China – ASEAN Monitor Weekly

Trade and Investment

China, Myanmar agree to solve suspended dam issue
Chinese Premier Li Keqiang and Myanmar’s State Counsellor Aung San Suu Kyi agreed on 25 August to enhance cooperation between energy departments to find a proper solution to the suspended Myitsone Dam project. The project is jointly funded by the two countries, but was suspended by the previous Myanmar government in 2011. Although the move does not necessarily lead to a final resumption of the project, it is a positive signal that the new leadership in Naypyidaw is handling its relations with Beijing in a prudent and pragmatic manner, analysts said.
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China, ASEAN ‘need fast RCEP deal’
ASEAN’s trade relationship with China has reached a crucial turning point with the latest 2015 figures showing a 3% contraction, making it necessary to quickly conclude the Regional Comprehensive Economic Partnership (RCEP) agreement, according to the Chinese think-tank Institute of World Economics and Politics. Imports and exports between China and ASEAN dropped 3% to about US$460 billion last year, representing the first decline since the 2008 global financial crisis. The current free-trade agreement between China and ASEAN countries is still significantly underutilised, reaching only 6% of its full potential.
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The Chinese Economy

China’s Biggest Economic Challenge
China can strive for maximum growth now or later – but not both. The Chinese government is aware that promoting growth in the long term involves structural changes that will slow the economy in the short term. China’s success in striking a balance has surprised many analysts. In several areas it has pressed ahead with ambitious reforms while letting growth moderate to a gentler pace of less than 7 percent a year. The biggest threat to China’s rising prosperity is a continuing and largely uncontrolled expansion of credit bound up with the continuing role of state-owned enterprises, which are less efficient and less profitable than those in the private sector. Economists at the International Monetary Fund put the restructuring of weak state-owned enterprises high on the list of needed reforms.
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Political Security

China Plans More Island-Building in South China Sea
Chinese state-media recently reported that China and ASEAN nations reached agreement on some issues on operations in the South-China Sea. The publication said they agreed to create a communications system for sea-based emergencies and that a temporary agreement on South China Sea operations would be written by the middle of next year. Some experts believe such a deal unlikely as talks have been going on for more than ten years with little progress and China has increased its activity in the area since July even while at the same time an UN-supported court dismissed most of China’s territorial claims.
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China is building a naval facility in Djibouti, showing Beijing’s ambitions to be a global maritime power and protect its expanding interests abroad. The 90-acre plot is based about 8 miles from the largest US military base in Africa and is due for completion next year. The naval outpost is expected to feature weapons stores, ship and helicopter maintenance facilities and possibly a small contingent of Chinese marines or Special Forces.
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