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Daily Archives: October 12, 2021

US Cautions Beijing Over 'Pressure' Campaign vs. Taiwan

U.S. military officials warned Tuesday that China’s unrelenting pressure campaign against Taiwan is only increasing the chances for mistakes and, perhaps, an unintended fight.

The Pentagon accused Beijing of ratcheting up tensions across the Taiwan Strait, cautioning that the “provocative” tactics could backfire.

“The PRC (People’s Republic of China) has stepped up efforts to intimidate, pressure Taiwan and other allies and partners, including increasing their military activities conducted in the vicinity of Taiwan, the East China Sea and the South China Sea, which we believe are destabilizing and only increase the risk of miscalculation,” Pentagon press secretary John Kirby told reporters.

Kirby added that the U.S. commitment to Taiwan remains “rock solid.”

“We have an abiding interest in peace and stability across the Taiwan Strait, and that’s why we’re going to continue to assist Taiwan in maintaining a sufficient self-defense capability,” he said. “We urge Beijing to honor its commitment to the peaceful resolution of cross-strait differences.”

China’s increasingly public push for the reunification of Taipei and Beijing has sparked a heated back and forth with Taiwanese leaders who want to keep Taiwan as a self-governing entity.

“We will do our utmost to prevent the status quo from being unilaterally altered,” Taiwanese President Tsai Ing-wen said Sunday while speaking at the territory’s National Day celebration.

“We will continue to bolster our national defense and demonstrate our determination to defend ourselves in order to ensure that nobody can force Taiwan to take the path China has laid out for us,” she added.

Tsai’s comments followed Chinese President Xi Jinping’s declaration Saturday that reunification with Taiwan “must be realized.”

“No one should underestimate the Chinese people’s strong determination, will and capability to safeguard national sovereignty and territorial integrity,” he said.

Chinese media have also railed against reports that the U.S. has a small contingent of special forces and Marines in Taiwan to train Taiwanese forces.

U.S. defense officials have repeatedly refused to comment on the alleged training, first reported by The Wall Street Journal.

“I don’t have anything to say publicly about those reports,” the Pentagon’s Kirby said Tuesday, when pressed on the issue.

U.S. military and intelligence officials have been increasingly concerned with what they see as China’s ever more aggressive military posture toward Taiwan, highlighted by a series of aerial incursions that saw more than 150 Chinese jets encroach on Taiwan’s air defense identification zone over a span of several days last week.

As recently as June, however, U.S. military officials questioned whether Beijing would be capable of taking Taiwan by force.

“China has a ways to go to develop the actual no-kidding capability to conduct military operations to seize through military means the entire island of Taiwan, if they wanted to do that,” General Mark Milley, the chairman of the Joint Chiefs of Staff, said at the time.

“I think that there’s little intent right now or motivation to do it militarily,” he added, calling the probability of an attack low. “But it is a core — c-o-r-e — national interest of China to unite Taiwan.” 

Ken Bredemeier contributed to this report.

US Affirms Need for Counterterrorism, Humanitarian Assistance in Afghanistan 

U.S. President Joe Biden held a virtual meeting with leaders of the world’s richest nations to push top priorities in Afghanistan, the White House said Tuesday, as the impoverished nation stares down a humanitarian crisis after the U.S. withdrawal and the Taliban’s subsequent takeover.

White House press secretary Jen Psaki described Tuesday’s call with leaders of the G-20 as “an opportunity — and a constructive opportunity — to discuss counterterrorism efforts and efforts to provide international humanitarian assistance.”

This is the first such meeting of international leaders since the U.S. withdrawal in late August. Also in the past week, top U.S. officials went to Doha, Qatar, for the first round of face-to-face negotiations with the new Taliban regime. Neither party said whether any agreements were reached, though the United States continued to refrain from officially recognizing the Taliban’s legitimacy as the government of Afghanistan.

In a statement after Tuesday’s meeting, the White House said the U.S. “remains committed to working closely with the international community and using diplomatic, humanitarian, and economic means to address the situation in Afghanistan and support the Afghan people.”

The U.S. did not announce any new funding for Afghanistan on Tuesday or provide concrete details on how it will meet those commitments. But Psaki stressed the U.S. is already the largest single humanitarian donor to Afghanistan, having provided more than $330 million this year.

“And we will continue to take steps to alleviate the suffering of the Afghan people and call on other donors to step up their contributions to help deliver critical assistance,” she said.

‘Make-or-break moment’

United Nations Secretary-General Antonio Guterres has warned that Afghanistan is facing “a make-or-break moment.”

“If we do not act and help Afghans weather this storm and do it soon, not only they but all the world will pay a heavy price,” he said before the leaders gathered on Tuesday.

Before the Taliban takeover, international aid accounted for 75% of Afghanistan’s state spending. But governments and international organizations have cut off such funding and have frozen Afghanistan’s assets.

Now, about half of the population needs humanitarian or protection assistance, says the U.N. Office for the Coordination of Humanitarian Affairs. One-third of Afghans are currently facing “emergency” or “crisis” levels of food insecurity,

“This moment is not the moment to abandon Afghanistan’s children,” UNICEF spokesman Salam Al-Janabi told VOA. “This is not the moment to avert your eyes from what is happening here. And they need the assistance to survive. Basically, it is now a matter of life and death for many of these children who are severely, acutely malnourished.” 

All that, Guterres warned Tuesday, could have dire consequences beyond just human suffering.

“Without food, without jobs, without their rights protected, we will see more and more Afghans fleeing their homes in search of a better life,” he said. “The flow of illicit drugs, criminal and terrorist networks will also likely increase.” 

Notable absences

Conspicuously absent from Tuesday’s virtual meeting, hosted by Italian Prime Minister Mario Draghi, were the leaders of China and Russia, top U.S. adversaries who are geographically closer to the landlocked Central Asian nation. Both have had a long and complicated relationship with Afghanistan and oppose putting conditions on aid.

Michael Kugelman, deputy director of the Asia Program at the Wilson Center, said it is likely the Group of 20 will see past those differences.

“There’s a very strong motivation for the G-20 countries — including those that don’t get along with each other — to put their minds together and come up with a clear plan to deliver much-needed humanitarian assistance,” he told VOA. 

And Psaki brushed aside concerns over the absence of those two countries

“It was a meeting organized by the Italians,” she said. “So, I would certainly point you to them for confirmation of who may or may not have attended. But I would note that it is still fruitful, of course, to have an opportunity — or this is how the president views it — to discuss the efforts to work together on counterterrorism work, including against threats from ISIS-K (Islamic State Khorasan), to ensure safe passage for those foreign nationals and Afghan partners with documentation seeking to depart Afghanistan.”

To that end, on Tuesday, the U.S. State Department announced it was naming Ambassador A. Elizabeth Jones as the new coordinator for Afghan relocation efforts. The veteran diplomat will help eligible Afghans depart the country and transition to their resettlement in the United States.

White House Congratulates Iraqi Government on Election

The White House extended congratulations to the Iraqi government Tuesday for its mostly peaceful election, while mentioning the certification of the results was still pending. 

“We congratulate the Iraqi government on having fulfilled its promise to hold earlier elections,” White House press secretary Jen Psaki told reporters.

“Once the final results are certified, we hope the new council of representative members will form a government that reflects the will of the Iraqi people.”

The party of cleric Muqtada al-Sadr was the largest vote-getter in Iraqi parliamentary elections, according to initial results released Monday.

A count based on partial results shows the Shiite Muslim cleric has won more than 70 seats in the 329-seat parliament.

Al-Sadr’s party said it won 73 seats, increasing its seat count of 54 and giving it a large influence in government formation.

Reuters news agency said former Prime Minister Nouri al-Maliki appeared have the next largest win among Shiite parties, according to initial results.

U.S. State Department spokesman Ned Price said the new government must “work to address Iraq’s governance, security and economic challenges.”

Top European Union diplomat Josep Borrell said if there are claims of irregularities in the election, then they need to be dealt with “promptly though available procedures.”

Shiite groups have dominated Iraqi politics since the fall of Sunni leader Saddam Hussein in 2003. They will continue that trend if the final vote count shows al-Sadr’s party is the winner.

Hundreds of al-Sadr’s supporters, with flags and posters of him, celebrated his front-runner status Monday night in Baghdad’s Tahrir Square, according to Reuters.

Al-Sadr is a populist religious leader known for commanding an insurgency against U.S. forces after the 2003 U.S. invasion that started the nearly nine-year war in Iraq.

He claimed victory in a live speech on state television Monday and promised a nationalist government without foreign interference, Reuters reported.

Sunday’s vote was marred by a record low turnout for parliamentary elections, at just 41%, according to Iraq’s electoral commission. That is below the 44.5% recorded in 2018, the previous all-time low.

The election was held months ahead of schedule in response to youth-led protests against corruption and faltering public services. The protests brought tens of thousands of people onto the streets in late 2019 and early 2020, with demonstrators calling for reforms and new elections.

However, a police crackdown on the protests, which left nearly 600 dead, along with widespread disillusionment about Iraq’s political elite, led many protesters to later call for a boycott of this year’s elections.

Sunday’s vote was held under a new law making it easier for independent and reform candidates to be elected, including by making voting districts smaller. In practice, however, powerful parties were still best able to mobilize supporters under the new rules.

The election results are expected to largely maintain the country’s traditional political blocs.

However, since no one party won a majority of seats in parliament, negotiations to choose a prime minister to run the government are expected to take weeks or even months.

Some information for this report came from The Associated Press, Reuters, and Agence France-Presse. 

 

Real Estate Debt Crisis and Energy Shortage Threaten China’s Economic Growth 

At a time when the Chinese economy is facing multiple challenges, including an energy shortage and supply chain problems that have disrupted multiple industries, an expanding crisis in the real estate sector threatens even further damage. 

For months, the slow-moving default crisis at China Evergrande Group, one of the country’s largest property developers, has put a spotlight on the real estate sector, which makes up a much larger share of gross domestic product in China – nearly 30% – than it does in most developed countries. 

The crisis has accelerated in recent days, with more real estate companies defaulting on their bond payments, or asking for forbearance from creditors in order to avoid default.

Experts warn that the deterioration of the Chinese real estate sector could lead to reluctance of foreign investors to place bets on Chinese companies in general – bad news at a time when the government in Beijing is struggling to manage multiple problems. 

Energy shortage 

The crisis in the property sector comes at a particularly bad time for China, which is currently facing widespread shortages of coal, which it uses to generate around 70% of its electricity. 

The coal shortage is driven by a number of factors, including a boycott by China of Australian coal put in place last year after officials in Canberra demanded an investigation into the origins of the COVID-19 pandemic, which first appeared in China.

But China has also placed a series of new regulations on coal mines while simultaneously requiring that energy prices be kept artificially low. This led to disinvestment in the coal sector, and lower production. 

This week, Beijing announced that it will allow energy firms to set prices on the open market without a ceiling, which will make electricity significantly more expensive, but will also incentivize more production.

The moves to improve the supply of energy are not expected to achieve real results until sometime next year. Meanwhile, the energy shortage has cascaded through the Chinese economy. The country has faced intermittent blackouts that have impacted everything from heavy industries like steel, aluminum and cement, to the manufacture of electronics and other consumer goods. 

Broader problems in real estate 

At a time when foreign investment could help drive improvement in the country’s energy sector, the struggles of the property development market are making those investments look more and more risky. 

Evergrande’s failure to make payments on a pair of dollar-denominated bonds last month – and the Chinese government’s apparent lack of interest in bailing out the company – has raised questions about the future of the conglomerate, which has more than $300 billion in debt still outstanding.

On Tuesday, investors in Evergrande bonds reported that the company had missed another payment of $148 million. 

Now, the crisis at Evergrande seems to be infecting other firms in the property sector. Last week, Fantasia Holdings Group, a Shenzhen-based property developer, shocked the markets by defaulting on a $206 million payment. Days before, the bonds had been trading at 99 cents on the dollar, suggesting that investors thought it highly likely that the company could service its debt. 

On Tuesday, another firm, Sinic Holdings, announced that it does not expect to be able to make a payment on a $250 million bond coming due next week, and that the failure will cause it to “cross-default” on two other outstanding bonds.

Funding crisis 

Still more firms are showing signs of imminent distress. Modern Land Co., based in Beijing, has asked creditors for a three-month extension on a pending payment, and Xinyuan Real Estate has asked its creditors to trade bonds coming due on Friday for new bonds that won’t mature until 2023, a move rating agencies see as tantamount to default. 

The series of defaults in the property sector has given international investors reason to be extremely leery of the Chinese property market. Moody’s Investors Service, Fitch Ratings and S&P Global Ratings have all slashed credit ratings on a host of Chinese developers.

Bondholders who were willing to accept a 10% interest rate on Chinese junk bonds – securities considered to be below “investment grade” by ratings firms – are now demanding rates above 20%, in some cases. Holders of existing bonds are expecting to take significant “haircuts” on their holdings, meaning that they will be forced to accept less than they are owed. 

A drag on economic growth 

High borrowing costs are likely to be a persistent problem for Chinese companies, Doug Barry, a spokesman for the U.S.-China Business Council, told VOA. 

“A problem for the Chinese economy is that it will cost higher rates of return to sell Chinese debt in world equity markets,” he said.

Barry said that the likely result is that China will receive less investment capital from overseas in the future, which will hamper economic growth.

“The immediate effects could be lower levels of investment and lower levels of growth,” he said. “This, paired with energy shortages, represents a one-two punch. Foreign companies with substantial investments in China are watching closely with an eye toward keeping supply chains intact and costs stable.” 

“The world economy is intertwined with China’s, ‘like lips and teeth,’ to use a Chinese expression,” he added. The hope is that officials will get a grip on the immediate problems and do the work necessary to stabilize for the longer term financial, property and energy markets.” 

Public concern limited 

Tianlei Huang, a research fellow at the Peterson Institute for International Economics, said in an email exchange with VOA that inside China, there doesn’t appear to be broad public concern about the crisis in the real estate sector seeping into other parts of the economy. 

However, he added, “There is no denying that Evergrande’s debt is worrying. Though the overall debt held by financial institutions is limited, certain banks with high exposure to Evergrande and other weak property developers could suffer a heavy blow and see a sharp deterioration in asset quality should there be a cross default.” 

The lack of widespread public concern may be due, in part, to how difficult it is to get a full picture of the indebtedness of large Chinese companies. 

Hidden debt 

“What is equally worrying is that Evergrande also has lots of off-balance-sheet debt and it is unclear how much,” Huang said.

Many Chinese firms supplement bank loans and bond issuances with other sources of funding, including investment capital routed through wealth management firms seeking high returns for their clients. 

“You may have seen videos of gatherings of investors in front of Evergrande’s office buildings asking for repayments,” he said. “Local governments are now on high alert for any large-scale gatherings related to Evergrande.”