The Week in Asia – January 2019

In The Week in Asia, Asia House Advisory takes a look at the top five developments in Asia this week affecting trade, investment and public policy.

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Friday 25 January 2019

This week, evidence of the effects of the US-China trade war became clear, and regional election campaigns are shaping up.

1. Thai elections declared

Thailand’s military junta has announced that national elections will be held on 24 March 2019. It will be the first elections in eight years and will end the military rule that has been in place since the 2014 coup that took power from a Pheu Thai Party-led government. This is one month later than initially scheduled. It is still unknown when the election results will be announced, however the current government has assured investors that regulations and incentives enacted under their rule related to foreign investment will remain in place.

2. China’s slowest growth since 1990 confirmed

Data released by China’s National Bureau of Statistics this week confirmed the nation’s slowing pace of growth, at 6.6 percent growth for 2018. The cooling growth is related to China’s transition away from an export-led economy towards domestic consumption-led growth – what Beijing would refer to as a focus on quality rather than quantity and an attempt to create a modern, sustainable economy. Slowing Chinese economic growth, however, is one of the biggest risks to the global economy in 2019, as discussed at this weeks World Economic Forum meeting in Davos.

3. Priyanka Gandhi enters politics to reinvigorate India’s opposition party 

Priyanka Gandhi – whose father, grandmother and great-grandfather were all Prime Ministers of India – was appointed the Congress Party General Secretary in charge of eastern Uttar Pradesh, widely considered India’s most politically important state. Gandhi’s brother, Rahul Gandhi, is Prime Minister Modi’s main opposition for the upcoming elections, likely to be held in May. Priyanka Gandhi’s appointment is seen as a move by the Congress party to attempt to inject momentum into the party ahead of the elections, after it suffered an emphatic loss in 2014.

4. South Korean economic growth slows

Despite beating expectations in the fourth quarter, South Korea’s economic growth for 2018 was recorded at 2.7 per cent, the slowest growth for six years. This reflected both the global economic slowdown and South Korea’s exposure to China, which is being impacted by the ongoing US-China trade tensions. Due to this, the outlook for next year doesn’t look promising as weakness in exports are expected to continue.

5. ASEAN Secretary-General visits the UK and confirms importance of post-Brexit relationship

ASEAN Secretary-General Dato Lim Jock Hoi’s two-day visit to the UK resulted in a confirmation of the strong commitment of both sides to forming a stronger relationship. Future co-operation is likely to focus on key sectors, including fintech, green finance, the development of smart cities, cyber security, education and defence. UK investment throughout Southeast Asia exceeds investment in India and China and its importance is increasing as Britain looks towards post-Brexit opportunities. Cooperation between the EU and Southeast Asia also ramped up this week, as EU Trade Committee MEPs gave the green light to progress with the EU-Singapore free trade agreement.

NEXT WEEK IN ASIA 

Looking ahead to next week, there are a couple of events to look out for:

A Chinese delegation will visit the US for trade talks, after Vice-Premier Liu He accepts an invitation to visit Washington. He is expected to meet US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin. It is hoped the talks will lead to a breakthrough in the US-China Trade War, which has been in a state of temporary truce since the G20 summit in December last year.

The official blueprint for China’s ‘Greater Bay Area’ is due to be released soon. China’s plan is for the development to become an innovation and technology hub to rival Silicon Valley. The ambitious project forms one of the main centres of China’s infrastructure and economic development plans and includes Hong Kong, Macau and Guangdong. It is also likely to have a large impact on the relationship between Hong Kong and China, as Hong Kong is integrated further into China’s mainland economy.

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Friday 18 January 2019

This week saw domestic and international tensions continue to play out across Asia.

1. Indonesia presidential debates

The first of five live Indonesia presidential debates between incumbent Jokowi, his running mate Ma’ruf Amin, and third time challenger Prabowo and his running mate Sandiaga Uno took place on Thursday evening (17 January). The candidates debated over issues related to law, human rights, corruption and terrorism – all hot button issues in the populous democracy still attempting to rid itself of corruption, radicalism and create meaningful equality. The candidates are vying for the votes of approximately 10-15 per cent of the population that are undecided. So far it hasn’t impacted the polls much, where Jokowi remains in the lead with the most recent surveys giving him 47.7-54.9 per cent of the votes, and Prabowo getting 30.6-35.5 per cent.

2. Thai elections postponed by a month

Thailand’s military junta has postponed scheduled elections again, saying the move is necessary so elections do not clash with preparations for the coronation of the new King, Maha Vajiralongkorn, in May. There was no objection from the two largest opposition political parties, but the pro-election movement is still calling on the government to issue a Royal Decree on the election, which would confirm it is going ahead. The junta had last month lifted a ban on political activities, allowing political parties to campaign. The postponed date is still to be confirmed, however the ruling junta prefers 24 March.

3. China’s Vice-Premier to visit US following preparation talks in Beijing

China’s Commerce Ministry announced that Vice-Premier and ‘economic tsar’ Liu He will visit the US at the end of January for another round of trade negotiations with the Trump administration, most likely with US Trade Representative Robert Lighthizer and US Treasury Secretary Steven Mnuchin. Last week lower level negotiations were held in Beijing, the first talks since the temporary truce announced at the G20 summit in December. Discussions ran over an extended three-day period, indicating that talks went well, however nothing concrete has been announced. The US is still seeking large-scale structural changes in China’s economy, so prospects for a breakthrough remain muted.

4. Asian governments prepare for Brexit

After Theresa May’s Brexit deal was decisively voted down in the UK parliament, reactions from Asian governments highlight the risks and opportunities in Brexit. Japan, which has billions invested in the UK through more than 1,000 companies, said that it would support its companies in order to minimise the impact of Brexit. South Korea, who has a FTA with the EU, will continue to look into the possibility of a similar arrangement with the UK. Similarly, Australian companies have taken Brexit contingency measures and the government is looking to set up a trade working group for free trade discussions with the UK.

5. Huawei faces increased resistance in the West

Following tensions arising from the arrest of Huawei CFO Meng Wanzhou in Vancouver last month, Chinese ambassador to Canada warned there would be ‘repercussions’ if Huawei was banned from Canada. The US has been pressuring allies to halt contracts with Huawei amid allegations of spying and corporate espionage. A number of countries have done so, with Germany just announcing that they are considering a ban.

NEXT WEEK IN ASIA

Looking ahead to next week, there are a couple of events to watch out for:

The World Economic Forum’s annual meeting takes place between 22 and 25 January in Davos, Switzerland. Trump, who stole the headlines at last year’s event, has cancelled US participation due to the Government’s partial shut-down. Theresa May has also cancelled her trip due to Brexit negotiations and Emmanuel Macron is staying in Paris to deal with the ‘yellow vest’ protesters. Nevertheless, discussions on free trade, global growth slowdown and trade tensions are likely to dominate discussions.

High level Malaysia and Singapore ministers will meet over airspace and maritime tensions.  Tensions rose between the two nations at the beginning of this week over airspace management and territorial water disputes. However, Malaysia’s Foreign Minister said communication with Singapore remained open and discussions over the issues are ongoing. Simmering tensions over the issues escalated in December, but officials insist relations are ‘still good’.

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