BRICS & Banks
Lula stays home for Brazil's health, Central Asia cohesion, Anwar in Phnom Penh, Deutsche Bank in trouble, Silk Road in Central Asia
UPDATE: It is no mere coincidence that former Brazilian president Jair Bolsonaro announced his return to Brazil to coincide with President Luiz Inacio Lula da Silva’s visit to Beijing. The result was the indefinite postponement of Lula’s trip to China and key talks with President Xi Jinping.
The Chinese president extended the offer to the "first China-Central Asia summit", scheduled for May, in similar telegrammes sent on Monday and Tuesday to the leaders of Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan.
Prime Minister Datuk Seri Anwar Ibrahim arrived in Phnom Penh on Monday (March 27) day for a one-day official visit to further strengthen bilateral relations and cooperation between Malaysia and Cambodia, established in 1957. It is Anwar's maiden visit to the country made at the invitation of Cambodian Prime Minister Hun Sen.
The world remains on a knife-edge. After a period of relative calm following the bailout of Credit Suisse, the FTSE 100 has ended the week firmly in the red again amid another sharp sell-off in bank stocks. Despite reassurances from, among others, the Bank of England governor and German chancellor Olaf Scholz about the relative strength of the financial system compared to the 2008 crash, financial markets are far from convinced.
More than 2,000 years ago, an emissary from China's Han Dynasty traveled westward on a mission of peace and opened an overland route linking the East and the West. Spanning thousands of miles and years, the ancient Silk Road, with its longest part lying across the territory of Central Asia, has embodied the spirit of cooperation, mutual learning and mutual benefit.
Brazil Under Pressure
It is no mere coincidence that former Brazilian president Jair Bolsonaro announced his return to Brazil to coincide with President Luiz Inacio Lula da Silva’s visit to Beijing. The result was the indefinite postponement of Lula’s trip to China and key talks with President Xi Jinping.
The international community largely remembers Lula as one of the most strident voices in defense of the so-called Global South. He was one of the main proponents of BRICS and the G-20, and he was the one in charge when China became Brazil’s leading trading partner in 2009, surpassing the United States.
However, rising U.S. pressure against Beijing’s influence in Brazil and an increasingly hostile attitude toward the Chinese within Brazil could make China the scapegoat for structural problems in the local economy. The potential for weakening relations in the medium and long term should not be overlooked.
Continuing domestic tensions following the closely fought Brazilian election and the subsequent January 8, 2023 violent insurrection staged by Bolsonaro supporters give credence to the argument that Bolsonaro’s return was timed to destabilise the Lula administration and generate internal debate over Brazil-China relations.
While India, China and SouthAfrica continue to support BRICS enlargement, benefit from low cost Russian energy and seek de-dollarisation, Lula is walking an economic and diplomatic tightrope of Brazil-US-China relations manifested in the return of Jair Bolsonaro, economic headwinds and the Ukraine conflict.
Lula has stepped forward as a peace mediator, but his efforts are largely overshadowed by China’s 12 point position paper for establishing peace in Ukraine. On the face of it, Lula’s cancellation implies differences between Brazil and China over peace negotiations. However, both Brazil and China require BRICS solidarity for any peace proposal to carry weight at the August 2023 summit in South Africa.
The widely discussed expansion of BRICS and its unified position of not condemning Russia must now face the looming shadow of Brazil breaking ranks due to its internal domestic political volatility and the spectre of a repeat of the US interference that was behind the election loss of 2018 and fall from grace of Dilma Rousseff.
Rousseff, who is a Lula protege, was successfully promoted by Lula for the presidency of the expanding New Development Bank (NDB formerly the BRICS Bank) and unanimously elected on 24 March 2023. Thus, Brazil has gained further weight within the expanding membership and institutional framework of BRICS.
In Beijing, the recent success of Iran-Saudi rapprochement and its positive spillovers for Yemen, Iraq, Syria and Lebanon were further bolstered by the Xi-Putin summit. President Xi’s recent invitation to the Central Asian states for a Beijing Summit in May also point to the intense efforts of China toward achieving a draft peace proposal before the BRICS summit and the UN general Assembly in September 2023.
The global instability engendered and prolonged by the proxy NATO war against Russia, most notably manifested in the current systemic banking crises, inflation and social unrest in the US and EU, is best addressed by cohesive BRICS leadership of the Global South in multilateral forums. The United States is attempting to split China and Brazil to undermine BRICS expansion, de-dollarisation, China’s Ukraine peace initiatives and ultimately to isolate both Russia and China. Whether Lula can successfully traverse the Brazil-US-China tightrope before the BRICS summit and UNGA later this year has great significance for constraining the excesses of US economic policy and increasingly belligerent foreign policy to progress global multipolar stability, security and development well into the 21st century.
The Editor
President Xi Invites Central Asia For Summit
The Chinese president extended the offer to the "first China-Central Asia summit", scheduled for May, in similar telegrammes sent on Monday and Tuesday to the leaders of Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan.
Reclusive Turkmenistan, the top supplier of gas to China, has not yet announced whether it has been invited to the gathering.
In the four invitations sent out on Monday and Tuesday to mark Nowruz, the Persian New Year, which is celebrated in the region, Xi underlined the strengthening ties between China and the Central Asian regimes. Beijing’s effort seeks to build on the growing stability in the region following the exit of US forces from Afghanistan, the emerging economic partnership with Iran and the successful rapprochement of Iran and Saudi Arabia.
Turkmenistan officially joined the Belt and Road Initiative (BRI) in January 2023 uniting all Central Asian countries into both the SCO and BRI. Thus, Beijing seeks to further stabilise the region, both politically and economically through regular multilateral summits and, in particular, align the regions foreign policy with the Sino-Russian Entente Presidents Xi and Putin declared in their March 2023 Summit.
In addition to Xi, Russian President Vladimir Putin and Turkish counterpart Recep Tayyip Erdogan, chief European Union diplomat Charles Michel and US Secretary of State Antony Blinken have all beaten a path to Central Asian doors in recent months.
The Editor
PM Anwar arrives in Phnom Penh to strengthen ties
Prime Minister Datuk Seri Anwar Ibrahim arrived in Phnom Penh on Monday (March 27) day for a one-day official visit to further strengthen bilateral relations and cooperation between Malaysia and Cambodia, established in 1957. It is Anwar's maiden visit to the country made at the invitation of Cambodian Prime Minister Hun Sen.
Anwar's arrival at Phnom Penh International Airport at 9.05am local time and was greeted by Human Resources Minister V. Sivakumar and Cambodia's Senior Minister of Special Functions for Islamic Affairs Datuk Dr. Othsman Hassan, who is the minister-in-attendance.
Besides Sivakumar, also accompanying Anwar during the visit are Foreign Minister Datuk Seri Dr Zambry Abdul Kadir and Minister in the Prime Minister's Department (Religious Affairs) Datuk Dr Mohd Na'im Mokhtar.
The prime minister was taken to the Peace Palace, which is the official office of the Prime Minister of Cambodia. Both Prime Ministers will explore new ways and means to further deepen the long-standing bilateral ties that cover all fields of cooperation ranging from political security and economics to socio-cultural aspects.
“They will exchange views on sub-regional, regional and international issues of common interest and concern,” the statement said.
“Subsequently, there will be a signing ceremony of some cooperation initiatives and a joint press conference,” it added.
In the evening Anwar will join Mr Hun Sen for the Iftar dinner, and will participate in the Isya’ and Terawikh prayers with Muslim scholars and the Muslim community in Cambodia.
Dr. Kin Phea, Director-General of the Royal Academy of Cambodia’s International Relations Institution, said yesterday the official visit of the Malaysian Prime Minister to Cambodia today reflects the effort of the two nations to move forward the bilateral relation.
DR. Kin Phea said Anwar’s visit to the Kingdom would contribute to strengthening and broadening the relations between Cambodia and Malaysia.
“It is hoped that the trade volume will increase and investments from Malaysia would be at new heights. The visit also highlights the effort made by the Cambodian government to make more friends externally while reforming internally,” he added.
The world remains on a knife-edge. After a period of relative calm following the bailout of Credit Suisse, the FTSE 100 has ended the week firmly in the red again amid another sharp sell-off in bank stocks. Despite reassurances from, among others, the Bank of England governor and German chancellor Olaf Scholz about the relative strength of the financial system compared to the 2008 crash, financial markets are far from convinced.
As fears of contagion and further government and regulatory intervention linger, investors are hunting for the next weakest link. With its shares tumbling more than 15pc in early Friday trading and the cost of insuring its debts against default surging to a four-year high, the smart money is now on Deutsche Bank to be the next domino to fall. As of lunchtime, the markets were pricing in a 31pc likelihood of default probability on its unsecured bonds.
Even if the German giant has bags of liquidity to withstand a crunch, as some commentators have pointed out, the scary thing is it may not matter. As is often the case in banking crises, fears about Deutsche Bank could quickly become a self-fulfilling prophecy. On paper, Credit Suisse should never have needed rescuing but in the end, a loss of market and customer confidence effectively killed it.
Amid such a febrile atmosphere and a longstanding cocktail of ruinous inflation, seemingly unending interest rate rises, and a fragile geopolitical situation throughout Europe any optimism is completely obliterated by a systemic banking panic.
As Germany’s largest financial institution with around $1.4tr in assets, Deutsche is firmly in the “systemically important” category. There is enough reason to think it won’t be next. The bank comfortably meets all of the strict capital requirements that were imposed on the industry after the financial crash suggesting it has sufficient capital, liquidity and is adequately funded. However, the same could have been said of Credit Suisse. Recent events have shown that once investors lose confidence, it is desperately difficult to regain. If the markets have already made up their mind about Deutsche, then any optimism will be squashed under a stampede for the exit.
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Xiplomacy: Landlocked Central Asian countries find seas of opportunities in cooperation with China
BEIJING - More than 2,000 years ago, an emissary from China's Han Dynasty traveled westward on a mission of peace and opened an overland route linking the East and the West. Spanning thousands of miles and years, the ancient Silk Road, with its longest part lying across the territory of Central Asia, has embodied the spirit of cooperation, mutual learning and mutual benefit.
Since China proposed the Belt and Road Initiative (BRI) in 2013, China and five Central Asian countries -- namely Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan -- have stepped up their cooperation for greater regional development. Last week they held a first-ever forum on industry and investment cooperation, which refreshed the age-old Silk Road.
In a congratulatory letter addressed to the two-day forum opened Thursday in East China's coastal city of Qingdao, Chinese President Xi Jinping said deepening industry and investment cooperation between China and the five countries of Central Asia will safeguard the stability of regional industrial and supply chains, promote regional industrial development, increase engagement in world's economic activities, and boost common prosperity.
COMMON DEVELOPMENT
Since the establishment of their diplomatic relations three decades ago, China and the five Central Asian countries have developed strategic partnerships and established a new path of good-neighborliness, friendship and win-win cooperation, thereby setting up a paradigm for a new type of international relations.
Focusing on promoting high-quality development of regional economy through mutually beneficial cooperation, the forum brought together representatives from political and business circles, eyeing greater cooperation in sectors such as the digital economy, energy and agriculture.
The idea on holding the forum started from the virtual summit commemorating the 30th anniversary of diplomatic relations between China and the five countries held on Jan 25, 2022 when Xi put forward the initiative on holding the forum.
During the summit that marked the first collective meeting among the C+C5 heads of state, Xi called on the six countries to magnify the exemplary role of good-neighborly friendship, build a cooperation belt for high-quality development, strengthen the shield for defending peace, build a family with diverse interactions, and protect the global village that enjoys peace and development.
The five-point proposal has been welcomed by the leaders of the five Central Asian countries. Under the guidance of their leaders, relations between China and Central Asian countries have gained new momentum.
Official figures showed that China's trade with the five Central Asian countries totaled $70.2 billion in 2022, some 100 times of the volume 30 years ago.
Meanwhile, as the BRI has become a popular international public good and platform for international cooperation, China and Central Asian countries have successfully implemented multiple infrastructure projects under the framework of the initiative.
As Xi said in the congratulatory letter to the forum, China is willing to share with the Central Asian countries the super-large market, complete industrial system and advanced technologies, deepen pragmatic cooperation, achieve mutual benefit and win-win results, work together to promote high-quality development of regional economy, and build a closer community with a shared future.
COOPERATION IN AGRICULTURE, ENERGY
Agriculture has been a major area for cooperation between China and Central Asian countries. A great variety of Central Asian agricultural products have entered the Chinese market, including camel milk from Kazakhstan, honey from Kyrgyzstan, dried fruits from Tajikistan, cotton from Turkmenistan, and cherries from Uzbekistan.
The first China + Central Asia industry and investment cooperation forum has provided agricultural companies from both sides with another opportunity to expand their businesses.
"I'm here looking for a Central Asian supplier with the freshest nuts," said Wang Baohua, manager of Jingxiang Food Technology Co Ltd, which produces mainly sesame paste and other condiments in the city of Heze, Shandong Province.
Having imported sunflower seeds and sesame seeds from Central Asian countries for years, the company is expected to increase its production capacity tenfold this year and plans to open a factory and carry out technical cooperation in Central Asia.
Another field of their growing cooperation is energy industry.
Tajikistan had suffered for years a severe power shortage in winter as it used to rely on hydropower that went down drastically during the dry season.
In 2011, the Tajik government and China's TBEA energy company jointly launched the project of the Dushanbe-2 thermal power station, a combined heat and power plant with a total installed capacity of 400 megawatts. Completed in 2016, the station enabled the restart of central heating for Dushanbe residents after a 15-year hiatus.
In Uzbekistan, a chemical complex cooperation project under the framework of the BRI has changed the country's dependence on imports of polyvinyl chloride, caustic soda, and created a large number of new jobs, which is of great significance to the economic development of the country.
So far, China and the five Central Asian countries have agreed to launch dozens of major projects on production capacity cooperation, covering automobiles, energy, metallurgy, chemical industry and medicine, with a total investment of over $20 billion.
INTERCONNECTIVITY
Since the BRI was put forward in 2013, it has vigorously promoted interconnection among countries along the route and advanced regional economic development, especially in landlocked Central Asia.
During Xi's state visit to Uzbekistan in September 2022, China, Kyrgyzstan and Uzbekistan signed a memorandum of understanding on cooperation on the Kyrgyz section of the China-Kyrgyzstan-Uzbekistan railway, making significant headway in the construction of a transport corridor in the Eurasian continent.
The China-Europe freight trains through Central Asia, the China-Kazakhstan Horgos International Frontier Cooperation Center, and the China-Kazakhstan International Logistics Base in the eastern Chinese port of Lianyungang have all helped open the door to global markets for Central Asian countries. The enhanced interconnectivity has also encouraged many Chinese companies to invest in the region.
In late 2016, Xi'an Aiju Grain and Oil Industrial Group completed the construction of a 300,000-ton oil processing plant in Kazakhstan. Liu Dongmeng, deputy general manager of the group, told Xinhua that the group has also signed 100,000 hectares (1,000 square km) of land for transnational contract farming in northern Kazakhstan.
He recalled that back in March 2016, Aiju group imported 2,000 tons of non-Genetically Modified Organism (GMO) high-quality oil from Kazakhstan, taking the first Chang'an China-Europe freight train.
"We are beneficiaries of the Belt and Road construction," Liu said, adding they have also established a joint laboratory with China's Northwest A&F University and Kazakh National Agrarian University.
With the completion of a number of projects, a comprehensive connectivity network linking China and the five Central Asian countries, is taking shape. The network, which includes roads, railways, aviation as well as oil and gas pipelines, has contributed to the stability of industrial chains and supply chains in Asia and Europe.
Since the "Shanghai Express" of the China-Europe freight trains launched an international route to Central Asia in July 2022, the huge trade potential between China and Central Asian countries has been fully released. Commodities from both sides have been transported through the freight trains and then shipped to other parts of the world.
Projects under the BRI have demonstrated how effective cooperation can transform the concept of "building a community with a shared future for mankind" into practical reality, said Almas Chukin, a prominent Kazakh economist.
"President Xi Jinping's idea is that by joint efforts and by understanding the community with a shared future for mankind, we are in a win-win situation ... and it ensures the prosperity of all countries that can develop and work together," Chukin said.
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