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    The Week in Asia

    Published On: 20 December 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 20 December 2019


    US tech groups denounce Trump administration’s anti-Huawei push

    US technology companies have this week rebuffed a request from the Trump administration to stop sourcing supplies from some Chinese companies. The US State Department has asked telecommunications carriers and chipmakers to agree to a set of principles that would preclude them from buying from companies that could have broken sanctions, or whose domestic intelligence agencies could have accessed data – which would include companies such as Huawei. However, US companies fear that signing up to such principles could open them up to being sued on antitrust grounds. The refusal of big companies such as AT&T and Verizon to join such schemes is a signal of wider pushback from the US business community against the US government’s anti-China stance.

    Citizenship bill sparks protests across India

    Following the passage of a controversial citizenship bill in India which offers Hindus and other non-Muslim immigrants fleeing persecution fast-tracked citizenship, widespread protests have broken out across the country this week. The bill, passed by parliament last week, has been widely criticised as going against India’s foundation as a secular country, and has also been strongly condemned internationally – including calls for sanctions to be placed against Amit Shah, the country’s Home Minister. Prime Minister Narendra Modi has staunchly defended the bill, but opposition leaders have seized the occasion to organise protests against the Modi administration more generally. The Supreme Court is expected to hear petitions regarding the constitutionality of the law in the coming days.

    Hong Kong protests trigger US$5 billion fund outflow

    The anti-government protests this year in Hong Kong have prompted investors to pull around US$5 billion from Hong Kong this year alone. This is equivalent to 1.25 per cent of the city’s GDP. Given the widespread and continued nature of the protests, Hong Kong’s economy has suffered, particularly its financial sector. The presence of large global banks in the city and Hong Kong’s position as a key global financial centre mean that this outflow may have implications for global financial stability. Combined with the impact of the US-China trade war, Hong Kong has seen downward pressure in its financial system and economic stability.

    EU-China investment treaty talks in jeopardy

    The outlook is less than positive for the EU-China investment treaty, originally planned to be completed by the end of 2020. European Commission Director-General for Trade, Sabine Weyand, has said that talks are moving too slowly, and has urged more political commitment from Beijing. Though the two sides are committed to negotiations, with aims for its completion next year, there has been little tangible progress. The investment treaty has however remained a priority for the EU, as it will allow greater access to the Chinese market for European investors and businesses. Though the EU and China are expected to make new rounds of offers this week, it is unlikely that they will lead to any significant progress in the negotiations.

    Indonesia files lawsuit at WTO against the EU on palm oil

    The Indonesian government this week filed a lawsuit at the World Trade Organization against the EU over the bloc’s stance on palm oil. The European Commission recently concluded that palm oil causes deforestation and is unsustainable. The decision could mean that palm-based diesel in fuel would need to be phased out by 2030 within the EU. This has heightened trade tensions, with Indonesia now investigating subsidies on dairy imports from the EU. Indonesia has also stated that it is prepared to walk away from negotiations on a comprehensive economic trade agreement if the ban on palm oil was upheld. Palm oil continues to be one of Indonesia’s biggest exports, but controversies about sustainability issues in the industry in Indonesia are likely to continue to cause tensions with trade partners such as the EU.


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    Friday 13 December 2019


    India proposes its first major data protection law

    A bill on personal data protection was introduced to the Indian parliament on Wednesday, the first of its kind in the country. The legislation would restrict how companies can manage sensitive information while giving government authorities powers to access such data. Privacy advocates have spoken out against the bill, arguing that it is a step back for protection following the 2017 Supreme Court ruling that all Indians had a fundamental right to privacy. There has, however, been little clarity on the role and reach of individuals, corporations, and government over data. The bill is unlikely to pass during the current parliamentary session but is expected to become a key issue during next year’s session. The bill represents the first major proposal in India on the use and control of citizens’ personal data.

    China aims for six per cent economic growth in 2020

    China’s top leadership met for the central Economic Work Conference this week to lay down priorities for economic policy in 2020. While details on targets for fiscal deficits, inflation and other key metrics are yet to be released at legislative meetings early next year, targets for gross domestic product expansion will be set at around six per cent. Such a target will give policymakers flexibility to acknowledge the slowdown in growth while maintaining their goal of doubling output this decade. Chinese officials face a tough combination of slowing growth and rising inflation, along with continuing trade tensions with the US. Given this, other economic targets are likely to be modest in a bid to accommodate these changing global economic trends.

    China debuts biggest IPO in more than four years

    Postal Savings Bank of China (PSBC) launched its IPO on the Shanghai market this week to a lukewarm reception. The IPO was China’s biggest in more than four years, but souring sentiment towards the country’s banking sector dampened response to the IPO. PSBC is China’s fifth-largest commercial lender but has faced low demand for an equity offering in both of its listings – first in Hong Kong in 2016 and now in Shanghai. This is due partly to lower investor confidence in China’s banking sector, particularly after the government takeover and bailout of regional banks such as Baoshang Bank, Bank of Jinzhou, and Hengfeng Bank. PSBC’s lacklustre debut may reflect wider global sentiments on investor confidence in China’s banking and related sectors.

    Indonesia’s forest fires cost country at least US$ 5.2 billion in 2019

     The World Bank this week estimated that the damage and economic loss from forest fires in Indonesia this year total at least US$ 5.2 billion – equivalent to 0.5 per cent of Indonesia’s GDP. The forest and land fires, and resulting haze, led to significant economic impact – including US$ 5 billion in losses from affected economic activities related to the sector. Indonesia has historically experienced issues from forest fires due to their prevalence as a cost-effective way to prepare land for cultivation. The practice is controversial, not least for its climate impact; this year, it is estimated that forest fires in Indonesia emitted 720 megatonnes of CO2. Though more and more companies are committing to cleaner practices, including on forest preservation and restoration, environmental concerns remain a big issue for many Indonesian corporations operating globally.

    Saudi Aramco lists on local stock exchange as world’s largest IPO

    Saudi Aramco listed 1.5 per cent of its shares on Riyadh’s Tadawul stock exchange on Wednesday in what is the world’s largest ever initial public offering (IPO). The company, responsible for more than ten percent of the world’s oil supply, is aiming for a US$ 2 trillion valuation. This debut marks the culmination of a four-year process, a series of delays and an ultimate scaling-down of its ambitions. Aramco raised US$ 25.6 billion in its IPO, making it the largest globally, surpassing even Alibaba’s debut in 2014. The company is still pursuing its US$2 trillion valuation by encouraging more local investors to participate, as foreign investors have balked at the valuation expectations of Saudi officials. However, if Aramco is still looking to build international participation and global investment, it may have to consider a secondary listing on overseas markets.

    WTO appellate body paralysed

    The World Trade Organization’s (WTO) appellate body, the second tier of a binding dispute-settlement system, can no longer review appeals due to a lack of nominees. The appellate body, traditionally a seven-member panel, has the final say in WTO rulings which are appealed. The US has refused to consider any nominees to fill vacancies on the panel, as December 11 saw the terms of two of the three remaining panel members end. This brings the number of members on the panel to below three, the minimum number required to sign off on any rulings, and effectively means that no new appeals can be reviewed. Though WTO members will be able to bring disputes to the body and receive an initial ruling, parties can dispute the appeal ruling into limbo given the inactivity of the appellate body. The paralysis of the appellate body removes an important set of dispute mechanisms from the global economy, which will almost certainly increase uncertainty for businesses and encourage further trade tensions.



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

    South Korean president Moon Jae-in to visit China for trilateral with Japan: President Moon Jae-in will visit China next week for a trilateral summit with Japan, South Korea, and China. The summit will focus primarily on security issues, despite trade and security ties between Tokyo and Seoul remaining tense.

    China-US trade deal deadline likely to be missed: China and the US are likely to miss the coming 15 December trade deal deadline, which could have paved the way for an end to the trade war. Officials are continuing to try to reach an agreement before 15 December, when the US is set to impose further tariffs on US$ 156 billion worth of Chinese imports if a deal is not reached.


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    Friday 6 December 2019


    Hong Kong announces fourth round of economic relief measures
    Hong Kong’s Chief Executive Carrie Lam announced on Wednesday a fourth round of economic relief measures. Following three previous rounds in August, September, and October, the HK$4 billion relief aims to counter the impacts of domestic unrest and the US-China trade war on the city’s economy. Hong Kong is expected to record its first budget deficit in 15 years, with output growth in the economy contracting by as much as two percentage points. The economic relief provides targeted help for businesses, specifically to protect jobs and livelihoods. However, it remains to be seen as to whether this raft of relief packages, with a total of HK$25 billion, will be enough to help get the economy back on track.

    New legislation heightens US-China tensions

    The US House of Representatives on Tuesday nearly unanimously passed a bill requiring the White House to take stronger action against China in response to developments in Xinjiang – the latest move in the ongoing political and economic tensions between the world’s two biggest economies. This is the second time in a week that the US has progressed on legislation seen by China as an attempt to interfere in its domestic affairs. Retaliation from China this week included banning US military ships and aircraft from visiting Hong Kong and new sanctions against several US non-governmental organisations. However, the lack of other countermeasures indicates that both China and the US are leaving themselves some room to manoeuver in negotiations aimed at ending the trade war.

    Indonesia announces new rules for foreign internet companies

    The Indonesian government made public on Wednesday new regulations designed to facilitate tax revenue from foreign internet companies by ruling that significant business in the country is equivalent to a physical presence. The regulation, effective-immediately, requires all foreign-based companies that “actively trade in goods or services electronically in Indonesia” to be considered the same as having a physical base there, thus requiring all such companies to follow all applicable tax regulation. This includes major foreign players such as Google and Facebook. Designed to create a fair playing field with Indonesia’s local internet companies, the move has been welcomed by the country’s e-commerce association and will help Indonesia meet its tax revenue targets. Given the rapidly changing nature of the industry, the Indonesian government (and others) are rapidly playing catch-up on regulating the digital space.

    India’s cabinet green-lights controversial citizenship bill

    India’s cabinet has sent to parliament a controversial draft citizenship law. The law would make non-Muslims who have fled religious persecution in neighbouring countries automatically eligible for Indian citizenship. The move ties in with Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) vision, part of which includes pro-Hindu measures. The law must still be approved by parliament, but has been harshly criticised for setting religious criteria for citizenship in violation of the country’s constitution. Coming months after Modi led the BJP to a landslide second victory, this move could signal a trend in upcoming legislation in India.

    Japan pushes through US trade deal in record time

    Japan’s upper house pushed through a US trade deal in record time this week, in the hope of avoiding a trade war. Japan’s Diet completed ratification of the deal, which slashes Japanese tariffs on US beef, 10 weeks after it was first agreed. Under the deal, Japan will cut tariffs on US beef and pork to the levels as agreed in the Trans-Pacific Partnership, before the US withdrew from that agreement in 2017. Japan, meanwhile, won cuts in US tariffs on certain manufactured goods in the deal, which will come into effect on 1 January 2020. The quick push through of the deal reflects Prime Minister Shinzo Abe’s focus on continuing an amicable relationship with Washington amid an uncertain geopolitical landscape.


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

    Indonesia looks to establish a sovereign wealth fund: Indonesia is considering establishing a sovereign wealth fund along the lines of Singapore’s Temasek Holdings or Malaysia’s Khazanah Nasional to boost economic growth and support local companies. The proposal is being backed by the Ministry of Finance, Indonesia’s Investment Board, and the ministry in charge of state-owned enterprises.

    Malaysia to formally launch preparations for 2020 APEC summit: Prime Minister Mahathir Mohamad will formally launch preparations for the 2020 APEC summit, with a meeting of APEC senior officials to be held in Langkawi. Mahathir will be the first world leader to host the summit twice after first hosting the event more than 20 years ago.


    Asia House Advisory helps organisations understand new operating environments and meet business-critical challenges. Find out more.

    Want to get The Week in Asia direct to your inbox? Sign up to our mailing list and keep up to speed with Asian trade, investment and policy developments.