from Asia Unbound

Tillerson and the South China Sea, Cashless in India, and More

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December 16, 2016

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

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

1. Rex Tillerson’s South China Sea ties. While Tillerson’s relationship with Russia has attracted the lion’s share of attention after his recent nomination as secretary of state by President-Elect Trump, Tillerson’s ties to disputes in the South China Sea have garnered much less attention. ExxonMobil, under Tillerson’s leadership, wedged America’s largest oil company into one of Asia’s prickliest diplomatic disputes when it inked a deal with Vietnam to drill for natural gas in waters also partially claimed by China. Whereas other oil companies have given the South China Sea a wide berth due to fears of upsetting the delicate regional balance, ExxonMobil has emerged as a significant partner for Vietnam. China and its neighbors have occasionally clashed over disputed areas in the South China Sea over resources there: in 2014, for example, a Chinese rig started drilling in an area also claimed by Vietnam near the Paracel Islands, instigating a months-long impasse between Chinese and Vietnamese security forces. In the middle of the dispute, Tillerson flew to Beijing to meet with Chinese oil-company executives, including the chairman of the company which controlled the rig at the center of the dispute. While ExxonMobil and Tillerson have previously declined to comment on sovereignty claims in the South China Sea, Tillerson’s confirmation as secretary of state may herald an interesting change in America’s foreign policy approach to the South China Sea.

2. Cashless payments boom in India. So far, electronic payment services have been the winners in India’s ban of the 500 and 1,000 rupee notes in early November. Historically, India has been a cash-reliant economy, using bills for nearly 80 percent of transactions and with only approximately 20 percent of the population on electronic payment systems. However, users of such systems are growing rapidly with approximately 70,000 vendors joining Paytm, a popular mobile-payments service, daily in the wake of the demonetization and using it for 5–6 million transactions. Other services such as MobiKwik, Freecharge, and Bitcoin are increasingly ubiquitous as well. The government has also instituted the first subsidies to encourage the use of cashless payment and provides discounts for services bought online. Connecting bank accounts to Aadhar numbers, unique identifiers linked to biometric data, will further accelerate the use of electronic payments. Such data will make it easier to verify cashless payments by mobile phone through just a thumbprint. Many economists worry about an economic downturn for India as reduced cash in circulation slows activity, but a shift to cashless payments may ease some of that burden.

3. International nonprofits brace for new Chinese laws. China is placing strict restrictions on nearly all international nonprofits working in the country in an effort to expel unwanted foreign influences and consolidate the government’s control over society, culture, and politics. The law, passed in April and going into effect on January 1, will require all foreign nonprofits to register with China’s Ministry of Public Security, submit reviews of all operations and finances, and be sponsored by a Chinese partner organization. This places small nonprofits with a focus on criminal justice, rule of law, and civil rights at greater risk of police intervention in their activities. According to the law, foreign nonprofits are allowed to engage in the following sectors: economics, education, science and technology, health, culture, sports, environmental protection, charity, and disaster relief. That being said, even those organizations working on non-sensitive issues are vulnerable, given that there has been little official communication on how to go about the registration process or how the law will be implemented. In a December 8 meeting with Guo Shengkun, China’s minister of public security, U.S. National Security Adviser Susan Rice voiced her concern about the detrimental effect this will have on “people-to-people links” between the two nations.

4. Japan paves the way for legalizing casinos. On Thursday, Japanese legislators passed an “integrated resorts” law that removes a longstanding ban on casino gambling and is the initial step toward legalizing casinos in the country. Japan is known as the “final frontier” of the casino industry, with some estimates of its potential revenue as high as $40 billion annually. The combination of an affluent local population and a skyrocketing number of Chinese tourists makes Japan a unique opportunity for developers. Revenue from the pachinko industry earned more than $200 billion last year, far more than that from the casino industry in the United States and Macau. But casino developers may encounter pushback in coming years: a recent poll showed that 44 percent of Japanese oppose casinos, while only 12 percent support them. Many harbor concerns that casinos will be run by unscrupulous operators, worsen gambling addictions, and create public safety issues. The opposition leader against the ruling stated that casinos would damage the “dignity of the nation.” Whatever comes to pass in the coming years, casinos are not everyone’s idea of fun and games.

5. Philippines hunts for lost Marcos art. Thirty years ago, when Filipino investigators entered the New York City townhouse of Imelda Marcos, the wife of notorious Filipino leader Ferdinand Marcos, the family’s $500 million worth of art—including works by Van Gogh, Picasso, and Monet—was nowhere to be found. Over the years, around $17 million of it has been retrieved by the Philippines government. Today, around 200 works are still missing, part of the estimated $10 billion in assets Marcos stole while in power. The country’s Presidential Commission on Good Government has come up with to creative methods to employ the public’s help, creating a website gallery of the works and a hashtag, #ShowMetheMonet, to publicize the effort. Just a few weeks ago, it was reported that fifty works were located in a climate-controlled Brooklyn warehouse. Who the works rightfully belong to—either the Filipino people or the Marcoses’ personal secretary, who was convicted in 2013 of conspiracy and tax fraud—is now in the hands of a Manhattan federal judge.

Bonus: Growing popularity of Asia’s craft breweries. November’s fifth annual Beertopia festival in Hong Kong saw a record turnout of over 14,000 attendees and featured almost 125 breweries from around the world. This two-day festival has become the biggest craft beer event in Asia, with almost half of the breweries featured based in the Asia Pacific. The growing popularity of the event reflects a increasing interest in craft beer throughout Asia, with many of the Asian craft breweries present at the beer festival eager to highlight their respective regional terroirs by showcasing local ingredients that give their beers a distinct sense of place, such as cacao nibs from Vietnam or Sichuan peppercorns and chilies. Many Asian breweries have benefited from the revision of outdated brewing laws, such as Japanese breweries, while some craft breweries have even resorted to circumventing archaic laws to brew their beer, like a Thai brewery brewing their beer in Cambodia and selling it back home in Thailand as an “import.”

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