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* China Watch: Outlook for 2018, Larry Brainard, Trey McArver, Michelle Lam, 7 Dec 2017
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* China Watch: Financial liberalisation - a step forward, Jon Harrison, Michelle Lam, Trey McArver, 16 Nov 2017

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North Asia – More dangerous than the South

Overview

Although it attracts most attention, the South China Sea is not the prime danger zone in East Asia. That hotspot lies to the north, straddling China, Japan and the Korean peninsula. The risk there is still rising owing to the determination of the Kim Jong-un regime to pursue its military ambitions and China's hesitation to intervene effectively. Since the US is linked by treaties to Japan and South Korea, the region brings together the world's three biggest economies and has seen a significant military build-up in recent years. Meanwhile, relations between Taiwan and the People’s Republic have become tetchy after the sweeping election victory of the autonomist-minded Democratic Progressive Party (DPP) in presidential and legislative elections at the beginning of this year. Northeast Asia looks like providing the next occupant of the White House with a major early test as the challenge from Pyongyang mounts, Japan frets about its missile defences, Taipei seeks greater international recognition and Beijing remains wedded to its policy of challenging the post-1945 strategic status quo (see our 8 April 2016 note The ‘Thucydides Trap’ looms in East Asia).

South Korean experts believe that the Kim Jong-un regime has decided on what one analyst calls a “definitive step up” in its nuclear and missile programme. Pyongyang no longer sees any need to demonstrate its independence and its indifference to international opinion but has moved to active preparations for war, according to that analyst. Military sources in Tokyo told Reuters this week that North Korea’s 21 rocket tests this year have left the Japanese authorities feeling unsure about whether they could fend off a missile strike without US help. Upgrades to the country’s ballistic missile defence (BMD) system are not due to start till next spring, and it could be 2020 before new systems are deployed. As a result, the sources said, Japan may need to depend more heavily on US assistance.

That assistance is likely to take the form of an increased naval presence by missile-equipped Aegis destroyers and the Terminal High Altitude Air Defence (THAAD) system, built by Lockheed Martin (LMT.N). The US and the Park Geyn-hye administration in Seoul agreed in July to deploy the system as soon as possible in South Korea, whose Defence Minister, Han Min-koo, told the parliament in August that North Korea was “doing things at a rate that is beyond our imagination" (see also our 11 February 2016 note North Korean missile test brings new containment fear for Beijing)

The US-South Korea statement announcing the July agreement specified that the system would be deployed only against the threat from the North. But Beijing, which already feels hemmed in by the US alliances and the presence of American naval and air forces in Japan, fears the system’s radars will be able to reach far into its territory and will thus constitute a new military containment against its missiles. Beijing has protested at the plan to both the US and South Korea. Saying that THAAD would harm peace and stability in the region, the Chinese Foreign Ministry expressed “strong dissatisfaction and resolute objection”.

China, which has the “Little Brother” of North Korea as its only treaty ally, threw its support behind stepped-up UN sanctions after the North Korean nuclear and missile tests earlier this year But it maintains its food and energy supplies to that country and is avoiding any measures that could cause an implosion across the Manchurian frontier. In China’s strategic thinking, the North is still valuable as a buffer state on its border. Beijing sees it as a valuable piece in the regional chess game with the US and wants to head off any prospect of reunification leading to the stationing of US-allied troops on the other side of the Yalu River.

North Korean nuclear tests with strength estimated by foreign scientists

At the same time, Beijing’s links with the Kim circle have been weakened by the removal of two key figures: the PRC’s former security chief Zhou Yongkang, who had dealt with Pyongyang, has been jailed in the anti-corruption drive; and the Young Leader’s uncle, Jang Song Thaek, who was executed for "acts of treachery". As a result, the country that could have had the greatest restraining influence on Kim Jung-un has been relegated to playing a minor role. In addition, the South Korean experts report that dislike of China in the North has grown and that Kim gains nationalist support from being seen to be independent of Beijing.

Apart from the North Korean threat, China upped the ante in its confrontation with Japan by sending eight military planes into the Miyako Strait, which lies between Okinawa and Taiwan, at the end of September. Japan scrambled fighter jets to meet the planes, which did not enter Japanese air space. It was the biggest Chinese sortie reported so far in the tussle between the two countries, which is nominally over the sovereignty of the uninhabited Senkaku/Diaoyu Islands but, in reality, is a much wider contest for regional influence – and once again the US is involved as Tokyo’s ally with its big fleet based in Okinawa. The Chinese air force said the planes were part of a fleet of 40 fighters, bombers and tankers en route to a routine drill in the West Pacific.

As for relations between the Mainland and Taiwan, President Tsai Ing-wen told the Wall Street Journal this week that the PRC was taking cross-Strait relationship backwards with moves to exclude the island from international organizations. “I hope that this—and the overall situation—is not misinterpreted by mainland China to the degree where they believe pressure can force Taiwanese people to yield,” she added. “The Taiwanese people will stand up against this pressure together. The government will never enact measures that defy public opinion in Taiwan.” Economic relations were becoming less complementary and more competitive, she said. (See our 14 June note, On the road in Taiwan: Caught in a geopolitical fix and economic decline)

South China Sea – Some relaxation but warning to Japan

In contrast with the uncertainty of North Korea’s intentions and the danger of an accidental clash between Chinese and Japanese planes in the Senkaku/Diaoyu region, the South China Sea dispute has become somewhat predictable, although a new element was introduced in mid-September when Russian naval ships joined the Chinese navy for eight days of drills in the area. Naval cooperation has become a feature of the closer relationship between Beijing and Moscow, which backs China’s rejection of the negative verdict on its claims to most of the sea handed down by a UN tribunal this summer (see our 15 August 2016 note Regional skirmishes will continue, but the next big move is for the new US President).

In other developments:

  • Indonesia showed its concern at activity by Chinese fishermen off the Nantua Islands when in early October its air force held its largest-ever military exercise in the area.
  • Beijing scored points when, in a reversal of the hostility shown to the PRC over the South China Sea by his predecessor, Benigno Aquino, Philippine President Rodrigo Duterte said at the end of last month that joint exercises currently being held with US troops will be the last of their kind. His country was a key element in the Obama administration’s “pivot” to Asia with agreement to step up the US military presence and the Aquino administration’s tabling of the complaint against China at the UN tribunal. “The sun is rising over the horizon and will shine beautifully on the new chapter of bilateral relations,” the PRC ambassador to Manila, Zhao Jianhua, declared after Duterte’s remark.
  • China is pressing for a bilateral agreement with Vietnam that will resolve their disputes over sovereignty in the sea, thereby seeking to balance the strengthening of links between Hanoi and Washington while the Vietnamese, for their part, try to maintain a balancing act without relinquishing their territorial claims. Meeting Vietnamese Prime Minister Nguyen Xuan Phuc in Beijing in September, Xi Jinping told him that their nations could manage their differences and promote maritime cooperation through “friendly negotiations" and that “the common interests between the two countries far outweigh the differences".
  • But the PRC remains committed to extending its reef-building programme and warned Tokyo that Japan would be "playing with fire" if it forged ahead with plans to increase naval activity in the South China Sea through joint training patrols with the US in waters claimed by China. "China's military will not sit idly by," a PLA spokesman warned.

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