Driving commercial and political engagement between Asia, the Middle East and Europe
Driving commercial and political engagement between Asia, the Middle East and Europe
Driving commercial and political engagement between Asia, the Middle East and Europe
Asia House Advisory takes a look at the top developments in Asia this week affecting trade, investment and public policy.
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THURSDAY 24 DECEMBER 2020
The next edition of the Week in Asia will be sent on 8 January 2021.
China launches antitrust investigation into Alibaba
China’s State Administration of Market Regulation this week announced an antitrust investigation into Alibaba, the country’s biggest technology company. The move comes less than a month after authorities stopped Alibaba’s sister company Ant’s planned US$37 billion initial public offering. The investigation is the first of its kind into a large Chinese company. The market regulator is investigating suspected monopoly practices. China has recently increased scrutiny of the country’s ‘big tech’ firms, particularly in e-commerce and fintech. Alibaba has said it will cooperate with regulators on the investigation and that business operations remain normal.
Indonesia sees major cabinet reshuffle
Indonesian President Joko Widodo this week held a major cabinet reshuffle, replacing six ministers on Tuesday. Among the positions reshuffled include the health ministry, the social affairs ministry, and the maritime affairs and fisheries ministry. Former vice-presidential candidate Sandiaga Uno has been appointed Tourism Minister; Budi Gunadi Sadikin, who was previously Vice Minister for State-Owned Enterprises and head of the country’s COVID-19 economy recovery task force, has been appointed Health Minister. Indonesia’s Ambassador to the US, Muhammad Lutfi, has become Minister of Trade. The move has been widely seen as an attempt to regain public trust, following a number of corruption scandals and arrests, and to help steer the country out of the COVID-19 pandemic.
Update on EU-China investment deal
After seven years of negotiation, the EU and China may soon complete, in principle, an agreement on the Comprehensive Agreement on Investment (CAI) and finalise it before the end of this year. If signed, the CAI will be another major achievement for China in carving out an economic space for itself with the EU. The CAI would improve access to the Chinese market for European companies and offer more protection for investors. However, chances of a deal being completed this year seem to be diminishing as opposition from both within the EU and the US grow on the fact that the agreement does not adequately address issues around forced labour.
NEXT WEEK IN ASIA
Japan to lay out green growth strategy: On 25 December, Japan will lay out a green growth strategy that will include a goal to replace petrol-powered vehicles with electric cars by around 2030. This comes following Prime Minister Yoshihide Suga’s pledge of carbon neutrality by 2050.
COVID-19: ASIA ROUND UP
HONG KONG: Hong Kong Chief Executive Carrie Lam has said that residents will be able to choose which COVID-19 vaccine to take, after the government reached deals with AstraZeneca, Sinovac, and Pfizer-BioNTech.
INDIA: India has announced its intention to mass-produce enough doses of COVID-19 vaccines to help the global community fight the pandemic.
SOUTH KOREA: South Korea has signed deal with Pfizer and Janssen to import over 16 million COVID-19 vaccines in total.
UAE: The UAE will provide COVID-19 vaccines free of charge to all citizens and residents.
China, Indonesia, Japan, South Korea, and the Philippines, among others have all banned travellers from the UK due to concerns over a new strain of COVID-19.
These COVID-19 insights are taken from Asia House Advisory’s focused monitoring service, one of the ways in which Asia House is providing analysis on economic and public health policy measures taken by governments across Asia and the Middle East. Please reach out to Ed Ratcliffe, Head of Advisory, at ed.ratcliffe@asiahouse.co.uk for further details on this and our other advisory services.
Asia House Advisory helps organisations understand new operating environments and meet business-critical challenges. Find out more.
FRIDAY 18 DECEMBER 2020
Progress made on EU-China investment deal
Talks on an EU-China investment deal gained momentum this week, with China’s ambassador to the EU re-affirming hopes for an agreement by the end of the year. Officials reported progress on issues including level playing field provisions, but discussions were ongoing on market access and sustainable development. A deal would boost market access for European firms, especially in manufacturing, financial services, real estate, construction, and some services, by addressing obstacles such as joint venture requirements and investment bans.
Australia takes China to the WTO as tensions rise
Australia announced that it will ask the WTO to investigate trade sanctions recently imposed by China on major Australian exports. Canberra will ask the WTO to investigate 80 per cent tariffs on barley exports, and may appeal other sanctions on coal, wine, beef, timber, and lobsters imposed by Beijing in November. China maintains that Australian barley is sold below cost in China due to domestic subsidies by the Australian government. It remains unclear whether China has formally banned Australian coal imports. It is alleged that the sanctions are a political manoeuvre in response to criticism of China’s foreign policy and handling of the COVID-19 pandemic, and the banning of Chinese tech from Australia’s 5G network. China and Australia signed a trade deal in 2015, but diplomatic tensions have escalated this year.
US labels Vietnam currency manipulator and adds India, Taiwan, and Thailand to watch-list
The US has targeted several Asian economies this week over claims of currency manipulation. In its most recent report released on December 16, the US Treasury added India, Taiwan and Thailand to a list of countries being closely monitored. They join China, Japan, Korea, Singapore and Malaysia on the list. Vietnam has been moved up the list, and is now designated as a currency manipulator – a long-threatened move by the Trump administration, which has complained of the ballooning US trade deficit with Vietnam. The designation could lead to punitive measures, although it is widely thought that the incoming Biden administration may take a less aggressive stance.
Japan announces fund for ASEAN smart cities
The Japanese government has announced a US$2.4bn fund for ‘smart city’ projects in Southeast Asia. The fund will support the role of Japanese companies in infrastructure and technology developments in ASEAN. Japanese firms are up against competition from Chinese, Korean and western rivals. Japan has asked 26 cities across ASEAN to present plans for smart city developments by the end of the year. South Korea announced a similar support package earlier in 2020, while China is involved in infrastructure and technology projects across the region though the Belt and Road Initiative and other programmes.
Major indices drop Chinese military-connected companies
Following the ban on US investors from transacting shares in companies with ties to the Chinese military, major index provider MSCI will drop seven companies from its indices in early January. MSCI joins other index groups including FTSE Russell in taking such measures. An executive order issued by President Trump in mid-November banned new transactions in US-listed shares of business identified by the Pentagon as having ties to the Chinese military. This includes construction companies, technology manufacturers, and surveillance camera company Hikvision which has been implicated in security operations in Xinjiang. This month US lawmakers sent letters to tech firms Intel and Nvidia following reports of their chips being used in surveillance in Xinjiang.
COVID-19: ASIA ROUND UP
CHINA: China has confirmed it will buy 100 million doses of the Pfizer-BioNTech vaccine next year. A WHO team investigating the origins of COVID will arrive in China in January.
HONG KONG: The government has secured 15 million doses of vaccine from China’s Sinovac and Pfizer-BioNTech, with one million doses to be delivered in January 2021.
SOUTH KOREA: Daily cases exceeded a February peak despite tightened social distancing measures. The government has signed deals with AstraZeneca, Pfizer, Modern and J&J for vaccines.
SINGAPORE: Singapore has approved the Pfizer-BioNTech COVID-19 vaccine, and the country plans to open travel for high value business.
AUSTRALIA & NEW ZEALAND: New Zealand and Australia will launch a ‘Trans-Tasman’ travel bubble in early 2021 if both countries can contain the virus. New Zealand has also announced that it has secured enough vaccines to cover its population and those of neighbouring islands.
SAUDI ARABIA: Saudis travelling to the UK are no longer required to quarantine after the UK government added KSA to the UK exemption list.
UAE: Abu Dhabi started COVID-19 vaccinations days after health officials approved the jab by Chinese manufacturer Sinopharm.
VIETNAM: Vietnamese company Nanogen Pharmaceutical Biotechnology is proceeding with clinical trials of a COVID-19 vaccine.
These COVID-19 insights are taken from Asia House Advisory’s focused monitoring service, one of the ways in which Asia House is providing analysis on economic and public health policy measures taken by governments across Asia and the Middle East. Please reach out to Ed Ratcliffe, Head of Advisory, at ed.ratcliffe@asiahouse.co.uk for further details on this and our other advisory services.
Asia House Advisory helps organisations understand new operating environments and meet business-critical challenges. Find out more.
FRIDAY 11 DECEMBER 2020
UK signs post-Brexit free trade agreements with Singapore and Vietnam
The UK this week signed free trade agreements (FTAs) with Singapore and Vietnam. The Singapore FTA largely replicates the existing EU-Singapore FTA, in which 84 per cent of tariffs that apply to Singapore exports to the UK are exempted, with the balance to be removed by the end of 2024. The FTA with Vietnam sees 99 per cent of tariffs between the two countries eliminated after seven years. The FTAs are the first the UK has struck with ASEAN countries, and UK International Trade Secretary Liz Truss has said they are “part of a much wider strategic investment for the UK” which takes the UK a step closer to joining Singapore and Vietnam in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). This week’s deals, along with the recent FTA signed with Japan, may help lay the groundwork for the UK’s accession to the CPTPP.
Chinese state investors sound alarm on defaults
A series of high-profile defaults in or involving state-owned companies in China has jolted the market and rattled investors. The issue has raised concern among investors globally, as Chinese state-owned companies, traditionally seen as a ‘safe pick’, start to default on debt. State firms defaulted on a record US$6.1 billion worth of bonds between January and October 2020. The problem has worsened in recent weeks, with major companies, including BMW’s Chinese partner Brilliance Auto Group, smartphone chip maker Tsinghua Unigroup, and Yongcheng Coal and Electricity, all declaring bankruptcy or defaulting on loans. In response, bond prices have plummeted and interest rates have spiked. Given how important the success of the state-owned sector is to the economy, the spate of defaults could seriously impact China’s continued recovery and hinder global economic growth.
ADB forecasts rapid growth for China and India
The Asian Development Bank (ADB) published its final update for the year in its Asian Development Outlook, forecasting a rapid expansion for India and China next year. China is expected to grow 2.1 per cent this year, up from a 1.8 per cent growth forecast in September and is expected to grow 7.7 per cent next year. India is likely to contract eight per cent this year, before rebounding to eight per cent growth in 2021. Overall, the ADB predicts that developing Asia’s first economic contraction in nearly 60 years will be less severe than originally forecast, largely due to China’s faster-than-expected recovery from the COVID-19 pandemic. Regional GDP is now predicted to shrink 0.4 per cent in 2020.
WTO Chief Economist Bob Koopman shared insights on the prospects for global growth during the Asia House Global Trade Dialogue this week. Read more.
Katherine Tai chosen as next US Trade Representative
Incoming US President Joe Biden has tapped Katherine Tai, a Mandarin-speaker with considerable China experience, as the next US Trade Representative (USTR). Tai has past experience as chief counsel for China trade enforcement, and in litigating American disputes against Beijing at the World Trade Organization. The position of USTR has risen in profile in recent years, as trade tensions with China have escalated. Tai is currently the Democrat’s chief trade counsel to the House Committee on Ways and Means. She also served as the staff lead on the Trans-Pacific Partnership. Tai’s past experience will help her to hit the ground running on key priorities for the Biden administration, which could include exploring accession to the CPTPP.
The potential impact of the Biden administration on US-China relations was discussed at the Asia House Global Trade Dialogue this week. Read more.
Indonesia holds regional elections across nine provinces
More than 100 million Indonesian voters in nine provinces, 37 cities, and 224 districts headed to the polls on Wednesday to elect governors, mayors, and district heads. The regional elections were delayed from September in light of the COVID-19 pandemic. Several notable entrants to Indonesian politics ran for key regions this election, including President Joko Widodo’s eldest son, Gibran Rakabuming Raka, who is set to become the new mayor of Solo – the position that propelled his father, Widodo, onto the national political stage. Widodo’s son-in-law Bobby Nasution is projected to win the mayoral race in Medan, North Sumatra. Official results for all elections are due by 15 December. Though Widodo rose to power as a ‘man of the people’, many are questioning whether he is now trying to build his own political family and become more entrenched in Indonesian politics.
NEXT WEEK IN ASIA
British Foreign Secretary Dominic Raab to visit India: Dominic Raab will begin a two day visit to India from 16 December, which is expected to focus on bilateral trade and security. Raab and Indian Foreign Minister Subrahmanyam Jaishankar are expected to review progress made on an effort to draw up a ’10-year roadmap’ for a ‘quantum jump’ in the relationship between the two countries.
Central banks in China, Japan, Taiwan, Indonesia, and the Philippines to meet: Central banks across the region are expected to meet next week, but all are expected to leave rates unchanged.
COVID-19: ASIA ROUND UP
HONG KONG: Hong Kong has banned dining in at restaurants after 6pm to curb a rise in COVID-19 cases. The government will also study additional relief measures for those affected by the latest restrictions.
INDIA: India’s federal Health Secretary Rajesh Bhushan says the government’s regulator could grant a license to some developers of COVID-19 vaccines in the next few weeks.
JAPAN: Japan approved another US$3.7 billion to fight the pandemic, in addition to the US$706 billion stimulus package announced this week by President Yoshihide Suga. The country will buy about 10,000 deep freezers to store COVID-19 vaccines.
SOUTH KOREA: South Korea has signed deals with four companies as part of a programme that will provide COVID-19 vaccines for 44 million people.
AUSTRALIA: Australia halted the production of a domestic vaccine after trails showed it could interfere with HIV diagnosis.
SAUDI ARABIA: Saudi Arabia’s health authorities have registered the Pfizer-BioNTech COVID-19 vaccine for import and use. This clears the way for import and inoculation procedures to begin.
These COVID-19 insights are taken from Asia House Advisory’s focused monitoring service, one of the ways in which Asia House is providing analysis on economic and public health policy measures taken by governments across Asia and the Middle East. Please reach out to Ed Ratcliffe, Head of Advisory, at ed.ratcliffe@asiahouse.co.uk for further details on this and our other advisory services.
FRIDAY 4 DECEMBER 2020
Huawei signs 5G deal in Indonesia
Huawei has entered into an agreement with Indonesia to develop talent in 5G technology and related fields as the government seeks to boost skills for the digital age. Huawei will support training for 100,000 people to become proficient in digital technologies, and will also provide technological services for Indosat Ooredoo, Indonesia’s second-largest telecommunications company. European businesses Ericsson and Nokia are also conducting tests for 5G networks in Indonesia. The move comes as many western countries – including the US and the UK – have banned or capped Huawei’s involvement in 5G development. Southeast Asia and other emerging markets have become a battleground for US-China technology and geopolitical tensions, and the move – in addition to the greater flow of Chinese tech investment into Indonesia – could reflect the direction countries such as Indonesia are moving in.
GO-JEK founder and Indonesian Minister of Education and Culture Nadiem Makarim will be discussing digital skills and Indonesia’s rapidly growing tech economy at the Asia House Global Trade Dialogue this coming Monday, 7 December. REGISTER NOW.
New US legislation toughens stance on Chinese companies
The US House of Representatives on Wednesday passed new legislation – the Holding Foreign Companies Accountable Act – that could force Chinese businesses to delist from American exchanges, unless they meet all US accounting rules. The new legislation, which President Trump is expected to sign in the upcoming days, could affect companies like Alibaba and China Telecom. The new rulings will require Chinese companies to give the US Public Accounting Oversight Board access to audited accounts, which is currently prohibited by Beijing. Listed companies may also have to prove that they are not controlled by a foreign government. The legislation is part of a broader push in the US to take a stronger stance against China in key economic areas, including technology and supply chains. China has similarly this week implemented its export control law, which will strengthen the government’s control over the flow of goods, technology, and services, and aims to safeguard national interest against foreign trade pressure. However, Chinese companies – including state-backed ones – are continuing to invest in US technology firms, despite increasing restrictions.
Malaysian parliament continues to debate 2021 Supply Bill
Malaysia’s 2021 budget – the Supply Bill 2021 – was passed last Thursday at the policy stage, and this week is being debated at the committee stage, where budgets for each ministry are being scrutinised. Debate at the committee stage will continue until 15 December. The vote on next year’s budget has been widely viewed as a confidence vote on Prime Minister Muhyiddin Yassin and his government. Malaysia has in the last months seen political turmoil, coming after Yassin’s government took over from the previous Pakatan Harapan party in March. Yassin’s Perikatan Nasional (PN) coalition holds a slim majority over the opposition. This budget is the largest budget ever tabled in Malaysia and was the first in which opposition members were consulted by the government in the run up to its delivery in parliament.
READ Asia House Advisory’s new Malaysia Outlook briefing, which explores the country’s political and economic uncertainty and the implications for investment. Charles Hay, British High Commissioner to Malaysia, will also provide the view from Kuala Lumpur when he briefs Asia House Corporate Members next week.
Australian federal government gets ‘veto power’ on foreign deals
Australia’s parliament on Thursday passed legislation that gives the federal government ‘veto’ power on any agreements that state governments may make with a foreign country. Though Australian Prime Minister Scott Morrison has stressed that the new law is not aimed at China, many anticipate that this, in addition to other actions this week, will further stress the bilateral relationship. China-Australia relations are likely to further deteriorate, with both countries imposing further import and export restrictions on each other in recent weeks.
Key Hong Kong activists receive jail sentences
Hong Kong pro-democracy activists Joshua Wong, Agnes Chow, and Ivan Lam were this week convicted and sentenced to jail time after pleading guilty to charges related to last year’s pro-democracy protests. Hong Kong media mogul and public critic Jimmy Lai has also been denied bail, and will remain in custody for at least another four months. He has been accused of using business premises for uses other than specified under the terms of its lease. These high-profile convictions come against a backdrop of pro-democracy protests and the passage and implementation of a controversial national security law in Hong Kong. Four pro-democracy lawmakers were disqualified from Hong Kong’s legislative assembly in November; the rest of their pro-democracy colleagues resigned in protest.
NEXT WEEK IN ASIA
Indonesia local elections: Indonesia will hold regional elections on 9 December across 270 regions. The elections will see some important ‘up and comers’ competing for key posts, including President Joko Widodo’s son, Gibran Rakabuming Raka, who is aiming to secure the mayorship in Surakarta, Central Java.
Japan to release Q3 GDP estimate: Japan will release revised Q3 GDP estimates, as well as other growth indicators, including labour earnings, household spending, and current account numbers.
COVID-19: ASIA ROUND UP
INDIA: The government will allow domestic air carriers to step up operations to 80 per cent of pre-COVID-19 capacity. International commercial air services remain suspended until 31 December.
JAPAN: Parliament passed a law to cover the costs of COVID-19 vaccinations.
AUSTRALIA: The economy grew 3.3 per cent in the July to September quarter.
PHILIPPINES: The unemployment rate fell to 8.7 per cent in October, from 10 per cent in July. President Rodrigo Duterte issued an executive order granting the Food and Drug Administration the power to clear COVID-19 drugs and vaccines for emergency use.
These COVID-19 insights are taken from Asia House Advisory’s focused monitoring service, one of the ways in which Asia House is providing analysis on economic and public health policy measures taken by governments across Asia and the Middle East. Please reach out to Ed Ratcliffe, Head of Advisory, at ed.ratcliffe@asiahouse.co.uk for further details on this and our other advisory services.
Asia House Advisory helps organisations understand new operating environments and meet business-critical challenges. Find out more.
