China-ASEAN Monitor Weekly
Politics and Security
Malaysia-China joint military collaborations to tackle threats
Malaysia and China will increase their military collaboration, in areas such as extremism, terrorism, kidnapping, and other threats, said the Malaysian Prime Minister’s Office after Prime Minister Najib Razak received a courtesy call from Meng Jianzhu, Special Envoy of Chinese President Xi Jinping, on 25 May. The introduction of a secure communications link would also be considered, in response to “the dynamic security challenges in the Asia Pacific region, such as the threat of Islamic State and food security”.
Pentagon says China aircraft intercept violated 2015 agreement
The Pentagon has concluded that an intercept of a US military aircraft by Chinese fighter jets last week over the South China Sea violated an agreement the two governments signed last year, a US defence official said on 26 May. The Pentagon findings contradict what the Chinese Defence Ministry said earlier in the day. Last year, the United States and China announced an agreement establishing rules of behavior to govern air-to-air encounters and creating a military hotline.
The Chinese Economy
Warning sign: China sets currency at 5-year low
China’s central bank weakened its currency on 25 May, setting the reference rate for the yuan at the lowest level in five years. The actual cut was small: only about 0.3%, and it didn’t send world markets into a downward spiral like in August, when China devalued its currency by nearly 2%, or in early January, when it cut by about 0.5%. Nevertheless, it’s a warning sign. “Whether China stress re-emerges is a key unknown,” wrote the economics team at Deutsche Bank Research.
China’s Middle Class Is About to Demand Big Changes
According to basic theories of democracy, sustained economic development leads to increased democracy, but, contrary to theory, China’s middle class has been politically passive. A close examination of China’s socioeconomic development indicates that the middle class is most likely on the verge of demanding dramatic change. Comparing China’s socioeconomic development with comparable middle-income countries that have made the transition to democracy in the last four decades, Chinese income and education levels are exactly at the median, with a per capita GDP of US$13,000 in purchasing power parity, and an average of 7.5 years of schooling for adults over 25. This suggests that despite tremendous growth, China is not developed enough to make it impossible for the survival of one-party rule. But as Chinese income and education levels rise further in the coming decade, according to theory, the society will become far less hospitable to the continuation of one-party rule.
Trade and Investment
Thai PTT Global looks at SE Asia to offset weak China demand
Thailand’s PTT Global, the petrochemical flagship of Thai top energy firm PTT Pcl said on 19 May it planned to increase exports to the ASEAN region to 10-15% over the next two years from 5% now, to offset weak demand from China, the company’s biggest overseas market. Sales to China are expected to fall to 10% by 2018 from 19% now, he said, adding potential new markets include Cambodia, Laos, Myanmar and Vietnam, which have high demand for plastics.