US Expands Its Military Footprint Near Taiwan And In South China Sea

IN THE MORE than 30 years since the Philippines threw out the US military bases at Clark Field and Subic Bay, China has emerged as a military power, especially in the South China Sea, and a potent threat to Taiwan.

Hence the newly announced agreement between Manila and Washington to allow US forces greater access to four as yet unannounced Philippines military bases. They would fill the gap in the chain of defence alliances the United States is building, stretching from South Korea and Japan to Australia in response to China’s growing regional power. and military capabilities.

The announcement followed a meeting in Manila between Philippine President Ferdinand ‘Bongbong’ Marcos Jr and US Defence Secretary Lloyd Austin.

The bases used are likely to be:

• Cagayan on the northern tip of Luzon, which faces Taiwan; 
• Zambales, which faces the Scarborough shoal in what Manila calls the West Philippines Sea and where Beijing has been active in island building; and 
• Palawan, which faces the Spratly Islands, another area of Chinese activity. 
• Isabela, to the south of Cagayan, facing eastwards into the Pacific.

US forces already have limited access to five sites in the Philippines under the two countries’ 2014 Enhanced Defence Cooperation Agreement. 

The four additions and expanded access will not mean the return of full-blown US bases like Clark Field and Subic Bay, with thousands of US troops permanently (and disruptively) stationed. The bases will be used as operational bases for supply and monitoring activities. Cagayan and Isabela, some 200 miles from Taiwan, would likely become forward operating bases in the event of military conflict over the island. 

The Philippines has to balance its extensive economic relationship with Beijing — President Marcos was in Beijing earlier this month on a three-day state to sign what he said were $22.8 billion in new investment pledges from China and an agreement to promote Chinese tourism to the Philippines — with its growing concern about China’s colonisation and militarisation of the South China Sea.

Since 2014, China has built ten artificial island bases, including one at Mischief Reef, deep inside the Philippines’ exclusive economic zone. In December, there were reports of new land reclamation being undertaken in the disputed Spratly Islands.

During Marcos’s state visit, he also signed an agreement to set up a maritime hotline to de-escalate any stand-offs, accidental or otherwise, in the disputed waters.

Beijing is not letting the new base agreement derail its relations with Manila, at least for now. Foreign ministry spokesperson Mao Ning was relatively sanguine when he said:

Out of its selfish agenda, the US side has held up to the cold war. Regional countries should remain vigilant about this and avoid being used by the US.

China knows that Marcos wants to balance his country’s relationships with China and the United States, unlike his recent predecessors who tilted towards China. It will be careful to avoid driving the Philippines into being a fully-fledged defence partner with the United States like Japan and Australia.

Yet on Manila’s part, it, too, has no intention of becoming one.

China’s Carrots For The Philippines Draw A Sceptical Look

PRESIDENT FERDINAND MARCOS JR of the Philippines has wrapped up a three-day state visit to China.

An agreement was reached during the visit to restart negotiations over joint oil and gas development in non-disputed areas of the South China Sea, although not much is likely to come of it. Likewise, the hotline set up to avert dangerous incidents in disputed areas will likely prove of limited value.

In recent years, existing communication channels failed to prevent significant confrontations at Reed Bank, Whitsun Bank and Iroquois Reef in the disputed Spratly Islands.

The Philippines has also raised concerns over reportedly new Chinese land reclamation and construction work in the Spratlys and over what it called the ‘swarming’ of Chinese vessels in disputed waters claimed by the Philippines.

The Philippine navy believes Chinese ships manned by militias have been at the Iroquois Reef and Sabina Shoal for almost a year.

Away from the thorny defence and security issues, Marcos Jr’s office said he secured USD22.8bn in new investment pledges from China, including USD13.76bn in renewable energy, USD7.32bn in electric vehicles and mineral processing, and USD1.72bn in agriculture.

Precedent suggests that investment promises should be treated with similar scepticism to statements of progress over maritime disputes.

Marcos Jr differs from his predecessor, Rodrigo Duterte, in pursuing balanced relations between Beijing and Washington rather than tilting towards Beijing.

However, with Marcos Jr facing growing domestic public pressure to shore up defence ties with Washington to defend its South China Sea interests, Beijing is offering carrots, more than wielding this stick to prevent Marcos from turning more to Washington.

China Lifting International Travel Ban Causes Concern

THE UNITED STATES is considering following Japan, Malaysia, Taiwan and India in imposing restrictions on arrivals from China now that Beijing is to allow its citizens to travel internationally again from January 7.

European countries such as Germany and the United Kingdom are monitoring the situation.

Traffic to web travel sites in China has sharply increased since authorities announced the coming lifting of the last of the zero-Covid restrictions earlier this week.

Searches for Hong Kong, which has now lifted all its Covid restrictions, Macau and neighbouring countries like South Korea, Japan and Thailand, were the most popular.

However, it will take some time for airlines to restore capacity on their China routes. Business travel is likely to rebound before tourist trips.

Nonetheless, foreign countries are concerned by the number of infected travellers arriving and the possibility that new virus mutations will occur within a population among which the infection rate is surging.

At this point, new mutations are a theoretical possibility more than an immediate threat.

Restrictions are likely to include a requirement for visitors to be fully vaccinated and to show a recent negative test.

The United States already requires the former of all arrivals, but not the latter. A mandatory negative test on arrival from China is one measure under consideration. Malaysia, Japan and Taiwan now require it.

Responding to a question about the prospect of restrictions, Foreign Ministry spokesperson Wang Wenbin highlighted the need for more international travel to maintain the stability of global supply chains and restore the growth of the world economy, underlying the economic imperatives currently driving China’s public health policy.

Updates:

• The United States is to require all arrivals from China to show a negative Covid test.
• Italy says it will test all arrivals from China after almost half of the passengers on two flights to Milan from China were found to have the virus. 
• However, the EU is saying that screening all arrivals from China is unjustified at this point as the BF7 omicron variant that is prevalent in China is already present in Europe but has failed to become dominant.

Plain Talk On Taiwan Overshadows Wooliness of IPEF

NOT FOR THE first time, US President Joe Biden has said that the United States would defend Taiwan militarily in the event of China using force to take control of the island. Nor is it the first time that his diplomats have had to walk back his comments, even before the inevitable condemnation from Beijing. 

At the same time, Biden, who was responding to a question during a press conference during his visit to Tokyo, said there had been no change in US policy towards Taiwan. The US One China policy holds that Washington maintains formal diplomatic relations only with Beijing and none with Taiwan and exercises’ strategic ambiguity’ over Beijing’s One China principle that Taiwan is an inalienable part of China to be reunified one day. Part of that ambiguity is not to say publicly that the United States would defend Taiwan militarily.

It has always been an illusionary fudge. The same year that Washington and Beijing established formal diplomatic ties (1979), setting the intractable Taiwan issue to one side, the US Congress passed the Taiwan Relations Act. The act guarantees US support for the island and specifies that the US must help Taiwan defend itself. It has been the basis on which the United States has continued arms sales to Taipei.

As regional leaders watch China build up its armed forces and demonstrate prowess in the skies around Taiwan and the waters of the East and South China Seas, concern about military action against Taiwan has increased. Pressure has been quietly mounting for the United States to be explicit about its military support for Taiwan in such an event. 

Recently, former Japanese Prime Minister Shinzo Abe said it was time for the United States to state clearly that it would defend Taiwan. Our man in Tokyo tells us that the incumbent, Fumio Kishida, has passed on the same view. 

Opinion in Washington splits between officials and politicians taking a more assertive posture towards Beijing and those who fear provoking Beijing into advancing its plans for reunification. Russia’s invasion of Ukraine has made the question of whether something similar could happen in Taiwan more prominent in Washington discussions.

Beijing’s view, repeated after Biden’s latest remarks, is that the Taiwan question and the Ukraine issue are fundamentally different. Foreign ministry spokesman Wang Wenbin said that to compare the two is absurd. 

Biden was speaking a truth hiding in plain sight as his administration seeks haltingly to mould a China policy that incorporates the direction set by his predecessor Donald Trump, but without the idiosyncratic rhetorical toxicity and disregard for diplomatic process. 

His comments on Taiwan overshadowed the announcement of his administration’s Indo-Pacific Economic Framework (IPEF). The IPEF aims to fill the vacuum of US economic engagement in the region left by Trump’s withdrawal from the US-initiated Trans-Pacific Partnership (TPP) in 2017 and cold-shouldering of its successor, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

At this point, the IPEF is little more than a bare framework and far from a conventional trade agreement that most of the 13 US allies that have signed up for it would prefer. The trade-agreement adverse Biden administration may cast it as a trade arrangement for the 21st century. However, it reflects domestic US political realities, including needing to satisfy Biden’s organised labour constituents and the groundswell of anti-China economic nationalism in Washington, as it does the promotion of regional economic integration.

Many of the South and Southeast Asian participant countries will be uneasy about the way the IPEF is being portrayed within the United States and among Washington’s closest regional security allies as a way of containing China’s growing economic sway over the region. China’s closest neighbours want deeper economic relationships with both powers.

The IPEF has four pillars:

• fair and resilient trade, encompassing seven subtopics, including labour, environmental, and digital standards; 
• supply chain resilience; 
• infrastructure, clean energy, and decarbonisation; and 
• tax and anti-bribery and anti-corruption.

Participants in the IPEF can pick and choose from that menu as they wish. Even though this should eliminate some of the horsetrading that so often stalls conventional trade deals, negotiating agreements for each IPEF pillar will neither be quick nor easy.

The target deadline is likely the Asia-Pacific Economic Cooperation (APEC) Leaders’ Meeting in November 2023, which the United States will be hosting.

RCEP Arrives

THE CHINA-STEERED Regional Comprehensive Economic Partnership (RCEP) will come into effect on January 1, bringing together China, Japan, South Korea, Australia, New Zealand and the ten ASEAN nations in the world’s largest free trading agreement (FTA).

The 15 nations account for more than half the world’s exports and almost one-third of its GDP and its population. More significantly, they will likely account for most of the world’s economic growth in the coming decades.

RCEP was signed on November 15, 2020, having been hurried forward by Beijing. Ratification by the required nine signatory nations was achieved on November 2, and the agreement will come into effect in the minimum stipulated 60 days. Indonesia, the Philippines, Malaysia and Myanmar are the only four nations left to ratify it.

About 90% of goods will be traded tariff-free within RCEP, although that is largely the case already as ASEAN has FTAs with Australia, Japan, New Zealand and South Korea. The bigger benefit will likely come from dismantling non-tariff barriers.

This will bolster China, Japan and South Korea by strengthening their supply chains in the region. Regional supply chains are likely to become more China-centric, and, as the largest economy, China will be well-positioned to dictate terms and technical standards.

RCEP’s less industrially advanced nations such as Cambodia and Laos will benefit less substantially and have been given extensive phase-in periods to ease the transition. (Long transitions, exceptions, exclusions and non-enforceability of many of its 20 chapters are quite a feature of RCEP.)

The raw materials, machinery, motor vehicles and consumer products sectors are likely to benefit most, but trade in agricultural products, always contentious, is not covered under RCEP. RCEP also ducks other controversial issues such as subsidies for state-owned enterprises and labour rights.

Trade in services will be liberalised along two tracks. One group of countries — China, Myanmar, Thailand, Cambodia, Laos, Vietnam, the Philippines and New Zealand — will open selective service sectors on a ‘positive list’ basis. The others will open all service sectors unless expressly excluded.

RCEP’s membership has considerable overlap with that of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The latter addresses indirect barriers such as state-owned enterprises, subsidies, labour rights, environmental protections and climate change.

It also provides stronger intellectual property rights protections than RCEP. This may steer investment to RCEP members who are also part of CPTPP.

RCEP should help drive economic recovery in Southeast Asia in the short term as the region battles through the latest surge of Covid-19.

In the medium term, it should increase trade and investment within the region. Estimates vary widely, but there is agreement that it will be material and in part at the expense of other parts of the world.

This will accelerate the emergence of a China-centric regional economic sphere that has been occurring for some years and is distinct from markets in the West and the supply chains that feed them.

The shift of the world’s centre of economic gravity to the region would be slowed if the United States and the EU were to join one of the two groupings. Prospects for either are dim, with an increased number of bilateral trade agreements more likely, especially with security partners.

In the longer term, as RCEP’s member countries develop, they will have to address the structural, protectionist issues that the agreement has parked to the side. That will bring political tensions.

China Demonstrates Hands-On Non-Interference In Myanmar

CHINA REGARDS THE military coup in Myanmar as an internal affair, and thus not one on which it needs to express any deviation from its default position on non-interference.

Given Beijing’s long-standing ties to the Myanmar military, it is safe to assume that its sympathies do not lie with the overthrown elected civilian government’s supporters. Its blocking of any action at the UN Security Council, such as imposing sanctions over the increasingly bloody February 1 coup, confirms that. So does Foreign Minister Wang Yi’s latest commitment to working with the Association of Southeast Asian Nations, as ASEAN espouses non-interference in member states’ affairs.

That is not to say that China does not have interests in the country. One is the 800-kilometre-long twin oil and gas pipelines that run from Kyaukpyu, the deepwater port that China is building on Myanmar’s Bay of Bengal coast, to Kunming, the provincial capital of Yunan in southwestern China. The pipelines, like Myanmar itself, are a key part of the Belt and Road Initiative. It gives China a short cut to the Indian Ocean, avoiding the chokepoint that is the Strait of Malacca.

The port and the pipelines are centrepieces of the China-Myanmar Economic Corridor, which passes through the rebellious Shan state. China plans several projects in the Shan and neighbouring Kachin states, which lie along the entirety of its strife-ridden border with Myanmar and where China periodically tries to broker peace.

These projects include three cross-border economic cooperation zones, the Myitkyina Industrial Zone in Kachin state and the railway from the Shan border town of Muse to Mandalay, which will provide a through rail link from Kunming to both Kyaukpyu and Myanmar’s largest city, Yangon, where China is also building residential, commercial and industrial facilities.

Many Chinese enterprises are also involved in resources extraction, including jade mining. China is Myanmar’s largest trading partner. The total value of two-way trade was $12 billion in 2019-20, with China running a $1.3 billion trade surplus, according to Myanmar’s Commerce ministry. There is also a lot of cross-border smuggling.

Anti-Chinese sentiment –never far from the surface in days of the former junta — has risen across Myanmar. In the face of threats to blow up the oil and gas pipelines, Beijing reported moved troops to its border opposite Muse at the beginning of the month, although it is unclear what they will do beyond providing a show of force. Moving troops into the country would require a tortuous twisting of the definition of non-interference.

So far, Beijing has just sought assurances from the Myanmar military about the pipelines’ security. With some cause. Fighting between the Kachin Independence Army and Myanmar’s military is reported across Kachin and northern Shan states, where Naypyidaw’s rule is mostly in name and requires repeated military crackdowns.

The Brotherhood Alliance, which includes the Myanmar National Democratic Alliance Army, Ta’ang National Liberation Army and Arakan Army, all of which are based along the Chinese border, says it is ready to join forces with all ethnic minorities to fight the regime if the killing of protesters continues.

The military has for decades fought ethnic armed organisations across Myanmar. Intensification of those conflicts was always likely to be part of the coup’s fallout, a development that Beijing will find difficult to ignore. Quietly, it will continue to provide its old friends in Myanmar’s military with diplomatic, financial and military support while continuing to warn against external interference in an internal affair.

RCEP Provides Beijing With A Win-Win

CHINA IS ON the north-northwestern rim of the Regional Comprehensive Economic Partnership (RCEP). Yet it will be at the heart of the economic bloc that the trade agreement will cement.

RCEP is due to be signed on November 15 during the virtual twin ASEAN and East Asia Summits. The latter involves the ASEAN Plus Six — the six being China, Japan, South Korea, India, Australia and New Zealand — and the United States and Russia. As RCEP does not include India, the United States or Russia, it will have a summit of its own, too.

The 15 RCEP members (China, the ten ASEAN nations, and the four other countries with which ASEAN has free trade agreements, Australia, Japan, New Zealand and South Korea) account for approaching 30% of the world’s gross domestic product and one-third of its population. More significantly, they will likely account for most of the world’s economic growth in the coming decades.

Whether that will make this the Asian century rather than the Chinese century in succession to the long American century, is a matter for the future. For the present, it is the world’s engine of growth that will drive the recovery of the global economy from its Covid-19-induced recession.

India withdrew from the RCEP negotiations late on, concerned about both the impact of the dismantling of regional tariffs on its farmers and Chinese imports on its manufacturers. It may return at a later date. Most ASEAN countries would welcome that. Beijing will be indifferent, especially if border tensions with India remain.

The United States was never in, pursuing the TransPacific Partnership (TPP) instead as a geopolitical counterweight to the China-led RCEP as part of President Barak Obama’s ‘pivot to Asia’. President Donald Trump’s withdrawal from the TPP as soon as he took office in 2017 left its successor, the Comprehensive and Progressive Agreement for TransPacific Partnership (CPTPP, also known as TPP-11), a pale shadow of a competitor to RCEP, especially as Beijing moved purposefully to fill the resultant vacuum.

The Trump administration’s putative Indo-Pacific economic grouping based on private sector investment and the Quadrilateral Security Grouping (the Quad: India, Japan, Australia and the United States) never amounted to anything. Many ASEAN nations are uneasy about the Quad, uncomfortable with its security and military focus that pushes them towards choosing between Washington and their neighbour who is often their main trade and investment partner.

There is talk that the prospective incoming US president, Joe Biden, might join the CPTPP, but this Bystander feels it is too late; that horse has bolted. An alternative would be for the United States to seek to join RCEP, on the better-to-be–inside-the-tent theory. That would require a US-ASEAN free trade deal first.

There is more than symbolic significance in the fact that the RCEP is being signed before the next US administration takes office, even if it will not be implemented until the second half of 2021, following ratification by the signatories.

For Beijing, RCEP is an opportunity to write regional trade rules to its advantage, and also diversify its trade at a time of both unsettled relations with the United States and an eastward shift of the global economy’s centre of gravity. A win-win.

China Extends Its Sway Over Mekong River

NOT FOR THE first time, there is concern that China’s hydro dam-building on the Mekong river is causing environmental harm upstream and low water levels downstream. And not for the first time, Beijing is pouring money on troubled waters.

Multiple hydroelectric dams are being built along its course and its tributaries, mostly in China, which calls the upper reaches of the river the Lancang, but also in Laos, which aims to be the ‘battery of Asia’.

Beijing rejects the accusation that it causes drought conditions downstream, where the low water levels are damaging agriculture and fisheries. The Mekong is the world’s largest inland fishery.

However, two days ago, Premier Li Keqiang (seen in the screenshot above) told a video meeting of the China-led Lancang-Mekong Cooperation (LMC) initiative that Beijing was willing to offer more assistance on water resources, road, rail and river transport connectivity and public health to its Southeast Asian neighbours.

He also said that China would share data on the river waters year-round, and not just during flood season. The intergovernmental Mekong River Commission (MRC) — which involves Thailand, Cambodia, Laos and Vietnam and has mostly been elbowed aside by the LMC — has called for year-round data for some time.

Mekong river nations’ leverage over China is limited. Water shortages would have to get far worse for the downstream countries to risk jeopardizing their relations with Beijing by pressing it over its dams.

Laos is unlikely to compromise on its hydropower ambitions, since electricity exports bring in much-needed foreign currency. At the same time, Thailand and Vietnam will be keen to keep importing Lao hydroelectricity to power their industrial development.

Undoubtedly, it is Beijing’s vision that is driving the development of the river. This encompasses not only dams but also development projects, special economic zones and trade that will integrate the region into the Belt and Road Initiative.

At some point, that might tempt the United States to look for means to deter companies and banks involved.

Troubled Waters Stir Again In Disputed South China Sea

THE SAILING IN mid-April of the Liaoning along with the rest of the aircraft carrier’s battle group for the South China Sea on a training exercise was one of the less noted recent incidents in the maritime region where tensions are again rising.

Warships of the United States (see photo above taken in the South China Sea on April 18) and Australia have also arrived in the waters where for much of this month a Chinese survey ship, the Haiyang Dizhi 8, has been shadowing an exploration vessel operated by Petronas, Malaysia’s state-owned oil and gas company.

Separately, Beijing has created two new administrative districts covering Macclesfield Bank, the Spratly Islands and the Paracel Islands, drawing protests from the Philippines, which claims infringement on its territorial waters. Earlier, Vietnam protested to China over the sinking of a Vietnamese fishing boat near the Paracels, which is says was rammed by a Chinese vessel.

Repeated confrontation between China and Vietnamese fishing boats has been the low-level frontline in this dispute.

Vietnam, the Philippines, Malaysia and China, along with Brunei and Taiwan, have conflicting territorial and jurisdictional claims in the South China Sea.

Washington already believes Beijing restricts freedom of navigation in the disputed waters of the South China Sea to advance its disputed territorial claims. The latest events will give it further opportunity to accuse Beijing of using the Covid-19 pandemic to step up its intimidatory behaviour towards the other nations in the region.

US Secretary of State Mike Pompeo has already done just that and claimed that Beijing is augmenting its military bases at Fiery Cross Reef (which China calls Yongshu) and Subi Reef (Zhubi), and landed special military aircraft on Fiery Cross Reef.

Beijing is seen in Washington as having taken similar opportunistic advantage of the pandemic over Hong Kong.

None of this bodes well for any progress in the already protracted discussions between ASEAN and China over a South China Sea Code of Conduct — especially as a PLA-Navy spokesman says the Liaoning will now be regularly conducting training exercises in the South China Sea.

ADB Lays Out Rocky Climb Back Up The Cliff

NO ONE CAN say how widely the Covid-19 pandemic may spread, and containment may take longer than currently projected. The possibility of severe financial turmoil and financial crises cannot be discounted. Sharp and protracted declines in commodity prices and tourist arrivals will challenge dependent economies across [Asia].

On such a downbeat, but realistic note, the Asian Development Bank introduces its 2020 Outlook, published on April 3. Its underlying theme is that the nascent recovery from last year’s decelerating pace of growth because of US-China trade tensions and the related global manufacturing recession has been snuffed out by the pandemic, and then some. Growth will rebound next year, the Bank believes, but not before it declines steeply this year.

For China, the Bank is forecasting growth to tumble to 2.3% for the year, against 6.1% last year and 6.7% in 2018. The high-frequency indicators from the early months of the year showing double-digit contractions in industry, services, retail sales and investment imply that the economy could likely see a double-digit contraction reported for the first quarter. The GDP figures are due on April 17.

To put that into context, the likely impact of Covid-19 will be more severe for China than that of the Asian financial crisis in 1997–98, the SARS (severe acute respiratory syndrome) epidemic of 2003 and the 2008 global financial crisis.

However, the recovery in the second half of the year implied by the growth forecast for the full year is seen carrying into 2021. The ADB expects growth will rebound to 7.3% in 2021, helped not just by the return of regular commercial activity but also by easy monetary policy and hefty and probably repeated fiscal and infrastructure stimulus on the part of governments.

The knock-on effect across the region will be as severe, as trade growth weakens further on the back of waning domestic demand, a halt to tourism, and transport and other supply disruptions because of the pandemic. The ABD forecasts regional growth of 2.2%, down from 2019’s 5.2%, but then a recovery to 6.2% in 2021. Excluding Asia’s newly industrialised economies (South Korea, Taiwan, Hong Kong and Singapore), growth is seen to slow to 2.4% in 2020 from 5.7% in 2019, and then to pick up to 6.7% in 2021.

A further drag on growth in China and the region, noted by the United Nations Conference on Trade and Development (UNCTAD), will be the fall in profits for foreign affiliates of multinational enterprises operating in the region, which in turn will reduce funds available for direct reinvestment:

On average, the top 5,000 multinationals, which account for a significant share of global foreign direct investment (FDI), have now seen downward revisions of 2020 earnings estimates of 30% due to Covid-19, and the trend is likely to continue. Hardest hit are the energy and basic materials industries, (-208% for energy, with the additional shock caused by the drop in oil prices), airlines (-116%), and the automotive industry (-47%). The latter industry was fate first to see earnings revisions anticipating the supply chain shock. Industries now expecting to be hit by a global decline in demand are rapidly catching up.

UNCTAD Investment Trends Monitor, March 2020 Special Edition

As the reinvested earnings component of FDI in Asia was 41% in 2018, these substantial downward revisions foretell sizeable effects on FDI from earnings losses. Downward revisions to multinationals earnings in China average 21%, UNCTAD notes.

The risks to its forecasts, as the ADB acknowledges, are nearly all to the downside and substantial. The assumption that the pandemic will be contained globally this year and normal business conditions will return next is a ‘good-case’ one: vast uncertainty about the duration and severity of the pandemic remains. The potential for second and third waves of the outbreak exist.

Thus the ADB’s broad range for the total global cost of the pandemic of between $2.0 trillion and $4.1 trillion, equivalent to between 2.3% and 4.8% of global GDP, with China’s cost approaching 5% of GDP. As the ADB also says, ‘the possibility of a financial crisis cannot be discounted and the pandemic could also bring about fundamental changes to the global economy over the long term’.

Most notable of those would be a retreat from the globalization that has underpinned the rise of developing Asia, with multinationals repatriating production and shortening global supply chains.

However, it is not just the pandemic that hangs heavy over the outlook for the region. Trade conflict between Washington and Beijing remains a significant risk, especially if the pandemic causes China to fall short on its commitment to increase imports of US goods and services in 2020 and 2021 by $200 billion over 2017 values, as the Phase One trade agreement between the two countries requires.

As this Bystander has noted, this was always an ambitious target, as are its components for imports of agricultural, manufacturing and energy products and services. With the president of the United States facing re-election in November and the US economy already taking a severe hit from the pandemic, nothing adverse can be ruled out.