China & Indonesia add Security Pillar to Ties - Breakdown of China's Foreign Trade Data - Understanding the 10 Trillion Debt Package - China-Philippines Spat Over New Laws
Hi folks,
A lot has happened over the weekend in the China news space. So, I am doing a special newsletter today, covering key developments.
Regards,
Manoj
Let’s begin with Xi Jinping’s meeting with visiting Indonesia President Prabowo Subianto in Beijing. Xinhua reports:
“Xi noted that Prabowo visited China in his first overseas trip right after he was elected in March and chose China as the first country to visit after taking office, which speaks volumes about the great importance he attaches to developing relations with China and demonstrates the high level and strategic nature of China-Indonesia relations. Xi went on to point out that the adherence to strategic autonomy, mutual trust, mutual assistance, win-win cooperation, fairness and justice represents not only a summary of the experience in developing bilateral ties over the past decades, but also an important principle that should be followed for ensuring the sustained and stable development of bilateral relations in the future. China is willing to work with the new Indonesian government to build on past achievements, promote building a community with a shared future with regional and global influence, and continue to write a new chapter of seeking self-improvement via solidarity, and boosting coordination and mutually beneficial and win-win cooperation among major developing countries, said Xi.”
“Xi stressed that the two sides should consolidate higher-level strategic mutual trust, increase high-level exchanges and cooperation between governments and legislative bodies and at the sub-national level, strengthen exchanges of governance experience, firmly support each other in exploring modernization paths suited to their national conditions, and firmly support each other in upholding respective core interests and major concerns. Xi called on the two sides to further improve the layout of strategic cooperation and foster cooperation regarding the ‘five pillars’ of politics, economy, people-to-people and cultural exchange, maritime affairs and security. Xi urged the two sides to deepen high-quality Belt and Road cooperation, continue to operate well the Jakarta-Bandung high-speed railway, advance cooperation on the Regional Comprehensive Economic Corridor and the ‘Two Countries, Twin Parks’ project, strengthen cooperation in such areas as digital economy, advanced manufacturing and the circular economy, carry out joint maritime development, and continuously deepen all-round mutually beneficial cooperation. China is also ready to work with Indonesia to build more projects for the benefit of the people, strengthen exchanges and cooperation in poverty reduction, medicine, grain cultivation and fisheries, provide support for the training of scientific personnel and the development of vocational education in Indonesia, and introduce more facilitation measures to expand personnel exchanges, Xi said.”
“This year marks the 70th anniversary of the Five Principles of Peaceful Coexistence and the next year marks the 70th anniversary of the Bandung Conference, Xi noted, adding that as major developing countries, emerging markets and major members of the Global South, China and Indonesia should jointly champion the Asian values featuring peace, cooperation, inclusiveness and integration, enrich the Five Principles of Peaceful Coexistence and the Bandung Spirit with the imperatives of the new era, lead countries in the Global South to unite and strengthen themselves, and steer global governance in a fairer and more equitable direction. China is ready to carry out closer multilateral strategic coordination with Indonesia, oppose unilateralism and protectionism, advocate an equal and orderly multi-polar world and inclusive economic globalization that benefit all, and jointly safeguard regional peace and stability, Xi said.”
Prabowo said that China is a “great country”. He added that “under the complex and volatile international situation, Indonesia hopes to work with China to further strengthen all-round strategic coordination, become closer comprehensive strategic partners, and build a community with a shared future that has regional and global influence.”
He also referenced “joint maritime development” as part of his agenda. In addition, Xinhua English reports that Jakarta backs the “one-China principle” but PD reports that Prabowo talked about 一个中国政策 or one-China policy. That said, PD’s report also says that Prabowo told Xi that “Indonesia fully supports the Chinese government’s position on the Taiwan issue” and “firmly supports the Chinese government's efforts to safeguard its territorial integrity and achieve national reunification.” 印尼完全支持中国政府在台湾问题上的立场，坚定奉行一个中国政策，坚定支持中国政府为捍卫领土完整、实现国家统一所作努力. The joint statement below settles this debate rather definitively, I would say.
He added:
“Xinjiang-related affairs are entirely China’s internal affairs. Indonesia adheres to the principle of non-interference in internal affairs and firmly supports China’s efforts to maintain development and stability in Xinjiang.” He “thanked China for upholding justice and fairness on the Palestinian issue. Indonesia adheres to independence and self-reliance, adheres to an independent and non-aligned foreign policy, will not join any military alliance or ‘exclusive bloc’ against a third party, supports the three major global initiatives proposed by President Xi Jinping, and is willing to communicate and cooperate closely with China within multilateral frameworks such as the G20, and make positive efforts to safeguard the common interests of the Global South, promote world multipolarization, and promote the building of a community with a shared future for mankind.” 涉疆事务完全是中国内政，印尼坚持不干涉内政原则，坚定支持中方为维护新疆发展稳定所作努力。感谢中方在巴勒斯坦问题上主持公道正义。印尼坚持独立自主，坚持不结盟外交政策，不加入任何针对第三方的军事同盟或“小圈子”，支持习近平主席提出的三大全球倡议，愿同中方密切在二十国集团等多边框架内沟通协作，为维护全球南方共同利益、促进世界多极化、推动构建人类命运共同体作出积极努力.
The two sides issued a joint statement, which is available in English. Key excerpts:
Both sides stressed that the key to the remarkable achievements in China-Indonesia relations lies in their commitment to strategic autonomy, mutual trust and assistance, win-win cooperation, and fairness and justice. The two countries have always supported each other in the pursuit of national independence and development. On the new journey ahead, both will carry forward the fine tradition of bilateral cooperation, keep to the right direction of bilateral relations, and set a good example of major developing countries working in unity, seeking common development and advancing South-South cooperation.
Both sides pointed out that the profound changes unseen in a century are quickly unfolding. The Global South is growing with a strong momentum and the collective rise of developing countries is unstoppable. Greater solidarity and cooperation between China and Indonesia will be a boost to the force for global development and the force for peace and stability, and provide important impetus to multipolarization of the world. Both sides noted that this year marks the 70th anniversary of the Five Principles of Peaceful Coexistence and next year will be the 70th anniversary of the Bandung Conference. The Five Principles of Peaceful Coexistence and the Bandung Spirit remain as relevant as ever and have become open, inclusive, and universally applicable basic norms of international relations and fundamental principles of international law. They have made indelible historic global contributions. Indonesia congratulated China for successfully hosting the commemorative events marking the 70th anniversary of the Five Principles of Peaceful Coexistence. China supports the continued revitalization of the Bandung Spirit. Both sides will carry forward the Asian values of peace, cooperation, inclusiveness and integration, enrich the Five Principles of Peaceful Coexistence and the Bandung Spirit with renewed commitment, send a strong message of the Global South pursuing strength through unity, and contribute to building a community with a shared future for mankind. Both sides believed that the world is undergoing profound changes and ever-emerging global challenges. China and Indonesia, as major developing countries with global influence, are committed to collaborating closely with the Global South in strengthening solidarity and cooperation, upholding justice and equity in the turbulent and changing world, working in unison in making the global governance system more just and equitable, and protecting the common interests of developing countries. The two sides will take a leading role in advancing regional and South-South cooperation, promoting global governance reform, and demonstrating the regional and global influence of China-Indonesia relations.
Both sides emphasized that head-of-state diplomacy provides political safeguard and strategic guidance to the furtherance of China-Indonesia relations…Both sides agreed to upgrade their ‘four pillar’ cooperation covering political, economic, people-to-people exchange and maritime aspects, to ‘five-pillar’ cooperation with the addition of security as the fifth pillar…Both sides also agreed to hold the first meeting of the 2+2 Dialogue Mechanism for Foreign Ministers and Defense Ministers in 2025, which serves as the primary platform to expand high-level strategic communication and political, security and defense cooperation between the two countries.
Indonesia and China reaffirm their mutual support to the sovereignty, territorial integrity, and national security of both countries. Both sides emphasize the right to safeguard these principles, and maintain independence from external interference. China resolutely supports Indonesia’s national unity and territorial integrity. Indonesia reiterates its consistent adherence to one-China principle, which is reaffirmed by the UN General Assembly Resolution 2758, and its recognition that the Government of the People's Republic of China is the sole legal government representing the whole of China and that Taiwan is an inalienable part of China and firmly supports the Chinese Government’s efforts to achieve peaceful national reunification. Indonesia considers issues related to Xinjiang and Xizang as internal affairs of China and firmly supports China's efforts to maintain development and stability in Xinjiang and Xizang.
Both sides will deepen bilateral and multilateral cooperation, and add more substance to the GDI, the GSI and the GCI, and make joint efforts through other mutually supported collective approaches to global development, security and civilization.
Both sides agreed to promote integrated and coordinated development and to achieve deeper integration of industrial and supply chains, value chains, data chains and talent chains. Both sides will work together to promote the Regional Comprehensive Economic Corridors and the Two Countries, Twin Parks, expand two-way trade and investment, increase the use of local currencies, and provide a conducive business environment for bilateral trade and investment cooperation. China supports Indonesia's development of the North Kalimantan Industrial Park. Both sides will work together to cultivate new drivers of global development and progress, tap the potential of cooperation in new energy vehicles, lithium batteries and photovoltaic products, and seize the opportunities for cooperation on new quality productive forces such as digital economy and green development. China supports Indonesia’s efforts to accelerate its energy transition and will engage in more high-quality cooperation with Indonesia in clean energy industry and energy infrastructure. Both sides will strengthen sustainable and mutually beneficial mineral cooperation. Both sides agree to fully leverage their complementary advantages in resources and production capacity, and sign memorandum of understanding on strengthening cooperation in important mineral resources and on establishing Green Mineral Resources Partnership, so as to support their respective transitions in development. Both sides will jointly safeguard the security and stability of the global mineral supply and industrial chains by strengthening global partnerships for energy transitions that deliver mutual benefits and sustainable future.
China welcomes Indonesia's plan to open a Consulate General in Chengdu.
The document also talks about education, tourism, cultural, media, health and youth-level cooperation.
The document then says that both sides “will actively explore and carry out more maritime cooperation projects, cultivate more bright spots, jointly safeguard peace and tranquility of the ocean, improve the maritime governance system…The two sides reached important common understanding on joint development in areas of overlapping claims and agreed to establish an Inter-Governmental Joint Steering Committee to explore and advance relevant cooperation based on the principles of ‘mutual respect, equality, mutual benefit, flexibility, pragmatism, and consensus-building’, pursuant to their respective prevailing laws and regulations...Both sides agreed to make full use of the China-Indonesia Technical Committee on Maritime Cooperation (TCM) at senior official level and the China-Indonesia Maritime Cooperation Fund. They aim to deepen cooperation on marine scientific research and environmental protection, navigation safety, deep-sea exploration, disaster prevention and mitigation, and maritime capacity building. The two sides will carry out more forward-looking, leading and exemplary maritime cooperation projects. The two sides will actively step up institutional cooperation between their coast guards. Both sides reaffirmed their commitment to the full and effective implementation of the Declaration on the Conduct of Parties in the South China Sea (DOC), and early conclusion of a code of conduct (COC) on the basis of consensus building, so as to jointly safeguard peace and stability in the South China Sea.
Both sides agreed to promote high-level military-to-military exchanges, improve dialogue mechanisms in the area of defense, and systematically promote cooperation at all levels and in all fields. The two sides will continue to strengthen mutual visits between the military, conduct joint exercises and training, hold the first joint military exercise on humanitarian assistance and disaster relief, and promote communication between military academies and think tanks.
Both sides will make good use of the annual meeting mechanisms in the fields of anti-narcotics, counterterrorism and immigration, strengthen law enforcement, security and counterterrorism cooperation, jointly combat transnational crimes including drug manufacturing, illicit drug trafficking, cross-border gambling, telecom and cyber fraud, and terrorism. Both sides agreed that these actions will contribute to regional peace and security. Both sides will strive to deepen cooperation on law enforcement capacity building, actively carry out training cooperation in relevant fields, strengthen mutual learning, and jointly improve the capacity of law enforcement.
Indonesia appreciates the important role played by BRICS countries in promoting solidarity and coordination among Global South countries and looks forward to joining BRICS at an early date, which China welcomes.
Both sides expressed grave concern over the on-going Israeli military operation and continued Israeli’s illegal presence in the Occupied Palestine Territory and humanitarian atrocities resulting from it, and emphasized that the question of Palestine is the biggest wound to human conscience. Both sides express serious concerns for the humanitarian crises caused by the conflict, oppose and condemn any act of violating the international law including international human rights law and international humanitarian law, and call for a comprehensive ceasefire without delay and emphasize the need to address the root causes of the conflict and the realization of the two-state solution with internationally agreed parameters is that the fundamental way out lies in the two-State solution. Both sides reiterated their firm support for the Palestinian people in pursuing their just cause of fully realizing the Palestinian people’s right to self-determination, as well as Palestine's full U.N. membership.
Both sides hold the view on the importance of respecting human rights and agree that every country’s independent choice of human rights development paths should be honored. Therefore, no country shall impose its will on human rights development paths of others. Both sides will continue working together with all parties for more constructive dialogue and cooperation on human rights on multilateral occasions, advocating the common values of humanity, opposing politicization of human rights, double standards or attempts to use human rights as a pretext to interfere in the internal affairs of other countries, and jointly promoting the sound development of the global cause of human rights.
Next, there’s a report on trade data for the January to October period. It says that China’s total goods trade was 36.02 trillion yuan ($5.07 trillion dollars), a year-on-year increase of 5.2%. Among them, exports were 20.8 trillion yuan (2.93 trillion dollars), an increase of 6.7%; imports were 15.22 trillion yuan (2.14 trillion dollars), an increase of 3.2%. In terms of dollars, total trade was up 3.7%. Exports grew 5.1% and imports expanded 1.7%. In terms of key partners, in dollar terms:
Trade with US was up 2.8%; exports were up 3.3%, imports rose 1.2%
Trade with the EU was down 0.2%. Exports grew 1.9%. Imports fell 4.1%
Trade with ASEAN countries was up 7.2%. Exports grew 10.8%; imports expanded 2.3%
Some noteworthy data points: Trade with Japan fell 4%; with Philippines fell by 1.5%; with Australia fell by 7.1%; with New Zealand fell by 7.6%.
Trade with Russia, in RMB terms, grew by 4.0%; exports were up 5.8%. Imports expanded 2.4%.
Trade with India expanded 2.2%. Exports were up 2.7% and imports were down 1.1%. Total trade with India was $115 billion. China’s exports were $99.8 billion and imports were $15.2 billion.
Earlier, late on Friday, the NPCSC meeting ended with some important announcements.
First, Xinhua reports that:
Chinese lawmakers approved a State Council bill on raising the ceiling on local government debt by 6 trillion yuan (about 840 billion U.S. dollars) to replace existing hidden debts. Under the new arrangement, the debt ceiling for special local government debt will be increased to 35.52 trillion yuan from 29.52 trillion yuan by the end of 2024. Also starting from 2024, China will set aside 800 billion yuan from each year’s new special-purpose bonds for local governments for five consecutive years, thereby providing debt relief to replace 4 trillion yuan of hidden debts, according to Minister of Finance Lan Fo’an. The new measures will add a combined 10 trillion yuan to China's debt relief resources. Meanwhile, the 2 trillion yuan of hidden debts resulting from housing improvement projects in run-down areas due by 2029 and beyond will be paid in accordance with the original contracts. As a result, the amount of hidden debts that China’s local governments need to deal with by 2028 is expected to drop from 14.3 trillion yuan to 2.3 trillion yuan.
The explanation issued along with this decision states that:
“As of the end of 2023, the balance of local government hidden debts nationwide was 14.3 trillion yuan. According to the preliminary calculation of GDP of 126.06 trillion yuan in 2023, the national government debt ratio (debt balance/GDP) after considering statutory government debts and hidden debts is 67.5%. Since 2024, affected by factors such as changes in the external environment and insufficient domestic demand, the contradiction between fiscal revenue and expenditure has become prominent, tax growth has fallen short of expectations, and land transfer income has dropped sharply, creating a gap from previous expectations in various regions regarding debt resolution resources, increasing the difficulty of addressing outstanding implicit debts. At present, local debt reduction work is at a critical stage. In order to ensure the completion of the goal of resolving the existing hidden debts of local governments, the State Council has proposed to increase the local government debt limit to replace the existing hidden debts. On September 25, the Politburo Standing Committee discussed and agreed in principle to the ‘Report on the Arrangements for Relating to Increasing the Local Government Debt Limit to Replace the Existing Hidden Debts’ by the Party Group of the State Council.” 截至2023年末，全国地方政府隐性债务余额14.3万亿元。按照2023年国内生产总值（GDP）初步核算数126.06万亿元计算，考虑法定政府债务和隐性债务后的全国政府负债率（债务余额/GDP）为67.5%。2024年以来，受外部环境变化和内需不足等因素影响，财政收支矛盾突出，税收增长不及预期，土地出让收入大幅下降，与各地此前对化债资源的预期有一定差距，化解存量隐性债务难度增大。当前，地方化债工作处于关键阶段，为确保完成地方政府存量隐性债务化解的目标任务，国务院提出了增加地方政府债务限额置换存量隐性债务的建议。9月25日，中央政治局常委会会议讨论并原则同意国务院党组《关于增加地方政府债务限额置换存量隐性债务有关工作安排的汇报》.
The explanation then recommends increasing the local government debt limit by 6 trillion yuan to replace the existing hidden debt. It adds that this decision:
Does not increase the overall burden of government debt and does not change the local debt repayment responsibility
Considering the interest rate difference between implicit debt and statutory government debt, it is estimated that accumulated interest payment savings of about 400 billion yuan can be achieved
Promote the solution of various local ‘triangle debt’ problems, boost the confidence of business entities, and reduce the bad debt losses of financial institutions
Support local governments in unloading burdens and move forward lightly, reverse the predicament of existing debt excessively occupying fiscal resources, free up more funds to solve grassroots ‘three guarantees’ and economic development bottleneck problems, optimize government investment layout, and promote high-quality development.
增加地方政府债务限额置换存量隐性债务，一是不增加政府债务总体负担，不改变地方偿债责任；二是考虑隐性债务和法定政府债务之间的利差，预计可累计节约利息支出约4000亿元；三是推动解决地方各类“三角债”问题，提振经营主体信心，降低金融机构呆坏账损失；四是支持地方卸下包袱、轻装上阵，扭转存量债务过度占用财政资源的困境，腾出更多资金解决基层“三保”及经济发展堵点问题，优化政府投资布局，推动高质量发展.
In terms of implementation, the document makes three points:
First, the State Council submitted a proposal to the NPCSC for approval to increase the local government debt limit by 6 trillion yuan, which will be implemented over three years.
Second, the allocation will be completed in one go to stabilise policy expectations. Based on the scale of local government implicit debt, debt limits will be allocated according to a unified national proportion, reflecting policy fairness and forming stable debt reduction expectations.
Third, arrange special debt limits and clarify the use of funds. To facilitate operation and realise policy effects as early as possible, the entire 6 trillion yuan will be arranged as special debt limits, allowing localities to use it for replacing various types of implicit debt within the monitoring scope. Under this arrangement, by the end of 2024, the local government special debt limit will increase from 29.518508 trillion yuan to 35.518508 trillion yuan. 一是总额一次报批，分年安排实施。国务院一次性向全国人大常委会提请审议批准增加6万亿元地方政府债务限额，分三年安排实施。二是分配一次到位，稳定政策预期。根据地方政府隐性债务规模，按照全国统一比例，分配地方政府债务限额，体现政策公平性，形成稳定化债预期。三是安排专项债务限额，明确资金用途。为便于操作、尽早发挥政策效用，6万亿元全部安排为专项债务限额，允许地方用于置换纳入监测范围的各类隐性债务。按此安排，2024年末地方政府专项债务限额将由295185.08亿元增加到355185.08亿元.
Among the other outcomes from the NPCSC meeting, lawmakers approved the preschool education law, the revised Law on Protection of Cultural Relics, the revised Mineral Resources Law, the energy law, and the revised Anti-Money Laundering Law. They also adopted a decision on amending the Law on Supervision by the Standing Committees of the People’s Congresses at All Levels, and a decision on removing Li Xiaopeng from the post of minister of transport and appointing Liu Wei to the position. The meeting adopted a decision on extending the authorization to temporarily adjust the application of relevant provisions of the Metrology Law in cities implementing a pilot program of improving business environment. They ratified an amendment to the 1996 London Protocol on the prevention of marine pollution by the dumping of wastes. They also adopted several reports on the deliberations of proposals submitted by lawmakers, as well as a deputy qualification report and personnel-related bills.
Moving on, there was a State Council Executive Meeting on Friday. The meeting reviewed and approved the ‘Several Policy Measures on Promoting Stable Growth of Foreign Trade’ and mulled measures on deepening the reform and development of elderly care services. Xinhua reports:
The meeting called for “beefing up financial support, fully utilizing policy support loans for small- and micro-sized businesses, and optimizing cross-border trade settlement to help enterprises strengthen their capacity in managing exchange rate risks. It also encouraged efforts to promote the development of cross-border e-commerce, the establishment of overseas smart logistics platforms, green trade, trade activities in border regions, as well as repair services for overseas goods in comprehensive bonded zones, adding that negotiations with more countries on signing mutual visa-free treaties will be continued.”
Finally, China reacted rather strongly to the Philippines’ new ‘Maritime Zones Act’ and ‘Archipelagic Sea Lanes Act’. The Ministry of Foreign Affairs summoned the Philippines ambassador to express its objection to the two new laws. issued a lengthy statement, saying:
The Philippine Maritime Zones Act essentially “attempts to enshrine the illegal award of the South China Sea arbitration in the form of domestic legislation. China strongly condemns and firmly rejects this as the move gravely infringes upon China’s territorial sovereignty and maritime rights and interests in the South China Sea. China’s territorial sovereignty and maritime rights and interests in the South China Sea shall by no means be affected by the enactment of the Act.”
“The Philippines’ attempt to whitewash its illegal claims and actions in the South China Sea by adopting the Maritime Zones Act in the name of implementing UNCLOS is illegal and invalid. The Act seriously violates the DOC and will inevitably complicate the situation in the South China Sea. China will firmly respond to any infringement or provocative actions taken by the Philippine side in the South China Sea citing the Act as the ground.”
“Many provisions contained in the Philippines’ Archipelagic Sea Lanes Act are incompatible with international law and resolutions of the International Maritime Organization (IMO). The Chinese side demands that the Philippine side earnestly abide by international law and refrain from undermining the legitimate rights of all parties under international law, including UNCLOS.”
This paragraph, in particular, is remarkable. China is telling the Philippines how treaties signed by erstwhile colonial powers define its territories.
“The territory of the Philippines is defined by a series of international treaties, including the 1898 Treaty of Peace Between the United States of America and the Kingdom of Spain (the Treaty of Paris), the 1900 Treaty Between the United States of America and the Kingdom of Spain for Cession of Outlying Islands of the Philippines (the Treaty of Washington), and the 1930 Convention Between His Majesty in Respect of the United Kingdom and the President of the United States Regarding the Boundary Between the State of North Borneo and the Philippine Archipelago. The Philippines’ territory so defined has nothing to do with China’s Huangyan Dao and Nansha Qundao. The Philippines has invaded and illegally occupied Mahuan Dao, Feixin Dao, Zhongye Dao, Nanyao Dao, Beizi Dao, Xiyue Dao, Shuanghuang Shazhou and Siling Jiao of China’s Nansha Qundao, and by doing so has seriously violated international law, including the Charter of the United Nations. It broke its own promise and kept a warship illegally grounded at Ren’ai Jiao of China’s Nansha Qundao for decades, thus infringing upon China’s territorial sovereignty and violating the Declaration on the Conduct of Parties in the South China Sea (DOC), especially its Article 5 which asks the parties to refrain from action of inhabiting on the uninhabited islands and reefs. Once again China urges the Philippines to immediately withdraw all its personnel and facilities from the aforementioned islands and reefs and immediately tow away the warship illegally grounded at Ren’ai Jiao. The establishment of the so-called “Kalayaan Island Group” beyond its own territorial scope by the Philippines infringes upon China’s territorial sovereignty, and is illegal and invalid.”