Fortnightly Review & Analysis: ASEAN, Indo-Pacific, East Asia, Japan & China (Vol 2 Issue V)

March 1- 15, 2017

ASEAN

Saudi King’s Visit to Indonesia

Saudi Arabia’s King Salman bin Abdulaziz is the first visit by a Saudi monarch to Indonesia in almost 50 years. King Salman is on a maiden tour of Asian countries to advance the kingdom's economic and business interests. Indonesia practices a moderate form of Islam and has a democratic secular government, but Saudi-funded institutes in the country are known to spread a highly doctrinaire interpretation of the Quran. They are tolerated in part because Indonesia wants to at least maintain its annual quota of citizens who can enter Saudi Arabia to participate in the Hajj to Islam's holiest city. In a speech at the legislature in the capital Jakarta, King Salman called for an intensified fight against terrorism. “The challenge we, especially Muslims, face now is terrorism,” he said. “We should close ranks in combating terrorism, radicalism and strive to bring world peace for the benefit of all of us.” Saudi Arabia is part of a US-led coalition that has carried out air strikes against the Islamic State (IS) group and other jihadists in Syria.

At a joint news conference, the two countries' foreign ministers affirmed Saudi Aramco and Indonesian oil company Pertamina's plans for a $6 billion refinery joint venture in Cilacap in central Java. The two countries also signed 11 agreements that included a Saudi commitment to provide $1 billion of financing for economic development and cooperation to combat transnational crime such as people smuggling, terrorism and drug trafficking. The two leaders discussed possibilities including three oil refineries, a power plant and infrastructure such as roads, housing and sanitation. Aside from the two countries having a common faith, Saudi Arabia employs hundreds of thousands of Indonesians despite a government ban on sending domestic workers there following the execution of an Indonesian maid in 2011. King Salman also spent six of his nine days in Indonesia vacationing on the resort island of Bali, a predominantly Hindu part of the Indonesian archipelago.

Malaysia-North Korea: Tensions Widen
On March 2, the Malaysian Bernama news agency announced Malaysia is scrapping visa-free entry for North Koreans traveling into the country in the latest fallout from a deadly nerve agent attack on Kim Jong Nam, the estranged half-brother of North Korea's ruler at Kuala Lumpur airport. On March 13, Malaysia said talks were underway for the release of nine citizens stranded in North Korea by a travel ban, while its defence minister tried to ease anxieties among the public about the risks of angering an unpredictable nuclear-armed state. Angered by the Malaysian police identifying North Korean suspects and wanting to question others in the killing of Kim Jong Nam, including a diplomat at the embassy in Kuala Lumpur, North Korea slapped a travel ban on Malaysians leaving its borders, prompting tit-for-tat action by Malaysia.

Malaysia meanwhile also decided to expel North Korean Ambassador Kang Chol later Kang on March 11 for refusing to apologize for his denunciation of the probe into the killing of Kim Jong Nam at the airport, which is widely believed to have been orchestrated by North Korea. A statement issued by Malaysian Foreign Minister Anifah Aman said that Kang had been declared persona non grata and was "expected to leave Malaysia within 48 hours" of 6 pm, March 11. As per local Malaysian media reports, if the rift widens further, Malaysia may consider breaking off diplomatic relations with North Korea.

Myanmar Naval Delegation Visits India

A Myanmar Navy Delegation visited India in first week of March. The visit was primarily aimed at familiarizing the Myanmar naval officers with Indian Naval Meteorology and Oceanography (METOC) operational / training facilities and exploring opportunities for defence co-operation in the field. The officers visited the Indian Naval Meteorological and Analysis Center (INMAC), as well as the School of Naval Oceanology and Meteorology (SNOM), to get an understanding of the meteorological forecasting capabilities, as well as the training imparted on Oceanology and Meteorology by the Indian Navy. They also visited other training / simulator facilities at Kochi including Flight and Tactical Simulator, Water Survival Training Facility and other training schools as well as Hydrographic Survey Unit.

The delegation also called on the Chief of Staff, Southern Naval Command, Rear Admiral RJ Nadkarni, who conveyed to them that all assistance in terms of training and setting up of meteorological facilities for the Myanmar Navy. This would add to strengthening of India-Myanmar defence cooperation. India has been providing assistance to Myanmar military in areas of training, sale of defence equipment and systems. Earlier, Chief of Naval Staff, Admiral Sunil Lanba, had visited Myanmar in November 2016 for enhancing mutual defence ties.

Philippines-China: Benham Rise Waters

On March 13, Philippine President Rodrigo Duterte said he had agreed to allow Chinese surveillance ships into Filipino waters, contradicting his defence minister who described their presence as "very concerning". Duterte also told reporters he did not want to have a "fight" with China over Benham Rise - waters recognized by the United Nation as indisputably Philippine territory - partly because he wanted Chinese economic help. "They have no incursion because we have an agreement," Duterte told reporters when asked about the reported presence of Chinese surveillance ships at Benham Rise, an underwater landmass 250 kilometres (155 miles) off the east coast of the main island of Luzon. "Some people are just blowing it up. We previously agreed. It was a research ship. We were advised of it way ahead."

Duterte's comments come after his defense secretary, Delfin Lorenzana, said last week that Chinese surveillance ships had been seen in Benham Rise, which is believed to sit atop lucrative oil and gas deposits. "The very concerning thing is they have several service ships plying this area, staying in one area sometimes for a month as if doing nothing. But we believe they are actually surveying the seabed," Lorenzana said, "I have ordered the Navy that if they see this service ship this year, to start to accost them and drive them away." Lorenzana said China may be "looking for a place to put submarines". Duterte emphasized on March 13 press conference that the Philippines was set to enjoy billions of dollars in Chinese investments and grants, following his decision not to argue with China over another territorial dispute in the South China Sea.

In 2012, the United Nations Commission on the Limits of the Continental Shelf approved the Philippines' undisputed territorial claim to Benham Rise. Chinese foreign ministry spokesman GengShuang said last week that although the UN had ruled in the Philippines' favor, this did not mean Benham Rise was part of its territory. China and the Philippines have had a long-running dispute over competing claims in the South China Sea. Parts of that strategically vital waterway are also claimed by Brunei, Malaysia, Taiwan and Vietnam. Duterte's predecessor, Benigno Aquino, had forcefully challenged China in diplomatic and legal circles over the South China Sea dispute, leading to a sharp deterioration in bilateral relations. Duterte, who took office last year, has reversed that policy, preferring instead to placate China in return for hoped-for billions of dollars’ worth of investments and grants.

Singapore

Singapore to Restructure its Company Act for Easier Debt Restructuring and Greater Transparency

Singapore introduced wide ranging changes to its Companies Act on March 10, 2017 in the parliament. These new provisions were passed in the Singapore parliament which will facilitate easy restructuring for the troubled firms. These provisions will provide a greater flexibility for troubled firms which are in financial difficulties. These changes has drawn inspiration from the US Bankruptcy Code. The new code will enable Courts to order moratorium in favour of a company proposing or planning to propose a scheme of arrangement for debt restructuring. In a scheme of arrangement, a debt restructuring proposal is approved in a meeting by majority creditors that together hold 75 per cent of the company's debt. This new provision will also provide an automatic moratorium period upto 30 days and will give the moratorium a worldwide effect to prohibit Company’s overseas assets from being seized by creditors in the process.

These changes, first tabled for the public consultation in December, include the new requirement for companies registered here to maintain registers of their beneficial owner, which is a person or entity that has a significant interest or control over a company. Locally incorporated companies will also be asked to maintain the register of nominee directors, who must in turn disclose the particulars of their nominators. The transparency related amendments are expected to kick in by March 31, 2017, but a transitional period of 60 days from this date will be given.

Thailand

Thai Charter Schedule will be soon Declared

The Prime Minister Pryut Chan-o-cha on March 09, 2017 refused to declare the details of the draft constitution, as revised following His Majesty King Maha Vajiralongkorn’s observations will be released. His remarks came after a group of concerned citizens on Monday submitted a petition to the Ombudsman’s Office calling for scrutiny of the Cabinet, given that it had not published the revised draft despite it being completed. The act of alleged concealment could be deemed non-transparent and violating the code of ethics for governmental officials, the group said in its petition. He further said that Public should wait and that the content would be released soon along with along with a schedule of when the King would return an endorsed charter draft. Deputy Premier Wissanu Krea-ngam, who is in charge of the government’s legal affairs, said earlier that the contents would be revealed soon but he also did not say when.

The original charter draft, written by the junta-appointed Constitution Drafting Committee (CDC), was approved by a majority vote in August 2016. The King made observations on the charter draft a month later, with the government, the National Legislative Assembly (NLA) and the charter drafters amending the charter accordingly. Prayut returned the revised charter draft to the King on February 2017 for royal endorsement, a vital step for the constitution to be promulgated. The King has 90 days to decide whether to endorse the draft.

Elections to be Conducted after Coronation

The Finance Minister of Thailand Apisak Tantivorawong on March 09, 2017 assured that the election would be held in 2018 after the Royal cremation of late King Bhumibol Adulyadej and the coronation of HM King Maha Vajiralongkorn later this year. Political instability caused by prolonged political protests and the current military rule have deterred new investors who are not familiar with Thai politics from investing in the Kingdom. After the junta toppled the elected government in 2014, it promised to quickly return the country to democracy but so far the pledge has not been implemented.

The Thai Finance Minister informed that the government had planned reforms that would benefit the country in the long run as the next government could follow the 20-year strategy put in place by the present government. He further said that the government had plans to invest about 1.7 trillion in infrastructure over the next few years along. This marks the availability of liquidity which will facilitate a wide ranging expansion plan of state enterprises for 2017. However, many development projects had been delayed due to regulatory changes initiated by the government like five double-track rail projects will be delayed by three to six months. Government investment will drive economic growth this year as the country relies more on the domestic market than external factors. The external factors like slowdown of China’s economy, Brexit and the policies of US President Donald Trump have added high risks to the incoming investment in Thailand.

Indo-Pacific

Why is China Expanding its Marine Force?

China plans to increase the size of its marine corps from about 20,000 to 100,000 personnel to protect the nation’s maritime lifelines and its growing interests overseas, military insiders and experts have said. Some members would be stationed at ports China operates in Djibouti in the Horn of Africa and Gwadar in southwest Pakistan, they said.

Chinese overseas maritime interests have increased manifold in the past decade with the Chinese also commencing construction of their first overseas military base at Djibouti. Chinese military strategy also underwent a shift in focus from "offshore waters defense" to the combination of "offshore waters defense" with "open seas protection" in 2015. The Chinese military is currently undergoing major changes in structure and manning with a planned reduction of about 300,000 in the strength of the PLA. ‘Trans-theater mobility’ is one of the stated objectives intended to be achieved according to the White Paper put out by the Information Office of the State Council in May 2015. Safeguarding ‘China's security and interests in new domains’ as also safeguarding the ‘security of China's overseas interests’ is one of the main strategic tasks of the Chinese armed forces.

It is therefore an expected progression in the Chinese Armed Forces to develop new capabilities and enhance existing ones to meet the stated objectives and accomplish the designated roles for the various services. Moreover, re-trenching of 300,000 personnel is not an easy task while re-training to assimilate them into new roles is far easier and unlikely to cause any great disturbance. The Marines will provide the required mobility and flexibility to protect Chinese interests in various parts of the globe as also provide the required security as China goes about expanding its presence in this part of the world.

China’s Continuing Deep Sea Exploration

Jiaolong, China's manned submersible, on 28 Feb 17, descended to 3,117 meters below sea level while operating in the northwestern Indian Ocean. The operation marked the 38th ocean scientific expedition by a Chinese team, and Jiaolong's first deep-sea exploration of the year. Yu Hongjun, field commander of the mission, said the expedition fully tested the system, and collected a variety of samples including 4.2 kg of sulfide, 18.7 kg of basalt and 16 liters of deep-sea water. Han Xiqiu, one of the scientists on the expedition, said future dives will evaluate the resource potential of the area. In January this year, China became the world’s first country to acquire 10,000-meter-deep marine artificial seismic profile data, when Bottom Seismometers (OBS) self-developed by Institute of Geology and Geophysics under the Chinese Academy of Sciences (IGGCAS) were successfully deployed in the Challenger Deep, the deepest section of the Mariana Trench measured at more than 10 kilometers, according to IGGCAS.

Construction of a ‘deep-space station’ and development of deep-sea exploration are some of the main objectives of the 13th five-year plan approved in May 2016. China also has a contract for seabed exploration for polymetallic sulphides in the Southwest Indian Ridge as also for cobalt-rich ferromanganese crusts in the Western Pacific awarded by the International Seabed Authority. However, the north west Indian Ocean does not fall into the ambit of either of these contracts. While deep sea exploration can be undertaken anywhere subject to maritime safety, the choice of the extant area is of concern. Chinese submarines have operated in this area under the garb of ‘anti-piracy deployment’. A Chinese submarine was also reported at Gwadar in November last year. With the CPEC gaining momentum, the deployment of PLAN assets, especially submarines, is likely to increase. Utilisation of these deep sea exploration capabilities which also yield military information will enhance the operational effectiveness of PLAN deployments in this region. Consequently, such exploration is of serious concern to the Indian Navy which has been monitoring Chinese maritime activity very closely.

North Korea: Four Missile Tests

After tests on a new intermediate-range missile, Pukguksong-2, last month on February 12 to coincide with Abe-Trump summit in Florida, North Korea conducted another round of tests on March 6. Pyongyang had threatened to take “strong retaliatory measures” if the annual military drills between South Korea and the US began. The North Korean state-run Korean Central News Agency (KCNA) reported that the four ballistic missiles launched simultaneously by the Hwasong ballistic missile division were “tasked to strike the bases of the US imperialist aggressor forces in Japan.” Three of the four missiles flew about 600 miles over North Korea and landed in the sea, within Japan’s exclusive economic zone off the Oga Peninsula in Akita prefecture, home to a Japanese Self-Defence Forces base. The fourth fell just outside the zone.

While North Korea did not say what kind of missiles it had fired, analysts at the Middlebury Institute of International Studies in California said they were extended-range Scuds capable of flying more than 600 miles. As per the analysts since North Korea had tested these types of missiles before, the point of the launches was not to see if the rockets would fly, but to test how quickly the unit could set them up and deploy them. North Korea’s extended-range Scud is halfway between a traditional short-range Scud and the medium-range missile known as the Rodong. On March 7, the US and South Korea, said that they had started deploying the advanced antimissile battery called Terminal High Altitude Area Defence, or THAAD in South Korea, designed to protect the region against North Korean missiles.

South Korean Constitutional Court Upholds Park Geunhye's Impeachment

South Korea's Constitutional Court on March 10, 2017 has upheld a decision passed by the South Korean National Assembly to impeach President Park Geun-hye over alleged corruption. The unprecedented decision was unanimous, with all eight judges on the court voting to remove Park, the country's first female president, from office. South Koreans immediately took to the streets, with some groups protesting against the decision and others celebrating her removal from power.

Park becomes the first democratically elected leader of South Korea who is forced from the office, capping months of paralysis and turmoil in the political sphere of South Korea. The decision by the Court comes amid rising tensions between South Korea with China and North Korea. The alleged scandal has also landed the Samsung Vice Chairman Jay Y Lee in jail. This decision made way clear for the presidential elections which will be held within 60 days from the date of verdict. Due to this verdict Park lost her immunity as a President and could now face criminal charges over bribery, extortion and abuse of power in connection with allegations of conspiring with her friend, Choi Soon-sil. The special prosecutor also said Park was instrumental in blacklisting more than 9,000 artists, authors and movie industry professionals and excluding them from government assistance that constituted an abuse of power. Park had apologized several times for the scandal, but she rejected all allegations of wrongdoing when she submitted a written statement to the court’s hearing in February.

As this political saga which strangled the political arena of South Korea is over, South Korea can now push forward and press ahead to elect new leadership. The Central Bank is continuously monitoring the impact of the verdict and hold an emergency meeting on March 10 and ruled out any negative impact on market which rose after the ruling.

China’s Consistent Opposition to the Deployment of THAAD Batteries

China has consistently resisted the deployment of Terminal High Altitude Area Defense (THAAD) batteries in South Korea and has raised several security concerns about it. After Chinese Foreign Minister Wang had a bilateral meeting with his South Korean counterpart Yun Byung-se on the side lines of Munich Security Conference on February 18, 2017, the Chinese Ministry of Foreign Affairs once again protested strongly against the deployment of THAAD batteries. Chinese Foreign Ministry Spokesperson made remarks on March 07, 2017 in response to a question regarding the arrival of a part of the THAAD battery in the Republic of Korea (ROK), which began the process of deployment in the country's southeast region. He further emphasized that China will take necessary steps to maintain Chinese security interests and urged parties concerned to stop deployment and refrain from going too far along the wrong track. Again on March 08, 2017 Chinese Foreign Minister Wang Yi expressed concerns and said that South Korea is making a mistake in deploying the U.S. anti-missile defence system THAAD and urged Seoul to halt the deployment as it undermines Chinese Security.

The defence ministry of ROK has confirmed that two mobile launchers and a part of other equipment has arrived at Osan Air Base on March 06, 2017. It further confirmed that the THAAD system will be deployed in Seongju golf course. The processes include land provision to U.S. forces, the basic designing of the base, the evaluation of environmental effects and base construction. To accelerate the processes, the South Korean military reportedly planned to implement two or more procedures simultaneously.

The US Pacific Command in a statement on March 07, 2017 stated that the THAAD system will be deployed for the security of South Korea and to counter ongoing nuclear and ballistic missile tests from North Korea. Despite the oppositions and protest rallies, South Korea and the U.S. reportedly planned to complete the THAAD installation in one to two months and it will be operational as early as April 2017. The US insistence about THAAD in South Korea is aimed to protect the US reinforcement forces in times of emergency situations.
Japan

Japan Planning to Send Largest Warship to South China Sea

According to report by Reuters, Japan plans to dispatch its largest warship on a three-month tour through the South China Sea beginning in May, in its biggest show of naval force in the region since World War Two. China claims almost all the disputed waters and its growing military presence has fueled concern in Japan and the West, with the United States holding regular air and naval patrols to ensure freedom of navigation.

The ‘Izumo’ helicopter carrier, commissioned two years ago, will make stops in Singapore, Indonesia, the Philippines, Indonesia and Sri Lanka before joining the Malabar joint naval exercise with Indian and US naval vessels in the Indian Ocean in July. The 249 meter-long (816.93 ft) Izumo is as large as Japan's World War Two-era carriers and can operate up to nine helicopters. Japan has designated the Izumo as a destroyer because the constitution forbids the acquisition of offensive weapons. Based in Yokosuka, near to Tokyo, which is also home to the US Seventh Fleet's carrier, the Ronald Reagan, the Izumo's primary mission is anti-submarine warfare. Izumo will return to Japan in August. A spokesman for Japan's Maritime Self Defense Force declined to comment.

Japan does not have any claim to the waters but has a separate maritime dispute with China in the East China Sea. According to Reuters sources, Japan aims to also invite Philippine President Rodrigo Duterte, who has sought stronger ties with China while criticizing the alliance with the United States, to visit the Izumo when it visits Subic Bay in Philippines.

Japan's flag-flying operation comes as the United States under President Donald Trump appears to be taking a tougher line with China. Washington has criticized China's construction of man-made islands and a build-up of military facilities that it worries could be used to restrict free movement. Beijing in January this year had said it had "irrefutable" sovereignty over the disputed islands after the White House vowed to defend "international territories".

Abe Gets a Third Term as Party President

The ruling Liberal Democratic Party on March 5 decided to change its rules and allow the party president to serve up to three consecutive terms, or a total of nine years. That means Abe could seek a third term when his current term ends in September 2018. With the opposition parties struggling to increase support and with no serious threat within the LDP, Abe will have the luxury of deciding the optimal time to dissolve the Lower House and call a snap election.

While talks of constitutional revision have faded somewhat in light of low public enthusiasm for such a move, the LDP on March 5 revived the push by approving a document about future activities.“Specific steps would be taken toward initiating a proposal for amending the Constitution,” the document said. In addition, Abe spoke at the party convention and touched upon the fact that this year marks the 70th anniversary of the Constitution taking effect.“We must tackle the task of working on bettering the nation with an eye toward the next 70 years,” Abe said. “The LDP will take the lead in detailed discussions toward initiating a constitutional amendment.”

The postwar Constitution has never been amended. The ruling coalition of the LDP and junior partner Komeito currently control the two-thirds majority in both houses in the Diet to initiate a constitutional amendment. The term of Lower House members does not end until December 2018.

Saudi King Visit to Japan

King Salman bin Abdulaziz of Saudi Arabia and his large delegation began a four-day Japan visit on March 12, marking the first trip to the country by a Saudi king in 46 years since King Faisal's arrival in May 1971. The Saudi king was welcomed by Crown Prince Naruhito at Tokyo's Haneda airport. In September 2016, Deputy Crown Prince Mohammed bin Salman, visited Japan and agreed with Abe to work together on a set of reforms called "Vision 2030". The crown prince is also defense minister.

During their meeting, Prime Minister Shinzo Abe told King Salman that Japan wants to "vigorously advance its ties with Saudi Arabia, which is the linchpin of stability in the Middle East.” Under a "Japan-Saudi Vision 2030", the two leaders agreed to promote Japanese investment, research and manufacturing, through special economic zones. They also agreed to seek a possible share listing of Saudi Aramco, the state-run oil company that is being partially privatized, on the Tokyo Stock Exchange. The two countries also will cooperate in promoting renewable energy as well as seawater desalination by Japanese companies.

Although petroleum-exporting Saudi Arabia has the largest economy in the Middle East, its fiscal situation has worsened with the long slump in crude oil prices. In spring 2016, the nation compiled an economic reform plan to diversify its economy by the year 2030. Under the plan, the nation is seeking growth in industries such as manufacturing and services to replace the petroleum sector. Japan is hoping to support Saudi Arabia's reform efforts so Japanese businesses could join in such projects.

South Sudan Mission Scrapped

Japan decided on March 10 to withdraw Ground Self-Defense Force (GSDF) members from their UN peacekeeping operation in South Sudan after five years. The announcement came amid concern about the safety of the Japanese troops in South Sudan. Chief Cabinet Secretary Yoshihide Suga, however, denied that led to the decision. GSDF members were deployed to South Sudan starting in January 2012 to help build roads and take part in other activities. However, fierce fighting has broken out between rival factions affiliated with the current and previous presidents. Japanese opposition lawmakers and peace activists have accused the government of trying to cover up the worsening safety situation. The peacekeepers' daily log from last July, which the defense ministry initially said had been destroyed, described nearby clashes and concern about becoming embroiled in the fighting. Defense Minister Tomomi Inada has however, repeatedly refused to acknowledge any local combat action.

The team, which arrived in South Sudan in November, was Japan's first with an expanded mandate to use force if necessary to protect civilians and UN staff. The Japanese military's use of force is limited by the post-World War II Constitution. Abe said Japan would continue to assist South Sudan in other ways such as with food and humanitarian support, and will keep some personnel at the UN peacekeeping command office. Japan's earlier missions in South Sudan and other areas, including Golan Heights and Cambodia were limited to post-cease-fire assistance and noncombat roles.

China & Taiwan

Fifth session of 12th National People’s Congress

The fifth session of the highest institution of the country’s top legislature, National People’s Congress (NPC) took place from 5-15 March 2017, in Beijing. During his speech, Premier Li Keqiang covered important issues on various aspect of national and international developments. Primarily, he discussed: slashing the tax burden of businesses, cutting overcapacity, urbanisation, poverty reduction and elimination, supporting the real economy, infrastructure, national defence, economic globalisation and Hong Kong and Taiwan.

Amongst all issues, discussions on Chinese economy are the most important. Most of the themes discussed will give impetus to the ‘Belt and Road Initiative’ (BRI). In consonance with the continuation of “New Normal”, China has set up the growth rate of 6.5 per cent, with the goal of creating over 11 million urban jobs. This year’s deficit–to-GDP ratio is projected to be 3 per cent, with the fiscal deficit set at 2.38 trillion yuan, representing a year-on-year increase of 200 billion yuan. On the issue of defence and security, they have set a target of 7 per cent increase in its defence budget.

Additionally, relatively new issues such as: 5G mobile communication, artificial intelligence, digital economy, digital family, Hong Kong independence, list management system, national park system, new third board, online education, sponge city, were discussed. Moreover, QR code on the government work report also appeared this year.

China Increases its Defence Budget to 7 Percent

During the fifth session of the 12th National People’s Congress (NPC) in Beijing, China announced a 7 per cent rise in its defence budget. The military budget for this year will be 1.04 trillion yuan (USD 152 billion). China will spend 1.3 per cent of the country’s projected GDP in 2017. According to the People’s Daily, “The bulk of the defence budget will be spent on deepening national defence and military reforms, bolstering military and civilian integration, and improving the living, training and working conditions for service personnel at grassroots level.” The increase has come against the background of the slowest economic growth. This is a significant increase that will further consolidate China’s position as the second largest military spender in the world.

In 2015, China increased its defence budget by 10 per cent (USD 145 billion). As the budget was already touching double digit, much higher figures were expected in subsequent years. However, in 2016, China announced 7.6 per cent (USD 146 billion) increase in its defence budget. This was the lowest in six years. It is generally believed that there has always been discrepancy between China’s defence spending and China’s official budget. According to United States Department of Defence (DoD) annual report to the Congress on Military and Security Developments ‘Involving the People's Republic of China 2016’, China’s total military-related spending for 2015 exceeded USD 180 billion. However, the official budget for the same year was USD 145 billion.

Former Chinese Representative Reiterates its Position on Tawang

The former Chinese Special Representative on the boundary talks with India, Dai Bingguo has recently given an interview to the ‘China-India Dialogue’ magazine (published from China). He has said that “In order to resolve the India-China boundary dispute, New Delhi should cede the Tawang tract in Arunachal Pradesh”. Further, he said, “If the Indian side take care of China’s concern in the eastern sector of the border, the Chinese side will respond accordingly and address India’s concern elsewhere.” The present statement is reiteration of the Chinese position on Tawang.

India has made clear that there will be no major adjustment in the eastern sector and there can be no swap in areas consisting of settled population.

China Opens Second Airport in Tibet

China has operationalised the second largest airport terminal in Tibet, close to the Indian border, which will be able to handle 750,000 passengers and 3,000 of cargo annually by 2020. The new terminal, the sixth to be opened in Tibet, is part of Nyingchi Mainling Airport, close to Arunachal Pradesh. The airport will open new air routes to Xian, resume Beijing and increase round trip flight to Lhasa, Guangzhou, Kunming, Chongqing and Shenzhen. Overall, development of infrastructure in Tibet was discussed during the 12 the session of the NPC.

Premier Li Keqiang, has promised more infrastructure development in the region that will “improve local people’s livelihood” with an impetus to improve tourism, clean energy and ethnic medicines. Further, he said, “the country will strengthen support and funding for Tibet’s transportation and power- grid infrastructure.”

China’s ‘Anti-terror' Rallies in Xinjiang

In the past week, China has held two major anti-terror rallies in Urumqi, Xinjiang. The said rallies saw a sizeable number of troops being deployed in an attempt to portray China’s “all-out offensive” against the ongoing terrorism in the violence-stricken region. In line with this thought, similar rallies were also held in three other cities of Xinjiang – Hotan, Kashgar and Aksu. Xinjiang is seen as a restive region in China’s West and has witnessed outbreaks of violence over the years. In recent years, there have been number of violent incidence linked to Uyghur militant, both within Xinjiang and other parts of China.

Interestingly, about the same time when these rallies were being held, the Islamic State released a video which features militants from China’s Uyghur ethnic minority vowing to return home and “shed blood like rivers”. China has for years blamed exiled Uyghur “separatists” for a series of violent attacks in its Xinjiang region (which the Uyghur’s claim as their homeland).

China is gearing up for the 19th National Congress of the Communist Party of China and these anti-terror rallies are meant to show domestic and international audiences that the Party is in firm control of China in general and Xinjiang in particular.

China’s Stance on Taiwan and Hong Kong during the 12th National People’s Congress

During the fifth session of the 12th NPC, Premier Li Keqiang opposed Taiwanese “separatism”. He remarked, “We will resolutely oppose and contain separatist activities for Taiwan Independence.” “We will never tolerate any activity, in any form or name, which attempts to separate Taiwan from the motherland.” Later Foreign Minister Wang Yi, said there is no basis in international law for Taiwan to establish or maintain so called “diplomatic relations” with any country. “Since such relationships have no legitimacy, they will have no future.” In response to this development, the Mainland Affairs Council (MAC) of Taiwan said that the government’s policy to continue and promote peaceful and stable cross-strait development remain unchanged. Additionally, the MAC stressed on the issue that China should respect and understand Taiwan’s democracy.

The year 2017 is very important for Hong Kong as it marks the 20th anniversary of Hong Kong’s return to China. On Hong Kong, Premier Li said that the Hong Kong Independence moves would “lead nowhere”. “We will continue to implement, both to the letter and in spirit, the principle of ‘One Country, Two Systems’, under which the people of Hong Kong, the people of Macao govern Macao, and both regions enjoy high degree of autonomy.” Reportedly, in a closed door meeting, Zhang Dejiang, chairman of NPC told the Hong Kong deputies that Beijing is “entitled to ask questions” about the person chosen for the top job in Hong Kong. He also said that Beijing has the right to “step in” to Hong Kong’s leadership contest.

Taiwan launches Asia Pacific Industrial Cooperation (APIC)

In an endevour to promote its “New Southbound Policy”, Taiwan has launched Asia Pacific Industrial Cooperation (APIC). The organisation will be headed by Economic Minister Lee Chih-kung and Rock Hsu (Chairman of the Chinese National Federation of Industries). It is essentially to promote trade and business between Taiwan and six designated countries, namely, Vietnam, Malaysia, Thailand, Indonesia, India and the Philippines, each headed by a recognised industrial leader. In November 2016, a special task force was created to help promote “New Southbound Policy”, with an emphasis on using existing city-to-city relations to encourage bilateral visits and economic cooperation agreements.

The “New Southbound Policy” is a crucial part of Taiwan’s economic and trade strategy, which aims to redefine Taiwan’s important role in Asia’s development, identify a new driving force for a new stage of economic development and create future value. The policy is targeted to reduce Taiwan’s dependence on China and diversify its trade.