation in the very first half of 2015, while China Train Corporation recently announced a good asset-reorganisation with one of its subsidiaries.

Central authorities pointed out earlier this year that Beijing would really like mergers and acquisitions to create a figure of around 40 conglomerates under the SASAC.

The real-challenge will be in getting the Provinces to cooperate in cross-border mergers of provincial and municipal SOE assets. The ambitious Beijing-Tianjin-Hebei regional integration blueprint offers an important testing ground for getting different localities to cooperate, share, and consolidate financial and social planning and resources.

Commercial vs ‘social’

Schools, universities, medical goods and service providers, and providers of public utilities (drinking water, sanitation, energy, transport, as well as communications) together form an enormous and important part of the Chinese economy. It is important that they be run efficiently, but also essential that they fulfil the sociable purposes for which they can be found.

Providing equitable access to essential community goods and services means one can’t expect these firms to run upon purely commercial considerations. Consequently, the SOE guidelines indicate that SOEs will be categorised as “commercial” or “public goods and services,” and handled accordingly. Commercial SOEs will be asked to become leaner, more efficient, and much more market-oriented, while “social” SOEs will be encouraged to concentrate more on the quality of service supply.

Diversifying SOE ownership

A key part of making SOEs more efficient and more market-oriented is to allow private investors to purchase ownership stakes.

SOEs will be encouraged to bring in “various investors” through share-rights swaps, issuing new shares and/or ragtop bonds and other means. Institutional investors in particular, including foreign ones, will be allowed/encouraged to buy stakes in SOEs, and allowing SOEs to experiment with employee-share ownership schemes.

Oil and gas, electrical power, railways and telecommunications identify as suitable for “limited” private investment: indeed, key energy companies Sinopec and National Petroleum Corp have already started selling off parts of their operations.

While citing the Singapore Temasek model of state investment, strategic SOEs in China will never fit which model, but will remain below strict state (i.at the. Party) control.

Improved independent decision-making from board level will be urged by requiring the boards of all SOEs to have a majority of non-executive (external) directors. They will hire additional professional managers, and a more flexible and market-based compensation system for SOE officers will link pay to company performance.

Obstacles in order to reform

The key obstacle to SOE change will be overcoming “pushback” from entrenched interests at local, provincial as well as national government levels. China Communist Party makes overcoming this obstacle particularly difficult due to the emphasis on leadership of, as well as control.

Reforming the Party, especially to reduce corruption, is also a fundamental part of the Five-Year Plan, but helping to loosen the Party’s grip on control is nowhere in sight. The extent to which the actual politics of the 13th 5 year Plan remain compatible with it’s economic reform goals therefore remains.

China’s grip nevertheless tight on state-owned enterprises is republished with permission from The Conversation

Recent student protests in Japan against the Liberal Democratic Party’s (LDP) suggested changes to constitutional reinterpretation have Japan watchers asking ‘is the sleepy Japanese student waking up?’ Nevertheless, what if they were never asleep or they were just awaiting the alarm clock to go away?

Prime Minister Shinzo Abe’s highly questionable reforms would allow a greater protection role for Japan’s Self Defense Forces. Criticism of Abe’s efforts has been widespread as well as reinvigorated by the 70th anniversary of the finish of World War II on Fifteen August 2015. The protesting students wish to maintain the status quo and they are demonstrating on a platform of serenity. In doing so, they are defying the actual stereotype that Japan’s youth are disinterested in politics.

The voting price among those in their 20s is actually below 30 percent, but 50 plus percent of young people in Japan claim an interest in national politics, according to the Japanese Cabinet Workplace. Yet only 30.Two percent of respondents towards the same survey answered that their involvement or contribution to politics would matter. Keep in mind that the LDP has held majority power in the Diet for several years, despite Japan’s economic malaise and challenges.

In the December 2014 election, the overall voting rate stood from 52 percent, the lowest within postwar history. National partisanship may contribute to low voting rates, even among older generations, as the answers are clear before the close associated with a election. Some youth-led organisations claim that internet voting may increase voting rates, particularly among younger decades.

Younger generations also express their own opinions in non-traditional forms such as blog posts and social media. Japanese tapas bars (izakaya), for example, incentivise engagement via articles on their websites as well as tweets. The Teen’s Rights Movement and Youth Produce use YouTube and Twitter to express their opinions and test younger generations’ attitudes towards politics. The Teen’s Legal rights Movement began with a objective in January 2013 to lower the voting age to Eighteen from 20 and engage youngsters participation in political discussion. Approximately 15,000 students engaged in political discussions with the Teen’s Rights Summit.

Nevertheless, the attitude of traditional educators towards political education is more complex. Civic education, such as the political content of senior high school curricula, has become increasingly questionable because of political proposals to reduce the voting age.

Traditionally, teachers have been required to present an apolitical persona, particularly in light of the draconian war propaganda practised in schools before World War II. In March 2015, a teacher from Osaka was reprimanded and dismissed because of not standing up to sing the nation’s anthem at a graduation ceremony. He or she remained seated because of his concern about the anthem’s connection to the war: he wanted to educate students about its history so that they will never result in the same mistakes of the war period.

The Japan Teachers’ Union argues that civic education shouldn’t stop at conducting mock voting or even learning about the rules relating to the election system. It should also include an element of social responsibility for citizens to use their voting rights in ways, which fosters active participation in societal issues.

These youthful advocates and older teachers will have their chance to participate soon. In June 2015, Japan’utes National Diet passed a good amendment to decrease the voting grow older from 20 to Eighteen, bringing Japan into line with the voting age of most nations.

The Japanese government’s motivations for that reform are unclear, even though the stated rationale is to increase interest in politics among the younger population. The amendment will raise the number of voters by almost 2.5 million people at the 2016 elections. The reforms are top-down as well as, for the politicians, it may be a case of ‘be careful what you wish for’. Until now, the voting rate has been greatest among the 60s age bracket — almost 70 percent — which undoubtedly influences parties’ policies.

Yet, voting may be overtaken by other approaches — and not just with regard to younger people. This 10 years seems to have seen an increase in well-liked demonstrations in Japan, starting in 2011 with protests towards restarting Japan’s nuclear energy plants. However, student sounds seemed absent until now. The current protests in relation to the proposed constitutional reforms coalesce with the Japanese government’utes decision to reduce the voting age from 20 to 18, but they are not necessarily linked.

The possible drivers for student participation in the protests are numerous. Some are more Japan-specific (Abe’s controversial reform agenda or Japan’s less stable economic and global position). Others are arguably normal with student movements globally (deficiencies in life and economic possibilities for young people). There is also the outcome of recent student protests somewhere else, including Hong Kong, Malaysia and Taiwan. How various generations interact on the protest agendas also remains to be seen.

The drop in the voting age does not necessarily mean that students will turn out in greater numbers in order to vote in 2016. There may be no candidates that they consider deserving and there is no guarantee that younger people will vote as a collective. However, it may be the beginning of something new — otherwise revolutionary — in Japan. More youthful people may yet start to influence the sort of Japan to which we are all waking.

Japanese students awaken to politics is republished along with permission from East Asian countries Forum

On 9 December, Indonesia will have its first simultaneous local executive elections to elect governors, area heads and mayors in 269 localities (out of 537) across Indonesia. Whilst direct election of local executives has been held since 2004, this is the first time these elections will be held simultaneously on a single day.

This change was implemented in the new Local Government Elections Legislation enacted in March 2015. The nation’s Elections Commission (KPU), which is tasked with administering national and local-level elections in Indonesia, supports the legislation, arguing that it’s cheaper, more efficient and more useful. Local elections under the previous electoral routine are considered expensive and susceptible to ‘vote buying’ and other forms of electoral irregularities.

But the scheduled simultaneous elections tend to be unlikely to meet any of the above objectives. To begin with, while local government authorities are mandated to allocate 7 trillion Rupiahs (US$495.4 million) to cover election-related expenses in their particular localities, actual election costs could be much higher. Some districts have reported that total expenses have doubled, and perhaps even tripled.

According to a report by the State Auditing Agency (BPK), this might be because of the lack of ‘adequate human resources as well as administrative guidelines’, which encourages overspending through candidates and local bureaucrats. Thus, the actual KPU’s goal of reducing the price of local elections is unlikely to be met just by holding them simultaneously.

Another reason behind the high costs of operating local executive elections in Indonesia is the increasing prevalence associated with ‘money politics’. Candidates often have to supply payments to party authorities (to be officially nominated through their parties), their campaign team members and increasingly to potential voters as well.

My study throughout the 2014 election indicates that local legal candidates paid each potential voter between 50,000 in order to 60,000 rupiahs (US$ 3.Fifty to US$4.20). Surveyed voters established that they were more likely to vote for the actual candidate that was willing to give them the most money. With ‘money politics’ now seemingly institutionalised in both national and local elections, numerous local executive applicants can be expected to engage in such methods during this December’s elections.

Rigid nomination requirements with regard to local executive candidates, and also the increasing personalisation of local executive elections, also mean that merely a small number of potential candidates with broad name recognition as well as substantial campaign finances genuinely have a chance. Candidates can only end up being legally nominated by politics parties that hold at least 20 percent of seats in the local parliament (DPRD), or won 25 percent of legitimate votes cast in the previous nearby elections. This means that the only candidates apt to be nominated are those who can form a broad coalition with parties which are represented in the DPRD.

Often, successful nominees are incumbent governors, district heads as well as mayors. They have all the advantages their incumbent status can provide, ranging from popular name recognition and the ability to channel government sources to the constituencies crucial for their electoral achievements. As a result, a number of popular incumbents, for example Mayor Tri Rismaharini from Surabaya, will be re-elected without any real opposition.

A developing number of candidates are the spouses, children or other relatives of previous incumbents, taking advantage of their popular name recognition. These include the actual mayors of Pekalongan (Central Java) and Sibolga (North Sumatra), as well as the district mind of East Kutai (East Kalimantan) as well as Ogan Ilir (South Sumatra). Local election rules, which promote the dominance of incumbents, their families and well-funded politics candidates, are increasingly depriving Indonesian voters of a wider set of possible choices in local professional elections.

Holding simultaneous local elections in Indonesia was designed to promote better monetary efficiency and governance of local executive elections. But, it is unlikely to achieve these goals, and could potentially make matters much worse.

Simultaneous local elections won’capital t help Indonesian governance is republished along with permission from East Asian countries Forum

In the wee hours from the morning yesterday, Japan’s ruling Liberal Democratic Party (LDP)–Komeito coalition muscled a collection of security-related bills through the higher house of the Diet. The debts, now certain to become legislation, fundamentally re-draw the legal parameters of security cooperation where the Self-Defense Forces (SDF) may now participate.

The new laws will allow japan government to exercise a restricted form of the right to collective self-defence (CSD) and assist an ally during a army contingency, even if Japan is not directly under attack. Pm Shinzo Abe’s private advisory panel experienced argued that the potential to weaken trust in the US–Japan connections — and thereby its prevention capability — if Tokyo didn’t assist during a contingency should itself be a sufficient basis to exercise this right. The actual LDP bosses too had held out for a lenient reinterpretation.

Due to pressure from the LDP’s pacifist junior coalition partner, Komeito, the legislation allows Tokyo to exercise the right only if ‘an armed attack against a foreign country that is in a close relationship with Japan happens.  It also states … [which] poses a clear danger to [the Japanese people] …and there are no appropriate means available to repel the attack and ensure Japan’s survival’. The United States is for now envisaged as the only such collective self-defence partner.

The legislation also expands the range of the SDF’utes logistics support functions throughout a regional contingency or multinational mission not considered ‘incorporated with the use of force’. Abe’s advisors had called for the discontinuation of the concept altogether, while the LDP experienced sought to authorise most forms of logistics support to international troops even in combat areas. However, after more stress from Komeito, support activities may henceforth conduct in a military theatre only if it is ‘not the actual scene of actual fight activities’. The U.S. and Australia during regional contingencies and Tokyo’s multinational partners in ‘coalition of the willing’ peace enforcement missions expect to be the beneficiaries of such assistance.

Two key rationalisations underpin the security expenses: that Japan’s external security environment is rapidly deteriorating; and that US deterrent power in Asia is decreasing, with knock-on effects for US–Japan security arrangements. Hence, the imperative to reinterpret the SDF’s ‘self-defence’ and ‘use of force’ powers to enable smooth alliance cooperation and ‘preemptively reduce the potential for conflict by improving deterrence’.

Both rationalisations are contestable. The withering of Japan’utes security environment is a purpose of the insecurity generated through its own economic decline (instead of China’s rise) and its discomfiture in striking up a mutually beneficial political equation with Beijing. Meanwhile, the pre-eminence of US hard power in Asia seems assured. ‘Escaping the post-war regime’ and it is pacifist constraints, rather than deterrence, appears to provide a more likely motivation.

The laws received a groundswell of popular criticism, including by a host of non-partisan establishment voices ranging from ex-Supreme Court justices to Cabinet Legislation Bureau chiefs. Critics argue that the factors that trigger the physical exercise of the right to CSD are obscure, overly broad and excessively complex. What, for example, exactly is a ‘survival threatening situation’ why is an ‘imminent armed assault situation’ not also sufficient to workout the right to CSD? A key example given by the LDP of a ‘survival threatening situation’ — a blockade of the Strait associated with Hormuz — has also been criticised as misleading given that the Abe government itself projects oil to comprise just 3 per cent of the energy mix by 2030. Besides, had not Manchuria and Mongolia too, as sea lines of communications today, constituted indispensable lifelines during a darker current period in history? In addition, the integrated use of force beyond the ‘Far East’ theatre seems to overstep Article 6 of the US–Japan security treaty.

The security bills additionally take aim at two of 3 key tenets of Japanese pacifism: the dispatch and exercise of force overseas and the minimum exercise of force. The laws permits incursions into other countries’ property, sea and airspace with the purpose of using force by way of CSD-linked minesweeping operations and strikes on enemy army bases. And while current vices on the minimum use of pressure remain, the SDF’s strategies support assistance (which includes moving toxic gas weapons and supplying depleted uranium munitions) to partners in close proximity to the battlespace would successfully make it an accessory to the utilization of force that bears no correlation with minimum amounts necessary for ‘self-defence’.

Constitutional barring from working out the right to CSD is misplaced and is a cardinal criticism. It is true that Abe has adapted the actual interpretation of the constitution to suit the security bills. Post-war Japan offers always located its legal rights to self-defence and deterrence within the preamble and in Article 13, which states that people’s life, liberty and pursuit of happiness shall be the supreme consideration within legislation. Article 9.Two affords space to maintain a military capability. The This summer 2014 reinterpretation of the constitution and the protection bills operate, for the most part, inside the construction and constraints specified by subsequent Cabinet Legislation Agency interpretations.

Future Japanese governments could be wise to limit their physical exercise of the right to CSD to the Post 6 ‘Far East’ area of procedures, defined as the area north from the Philippine islands. Involvement in disputes neither clearly associated with Japan’s interests nor spelt out persuasively to the public, such as in the South China Ocean, would degrade, not enhance, deterrence. Future governments might also be prudent to limit their logistics support-related participation to peacekeeping or peace enforcement tasks that have clear UN authorisation.

Most of, future governments must reconstruct the bases of Japan’utes geo-political relationship with China. Tightening deterrence arrangements without a strategy of comprehensive diplomatic engagement that offers a principle of shared self-restraint with a rising potential enemy is a recipe for further low self-esteem. Japan’s ‘silver pacifism’ — with its aversion in order to military adventures, near and remote — will require that its frontrunners exercise their newly mandated security prerogatives with patience and discretion.

Abe’s new security laws doubles-down on the US alliance is actually republished with permission from Eastern Asia Forum

Japan's markets will reopen Thursday.  The day after, Japan expects to report that core inflation fell back below zero for the first time since April The year 2013.  Abenomics has lost its sparkle with the economy contracting in four of the past seven groups.

In some ways, Abenomics was a typical LDP plan of fiscal and financial expansion but on steroids.  The reforms that are area of the third arrow have largely didn’t capture the imagination associated with investors though we see the corporate governance reforms as substantial.

S&P's recent downgrade associated with Japan to A+, matching the earlier move by Moody's, had been coupled with an ominous warning Abe will likely fail to reverse the deterioration over the next 2-3 years.  Debt-to-GDP is around 246% and the budget deficit throughout the current fiscal year is actually near 6.2%, more than two times the size of the US shortfall.

Abenomics has succeeded in boosting the actual profitability of Corporate Asia.  This is a function of the weaker yen and corporate tax slashes.  Yen weakness did not increase market share for Japanese exports however has translated into greater foreign earnings.  

August trade figures released last week showed that exports on the year-over-year basis were up 3.1%. However, this is a function of worth, not volumes.  Consider that Japoneses exports to the US are up 16% in value terms but are virtually flat by quantity.  The value of exports to the EU expires 5.1%, but less by volume.  Exports to China clarify the point.  By value, they’re up 1.6%, but down 4.4% by volume.  

In reality, many expect that over the next couple of months Japan may declare additional fiscal support by means of a supplemental budget.  Anticipations of additional monetary stimulus in the form of additional asset purchases are also running high, and will likely be boosted by a the re-emergence associated with deflationary pressures.  Many look for a BOJ announcement toward the end of next month.

If accurate, BOJ's Kuroda is not showing any kind of sign that he is moving in this particular direction.  In fact, the BOJ seems to be soft peddling its preferred measure of core inflation for a measure that excludes food and energy (and alcohol).  It stood at 0.6% in July and expects to have ticked up to 0.7% within August.

BOJ's ETF purchases and a weaker yen may have helped lift Japanese equities.  The diversification of Japoneses pension funds also pushed in the same direction.  While Abenomics may not be over, the diversity of Japanese pensions seems close to completion.  In the March to June period, Asia pensions sold domestic equities breaking a five-quarter buying exercise.  The large Government Pension Expense Fund appears to be within Three percentage points of its focus on weight for domestic bonds, stocks, and foreign property. 

The foreign appetite for Japanese stocks has waned.  In fact, this quarter through mid-September, international investors have more than cut in half the purchases of the past 12 months.  Foreigners have sold roughly $34.3 bln of Japanese equities since the beginning of July.  This leaves them net buyers of $31.0 bln over previous year.  The pace of liquidation offers accelerated.  The week through Sept 11, which is the most current information, saw foreign investors sell a record of a little more than $11 bln associated with Japanese stocks.   Through Sept 11, foreigners sold Japanese stocks consistently since mid-June, with only three exceptions in the 14-week extend. 

One issue that we suspect hasn’t yet gotten the attention this deserve involves Japanese banks.  Data from the Bank for International Settlements shows that Japoneses banks surpassed UK banking institutions are the leading cross-border lenders within Q1.  Their foreign claims from $3.53 trillion squeezed in front of British banks by a small $10 bln.  The Japanese lending has been focused in infrastructure projects and also to Asian countries. 

Reports suggest some of the banks' funds previously invested in JGBs diverted in order to foreign corporate loans.  Mizuho, for instance, which is Japan's second biggest lender, bought portfolios associated with corporate loans in The united states from UK banks, that are re-focusing on its domestic client base.

The challenge is that the weaker economies, currency mismatches, and other considerations tend to be souring loans, especially to rising Asia.  Lending to Asian countries reached $189 bln at the end of March.   Asia, ex-Japan accounted for 9.3% of the property of Japan's largest loan provider (Mitsubishi UFJ) at the end of March, the largest in at least a decade.  Overdue loans from the region rose 77% in the year through the end of 03 at Sumitomo, Japan's second biggest lender, and 24% at Mizuho.  Moody'utes has made 63 downgrades in the region, not including Japan and only 13 updates.  That seems to be a key dimensions of the challenge facing big Japanese banks.

Japan Economic Revise is republished with permission from Marc to Market

This could be a decisive week for Brazil as the toxic mixture of complicated politics, worsening basic principles and financial market stress comes to the fore.  These days, the congress is supposed to vote on whether to uphold or overturn the decision by President Rousseff to veto a sharp increase in spending. 

If the veto overturns, it would threaten the actual government’s already fragile attempt for fiscal consolidation.  At this point, it’s unclear whether the government may have enough support to uphold the veto, so it is possible that they’ll try to delay the election.  Still, the uncertainty over this story will be a definitive variable for Brazilian financial markets, which are at growing chance of becoming disorderly.

The Treasury and the main bank are trying to ensure that liquidity remains ample, but it may not be enough, especially the aforementioned veto is overturned.  The Treasury announced a relationship buyback yesterday. This is welcome information, at least as a sign that the Treasury is ready to step up alongside the central bank to slim against the moves.  The selloff from our market debt curve faster in September, with yields on swaps maturing in January 2017 rising to 15.61% through around 14.2% at the start of the actual month.  The growing fiscal concerns have also led to a clear, crisp steepening of the local debt contour, worsening sentiment locally as well as making the government budget funding even more difficult and expensive.

Here is a quick summary of the unfavourable profile and composition of Brazil’utes internal federal debt, according to the Treasury’s July report.  Approximately, 41% of debt is fixed rate; 33% is indexed to inflation; 21% is actually floating rate; and 5% is actually FX-linked.  Financial institutions hold 26% of the inner debt, investment funds hold 20%, non-residents hold 19% (of which 82% of their assets are in fixed rate securities), and it will be a mix of government and insurance companies.  In terms of maturity, 23% of the inner debt matures in the next 12 months and the average maturity is 4.5 years.  The average interest rate on government debt over the last 12 months is 15%.

At this point, the actual central bank is the nearest the country has to a macroeconomic point, but it is being put to the test.  USD/BRL is nearly at the psychologically essential level of 4.0.  The actual central bank announced the FX credit line auction this week to provide extra liquidity.  This may have helped, but it is far from a decisive development, similar to the decision to increase in Forex swap rollover to 100% a couple weeks ago. 

Rates continue to rise and are now implying several much more hikes to bring rates northern of 15%.  Of course, a lot of this really is risk premium and a function of the dynamics of local rates.  Indeed, the central bank’s survey suggests prices on hold until the end of the year and even cuts in 2016. Although we do not discard further price hikes, the recent moves seem like a clear case of overshoot to all of us, reflecting how politically driven tension (or even panic) in nearby markets can detach property from fundamentals.  There will be an excellent opportunity to receive long-end rates within Brazil at some point, but we do not think it is now.

The pressure factors for Brazil continue to attach and are well documented by the media. We highlight two recent developments.  First, the impeachment procedure is picking up steam and that we increase the odds now to 30%. Financial markets are unclear about whether this is a good or bad development.  We think it’s decidedly negative in the short-term as it may lead to social unrest and huge doubt.  Moreover, the most likely brand new president would be the vice president from the PMDB, which does not inspire a lot confidence.

Second, news that telecommunications company Oi is seeking advice to enhance its debt profile added stress on the corporate side.  The company reportedly hired Rothschild for advice among talk that it was looking to rebuild its debt.

A Decisive Week for Brazil is republished with permission from Marc to Market

The impact of the Ukraine crisis around the geopolitical order in Europe as well as beyond is clear. Although The far east is not directly involved, many Western observers believe that it is the biggest winner from the crisis. The argument is that Western sanctions mean Russia will transfer closer to China while the Usa has to shift its interest back to Europe, thus moderating it’s rebalancing efforts to counter the rising China. Ultimately, the argument goes, this creates a new strategic opportunity for Beijing.

Analysts like John Mearsheimer who hold this view tend to focus on signs of closer Sino–Russian relations. A 30-year gas deal, hands deals, joint naval exercises within the Mediterranean, a currency exchange agreement, complimentary stances on proper issues and a propensity to supply each other political support before Western critics all seem to point in that direction. These analysts then conclude that a ‘soft’ Sino–Russian alliance is coming to concentrate on the United States intentionally.

These arguments are flawed. There is still proper distrust between the two powers. Additionally, China has refused in order to compromise on its principles of non-interference and sovereignty by supporting Russia’s annexation of Crimea.

Yet a more fundamental mistake is that these analysts underestimate the China–Ukraine relationship. It is problematic to say China as well as Russia are moving nearer due to the crisis if Beijing has not altered its co-operation with Kiev. While China–Ukraine relations appeared frozen at the height from the crises, they have now started to warm up with increasing indications of exchange and cooperation within economics, trade and other proper areas.

Between March and May 2015, officials from Ukraine and China authorized off on a loan-for-grain deal really worth US$3 billion and a bilateral currency exchange worth around US$2.4 billion. In the first half of 2015, Ukraine changed the United States as China’s leading corn exporter. There has also been discussion about possibly co-producing a series of new Ukrainian army aircraft in China.

Some wonder if Beijing abandoned Kiev. The Ukraine turmoil did put Beijing inside a dilemma: both Russia and Ukraine are its strategic companions. Some observers assume that the rational choice was to remain with Moscow, but this underestimates the importance of Ukraine within Beijing’s calculations. Apart from shared economic interests, Ukraine is more prepared to sell advanced weapons as well as share sensitive technology with China than Russia.

Abandoning Ukraine might never be an option for The far east, although a short period of stagnation can be done. While Beijing is usually active in evacuating its civilians through restive situations, that did not happen in Ukraine. Chinese language investors, most of which are state-owned enterprises, remained.

After years of social as well as political instability, Kiev needs trade and investment to rebuild its national economy as well as China is ready to export facilities development projects under the One Belt, One Road initiative. Senior diplomats from both nations have expressed their readiness to cooperate under the effort. All this indicates that China as well as Ukraine are ready to restore and enhance their bilateral relations.

Many observers also argue that China sided with Russia in the Crimean crisis. They then raise the possibility that Russia may support China’s sovereignty claims within the East China Sea as well as South China Sea in return. However, this is questionable.

Russia definitely has more strategic importance than Ukraine in Beijing’s eyes, yet Beijing is not prepared to change its non-interference principle with regard to Russia. In a joint communique on the establishment of diplomatic relations within 1992 and again in subsequent statements, China obviously recognised Crimea as under Ukraine’utes sovereignty. Backing down from this position would hurt China’s trustworthiness and antagonise the West.

There are multiple reasons why Beijing supports Moscow beyond Ukraine. Both China and Russia face Western criticisms for their domestic politics and human legal rights record, and both begin to see the United States as the top possible security threat. Due to a insufficient legitimacy from democratic elections or a broadly accepted ideology, Chinese frontrunners are sensitive to real or even imaged external threats, which generates strong incentives to help a remote Russia.

Sino–Russian cooperation following the crisis is asymmetric. Simply put, Russia needs China a lot more than China needs Russia. Putin has paid exorbitantly to please Beijing. In addition to the gas deal, Moscow has given key infrastructure projects to Chinese investors and agreed ‘in principle’ to sell Beijing some of its most advanced weapons. Putin’s offer can only create a temporary boom in Sino–Russian relations. Meanwhile seeds of distrust and resentment are taking root within the Kremlin due to Beijing’s refusal to confess Russia’s sovereignty over Crimea and indecisiveness on other key problems.

In addition, just as China continues to be ambiguous on Crimea, Russia is unlikely to take sides in China’utes maritime disputes. Russia has long served as the most important partner of India and Vietnam within national defence. Chinese frontrunners must remember that during the China–Indian border disputes in the Nineteen fifties, the Soviet Union stood along with India, which contributed to the actual collapse of the Sino–Soviet connections. In the 1980s, Vietnam, backed through the Soviets, threated China’s border security from the south.

Moreover, while Russia has disputes with Japan over the Kuril Islands/Northern Territories, it probably will not go as far as to antagonise Tokyo. In the long term, the Kremlin will develop its economic interests with Tokyo to avoid economic overreliance on China. It is possible that Beijing sees Russia’s involvement in East Oriental security as unhelpful and detrimental, considering that, it raises uncertainty and closer ties with Russia exacerbate Western accusations of China’s strategic motives.

Some argue that the Ukraine crisis signals a closer Sino–Russian strategic relationship, which could potentially undermine the United States’ position. However, China–Ukraine relations are actually warming up and they will probably continue to do so. With this in mind, it’s inaccurate to say China sides with Moscow or is the biggest winner from the Ukraine crisis.

Why the West is actually wrong about Beijing as well as Kiev is republished with permission from East Asia Forum