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India’s State Elections, South Korea’s Economic Squeeze, Afghanistan’s Red Cross Attack, and More

by Guest Blogger for Elizabeth C. Economy
February 10, 2017

Voters line up to cast their votes outside a polling station during the state assembly election in the northern state of Punjab, in the village of Nada, India, February 4, 2017. REUTERS/Ajay Verma Voters line up to cast their votes outside a polling station during the state assembly election in the northern state of Punjab, in the village of Nada, India on February 4, 2017. (Ajay Verma/Reuters)

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Rachel Brown, Sherry Cho, Larry Hong, Gabriella Meltzer, and Gabriel Walker look at five stories from Asia this week.

1. India kicks off state elections. Political contests in five Indian states over the next two months will offer insight into citizens’ attitudes toward Prime Minister Narendra Modi’s agenda. Last weekend, voters took to the polls in Goa and Punjab. Turnouts in the two states were unusually high with roughly 83 percent of eligible voters taking part in Goa, and 75 percent in Punjab. The relatively new Aam Aadmi party, which focuses on fighting corruption, is expected to excel in Punjab. Voting in Uttar Pradesh, which boasts a whopping 138 million registered voters, begins this weekend and will take place over the course of seven days this month and next. Elections are also being held in the states of Uttarakhand and Manipur. Among the hot campaign topics are unemployment rates and demonetization. The Modi government’s decision to ban 86 percent of all bills in circulation as part of  an effort to fight corruption produced considerable turmoil this fall, and could be a decisive issue for voters, particularly those in rural areas. Major wins for Modi’s Bharatiya Janata Party (BJP) will demonstrate popular support for his initiatives, while losses could weaken the BJP government. The election results for all five states will be announced in March; until then expect a flurry of campaign rhetoric.

2. South Korean companies feel pinch over THAAD. Chinese displeasure with South Korea’s decision to deploy the U.S. Terminal High Altitude Area Defense (THAAD) anti-missile system has manifested recently in economic troubles for South Korean companies. While South Korean Finance Minister Yoo Il Ho has stated that China has not taken any retaliatory measures over THAAD that warrant official state action, companies like Hyundai are experiencing fallout from Beijing’s dissatisfaction. Hyundai Motor Company recently announced the deferment of the Chinese launch of its Sonata plug-in hybrid due to a recent revision of Chinese qualifications for government subsidies, which now conveniently exclude the Hyundai Sonata hybrid. Lotte’s construction on a theme park in Shenyang, China has also been postponed after Beijing took issue with procedural matters following a fire inspection. The company has also been subject to an increasing number of regulatory probes in China. South Korea’s popular culture and tourism sectors are also feeling the THAAD backlash; music concerts and other performances by South Korean artists have been mysteriously cancelled or postponed, while reports of increasing restrictions on Chinese tourism to South Korea during peak travel seasons have led to a slump in stocks reliant on Chinese tourism.

3. Six Red Cross workers killed in Afghanistan. The International Committee of the Red Cross (ICRC) reported on Wednesday that six of its employees were killed and two went missing in northern Afghanistan’s Jowzjan province while they were en route to deliver livestock materials to remote communities hit by avalanches. Lutfallah Azizi, the provincial governor, said that “unknown gunmen” carried out the attack and claimed they were affiliates of the Islamic State. Although the Taliban has carried out the greatest proportion of the violence in Afghanistan’s fifteen-year war, the group swiftly denied involvement in this particular incident. Peter Maurer, the president of ICRC, tweeted that he was “devastated by this news out of #Afghanistan. My deepest condolences to the families of those killed – and those still unaccounted for.”

4. Booming Chinese overseas deals still face obstacles. In 2016, Chinese acquisitions of foreign companies—about 16 percent of the worldwide total of cross-border deals—skyrocketed to more than twice their 2015 volume. But according to new figures, the amount in cancelled deals grew even faster. In the United States and Europe alone, overseas acquisitions worth $75 billion were scrapped because of regulatory issues, a sevenfold increase from 2015. Because of increased capital outflow controls that can block Chinese companies from making investments abroad, as well as regulatory scrutiny from government actors such as the Committee on Foreign Investment in the United States (CFIUS), thirty Chinese deals fell through. Some important acquisitions are still on the table for 2017, despite the opposition: Midea just completed its purchase of Kuka, a German robotics company, for $5 billion, and ChemChina will likely take over Swiss agribusiness giant Syngenta for $43 billion later this year. Despite the hurdles for Chinese investors, the sheer volume of their deal-making is an achievement in itself, given that a decade ago it amounted to less than $3 billion a year.

5. New terms for U.S. studios in China. Hollywood will soon be able to renegotiate the terms of agreement on film releases in China, amidst a slowdown in China’s box office growth. The current agreement was announced in February 2012, during a tour of the United States by Xi Jinping, then China’s vice president and now its president. The agreement raised the number of blockbusters permitted in the Chinese market and allowed foreign filmmakers to receive a larger share of box office revenues. The two countries also decided to renegotiate the agreement in five years. Hollywood has a high stake in seeking better business terms in the new negotiations as China is on track to surpass the United States as the world’s largest movie market. According to several executives, U.S. studios’ top priority in the talks is increasing their share of Chinese box-office receipts from the current 25 percent. While there have been some preliminary negotiations, many observers worry that President Donald J. Trump’s harsh rhetoric on China’s trade practices will have an adverse effect on future discussions. Geetha Ranganathan, an analyst at Bloomberg Intelligence, says that the Trump administration is “making everybody very, very nervous”; the renegotiation “could be a casualty if he really wants to come down hard on it.” It remains unclear whether President Trump’s phone call with President Xi will help smooth the process for these negotiations and others.

Bonus: Abe tees off a new era of golf-course diplomacy. After visiting Washington, DC, this Friday, Japanese Prime Minister Shinzo Abe will hitch a ride on Air Force One to spend an overnight at Mar a Lago, President Trump’s luxurious Florida resort. There, the two leaders will share meals and engage in a classic test of strategy and skill—the game of golf. At their first meeting, in November, Abe and Trump established their common interest in the game through an exchange of golf-themed gifts. This weekend’s encounter will echo an earlier moment in golf-course diplomacy, when, in 1957, then Japanese Prime Minister Nobusuke Kishi, Abe’s grandfather, played a round with then U.S. President Dwight D. Eisenhower. Trump has praised the game as a diplomatic tool, and once said that former U.S. President Barack Obama “should play with people who can help the country… if he played more with maybe foreign leaders, it would be a wonderful thing.” Will Chinese President Xi Jinping be next on the green?

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