from Asia Unbound

Friday Asia Update: Top Five Stories for the Week of August 28, 2015

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August 28, 2015

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Blog posts represent the views of CFR fellows and staff and not those of CFR, which takes no institutional positions.

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Ashlyn Anderson, Rachel Brown, Lincoln Davidson, Lauren Dickey, Ayumi Teraoka, and Gabriel Walker look at the top stories in Asia this week.

1. China’s stock plunge. Chinese stocks plunged this week, with the Shanghai Composite Index falling 22 percent between August 19 and August 24. The market’s drop on what was deemed “Black Monday” erased the gains made over the past year. Until June, the Shanghai Composite Index had risen nearly 150 percent in one year and state media had assured that this was just the start of a bull market. The Chinese market’s tumble rattled stock markets around the world. Commodities were particularly hard hit and the price of oil sunk to a six-year low. While some pointed to China’s recent devaluation of the yuan as the source of investors’ concerns, others argued that the fall in the beginning of the week occurred because investors had mistakenly expected the government to act early and cut interest rates or otherwise intervene to stabilize the markets over the weekend. Instead, the People’s Bank of China cut the nation’s benchmark interest rate by 0.25 percent on Tuesday. While there were some big losers in this week’s stock market crash, including Asia’s wealthiest individual Wang Jianlin who lost $3.6 billion on Monday, overall the share of household wealth invested in stocks in China is less than 20 percent, significantly smaller than the share in the U.S.

2. Eleven killed in Nepal protests. Thousands of people turned out to protest a planned federal division of the country in the city of Kailali earlier this week, disobeying a government curfew. Eleven people were killed after protesters attacked police. Government officials sent in armed forces in response and claimed that individuals slipping across the border from India had played a part in the violence. The Nepalese Constituent Assembly, which has ruled Nepal since the end of the civil war that overthrew the monarchy in 2008, initially planned to organize the country into fourteen provinces, half of which would be drawn along ethnic lines. After they dropped that plan in favor of a seven province division, members of the Tharu ethnic group took to the streets, concerned about political marginalization under the new plan. Disagreements about how to give representation to the more than one hundred ethnic groups in Nepal have stymied progress on the constitution for seven years. The Tharu people are not alone in their concerns; members of the Madhesi community protested a similar plan just two weeks ago.

3. India-Pakistan engagement topples. Following the meeting of Indian Prime Minister Narendra Modi and Pakistani Prime Minister Nawaz Sharif in Ufa, Russia, on the sidelines of the Shanghai Cooperation Organization summit last month, progress has stalled again. This week, Pakistan canceled national security advisor–level talks at the last minute—a step spelled out in the joint statement released in Ufa following the prime ministers’ meeting. The cancelation arose due to varying interpretations of what the meeting agenda should include: India insisted that the talks cover solely terrorism, while Pakistan wanted to include dialogue on Kashmir. Furthermore, Pakistani National Security Advisor Sartaj Aziz was scheduled to attend a reception with Kashmiri separatist leaders immediately prior to the meeting with his counterpart in New Delhi, crossing a redline India has underscored. This is against the backdrop of a recent terrorist attack in Jammu in which the attacker admitted he was trained by the UN- and U.S.-designated terrorist group Lashkar-e-Taiba. While some insist the cancellation is only a minor setback in the long diplomatic game, others believe attempts to normalize relations only serve optical purposes.

4. Caste-related violence in India’s Gujarat state. Clashes in Ahmedabad began this week following a huge rally by the affluent Patidar community. The Patels, as they are commonly known, have been pushing for inclusion in India’s caste-based quota system despite being relatively well-off as a result of their work in the diamond trade and other successful businesses. Gujarati government officials, led by another Patidar, have ruled out including the community in the “other backward classes” category of the caste system, a designation that would give Patels a leg up in getting civil service jobs, university spots, and other societal benefits. Thousands of security forces were deployed by midweek after violence between police and Patel demonstrators left eight dead and police stations in ruins. Prime Minister Modi has appealed for calm in his home state, urging democratic protests and dialogue to resolve the ongoing tensions.

5. Japan protests Medvedev’s visit to disputed island. On Saturday Russian Prime Minister Dmitry Medvedev paid a visit to one of the four islands disputed between Russia and Japan since the end of World War II, a sore point in relations that has kept the two countries from signing a peace treaty ever since. Japan’s Foreign Minister Fumio Kishida lodged a protest, and Prime Minister Shinzo Abe, who has been eager to work with President Vladimir Putin on the issue, called it “extremely regrettable.” This is not the first time Mr. Medvedev has traveled to the disputed territory; as president, he first visited one of the islands in 2010, drawing a “furious reaction” from Japan. Two days after the visit, Abe clearly noted that he will still continue talks with Putin to resolve this longstanding issue. What is unknown, however, is Putin’s thoughts behind this visit. He has recently expressed that the dispute can be resolved and the countries are working on his possible visit to Japan later this year. Medvedev’s trip may be a message from Putin to his Japanese counterpart that Russia has little on which to compromise.

Bonus: Goldman Shenzhen Sachs. In a southern Chinese city famous for fakes, one organization has recently been discovered with a moniker suspiciously similar to that of Goldman Sachs, the New York–based financial institution. “Goldman Sachs (Shenzhen) Financial Leasing Company,” which also happens to share an identical Chinese name (高盛) with the better-known enterprise, has operated in Shenzhen for more than two years just a short distance from the Asia headquarters of Goldman Sachs in Hong Kong (a spokesperson for the latter institution confirmed there was no link between the companies). The Shenzhen company came to light through an investigation of supposed links to gambling and organized crime in Macau. This incident is only the latest in a spate of copycat Chinese companies, including nearly two dozen fake Apple stores, an IKEA replica, and a familiar-looking “Bucksstar Coffee” and “McDnoald’s” in a Nanjing mall.

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