East Asia Forum http://www.eastasiaforum.org Economics, Politics and Public Policy in East Asia and the Pacific Thu, 30 Oct 2014 11:00:20 +0000 en-US hourly 1 Does the WTO ruling against China on rare earths really matter? http://www.eastasiaforum.org/2014/10/30/does-the-wto-ruling-against-china-on-rare-earths-really-matter/ http://www.eastasiaforum.org/2014/10/30/does-the-wto-ruling-against-china-on-rare-earths-really-matter/#comments Thu, 30 Oct 2014 11:00:20 +0000 http://www.eastasiaforum.org/?p=44052 Author: Nabeel Mancheri, Tokyo University

In August, the Appellate Body of the WTO ruled that China’s export duties, quotas, and administration of rare earths, tungsten and molybdenum products violated various provisions of the GATT and the Accession Protocol that China promised to implement when it joined the WTO in 2001.Ruling in favour of the US, the EU and Japan, who had filed a joint complaint in March 2012,the WTO asked China to remove its export tariffs and quotas within a reasonable amount of time or face punitive retaliatory tariff measures.

The WTO ruling will not have a considerable impact on a rare earths market which already operates imperfectly. Instead, the ruling can be considered as a political win against an assertive and rising economic player. Even though China applied a number of restrictions on the export of rare earth elements,As a result, prices for most of rare earth minerals have almost declined to their 2011, pre-bubble levels.

In the last couple of years, rare earth prices have been unpredictable. In the short term, the WTO ruling could push prices further down by increasing Chinese supply. Last year, China’s rare earth exports rose by 38.3 percent, but the export value fell by 36.7 percent in the same period. The impact has already become visible in the market. The prices of the rare earth elements cerium, lanthanum and ytterbium plunged by 40 percent in the second half of last year and the trend has continued into this year as the average price of rare earth elements has fallen back to the levels of 2010.

Those who jumped into the rare earth business when prices climbed sharply in 2011 and 2012 are now doubtful about future prospects. Share prices of companies such as Lynas of Australia and the US’s Molycorp are following a downward trend these days, as investors have lost interest, even following the WTO ruling. This shows that the problems with rare earths lie elsewhere. No country other than China has enough expertise or the manufacturing facilities to refine oxides to metals. It has turned out to be more economical for companies such as Molycorp to export these minerals mined abroad to Chinese factories.

China may comply with the WTO ruling and lift the export restrictions, fearing large repercussions. Anticipating an unfavourable ruling, the country had already initiated a number of steps to control its rare earth resources. The major drive is to consolidate the industry into a few big conglomerates, with almost 300 rare earth firms either ordered to suspend production or having their production licenses revoked in the last few years. All legitimate companies — from mining to smelting, separation and utilisation —were merged into six large national rare earth conglomerates based on geographical location.

Consolidation of the industry would enable China to effectively control supply and to an extent prices. This is an industry that China has developed strategically as a complete supply chain starting from the early 1990s, ensuring any of the high-end rare earth products must originate or pass through China’s vast value chain. It has reached a level where even US defence industries are dependent on China for some of their advanced materials and components, including the magnets used in F-35 fighter jets.

China supplies almost 90 percent of global rare earth minerals and consumes about 70–75 percent. According to a US Government Accountability Office Report, as of 2010 China controlled 97 per cent of rare earth ore, 97 per cent of rare earth oxides, 89 per cent of rare earth alloys, 75 per cent of the neodymium iron boron magnets industry and 60 per cent of the samarium cobalt magnets industry. This dominance extends to the production of key intermediate products, such as magnets —many of these products being critical inputs for high growth industries such as hybrid cars, windmills and lighting.China is assiduously building up dominant positions in the entire supply chain of rare earths. China incentivises domestic companies to produce more technologically-advanced products rather than exporting raw materials abroad.

China continues to strengthen its hand in all stages of the supply chain, including refining, production of metal, alloy, components, and materials Over the last decade, China has encouraged nearly every major multinational utilising rare earth to move their manufacturing facilities to China or to establish subsidiaries in China. From a trailing position, China has successfully overtaken the more advanced countries in the rare earths industry and has gained enough capacity to control the whole value chain.

Nabeel A. Mancheri is a visiting research fellow at the Institute of Social Science, Tokyo University.

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Is Vietnam in denial on military strategy? http://www.eastasiaforum.org/2014/10/30/is-vietnam-in-denial-in-military-strategy/ http://www.eastasiaforum.org/2014/10/30/is-vietnam-in-denial-in-military-strategy/#comments Wed, 29 Oct 2014 23:00:55 +0000 http://www.eastasiaforum.org/?p=44033 Author: Shang-su Wu, RSIS

Vietnam’s recent, and significant, investment in military hardware is aimed at coping with a changing strategic environment. But will it make any significant difference in balancing against China’s military might in the South China Sea?

A Chinese coast guard vessel near the area of China's oil drilling rig in disputed waters in the South China Sea, off shore Vietnam, 14 May 2014. (Photo: AAP)

Over the last ten years, Vietnam has been especially focusing defence investment in its air and naval capability. This has included the purchase of Su-30MK2 fighter bombers, Project 636 submarines, as well as several types of surface vessels and missiles. These purchases may reveal Vietnam’s inclination towards an anti-access and area denial (A2/AD) strategy aimed at preventing foreign access or activities in its territorial waters. But in the face of the superior Chinese military power, Vietnam’s military procurements appear inadequate for pursuing an A2/AD strategy and may not achieve their intended goal.

First, as surveillance is the key for a ‘denial’ strategy, Vietnam’s existing platforms for maritime surveillance are potentially vulnerable. Hanoi has introduced three types of maritime surveillance aircraft (DHC-6-400, M-28P and C-212) for its air force and coast guard. But these slow propeller-powered aircraft are easy prey for Chinese fighters’ beyond-vision-range missiles, and even surface vessels’ long-range surface-to-air missiles (SAMs). Although Hanoi has launched a remote sensing satellite using French technology and management, its function for denial operation could be limited. The remote sensing satellite is to scrutinise geographic and geologic information rather than real time intelligence on the location of Chinese vessels. Additionally, the French management of the satellite may not cooperate with Hanoi’s military demands due to pressure from Beijing’s. If those aerial surveillance platforms are unable to search maritime targets during warfare, most Vietnamese strike units would need to find their own targets, and an optimal distribution of fire power would be less likely.

Second, Vietnam has a smaller number of sophisticated weapon systems than China. In terms of the third and fourth generation fighters, surface vessels and submarines, Vietnamese forces have even less than half of those in the Guangzhou Military Region. This leaves the Vietnamese military with a smaller margin for loss, presenting a disadvantage in attrition war. Vietnamese submarines may overcome certain asymmetrical disadvantages in the short term but would struggle in the long term. The People’s Liberation Army Navy’s (PLAN) South Sea Fleet could also deploy submarines outside major Vietnamese naval bases, such as Cam Ranh Bay, to monitor their operation.

Third, both Hanoi and Beijing procured several similar Russian weapon systems, such as the Su-30MK2, Project 636 submarines and S-300 PMU-1 SAMs. Due to the earlier purchase and China’s famous reverse engineering, the Chinese forces can already grasp the complete performance and characteristics of these weapon systems — Vietnam can’t. As a result, Hanoi may lose some tactical surprises which are supposed to compensate for their quantitative inferiority. In sum, Vietnam’s military modernisation may not achieve an A2AD strategic goal.

Finally, domestic budget constraints also suggest that another wave of massive military hardware procurement is unlikely. As such, it is unlikely that Vietnam will possess substantial capabilities in the foreseeable future.

Nevertheless, although Hanoi’s effort on defence may not effectively check Beijing’s massive military power, it does provide some strategic value. First, Vietnam is able to deter China much better than before. Compared to the end of the last century, the disincentives for Beijing using force against Vietnam are much greater. In order to ensure a successful outcome, the PLA would have to deploy more units to counter its Vietnamese counterparts. But more units would decrease strategic surprises and leave a more aggressive impression of China among the international community. As the Philippines — another ‘frontline’ state facing China’s strategic pressure — strengthens its defence through the Enhance Defence Cooperation Agreement (EDCA) with the United States, Vietnam’s considerable investment in defence could make it harder prey for China’s expansion or assertiveness.

Second, Hanoi’s military modernisation may serve as a bargain chip in negotiation with other powers for security cooperation. Vietnam’s investment in defence could lower the cost of intervention and ensure its commitment to defence rather than overall dependence. This would increase the possibility of extended deterrence or external intervention from a third party. And it would improve the military balance between Vietnam and China. But in view of Beijing’s increasing economic and military capability, a third party power may hesitate to support Hanoi in fear of the high costs of confrontation.

Overall, Hanoi’s military modernisation has not dramatically changed its attitude toward Beijing. Despite tension over conflicting territorial claims, Vietnamese decision makers still contact their Chinese counterparts through party-to-party and other channels. Considering the bilateral economic ties and inferior military capability, Hanoi may continue with a cautious tone in its relations with Beijing.

Dr Wu Shang-Su is Research Fellow at the Institute of Defence and Strategic Studies, S. Rajaratnam School of International Studies, Nanyang Technological University, Singapore.

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Then and now: Sino–Japanese relations 120 years after the war http://www.eastasiaforum.org/2014/10/29/then-and-now-sino-japanese-relations-120-years-after-the-war/ http://www.eastasiaforum.org/2014/10/29/then-and-now-sino-japanese-relations-120-years-after-the-war/#comments Wed, 29 Oct 2014 11:00:21 +0000 http://www.eastasiaforum.org/?p=44025 Author: Liu Jiangyong, Tsinghua University

The year 2014 marks 120 years since the First Sino–Japanese War. While the two nations have enjoyed several decades of peace, there is an uneasy feeling in China that recent developments and revisions to the Japanese constitution draw parallels with the decade prior to 1894.

In that year, under the pretence of defending their consulate and expatriates, the Japanese government sent troops to the Korean peninsula and invaded China. Four years earlier, in December 1890, the then Japanese prime minister and ‘father’ of Japanese militarism, Aritomo Yamagata, made a policy speech claiming that there were two lines to be guarded if Japan wanted to be capable of self-defence. The first was the ‘sovereignty line’, which traced the border of Japan’s national territory. The second was the ‘interest line’, which referred to any area within which the safety of the sovereignty line was intimately related.

The Korean peninsula was of course the first to be regarded as part of the ‘interest line’ by Japan. Yamagata, an aggressive proponent of this expansionist theory, became commander of the Japanese First Army in 1894, during the administration of Hirobumi Ito. Under his leadership Japanese troops invaded the Korean peninsula up to Pyongyang before marching straight on to Liaodong, China. After the annexation of the Korean peninsula, with the expansion of its so-called sovereignty line, Japan expanded its ‘interest line’ towards northeast China. By the same logic, the Japanese military subsequently created the Mukden Incident in 1931 and the Incident of July 7 in 1937, and launched an all-out invasion in China, leading to a legacy of war crimes.

Today, nearly 70 years since the Second World War and the retreat of Japanese imperialism, similarities have emerged between Sino–Japanese relations now and the relations in the decade before the outbreak of the First Sino–Japanese War. Despite strong public opposition in Japan, Prime Minister Shinzo Abe has recently made cabinet resolutions to amend the interpretation of the Japanese constitution to lift the ban on collective self-defence and proceed with amendments to the Self-Defense Forces Law. There have also been discussions with the United States about modifying the Japan–US defence cooperation guidelines and the division of military responsibilities. All of this indicates that Japan has abandoned its ‘special defence’ policy and is paving the way for joint operations with the military forces of the United States and other close allies.

At this stage the scenarios set by the Abe Cabinet that would permit use of military force include those when nations in close relationships with Japan are under attack and those needed to defend the life and liberty of Japanese people. There is an uneasy feeling in China that this expansion of Japan’s conception of its self-defence marks a return to the ‘line of interest’ referred to by Yamagata in 1890. The mood is that these seemingly unwarranted excuses and vague assumptions are being made with the Korean peninsula and China in mind.

Japan will not only be looking to continue strengthening its US alliance but will also include countries such as the Philippines and Vietnam among those nations with which it shares a close relationship. These countries have maritime territorial disputes with China, and placing them in this category would allow Japan to provide them with patrol boats and other such support.

Furthermore, Japan has been strengthening its ties with NATO—signing a new accord this year to increase cooperation. And Abe, on his latest visit to Australia, announced that the two countries would deepen military cooperation. These seeming attempts to form a wider strategy to contain China mark the first time Japan has acted in this way in nearly 70 years since the end of the Second World War.

The Japanese people are beginning to realise that this revision to the Japanese constitution is a violation of the conception of peace set down in that document. Rather than protecting the Japanese people, it is setting up a regional military posture which risks the lives of Japanese soldiers. It is little wonder then that the Abe cabinet’s actions will inevitably be strongly opposed by Japan’s peace-loving people, and cause vigilance and resistance from its Asian neighbours.

Abe is playing a delicate game of international diplomacy. While expressing his willingness to meet with Chinese leaders, Abe is simultaneously launching a diplomatic battle against China. He has shown no sign of repentance after visiting the Yasukuni Shrine late last year. While claiming that the door is always open for dialogues, he refuses to hold dialogues with China on the territorial issue of the Diaoyu/Senkaku islands. Japan appears to be looking forward to the Sino–Japanese summit in November but in fact refuses any communication when it comes to the most urgent issues to be addressed, such as the Diaoyu/Senkaku islands dispute. The Japanese side is fully aware that without formal lines of communication it will be nearly impossible for the Sino–Japanese summit to take place.

One important motive for Japan behaving in this way is to create the impression that it is China that does not act in accordance with international practice, so enabling it to seize the higher ground of public opinion. Yet no matter how elaborate Abe’s plan is, as long as it goes against the current of developing global peace and the will of the Japanese people, it will eventually fail completely. One hundred and twenty years since the outbreak of the First Sino–Japanese War, relations between the two countries are as troubling as ever.

Liu Jiangyong is a Professor and Associate Dean at the Institute of Modern International Relations at Tsinghua University.

This article appeared in the most recent edition of the East Asia Forum Quarterly, ‘A Japan that can say ‘yes’‘.

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After historic IPO, where to from here for Alibaba? http://www.eastasiaforum.org/2014/10/29/after-historic-ipo-where-to-from-here-for-alibaba/ http://www.eastasiaforum.org/2014/10/29/after-historic-ipo-where-to-from-here-for-alibaba/#comments Tue, 28 Oct 2014 23:00:16 +0000 http://www.eastasiaforum.org/?p=44011 Author: Mark J Greeven, Zhejiang University

Chinese e-commerce giant Alibaba has a track record of breaking records. It not only operates the world’s largest online business-to-business platform, but also the world’s largest online consumer marketplace. In 2004, it had the largest initial public offering (IPO) since Google on the Hong Kong Stock Exchange. In 2014, Alibaba had the biggest IPO in US history with its debut on the New York Stock Exchange on 19 September. Its founder Jack Ma — the first mainland Chinese to appear on the cover of Forbes magazine — and his core team have, in just 15 years, built a Chinese private company that is a global force to be reckoned with.

Jack Ma is not the only Chinese entrepreneur with potential and the world may need to prepare for a wave of global Chinese companies.

Alibaba’s strong IPO on the New York Stock Exchange indicates strong confidence in the company, on the part of both Alibaba itself and its domestic and foreign investors. Alibaba’s IPO is, first and foremost, evidence that a home grown private Chinese company can play with the big boys. Alibaba’s consumer-to-consumer platform Taobao had already proven 10 years ago that an unknown private Chinese company can best its large rival eBay in the Chinese domestic marketplace. Now having engineered the biggest stock offer ever in US history, raising US$25 billion, Alibaba is big enough to take on the leading companies in global markets.

Alibaba’s IPO is not just a commercial success, but also a national success. Alibaba has effectively raised the image of Chinese businesses abroad and created a fertile business ecosystem. The company has created 25,000 jobs and has led to the establishment of millions of small household companies that rely on its platform. This business ecosystem is what differentiates Alibaba from other global technology giants.

Alibaba’s IPO is an enormous confidence boost for other Chinese companies. China’s tech scene is booming. Innovative companies such as smart phone producer Xiaomi, online retailer JD.com, food delivery company Elema and taxi app Kuaidi are transforming traditional industries at break-neck speed.

Alibaba’s competitors Tencent and Baidu (often the three are referred to collectively as ‘BAT’) are already playing a global game — both are listed abroad and are exploiting their first mover advantages in the Chinese market. BAT are acting as investor big brothers of a new wave of tech ventures. These start-ups are likely to remain smaller than established Chinese companies, such as BAT, but could potentially develop breakthrough technologies. Tencent, Baidu and Alibaba each made more than 10 strategic investments and acquisitions in the last year. It is likely that Alibaba will use its newly raised capital to continue the acquisition war with Tencent and Baidu.

The question is, besides acquiring more technology start-ups in the coming years, what will Alibaba do with its significant resources?

One direction Alibaba might pursue is its ambition of building a nation-wide logistics network, dubbed the China Smart Logistics Network, in the next 8 to 10 years. Jack Ma combined Intime, Fosun, Forchn Holdings Group, STO Express, YTO Express, YunDa, and SF Express together to establish the China Smart Logistics Network with an investment of 300 billion renminbi (US$49 billion). The China Smart Logistics Network is designed to facilitate the further expansion of online shopping by setting up a network to deliver parcels within 24 hours to approximately 2000 Chinese cities. The network aims to support 30 billion yuan (US$4.9 billion) in online sales per day.

Technological changes are becoming ever more frequent. In particular, recent developments in big data are happening fast. Alibaba is sitting on top of what may be the world’s largest consumer behaviour database, but it is yet to be seen to what extent they can monetise its value.

Alibaba’s IPO is just the tip of the Chinese iceberg of private companies and technology ventures that will play an important role in changing and upgrading China’s economy, and further integrating it into global markets.

Mark J Greeven is Associate Professor at the School of Management, Zhejiang University.

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What to expect from the new US–Japan Defense Guidelines http://www.eastasiaforum.org/2014/10/28/what-to-expect-from-the-new-us-japan-defense-guidelines/ http://www.eastasiaforum.org/2014/10/28/what-to-expect-from-the-new-us-japan-defense-guidelines/#comments Tue, 28 Oct 2014 11:10:15 +0000 http://www.eastasiaforum.org/?p=44016 Author: Ken Jimbo, Keio University

When the current Guidelines for US–Japan Defense Cooperation were released in 1997, the core strategic impulse of Washington and Tokyo was to deal with potential armed contingencies in Northeast Asia, namely regarding the Korean peninsula and Taiwan. As the US Asia strategy emphasised deterrence of and response to these contingencies, Japan reconfigured its alliance strategy from predominantly territorial defence to proactive cooperation with the US in ‘situations in areas surrounding Japan’.

Ships from the US Navy and the Japan Maritime Self-Defense Force, including the George Washington Strike Group, steam together after the conclusion of exercise Keen Sword, a biennial exercise between Japan and the US, 16 November 2012. (Photo: US Pacific Fleet/Flickr).

In the 17 years since the 1997 Guidelines were established, there have been tremendous changes in the strategic environment, the state of the US–Japan alliance and Japan’s role in it. During the first decade of this century, the US and Japan expanded their common strategic objectives, driven mainly by the global anti-terrorism campaign.

The emerging strategic focus in the 2010s is undoubtedly driven by the rise of China. The continued modernisation of China’s military forces, and its recent assertive behaviour in territorial disputes in the East and South China Seas, is altering the post-Cold War strategic foundation of the US–Japan alliance.

The new US–Japan Defense Guidelines, which are expected to be released by the end of 2014, are likely to encompass four new operational domains.

First, the new Guidelines will address rising ‘grey zone’ challenges: infringements of Japanese territory that do not amount to a full-scale armed attack.

As Beijing has stepped up its assertive behaviour in the East and South China Seas, it has become increasingly apparent that the territorial status quo can be challenged without crossing the military threshold. For this reason the Interim Report on the revision of the Guidelines, released on 8 October, emphasised cases ‘where swift and robust responses are required to secure the peace and security of Japan even when an armed attack against Japan is not involved’. The new Guidelines will stress that both governments should have a ‘seamless’ response in all phases of a conflict, including ‘grey zone’ challenges.

This is a significant clarification of US involvement in ‘grey zone’ situations. The Interim Report could have suggested a divisional role-sharing model instead, where Japan takes sole responsibility for grey zone contingencies, while the US becomes involved later in escalation control. This division of roles would have also reflected Washington’s desire to avoid entrapment.

But a lack of US involvement in grey zone conflicts in such a role-sharing approach would be inherently risky. China could encroach on disputed zones through ‘tailored coercion’, without the risk of direct US involvement. This potentially undermines the credibility of US extended deterrence.

Against this background, the decision to adopt a seamless and all phases approach signals that Japan’s coast guard, law enforcement agencies, and Air and Maritime Self-Defense Forces — which have primary responsibility in grey zone contingencies — are inseparable from the dynamics of the US–Japan alliance.

To operationalise this seamless approach, the US and Japan will further enhance joint intelligence, surveillance and reconnaissance operations, joint training and exercises in grey zone scenarios, and cooperation among all government sectors.

Second, the new Guidelines will address how to counter China’s expanding anti-access and area-denial (A2/AD) capability. The modernisation of China’s conventional military capabilities is increasingly placing the US forward presence and its operations at risk. The People’s Liberation Army’s short and medium-range missiles, as well as its increasingly sophisticated navy and air force are becoming more capable of denying the US the ability to generate substantial combat power from its bases in the Western Pacific.

From the Japanese perspective, the most critical element of the US security commitment is the deployment of combat-ready US troops on Japanese soil. Without in-theatre logistical and basing support, the US and Japan cannot achieve pre-planned military operations and the augmentation of US forces.

As outlined in the Interim Report, protecting military facilities, air and missile defence, as well as resiliency, hardening and damage recovering capabilities are key to countering the A2/AD environment. The new Guidelines are also likely to suggest wider dispersal options in both commercial and non-commercial Japanese airports and ports to ensure flexible operations for US forces stationed in Japan.

Third, the US–Japan Defense Guidelines will emphasise cooperation for regional security. In 2013, the Joint Statement of the US–Japan Security Consultative Committee highlighted the importance of regional capacity building, maritime security, disaster recovery, trilateral cooperation with Australia and South Korea, and multilateral cooperation, especially with ASEAN countries.

Most symbolically, Japan and the US have already begun building the defence capacity of the Philippines. Japan has promised to provide coast guard patrol vessels to the Philippines. The Abe administration is also seeking to reform the guidelines for official development assistance (ODA) to allow for the strategic use of ODA to build recipient countries’ defence capacity. Currently, Japan’s ODA guidelines do not allow it to support foreign armed forces.

The United States is also upgrading its Navy and Marine Corp’s operational access to the Philippines and offering support for their defence capabilities. These two approaches will be further integrated to jointly craft a favourable balance of power in the South China Sea.

Fourth, the US–Japan Defense Guidelines will address bilateral cooperation on new technologies, space and cyberspace. The US and Japan will work to ensure the resiliency of relevant space assets, networks and systems. Japan has called for the Japan Aerospace Exploration Agency to provide information to the United States. This signifies Japan’s movement towards a deeper interagency approach for the national security agenda. Cooperation in cyberspace will include improvements to individual cyber capabilities, interoperability and sharing information about cyber threats.

These expected revisions to the US–Japan Defense Guidelines will provide a more effective framework for both nations to better manage the contemporary strategic environment in Northeast Asia.

Ken Jimbo is Associate Professor at the Faculty of Policy Management, Keio University.

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Continuity the key to New Zealand’s regional participation? http://www.eastasiaforum.org/2014/10/28/continuity-the-key-to-new-zealands-regional-participation/ http://www.eastasiaforum.org/2014/10/28/continuity-the-key-to-new-zealands-regional-participation/#comments Mon, 27 Oct 2014 23:09:28 +0000 http://www.eastasiaforum.org/?p=44008 Author: Gary Hawke, NZIER

New Zealand’s approach to regional affairs is unlikely to change with the recent re-election of Prime Minister John Key. The election, held on 20 September, provided a clear mandate for Key’s National Party. The routine three-yearly election was brought forward by a few weeks to provide certainty about who would represent New Zealand at the end-of-year meetings of APEC, the East Asia Summit, and the G20.

New Zealand Prime Minister John Key celebrates a decisive election victory with family in Auckland, 20 September 2014. New Zealand’s regional engagement did not feature highly in election debates, argues Gary Hawke. (Photo: AAP).

While there was little explicit attention to regional affairs in the election campaign, they were not far below the surface. Much of the media attention was focused on allegations of ‘dirty tricks’ by politicians and forthcoming revelations of illegal surveillance by security agencies. The former resulted only in evidence that some politicians now use modern social media in much the same way that some earlier politicians misused print media. The latter showed that there cannot be sensible public debate about security issues conducted by a media which sees itself as making the news through sensationalist sound bites rather than reporting significant information. The campaign generated no new information at all.

The election debate therefore never approached the question of how New Zealand’s participation in the ‘Five Eyes’ arrangement fits with New Zealand’s place in the contemporary world. The Five Eyes arrangement links the security services of New Zealand with Australia, Canada, the United Kingdom and the United States. Like the structure of the UN Security Council, or the distribution of votes in the governance of the World Bank and IMF, the arrangement originated in the era of the Second World War and there needs to be continued evaluation of how it fits changed circumstances. But that requires serious study of the costs and benefits of the present arrangement and feasible alternatives, not electioneering rhetoric. The appropriate balance between maintaining traditional friendships and adapting to a changed world will be one of the major issues facing the New Zealand government, and it starts without any electoral guidance.

The nature of New Zealand’s participation in the international or regional economy was not addressed honestly. Regional issues surfaced only in the context of opposition to overseas investment in New Zealand land. Currently, such opposition does not consider whether Chinese investment differs from foreign investment from other sources. Nor does it consider how New Zealand can benefit from economic integration if cross-border investment flows are regarded with suspicion — when it is obvious that New Zealand firms need to invest overseas to participate in regional and global opportunities. Open opposition to participation in the Trans-Pacific Partnership and other integration processes was mostly limited to questioning specific provisions, despite these provisions not yet being determined let alone known. But a wider change was never far beneath the surface.

The trade debate is in large part a proxy for the debate about open market economies that is at the core of the problems of the opposition Labour and Green parties.

The election result was a disappointment for Opposition parties. New Zealand First, which is little more than a vehicle for the populist career of Winston Peters, did not find itself in a kingmaker’s role and as Peters ages, the party’s future is uncertain. The Green Party ended with about the same proportion of the vote as in 2011, not the gain it expected to take it into office as a significant coalition partner. It now faces another three years in opposition and a good deal of reflection as it faces claims that environmentalism would be better served without the belief that it is indissolubly linked to left-wing causes. All previous efforts to separate the two have failed and the prospects for any quick change are dim.

But the big loser was the Labour Party. Its share of the vote was just 25 per cent. (The National Party got 48 per cent). The Labour Party had changed its leader to David Cunliffe, who was thought more likely to attract support than his predecessor David Shearer. But instead the Labour Party suffered its worst result since 1922. It is now engaged in a bitter leadership battle. Shearer suggested that Cunliffe should leave parliament, but he has only withdrawn from the leadership race because ‘at this time’ somebody else might better unify caucus. That is an understatement.

In any case, the problem for the Labour Party is not the personality of the leader but the inability of the party to focus on the future while it continues to battle over its past. It is deeply torn over whether or not the economic achievements of the Labour Government of the 1980s should be entirely disowned. Does it embrace the internationalist economic stance adopted in the 1980s or does it wish to return to a protectionist, insulated economy? The depth of disagreement means that the future existence of the Labour Party is not assured.

For the foreseeable future, New Zealand’s participation in regional affairs will be characterised by continuity. In the longer term, it depends on resolution — or at least evolution — of domestic debates about fundamental economic strategy.

Gary Hawke is an Associate Senior Fellow at the New Zealand Institute of Economic Research, and a member of the Academic Advisory Council of the Economic Research Institute for ASEAN and East Asia.

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Is that as good as it gets for Abenomics? http://www.eastasiaforum.org/2014/10/27/is-that-as-good-as-it-gets-for-abenomics/ http://www.eastasiaforum.org/2014/10/27/is-that-as-good-as-it-gets-for-abenomics/#comments Mon, 27 Oct 2014 11:13:00 +0000 http://www.eastasiaforum.org/?p=44004 Author: Tobias Harris, Teneo

As the second year of Abenomics progresses, Prime Minister Shinzo Abe’s program of coordinated monetary and fiscal stimulus and structural reform has lost some of its lustre. Not only have Abe’s approval ratings fallen below 50 per cent for the first time since he took office in December 2012, but a recent poll in the right-wing Sankei Shimbun found that, for the first time, disapproval of Abe’s economic policies had exceeded its approval ratings, with 47 per cent opposed and 39 per cent in favour. Coming amid reports of slowing inflation following the consumption tax rate increase in April and weak export data, slumping public support for Abe and Abenomics suggests that the Japanese government’s policy experiment could be losing steam.

To the extent that Abenomics depends on Bank of Japan (BOJ) Governor Haruhiko Kuroda’s quantitative and qualitative easing program, the experiment is insulated from the vagaries of public opinion. However, from the beginning, the BOJ’s radical measures to defeat deflation were only a first step towards a broader revitalisation and transformation of the Japanese economy that would strengthen Japan’s global competitiveness and raise its long-term growth potential. Restoring inflation would create the right economic and political environment to implement extensive reforms to the labour market (including increasing the role of women in the workforce) and the inefficient agricultural and service sectors, foster a new system of corporate governance to generate greater returns for investors, and reshape how the public and private sectors invest in next-generation technologies.

To realise these policy changes, which have in many cases been pursued by Japanese prime ministers for decades, Abe would have to overcome resistance from entrenched interests in the bureaucracy, the ruling Liberal Democratic Party (LDP) and in the economy more broadly, wielding strong public support — and the vote of confidence in Abenomics from foreign investors in the form of buoyant equity markets — as a weapon against defenders of the status quo.

Despite his rhetoric, Abe has proven to be a reluctant reformer, unable to translate his political capital into concrete policy outcomes. His 2013 and 2014 growth strategies, the centrepieces of the so-called ‘third arrow’ of Abenomics, have disappointed, signifying more a return to old-style industrial policy than a dramatic break with past practice. When it comes to difficult structural reforms like labour market reform, the growth strategies have offered only modest changes and do little to introduce more flexibility or reverse the growth of low-paid part-time and other temporary employment.

More significantly, in setting lengthy implementation timelines, the Abe government has allowed bureaucrats, LDP backbenchers and lobbyists to fill in the details of the strategy’s skeletal proposals, further watering down the government’s reform agenda. With most of the 2014 growth strategy’s legislative items delayed until the 2015 regular session of the Diet, Abe continues to show no great urgency in his pursuit of structural reform.

Why have Abe’s achievements thus far lagged behind his promises?

The reasons are numerous. First, structural reform is difficult. Were it easy, one of Abe’s reform-minded predecessors would surely have found a way to achieve it. But in practice, structural reform means uprooting economic institutions that have endured since the 1930s, when they were introduced by Japan’s militarist government and then were retained by the post-war US occupation.

As the leader of a messy, pluralistic democracy populated by interest groups that have profited from existing institutions, Abe cannot simply change the Japanese economy by decree. Of course, Abe’s pursuit of structural reform is further complicated by the fact that his LDP has profited from the status quo more than most. The LDP is at best ambivalent about structural reform and, despite Abe’s personal popularity and the broader power shift to the prime minister’s office, the party is still capable of undermining the government’s agenda, as happened when Abe’s regulatory reform council floated a proposal to abolish JA-Zenchu, the national council of agricultural cooperatives. The reform council’s trial balloon met with fierce resistance from LDP backbenchers who forced the government to back away from outright abolition and allow JA-Zenchu to participate in the reform process.

Finally, Abe may himself be ambivalent about reform or, at the very least, be reluctant to engage in open conflict with members of his own party about structural reform. It is significant that one of Abe’s first decisions when he became prime minister for the first time in 2006 was to readmit LDP members who had been expelled from the party in 2005 for opposing the postal system reforms of the then prime minister, Junichiro Koizumi. Abe appears to prefer stability to reform, which may make for durable government but which makes economic transformation less likely.

If Abe’s popularity has in fact peaked, it is even less likely that he will be able to deliver the long-term economic revitalisation he has promised. Instead, as his political capital declines—and as his government prepares for local elections in April 2015 and legislative elections sometime in 2016—he may be tempted to pursue politically expedient policies rather than difficult but necessary reforms. This logic may guide the prime minister’s decision to devote the forthcoming extraordinary session of the Diet to revitalising uncompetitive rural regions, which could potentially bear fruit in next year’s nationwide local elections.

But if Abe shrinks from the challenge of structural reform, it raises an uncomfortable question about whether Japan’s economy can be reformed at all. If a prime minister with historically high levels of public support, command of both houses of the Diet and the approval of foreign investors and international organisations cannot prosecute anything more than incremental changes to long-standing economic institutions, can anyone?

Tobias Harris is an analyst at Teneo Intelligence, the political risk arm of strategic consultancy Teneo.

A longer version of this article appeared in the most recent edition of the East Asia Forum Quarterly, ‘A Japan that can say ‘yes’‘.

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Asian cooperation hanging on a handshake http://www.eastasiaforum.org/2014/10/27/asian-cooperation-hanging-on-a-handshake/ http://www.eastasiaforum.org/2014/10/27/asian-cooperation-hanging-on-a-handshake/#comments Mon, 27 Oct 2014 01:00:30 +0000 http://www.eastasiaforum.org/?p=43997 Author: Peter Drysdale, East Asia Forum

The APEC summit is just over a week away and all stops are out in Beijing to make it an economic and diplomatic triumph, despite the huge underlying challenges in managing China’s relations with the region. The primary goals and foundations of APEC are economic — delivering on Asia’s economic development ambitions within the framework of the rules-based global economic system.

Japanese prime minister Shinzo Abe and other regional leaders look on as China’s President Xi Jinping shakes hands with former Indonesian president Susilo Bambang Yudhoyono at last year’s APEC meeting in Indonesia. This year there is intense focus on the APEC opportunity to begin to fix the political relationship between China and Japan. (Photo: AAP).

But, at its fundaments, APEC is a political construct, committed to those cooperative goals in concert, including with North America. So it’s not surprising that, once elevated to a leader’s level summit, APEC has served on the side to sort out political and diplomatic issues among its members — it provided the first venue for a meeting between a Chinese and US president after Tiananmen; it brought China and Taiwan together routinely before relations developed under their new framework; and it served as a vehicle to sort issues between Australia and Indonesia over the troubles in East Timor, for example.

This year there is intense focus on the APEC opportunity to begin to fix the political relationship between China and Japan, or more particularly the terms that might enable a handshake between the Chinese and Japanese leaders to take the first steps.

There are a number of issues that play into the current tensions between China and Japan.

The first has to do with the baggage of history. There will have to be understandings on how to manage the Yasukuni shrine and the other history issues that offend China and Japan’s other Northeast Asian neighbours if there is to be a beginning.

The second has to do with territorial disputes which, Sourabh Gupta says in this week’s lead essay, dominate manoeuvring around the upcoming meeting between the Chinese president and Japanese prime minister. At this point, Gupta says, both Japan and China need to agree on political restraint and moderation to avoid further conflict and assume responsibilities to reassert maintenance of the status quo.

‘The East China Sea has historically been a sea of peace, cooperation and commerce as ideas and goods have regularly crossed its shore’, writes Gupta. ‘In 2008 the then leaders, Hu and Fukuda, sought to restore the sea and the wider China–Japan relationship — which had been damaged by Koizumi’s repeated visits as prime minister to Yasukuni Shrine — to this historical norm. Setting the politically sensitive issue of maritime delimitation in the East China Sea aside, the two leaders agreed to jointly develop the sea’s bounty in overlapping zones without prejudice to their respective sovereign rights and jurisdiction claims. Rather than focusing on the sovereignty dispute itself, Beijing and Tokyo should concentrate on the opportunities arising from the islands’ sovereign rights and jurisdiction by jointly prospecting for oil and gas in seabed areas in the islands’ vicinity’.

There is a third important issue, one that is unstated but at the crux of the current diplomatic stoushes between the two countries.

The past two decades have seen huge changes in the scale and pace of global economic growth, driven importantly by what has been happening in Asia. The change in scale and structure of the Asian economy since Japan and Australia together helped frame the first institution for trans-regional cooperation — APEC — has been enormous. New players like China and India have changed the shape of regional economic and political affairs and the region’s growth has defined what many now call the Asian century.

Asia’s economic success has changed its place in the world and how it’s now perceived in global economic as well as political affairs. Old conceptions of the regional economic order are outmoded and Australia, Japan, China, South Korea, and Indonesia all have to re-think their place in the region and how the region relates to the global economic system. This is a process on which we all have been somewhat reluctant to embark, in part because there was a lack of comprehension of the speed and enormity of the changes as they unfolded, and also in part I fear because old dreams are difficult to let go and limit the imagining of designs and strategies that attend to the future beyond ideas that are rooted in the past.

Japan, of course, was the leading edge of Asia’s trade and industrial transformation but the other countries in Northeast Asia, ASEAN, China and India signed on. The 1980s and 1990s were the heyday of Asia’s first and second waves of golden growth. These were the days when Japan was at the centre of regional trade and economic growth. Asia was turbo-charged, with growth of around 7 or 8 per cent a year, lifting its share in global output and trade. Japan was number two in the world economy, edging up briefly on number one.

Perhaps no country’s geo-political and economic position in the region has changed more dramatically than Japan’s since the 1980s. And it is still not clear that policy-making or thinking has caught up with these new circumstances. At that time, Japan’s conception of its leadership role and its vision for the region — a role and a vision of region-wide economic dynamism, with expanding frontiers stretching from its Northeast Asian neighbours through Southeast Asia and, of course, into China — comprehended both Asianism and internationalism. Times have changed. Japan, for example, now has South Korea as a major competitor and threat to many of its prized and symbolic brands globally. South Korea also challenges Japan’s former position in Asia as a dynamic player in regional and global affairs. The economic ascendancy of China and the emergence of India both mean that Japan’s position in the region is very different from what it was at the beginning of the 1990s.

These new geo-political and economic circumstances require a fundamental re-conception of how we all must manage our national economic policy agendas and foreign economic diplomacy, including the approach to regional economic cooperation.

Failure to accept and to integrate these circumstances into the framing of policy and to set national priorities accordingly is bound to leave us on the back foot in realising both Asia’s economic and political potential in this new international environment — with a dynamic China–Japan relationship as one of its central poles.

Peter Drysdale is Editor of the East Asia Forum.

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China–Japan relations: creating a ‘sea of peace, cooperation and friendship’ http://www.eastasiaforum.org/2014/10/26/china-japan-relations-creating-a-sea-of-peace-cooperation-and-friendship/ http://www.eastasiaforum.org/2014/10/26/china-japan-relations-creating-a-sea-of-peace-cooperation-and-friendship/#comments Sun, 26 Oct 2014 11:00:42 +0000 http://www.eastasiaforum.org/?p=43986 Author: Sourabh Gupta, Samuels International

Tensions in the East China Sea over the contested Senkaku/Diaoyu islands dominate manoeuvring around the upcoming meeting between Chinese president Xi Jinping and Japanese prime minister Shinzo Abe at the APEC summit.

Yasuo Fukuda and Hu Jintao, authors of the Principled Consensus between China and Japan. (Photo: AAP).

Earlier this year, in response to Beijing’s assertive policy stance following the Noda government’s September 2012 nationalisation of the islands, the Abe cabinet granted the Self-Defense Forces (SDF) wider latitude to repel a so-called ‘grey zone’ infringement — an infringement on the Senkaku/Diaoyu islands that does not amount to a full-blown armed attack. The reinterpretation of Article 9 of the Japanese constitution (the ‘peace clause’) further allows the SDF to provide logistics support that is ‘integrated with the use of force’ to the US military in all but the most extreme combat locations. Implementing legislation to give effect to these changes is expected to clear the Diet in the months ahead.

The revised US–Japan Defense Guidelines, which are expected to be released in 2015, will operationally integrate the provision of SDF support to US forces in case of an emergency in the East China Sea. Joint plans to enable the US to assist the SDF in repelling a ‘grey zone’ infringement are also expected to be finalised.

Political pathways to conflict management are seemingly at a dead end. To seek a solution based on international law, as former prime minister Noda’s foreign minister fleetingly floated, also seems hopelessly unrealistic. Beijing does not currently submit to the compulsory jurisdiction of the International Court of Justice and cannot be summoned to the Hague against its will. For Tokyo, as administrator of the islands, to press a case would be an acknowledgement of the less-than-final status of the Senkaku/Diaoyu islands.

At this juncture it is necessary for both Japan and China to individually practice political restraint and moderation to avoid further conflict. Both sides must assume important responsibilities so that the prevailing status quo can be maintained.

Beijing must desist from violating the airspace over the Senkakus/Diaoyus as part of its Air Defence Identification Zone patrols over these waters. It should ensure that its coast guard neither conducts boarding operations in the territorial sea of the Senkakus/Diaoyus nor launches helicopters in the islets’ proximity. Inflammatory actions at sea — like the instances of training fire-control radar on a Japanese Maritime Self-Defense Force destroyer and helicopter in January 2013 — are also incompatible with maintaining the status quo.

Tokyo must maintain its present policy of ‘not entering, not researching and not constructing’ on and around the islands for the time being. It should ensure that activities, such as constructing a port of refuge for fishing boats, upgrading the islands’ lighthouse or deploying civil servants to manage and preserve the islands’ forestry endowment or survey its marine resources, are deferred until Japan–China relations heal. Provocative activities such as stationing Self-Defense Force members around the clock on the Senkaku/Diaoyu islands would also escalate tensions.

Once a period of political quiet in the surrounding waters and in the larger (post-Abe) Sino–Japanese diplomatic relationship takes firmer hold, practical and creative ways of cooperation to achieve win-win outcomes on both sides can be contemplated. Tokyo could acknowledge — without prejudicing its legal claim — that an explicable Chinese claim to the Senkakus/Diaoyus exists and, bearing in mind that the stability of the surrounding area is of mutual concern to both countries, resolve to maintain the existing status quo on the islands indeterminately.

Beijing would express its appreciation for this acknowledgement, resolve not to disturb the status quo or peace and stability in the area surrounding the islands and, to the extent that the status quo remains undisturbed, renounce the use of force to alter the administrative control of the islands. Gradually, China’s maritime law enforcement assertions in the territorial sea of the Senkakus/Diaoyus could be withdrawn and the situation would operationally revert to the status quo ante as existed prior to the purchase of the three islands. No scope for joint administration of the Senkaku/Diayou islands is likely to be admitted.

Correspondingly, Japan could remain committed to the absolute maintenance of the status quo on the islands, and any and all measures that reinforce its effective control — such as conducting lighthouse repairs, pier and shelter construction, and temporarily deploying personnel on the islands — could be informally vetted in advance with China. With the passage of time, detailed fishing rules in these disputed waters can be consensually arrived upon and negotiations towards a maritime communication mechanism or hotline, as a confidence-building measure, could follow.

The East China Sea has historically been a sea of peace, cooperation and commerce as ideas and goods have regularly crossed its shores. In 2008 the then leaders, Hu and Fukuda, sought to restore the sea and the wider China–Japan relationship — which had been damaged by Koizumi’s repeated visits as prime minister to Yasukuni Shrine — to this historical norm. Setting the politically sensitive issue of maritime delimitation in the East China Sea aside, the two leaders agreed to jointly develop the sea’s bounty in overlapping zones without prejudice to their respective sovereign rights and jurisdiction claims.

Rather than focusing on the sovereignty dispute itself, Beijing and Tokyo should concentrate on the opportunities arising from the islands’ sovereign rights and jurisdiction by jointly prospecting for oil and gas in seabed areas in the islands’ vicinity.

Indefinitely shelving the Senkaku/Diaoyu islands ownership issue, while jointly formulating win-win economic and political arrangements, would be in line with this cooperative spirit that has underwritten peace, prosperity and stability in East Asia for extended periods of time. The East China Sea would be transformed into a ‘sea of peace, cooperation and friendship’.

Sourabh Gupta is a Senior Research Associate at Samuels International Associates, Inc., Washington.

A longer version of this article appeared in the most recent edition of the East Asia Forum Quarterly, ‘A Japan that can say ‘yes’‘.

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New rules for China’s war on terror? http://www.eastasiaforum.org/2014/10/25/new-rules-for-chinas-war-on-terror/ http://www.eastasiaforum.org/2014/10/25/new-rules-for-chinas-war-on-terror/#comments Sat, 25 Oct 2014 11:00:06 +0000 http://www.eastasiaforum.org/?p=43983 Author: Kendrick Kuo, Johns Hopkins

After a very violent year, officials in China’s western province of Xinjiang announced in March 2014 that they were considering an anti-terror law for the region. The law would ostensibly fill the gaps in the national criminal law by addressing the unique challenges of terrorism. But do laws really matter in an authoritarian state and in a region as militarised as Xinjiang?

Armed Chinese People's Liberation Army take part in a training session at the foot of Tianshan Mountains in northwest China's Xinjiang Uygur Autonomous Region. (Photo: AAP)

The 1997 Criminal Law was the first legal recognition — albeit rudimentary — of terrorist crimes, listing them among other crimes that endanger public security. After the 9/11 terrorist attacks against the United States, China amended the law to include punishment for financial supporters of terrorism and harsher punishment for acts of terror. Yet the legal definition of ‘terrorism’, ‘terrorist organisation’, and ‘terrorist crime’ remained obscure, thus allowing broader interpretations to include a variety of groups. As if highlighting this ambiguity, Xinjiang Party Chief Wang Lequan in December 2001 described staging riots and beating, smashing and looting as terrorist activities.

The Criminal Law is only one part of a complex network of overlapping security-related legislation that form China’s legal approach to national security, all of which have implications for China’s war on terror. The State Security Law, adopted in 1993, parallels the Criminal Law, but focuses on collusion with foreigners to organise and carry out espionage, separatist conspiracies and terrorist activities — it was invoked earlier this year to prevent Uyghur professor Ilham Tohti from accessing his lawyer. Legal ambiguity pervades the entire apparatus of national security laws, as there is no legislation tailored to addressing terrorism.

Since the Kunming attack in March 2014, the Chinese public has become more aware of the limits of the criminal law provisions to support anti-terror efforts. Beijing faces mounting pressure for legislation tailored to handle attacks. The complexity of terrorism issues ensures that a national anti-terror law will take years to achieve. The announcement that Xinjiang was going to draft a regional law came with the qualifier that this was only the first step in a multiyear process of getting legislation passed.

China still lacks national anti-terror legislation, but Beijing has taken steps to remove legal ambiguity. In 2011, the Standing Committee of the National People’s Congress passed the Decision on Issues Related to Strengthening Anti-Terrorism Work, which described terrorist activity as ‘activities that severely endanger society that have the goal of creating terror in society, endangering public security, or threatening state organs and international organisations’. The decision also defined terrorist organisations and terrorists and explained the procedure for listing them.

While human rights organisations may see legal ambiguity surrounding counterterrorism as a boon to a Chinese regime intent on maintaining stability at all costs, Beijing may actually view it as an obstacle to legitimacy and to effective counterterrorism, undermining Beijing’s long-term project of ‘legalisation’.

Rather than just defending the Communist Party’s claim to the rule of law, national security laws can be instrumental in winning support for an expanded scope of state authority. China adopted the 1996 Martial Law in response to criticism of the decision in 1989 to declare martial law. The legislation allows the government to declare martial law and suspend a number of legal rights to restore order. It would be put to the test if the situation in Xinjiang deteriorates.

After the spate of attacks earlier this year, including the Kunming and Urumqi station attacks, the Higher People’s Court of Xinjiang executed 13 people on terrorism charges. Others received delayed death penalties and lengthy prison terms. The aftermath of terror attacks in China, though not given much media attention in the United States, is an important part of Beijing’s strategy. The announcement of indictments and punishments are important for China’s push for political legitimacy through rule of law. Authorities in Xinjiang have also used sentencing rallies, where mass trials are conducted with thousands in the audience. In May 2014, 55 people were sentenced on charges of terrorism, separatism and murder. While this model of mass sentencing is undoubtedly a show of force and political theatre, there is also an element of demonstrating the law at work.

Political legitimacy is not the only reason for the passing and implementing of improved national security laws. Broad and ambiguous laws may allow for abuse under the guise of legality, but they also limit the effectiveness of security personnel. Since Chinese criminal law does not offer specific regulations on terrorism, terrorist acts are treated under the category of ordinary crime where criminal liability is based on the type of criminal action as opposed to terrorist intent. For example, threatening the government with violence is not considered a terrorist crime under the criminal law. Chinese legal analysts thus see the lack of clear and precise terrorism-specific legislation as detrimental to national security.

Specific legislation that grants special authority in counterterrorist activities allows security personnel to supersede restrictions imposed by ordinary criminal cases. After the July 2009 incident in Urumqi, the National People’s Congress passed the People’s Armed Police Law, giving the People’s Armed Police greater authority to detain and investigate in order to handle riots, rebellions, terrorist attacks and other serious crimes. A national anti-terror law would potentially define responsibilities of different law enforcement agencies and also procedures for activating emergency measures.

Decentralisation of authority has also been an obstacle for effective, coordinated counterterrorism. Domestically, this concern was reflected recently in Xinjiang party chief Zhang Chunxian’s announcement that ‘we will properly conduct our work in Xinjiang under the leadership of the National Security Commission’. The simultaneous push for rule of law and the elevation of Xi Jinping as a visionary and charismatic leader are reconciled in the more encompassing drive to recentralise authority. The rule of law is another instrument to ensure that decisions made in Beijing are executed properly.

In this way China’s war on terror is likely to be disciplined and so accrue legitimacy. It will also, importantly, be effective.

Kendrick Kuo is a China specialist pursuing graduate studies at the Johns Hopkins School of Advanced International Studies.

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