Category Archives: China-Southeast Asia

China’s Low-Tech Jobs Start To Head West And South

Foxconn, the Taiwanese electronics manufacturer and, famously, assembler in China of Apple’s iPhones and iPads, is planning to set up a $5 billion-10 billion plant in Indonesia, another sign of China’s ebbing role as the low-cost workshop to the world. Work will start in October on the new factory that will initially produce 3 million mobile phone handsets a year, rising to 10 million units after 2013.

Earlier this month, Vancl, a popular online clothes retailer, said it had started to shift production overseas to cut costs. The company says that, allowing for increased shipping costs, it could save 5%-10% of its total costs by making  its glad rags in Bangladesh, where labour rates are a quarter of those in China. It is also looking at manufacturing in Cambodia and, like Foxconn, in Indonesia.

The two companies are the latest in a line of manufacturers moving production elsewhere in Southeast Asia to offset rising domestic material and wage costs. It would be premature to talk of the hollowing out of Chinese manufacturing. Cost is never the sole determinant in such calculations. Quality of available labour and speed to market remain important factors. Yet many foreign companies that contract for basic manufacturing of goods such as shoes, plastic toys, textiles and low-end electronics are reducing their buying or production in China and switching sourcing to elsewhere. Others are moving it inland as Beijing fosters provincial wage competition as part of a strategic shift toward an internally driven economy and a desire to reduce the growing wealth gap between the coasts and the interior. Adding to wage pressures, manufacturers across eastern China say they are struggling to find workers despite higher pay, because younger workers want white-collar, not factory jobs.

That is causing pain for both Chinese and foreign firms based on the coasts. It is there that China’s manufacturers have been leading the shift towards more sophisticated exports for some years, driven by the official sponsorship of high-tech zones. Lower-tech jobs will move away. It is a rite of passage for all developing economies.

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South China Sea Radar

Photo taken on July 18, 2012 shows a building on Zhubi Reef of south China Sea. (Xinhua/Wang Cunfu)

For those who asked about the radar station in the background of the picture in our earlier post about a large Chinese fishing fleet arriving at the Zhubi reef in the Nansha Islands (the Subi Reef in the Spratly Islands to much of the rest of the world), we offer the close-up photograph above. Beijing says the radar station is intended to be for weather monitoring. The Philippines, which is also building four radar stations in its own waters of the South China Sea that will use communications and surveillance equipment supplied by the U.S., fears China’s station could easily be used for military purposes, too.

China also has a radar station on Yongxing island in the Xishas (Woody Island in the Paracels to the rest of the world), the site of its new administrative capital for the rocks and reefs it claims in the South China Sea. There are also reports it is has built another radar station in the Spratlys at its garrison on Mischief Reef. There is a map of China’s coastal and South China Sea radar stations here.

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China’s South China Sea Fishing Fleet: How Far Will It Go?

Fishing vessels sail past Zhubi Reef of south China Sea on July 18, 2012. A fleet of fishing vessels from China's southernmost province of Hainan departed from Yongshu Reef on Tuesday night. The fleet arrived at Zhubi Reef at about 10 a.m. Wednesday. The fleet of 30 boats, the largest ever launched from the island province, planned to fish and detect fishery resources near Zhubi Reef. (Xinhua/Wang Cunfu)

The picture above shows two of the 30 vessels that comprise the largest fishing fleet dispatched from Hainan to Zhubi Reef, or Subi Reef, in the Spratly Islands (Nansha to China) in the disputed waters of the South China Sea. The 3-story domed building in the background contains a newly installed radar station and a helipad. It towers over the old wharf that China built to establish its claim to the reef. Vietnam, the Philippines and Taiwan all say the reef lies within their territorial waters. The reef surrounds a lagoon and is above water only at low tide, which is why the building appears to be in the middle of the sea. The sharp eyed may detect the band of lighter blue looking water above the reef itself. The fleet is being protected by the Yuzheng 310, one of the most advanced patrol ships of the Chinese fishery administration.

The 20-day fishing mission is the latest display of assertion of sovereignty by Beijing in the South China Sea. It comes in the immediate wake of a meeting in Cambodia of foreign ministers of the Association of Southeast Asian Nations (ASEAN), also attended by U.S. Secretary of State Hilary Clinton, that failed to reach consensus over how to deal with China over its territorial claims in those waters. Beijing successfully divided to conquer ASEAN on the issue, leaving its fishermen free to sail ahead (and its oil drillers to drill), further testing the diplomatic limits of the Philippines and Vietnam in particular.

Footnote: The new city that China is creating to administer its South China Sea specs of rock and reef is preparing to elect a 60-member city council and mayor later this year, according to the Southern Metropolis Daily.

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Damming The Mekong

While Myanmar appears to be pressing ahead with dam construction for hydropower plants in the face of environmental concerns, Laos is being more cautious. Or at least giving the appearance of being so. Viraphonh Viravong, the country’s deputy minister for energy and mines, tells the state-run Vientiane Times that Laos will not start building its controversial Xayaburi dam on the Mekong river until it has resolved all concerns about potential impacts.

The measure of Viraphonh’s words, and the environmental impact review being conducted by two sets of international consultants, Poyry from Finland and Companie Nationale du Rhone from France, will be being watched closely by China’s giant state-owned dam builder Sinohydro which is involved in at least eight of 25 dam-building projects in Laos for which Chinese firms are contractors, though Xayaburi is not one of them. Other Chinese companies with a similar interest include China International Water and Electric, China Southern Power Grid, Datang and Gezhouba.

Viraphonh said there are two issues with what at 1,260 MW would be Laos’s  largest hydropower plant. They are fish migration and sediment flow, both, according to environmentalists, critical to sustaining the Mekong’s ecosystem. Four dams exist in the narrow gorges of the Upper Mekong in China but until now there have been none on the slower moving lower reaches of the river. China’s damning has made downstream hydropower plants more economically feasible by smoothing out the seasonal flows of the Mekong.

A report for the intergovernmental Mekong River Commission published in October 2010 said that given the far reaching potential effects on the ecosystem, any construction should be delayed for 10 years to give time to plan for more sustainable hydropower development. However, a multi-billion dollar contract to build Xayaburi was signed in April with Ch. Karnchang, one of Thailand’s leading construction companies. Preliminary work has started regardless of deputy ministerial statements.

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Sinohydro Looks To Restart Work On More Myanmar Dams

The Salawin river (a.k.a. the Nujiang river in China) at the border village of Mae Sam Laep. Myanmar is on the left bank. Attribution: Takeaway at en.wikipediaSinohydro, the Chinese state-owned contractor for Myanmar’s suspended (for now) Myitsone dam project near the headwaters of the Irrawaddy river and China’s leading dam builder, faces a new environmental and reputational challenge now the government in Naypyidaw has approved construction of the controversial Hatgyi dam on the Salween river.

The isolated Salween is one of the world’s longest free-flowing rivers. It rises on the Tibetan plateau and courses through the canyons and gorges formed when the plates of the Indian subcontinent and Asian mainland met. For much of its 2,800 kilometers, the river flows through Yunnan, where it is called the Nu Jiang. Then it cuts through the eastern edge of Myanmar and marks 120 kilometers of the border with northwestern Thailand, a portion of which is shown in the photo above, before turning back into Myanmar to reach the Andaman Sea at the old teak trading port of Mawlamyaing.

En route, it flows through the watershed known as the Three Parallel Rivers of Yunnan, a UNESCO world heritage site. The river is so environmentally sensitive and biodiverse that local protests forced Beijing in 2004 to cut plans to build 13 hydroelectric dams along its own stretch of the river to four, and then in 2009 to suspended even those pending a still uncompleted environmental review. One of the proposed dams would have been bigger than the Three Gorges dam.

Map of Hatgyi dam on the Salween River in Myanmar The $1 billion 1,200 MW Hatgyi dam is one of at least five hydropower plants planned for the Myanmar leg of the Salween by a partnership of the Myanmar and Thailand state electric utilities (see map, right, from the environmental group, Salween Watch). Hatgyi’s go-ahead follows the signing of a peace deal between Naypyidaw and ethnic Karen rebels. Sinohydro, which was given the contract to build the dam in 2006 before fighting stopped construction starting, has reportedly been stockpiling equipment and material at the site since mid-April in preparation for a resumption.

Environmental groups are gearing up again to block construction, saying it will destroy traditional village life along the ecologically fragile river, forcibly uprooting local populations and flooding farmland. Periodic local protests against the project have been staged since 2004, the most recent in March.

Sinohydro is also the contractor for another proposed dam on the river that could now go ahead following a peace agreement between Naypyidaw and a different group of ethnic rebels, in this case the Shan. The $6 billion 7,100 MW Tasang dam is planned to be the one of the highest in southeast Asia, taller than the Three Gorges. China’s state-owned Three Gorges Corp., which built and runs the Three Gorges dam, is a sub-contractor to the Tasang dam project. Some 60,000 villagers will have to be relocated to build it. Sinohydro has reportedly started surveying work there. As with Hatgyi, most of the power generated will be sold to Thailand and China.

The Tasang, Hatgyi and Myitsone dams are just three of 56 hydrodam projects in Myanmar proposed, under construction or completed that Chinese companies are involved in, according to a count by International Rivers, a riverine NGO. Sinohydro is involved in at least 17 of them, equivalent to one in eight of all its 132 current dam projects outside China. The international expansion of its business is leading the company to be more environmentally and socially responsive than it was in the past. The extent to which it will need to be in Myanmar may most depend on how rapidly the government in Naypyidaw wants to push ahead with opening the country to rapid development, and how well the economic rationale for projects originally intended to provide export earnings to fund a military dictatorship that has now stepped back from power hold up.

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CNOOC Looking For Partners To Drill For Oil In The South China Sea

China’s recently abandoned tactic of asserting its territorial claims to the South China Sea through fishing rather than minerals extraction is well and truly dead. State-owned China National Offshore Oil Corp. (CNOOC) started drilling in the disputed waters in May. Now it is inviting bids from foreign oil companies for the joint exploration and development of nine blocks off the coast of Vietnam that would appear to lie south of the Paracel Islands and cover 160,000 square kilometers where Beijing’s claim to the South China Sea and the 200 mile zone claimed by Hanoi under the UN Law of the Sea overlap. Clash might be a more appropriate word. The diplomatic protests from Vietnam have already started. State-owned PetroVietnam also says CNOOC’s tender blocks overlap its own. This map from CNOOC shows the locations.

Footnote: CNOOC has invited such tenders in the South China Sea before but only in waters incontrovertibly Chinese.

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Beijing Creates A City In The South China Sea

Photo taken on May 5, 2012 shows the sunset scenery on the Yongxing Island, south China's Hainan Province. The Chinese government has raised the administrative status of Xisha, Zhongsha and Nansha islands in the South China Sea from county-level to prefectural-level, according to a Thursday statement. The State Council, or China's cabinet, has approved the establishment of the prefectural-level city of Sansha to administer the three island groups and their surrounding waters, while the government seat will be stationed on Yongxing Island, part of the Xisha Islands, according to a statement from the Ministry of Civil Affairs. The council has abolished the county-level Administration Office for Xisha, Zhongsha and Nansha Islands, which was also stationed on Yongxing Island, the statement said. (Xinhua/Hou Jiansen)Start re-labeling your South China Sea maps. In the latest ratcheting up of diplomatic pressure on territorial claims to the mineral rich waters, Beijing has raised the municipal status of its local government that administers the disputed area. A new prefectural level city, Sansha, replaces the existing county-level administration office for the Pratas, Paracel and Spratly Islands–the Dongsha, Xisha and Nanshas to China. Sansha, which will be part of Hainan province, will be based on Woody, or Yongxing Island (shown at sunset earlier this year in the photo), one of the Paracel (Xisha) Islands, as was the existing county-level administration.

Vietnam also lays claim to the Paracels and Spratlys. Hanoi formally incorporated them into the country by law earlier this week, a move that prompted formal protests from China, including summoning Hanoi’s ambassador in Beijing. Taiwan like China claims sovereignty over all three, while the Spratlys are also claimed by the Philippines, which is involved in a maritime standoff with Beijing off the Scarborough Shoal. Temporarily ended by bad weather, that looks set to be resuming.

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Pressure To Restart Work On Myitsone Dam Intensifies

Beijing continues to press Myanmar to allow a restart to work on the Myitsone Dam. Myanmar’s President Thein Sein unexpectedly and unilaterally pulled the plug last September on state-owned China Power Investment Corp.’s controversial hydropower project in Kachin state near the headwaters of the Irrawaddy river. The issue was again raised by foreign minister Yang Jiechi during his Myanmar counterpart’s visit to Beijing this week.

Meanwhile, CPI is pressing ahead with a new feasibility study addressing the environmental and social impact of the dam, this Bystander understands. It is recruiting a group of international dam-building experts for the task. Contrary to some reports, this is not being done by the Paris-based International Commission on Large Dams (ICOLD), an influential industry standards group, according to a statement the organization issued at the end of last month. It did confirm that CPI had “directly asked experts coming from countries with long term experience in building and operating large dams to assess its work”. It also said that Myanmar had applied for membership of ICOLD, whose current president happens to be from the China Institute of Water Resources and Hydropower Research.

CPI and its sub-contractor Sinohydro have kept about 200 workers on site regardless of the suspension. As we noted before, any resumption of work would have to wait until the end of the rainy season in October. But the increasing pressure form Beijing is making hitting that deadline look increasingly likely.

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Scarborough Shoal Dispute Flares Up Again

Landsat 7 image of Scarborough Shoal in South China Sea dated 23 February 2000The Philippines says that two of China’s most advanced fisheries protection vessels have been deployed in disputed waters of the South China Sea off the Scarborough Shoal, known as Huangyan Island to China (shown right). They are among five Chinese government ships–three from Fisheries Enforcement and two Coast Guard–16 fishing boats and 56 utility boats Manila says are plying waters that saw a stand-off between the two countries’ coast guard vessels last month and sparked a continuing diplomatic row. Beijing says that only 20 fishing boats are in the area, a typical number for this time of year.

The two countries had announced separate seasonal fishing bans in an effort to diffuse the dispute. Beijing says the Chinese vessels are observing its. Manila says they are harvesting clams and coral, in contravention of its ban, and has demanded they withdraw. The satellite image above shows the entrance to the lagoon bottom right; the outline is marked by the coral reef. On Tuesday, the foreign ministry said that what it called the Philippines’ provocations had necessitated “China to adopt corresponding measures to strengthen management and control.” It also took a dig, if not in name, at the U.S. for selling the Philippines a Hamilton class naval cutter. None of this sounds like an easing of tensions.

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The Shipping News

Much has happened this week since Beijing and Manila announced mutual temporary fishing bans that lower the tension in their dispute over territorial claims in the South China Sea that came to a head with a stand-off near the Scarborough Shoal (Huangyan Island to China). In summary:

  • Vietnam has repeated its rejection of China’s imposition of the above mentioned seasonal fishing ban in the South China Sea.
  • Beijing and Tokyo are holding a first round of talks on their maritime dispute in the East China Sea.
  • China is putting 4,000 islands to which it lays claim under real-time 3-D ariel surveillance, including 45 islands described as being “along baseline points of China’s territorial waters”.
  • Filipino oil company, Philex Petroleum, says it is seeking rigs to drill for natural gas near the Reed Bank off Palawan, waters disputed with China. China’s CNOOC might supply them.
  • North Korea has seized three Chinese trawlers in the Yellow Sea, apparently for ransom.

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