China Clues

China's BRI has had a tremendous impact on Cambodia, the digital yuan was quietly introduced in 2014, Australia is a maritime nation, Wang Yi: path to San Francisco will not will not be an easy one".

Oct 30, 2023

UPDATE: Ten years on, China's Belt and Road Initiative (BRI) has had a tremendous impact on Cambodia, injecting strong momentum into the kingdom's development of infrastructure, trade and economy.

The idea of a digital yuan, or renminbi (RMB), formally known as the Digital Currency Electronic Payment (DCEP), was quietly introduced in 2014, with the Chinese authorities keeping silent about the bold project until 2019. Since 2020 the new digital currency has been tested by several Chinese cities. Thus, in October 2020 Shenzhen issued 10 million yuan worth of digital currency to 50,000 random residents who applied to take part in the experiment.

Australia is a maritime nation. The sheer scale of our sovereign maritime territory and responsibilities, our dependence on maritime trade for our prosperity and the increasing value of activity in the maritime environment must all be recognised in our maritime strategy. In a highly interconnected world, we face fundamental vulnerabilities from the realities of our geostrategic situation.

China's BRI has huge socio-economic impact on Cambodia

Ten years on, China's Belt and Road Initiative (BRI) has had a tremendous impact on Cambodia, injecting strong momentum into the kingdom's development of infrastructure, trade and economy, a Cambodian scholar said on Tuesday.

Seun Sam, a policy analyst at the Royal Academy of Cambodia, said BRI projects invested or aided by China have been turning Cambodia into a key hub for trade and connectivity in the Association of Southeast Asian Nations (ASEAN).

"Cambodia is one of the countries that has seen the greatest impact of the BRI on its infrastructure, trade, economy and cultural landscape," he told Xinhua. "China's investments in Cambodia have catalyzed a significant transformation of its infrastructure."

Under the BRI, he said, roads, bridges, expressways, hydropower plants, seaports, airports and special economic zones have been built, facilitating economic and trade activities and efficient transportation of goods and movement of people within and beyond Cambodia's borders.

"These projects have significantly improved Cambodia's connectivity with the region, facilitating trade and attracting foreign direct investment (FDIs) while boosting Cambodia's economic growth and creating job opportunities for its people," Sam said.

He added that China's investment in energy infrastructure has helped reduce Cambodia's power shortages and fostered its sustainable development.

"The construction of hydropower plants, solar panel farms and power transmission networks has increased the country's energy production capacity and alleviated its dependence on costly imported energy sources," he said.

He said one of the most impressive outcomes of the BRI projects in Cambodia is the Sihanoukville Special Economic Zone (SSEZ), which has attracted FDIs and boosted Cambodia's manufacturing sector, leading to employment creation and increased exports.

The 11-square-km SSEZ has so far accommodated some 175 companies from China, the United States, Europe, Southeast Asia and other regions, generating nearly 30,000 jobs, according to the zone's operator.

Sam said investments in Cambodia under the BRI have also stimulated the construction and real estate sectors, leading to the development of modern residential and commercial properties across the Southeast Asian country.

"Despite slowing down during the COVID-19 pandemic, the construction sector remains a key employment generator, boosting incomes, improving living standards, reducing poverty and underpinning socioeconomic development," he said.

He added that thanks to the improvement in infrastructure connectivity, the country's rich cultural heritage and historical sites have become more accessible to tourists, with the influx of tourists generating significant revenue and providing new economic opportunities for local communities.

Apart from these, Chinese investments in the agricultural sector have helped modernize farming and improve productivity, and have had a positive impact on Cambodia's agricultural exports, benefiting local farmers and boosting the country's processing and packaging sectors, he said.

"In sum, the BRI has provided enormous benefits to Cambodia, injecting vigorous impetus into building a high-quality, high-level and high-standard Cambodia-China community with a shared future," he said.

BRI, a reference to the Silk Road Economic Belt and the 21st Century Maritime Silk Road, was initiated by China in 2013 to build trade and infrastructure networks connecting Asia with Europe and Africa on and beyond the ancient Silk Road trade routes.

Digital Yuan Adoption Accelerates

Despite doubts voiced by skeptics about the project's efficacy, Shanghai Petroleum and Natural Gas Exchange (SHPGX) announced on Friday that the China National Petroleum Corporation (CNPC) had completed a deal which envisaged the purchase of 1 million barrels of crude oil with digital RMB. The deal in question was reportedly carried out with the digital yuan wallet provided by the Bank of Communications.

Chinese media quoted Tu Hong, president of the Bank of Communications Shanghai branch, as saying that cross-border yuan settlements could "reduce the reliance on the current international transaction network, further ensure security, lower costs and simplify the transaction process."

"The settlement will promote digital currency cooperation among central banks in various countries, and will greatly accelerate the internationalization of the yuan," said Tu.

Meanwhile, judging from the People's Bank of China's (PBC) Friday report, the RMB's internationalization is going full throttle. From January to September in 2023, the yuan cross-border payments reached a whopping 38.9 trillion yuan, demonstrating a 24% year-on-year hike.

At the same time, the proportion of yuan cross-border payments in the total cross-border payments in both national and foreign currencies for trade of goods was 24.4%, marking a 7% year-on-year increase.

The offshore yuan market is also seeing increased transactions after the PBC inked a standing swap deal with the Hong Kong Monetary Authority in 2022. As a result, the Hong Kong Special Administrative Region (HKSAR) has emerged as the largest offshore yuan business hub in the world, with about 75% of offshore yuan payments being processed there, per the Chinese press.

One should bear in mind that the Chinese yuan joined the International Monetary Fund's (IMF) basket of reserve currencies only seven years ago. Prior to that, China created the Cross-Border Interbank Payments System (CIPS) to facilitate cross-border payments in the national currency.

Eventually, the Chinese currency's global market share leaped from 4% in 2019 to 7% in 2022, making the yuan the fifth most traded currency in the world. For comparison's sake, in 2001 the Chinese currency was ranked 35th.

The unfolding de-dollarisation seems to be accelerating the process of the yuan's internationalization. After the West slapped sanctions on Russia over the latter's special military operation in Ukraine, the RMB replaced the US dollar as the most traded currency in Russia in the beginning of 2023. A number of Russian companies, including Rosneft, issued bonds denominated in renminbi. Brazil and Argentina also increased settlements in yuan.

Remarkably, even Western European nations have opted to use the Chinese currency. Thus, China's national energy giant CNOOC and France's TotalEnergies completed their first yuan-settled liquefied natural gas (LNG) deal in March; earlier, in February, it was reported that TESCO, a British supermarket chain, decided to pay its Chinese suppliers in yuan.

Chinese experts draw attention to the fact that the yuan has seen increasing use scenarios and volume of transactions over the past several years. Per them, the yuan internationalisation will not only facilitate the growth of China's economy, but also improve the trading efficiency and flexibility of state and non-state actors who use the RMB for settlements.

Australian maritime strategy

By Jennifer Parker (ASPI)

In this report, the author argues that the Royal Australian Navy (RAN) lacks the resources to adequately protect Australia’s vast maritime interests. This concern isn’t unique to our time: maritime strategists have long lamented that, despite being uniquely an island, a continent and a nation, Australia struggles to understand the central importance of a maritime strategy to our defence and security. The underappreciation of Australia’s dependence on the maritime domain and that domain’s significance for the nation’s prosperity and security has consistently produced a RAN that’s overlooked and under-resourced.

In this report, the author examines whether the bipartisan thesis of a structural change in our strategic circumstances, as articulated in the 2023 Defence Strategic Review (DSR), also requires a structural change and an expansion of the RAN. The author argues that both are needed, through both an increased surface-combatant fleet that’s designed on the principle of a balanced fleet and a review of the RAN’s structure. Such a structural review should include consideration of bold changes, including reconsideration of a fleet auxiliary, a coastguard or forward basing of assets to support the workforce requirements of an expanded fleet.

This report looks mainly at the structure of the surface-combatant fleet, noting the recent finalisation of the surface-combatant fleet review. In the light of the Australian Government’s consideration of that review’s recommendations, the report makes eight recommendations for government consideration.

The author also argues that the status quo of 11–12 major surface combatants is insufficient for Australia. That was the case even when the force was structured around the concept of Australia having 10 years warning time of military conflict. That problem has become more acute today, given the new era of strategic competition and the capability and size of our potential adversaries, in particular China, as recognised in the DSR. The report recommends that a major surface-combatant fleet structure of 16–20 ships is needed.

Download full report here.

Wang Yi: “no self-driving path to San Francisco”

By GT staff reporters

When noting that China and the US agreed to work together for the meeting between the two heads of state in San Francisco, Chinese foreign minister Wang Yi said on Saturday that "the path to San Francisco" will not be an easy one, and there is "no self-driving to it." Therefore, both sides need to earnestly "return to Bali [consensus]," truly implement the common understanding reached by the two leaders, remove disruption, overcome obstacles, build consensus, and accumulate outcomes, Wang said.

Chinese analysts believe this signals Beijing's discontent with Washington's lack of sincerity and efforts in stabilizing China-US ties. The US recent moves of reaching out to China mainly serve for convening a grand APEC meeting, yet falls short of responding to China's core concerns, warned Chinese observers. They said Wang's comment that there is "no self-driving" to San Francisco is a reminder to the US to rein in its toxic domestic politics that are highly antagonistic of China; and that high-level communication between China and the US won't come "automatically" unless the US makes more efforts.

Despite the various differences and contradictions between the two countries, and there are still many issues that need to be resolved, both sides believe that maintaining dialogue between the two major countries is beneficial and necessary. They both hope that bilateral relations can stabilize and strive for improvement as soon as possible, Wang, also member of the Political Bureau of the Communist Party of China Central Committee, saidin a discussion with members of the US strategic communityin Washington on Saturday.

Wang also held talks with representatives from US business circles in Washington on Saturday. Wang stated that the driving force for cooperation between China and the US remains strong, the foundation remains solid, and the space for cooperation remains vast.

He expressed the hope that everyone will seize the new opportunities offered by China's high-quality development and high-level opening-up, play a role as a ballast stone in economic and trade cooperation, cultivate friendly public opinion and social foundation between the two countries.

Wang held two rounds of talks with Blinken on Thursday and Friday, during which the two sides agreed to work together toward a meeting between the two heads of state in San Francisco.

When he met with the US President Joe Biden on Friday, Wang said that his visit is aimed at communicating with the US side to follow through on the important common understandings reached by the two heads of state, and proceed from the Bali summit towards a San Francisco summit, so as to prevent bilateral ties from further deteriorating and bring the China-US relationship back on the track of healthy and steady development at an early date.

Not enough

From Wang's remarks and recent news reports, it is clear that China is not satisfied with US' sincerity and efforts in improving the bilateral ties, Wu Xinbo, director of the Center for American Studies at Fudan University, told the Global Times. Wu pointed out that the recent eagerness from the US to reach out to China is partly due to Biden's hope of hosting a grand APEC leaders' meeting; but the US failed to address issues concerning China's core interests.

Via a grand meeting, Biden tries to send a signal to US' domestic audience that Biden is capable of stabilizing China-US relations while engaging in intense competition with Beijing, said Wu.

Washington did not cease its crackdown on China's tech industry. The Biden administration is reducing the types of semiconductors that American companies can sell to China, citing the desire to close loopholes in existing regulations announced last year.

Earlier this month, US media NBC reported that officials in Biden's administration have privately told lawmakers that the White House is preparing a supplemental funding request to submit to Congress that includes money for Israel, Ukraine, Taiwan and US border security.

During his US visit, Wang told US National Security Advisor Jake Sullivan that "Taiwan independence" is the biggest threat to peace and stability across the Taiwan Straits and the biggest challenge facing China-US relations. It must be firmly opposed with concrete policies and actions.

Li Haidong, a professor at the China Foreign Affairs University, told the Global Times that the US should also rein in its toxic domestic politics that is highly confrontational against China. "The US domestic politics itself is highly confrontational, and they need to resolve internal conflicts by creating external enemies. This trend means that there will always be confrontation in US-China relations."

The US side needs to make sure that anti-China hawks won't thwart the efforts of pushing for a meeting between the two heads of state in San Francisco, Li said.

US Senate Minority Leader Mitch McConnell recently referred to China, Russia and Iran as the new "axis of evil" that the US must confront in an interview with the US media on October 22.

The US cannot count on setting up a time and place and hope high-level meetings between the two countries to occur "automatically," more needs to be done by the US to stabilize bilateral relations, said Wu.

Window of opportunity

The majority of people in both China and the US have rationally realized that if conflict and confrontation occur between China and the US, the world would undoubtedly face catastrophe. However, this does not mean that we can automatically avoid this worst-case scenario by adopting a "lying-flat" attitude, Chinese former ambassador to the US Cui Tiankai said at a high-level dialogue at the 10th Beijing Xiangshan Forum on Sunday.

Since June this year, the two countries have embraced more frequent high-level exchanges, with Blinken, US Commerce Secretary Gina Raimondo, US Treasury Secretary Janet Yellen and US Special Envoy on Climate Change John Kerry visiting China respectively. The most recent one is California governor Gavin Newsom, who has received a warm welcome in China as his open-mindedness on cooperation has been highly praised by the Chinese public.

China-US economic working group held its first meeting via video link last week. The US also sent participants to the 10th Beijing Xiangshan Forum scheduled from Sunday to Tuesday.

In the upcoming winter-spring flight season,the number of China-US direct regular passenger flights is expected to increase from the current 48 (24 round trips) per week to 70 per week, CAAC News reported on Saturday citing the Civil Aviation Administration of China.

Overall, negativity still prevails positivity in terms of China-US relation since the "balloon incident" when bilateral ties froze, Da Wei, director of Center for International Security and Strategy at Tsinghua University, told the Global Times, noting that now is the window of opportunity for the two to stabilize ties and prevent the relations from reaching another nadir.

Wu said that the window of opportunity for the two countries to stabilize ties is rather short, as China will closely watch if the US will return to its reckless crackdown on China after the possible higher-level meeting. He also noted that the bilateral relations also face ordeals from the 2024 elections for Taiwan's regional leader; and next year's US election also poses a challenge as playing the "China card" is a usual tactic by presidential candidates.

Long Mekong

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