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How Vietnam can keep the good times rolling

How Vietnam can keep the good times rolling

Few economies, if any, had a better 2020 – or seem better positioned to thrive in 2021 – than Vietnam’s.

As governments from Washington to Tokyo struggle to contain second and third waves of Covid-19 infection, Hanoi is winning accolades for a sage and nimble pandemic response. Though criticized early on for harsh social-distancing dictates, Prime Minister Nguyen Xuan Phuc’s government avoided the growth-killing lockdowns seen elsewhere in Southeast Asia.

What’s more, Vietnam’s 97 million people avoided the ghastly body counts, overwhelmed hospitals and national bickering about economic growth tradeoffs. Vietnam’s 35 official deaths on roughly 1,550 cases explain how it managed to expand a China-beating 2.91% last year.

Covid-19 isn’t Vietnam’s only 2020 triumph. It also emerged as a rare winner from Donald Trump’s trade war with China, a brawl that has devastated Asian supply chains. No country in Asia has been more proactive – and successful – in luring factory jobs fleeing the mainland than Vietnam.

Yet does Vietnam have what it takes to make a go of this breakout moment?

This question has rarely mattered more than it does this week as Vietnam’s Communist Party holds its 13th Congress. There, delegates will select the nation’s leaders for the next five years: the party’s next chief, state president, prime minister and National Assembly chair. Party bigwigs also are debating socioeconomic targets for 2025 and the years beyond.

Hanoi can make the most of this once-in-a-generation window for change by remembering “continued emphasis on structural reforms is needed to boost productivity and reduce economic imbalances,” says Era Dabla-Norris, the International Monetary Fund’s mission chief to Vietnam.

Vietnam can do just that by prioritizing three areas of reform.

1: Minding the extremes 

Vietnam’s smokestack economy, communist politics, dense population, low labor and land costs, 7% average annual growth rates over the last 10 years and physical proximity makes it something of a “mini-China.”

This familiarity dynamic gave Vietnam a big leg up in Southeast Asia as US President Trump’s tariffs and bans on companies drove factories out of Asia’s biggest economy.

Yet Vietnam also brings some complicated baggage to the table. Few doubt Vietnam is destined for middle-to-upper-income status. Investors fully get how Hanoi will get there – by emulating China’s export-led model and its heavy reliance on big state-owned enterprises.

A clothing boutique selling locally made products in downtown Hanoi. Photo: AFP / Hoang Dinh Nam

In its haste to move upmarket to capitalism, though, Vietnam is still too prone to “pendulum economics.” Investors oscillate between irrationally bullish to wildly negative on the country’s prospects. As a result, the $262 billion economy tends to crash every five to seven years as foreign capital flees even faster than it arrived. Reducing the amplitude of these swings must be a key focus for policy shifts heading toward 2025.

Part of the problem: Hanoi’s unhealthy preoccupation with exchange rates. The State Bank of Vietnam’s obsessive management of the dong earned Hanoi a place on Trump’s enemies list. In December, on the way out the door, Trump’s Treasury Department slapped Vietnam with a “currency manipulator” label.

“Vietnam,” says Francesco Pesole of Dutch bank ING, “has indeed been one of the key beneficiaries of the re-routing of Chinese products to dodge US tariffs and the US stance on Vietnam and its currency can be considered as a good gauge of how much the US is willing to expand its tough trade stance on China to the broader Asian region.”

Yet efforts to hold down the dong can lead to economic overheating that causes the pendulum to swing anew.

Oddly, the trade war acted to accelerate Vietnam’s increasing global presence since 1986, when Hanoi launched its “Doi Moi” reform process. The package of free-market upgrades tilted Vietnam away from its former Marxist command economy.

That drive transformed Vietnam from one of the world’s poorest countries into today’s lower-middle-income status. The momentum it generated, according to the World Bank, increased per capita income nearly three-fold from 2002 to 2018 to roughly $3,000, lifting more than 45 million people out of poverty.

Now, though, party officials gathered in Hanoi this week face a serious fork in the road. One key directional indicator may be whether Prime Minister Phuc, 66, retains his command control of economic change and regional integration.

It’s vital for Hanoi to signal it is “roughly going to continue with economic opening,” says analyst and Vietnam expert Murray Hiebert of the Washington-based Center for Strategic and International Studies.

2: Shrinking the state sector 

As 2021 begins, economists are laying out bullish projections for GDP. Case in point: Standard Chartered Bank’s Tim Leelahaphan forecasts 7.8% growth as the manufacturing sector stages a V-shaped recovery. “The recovery is steady,” Leelahaphan says. “In the last decade, Vietnam’s economic growth rate was one of the fastest and we expect this trend” to continue.

The service sector – and its ability to pull in foreign investment – will drive growth over the next few years and beyond. But there is a catch. Phuc’s team has acted slower than hoped to diversify growth engines away from factories.

This transition, says IMF economist Dabla-Norris, is the key to Vietnam reaching its true potential.

“Reforms to reduce economic dualism between the domestic and FDI sectors and lift productivity are crucial to support robust and inclusive growth,” she says.

“Continued efforts to remove structural distortions and improve the business climate are welcome. Priority should be given to reducing the regulatory burden faced by domestic private firms, improving access to land and financial resources, particularly for SMEs, and reducing corruption.”

A growing number of companies shifting production out of China to Vietnam. Photo: AFP

Though there are many ways to get there, Dabla-Norris stresses that “establishing an expedited SME-specific insolvency regime would help unlock capital and prevent unnecessary liquidations. Reducing labor skill mismatches, increasing human capital and technology access would also boost labor productivity.”

Economist Vo Xuan Vinh at the University of Economics Ho Chi Minh City views increasing the role of private enterprise as a Trojan horse of sorts. “The development of the private sector is putting strong pressure on Vietnam’s government to be more transparent and effective,” he says.

That, Vinh adds, has “forced the government to encourage greater private sector participation in the provision of public services and infrastructure investment. As a result, public bidding documents and planning information – previously confidential – are now more accessible.”

It helps, too, Vihn says, that foreign groups Hanoi is keen to win over – including the American, British and European chambers of commerce – are “pressuring the government to speed up institutional reforms and improve the business environment.” In other words, Vinh says, there’s no turning back for Vietnam.

The worry is that economic strains from the trade war or Covid-19 could reduce Hanoi’s appetite for disruption. “Globalization and global integration are on the right track, but they are met with the rise of extreme nationalism, strategic competition and trade wars,” declared Communist Party General Secretary Nguyen Phu Trong, the nation’s most powerful leader.

Only time with tell if these over-the-horizon issues will derail the reform process. Any hints about Hanoi’s commitment to reducing subsidies and preferential treatment for the state sector will be especially instructive.

3: Making unicorns the dominant species 

As Trump’s 25% taxes on nearly $400 billion of Chinese goods savaged Asian supply chains, Vietnamese factories suddenly found themselves with a surge in orders to produce electronic home appliances, furniture, garments, shoes, smartphones – you name it.

During the first 11 months of 2020, Vietnam saw a nearly 25% jump in exports to the US to $69 billion. It’s expected to result in a record trade deficit between the two, perhaps raising hackles on Capitol Hill and at President Joe Biden’s Treasury Department.

Yet this dynamic is also creating allies in Washington. Among them: the National Retail Federation, which argues that Vietnam is now a vital ally in efforts to curb China’s dominance in Asia.

“It’s important that this relationship not only continue, but expand as the global economy continues to recover,” argues David French, senior vice president at the federation. New US tariffs on Hanoi, he says, “will further harm US companies and result in higher costs for consumers.”

Yet the next step must be boldly and transparently making space for private enterprise, particularly in the tech space. That means diversifying growth engines away from cheap exports toward services, innovation and tech startups that grow into $1 billion-plus valuation unicorns.

Vietnam raced through the Covid-19 crisis with little economic or public health damage, March 10, 2020. Photo: AFP/Manan Vatsyayana

Bangladesh, another clear trade war winner, is gunning for garment factories relocating out of China. The South Asian growth tiger also is undercutting Vietnam on labor costs. All the more reason for Vietnam to let Bangladesh take orders from Uniqlo, The Gap and Zara while it prioritizes manufacturing goods for Apple, Intel and Toyota Motor.

Hanoi must up investments in education and training to increase productivity. It also must learn from some of China’s biggest mistakes in the Xi Jinping era. Exhibit A: President Xi’s counterproductive clampdowns on the media and the internet.

Love Facebook or not, Vietnam clamping down on social media outlets is a losing proposition in the information age. It’s hard to argue, seven years on, that Xi’s “Great Firewall” helped Beijing achieve any of its economic objectives. For all his pledges of epochal reform, a top Xi legacy is muddying China’s waters, styming the information flows markets need to function efficiently.

It’s worrisome that the lead-up to this week’s Congress in Hanoi has been accompanied by harsh crackdowns on dissent targeting Vietnamese social media users who critique the government’s performance, according to Amnesty International.

At present, Vietnam is too reliant on cheap labor and exports at the expense of policies that would create better-paying jobs and raise living standards.

Thankfully, around the nation, but particularly around Ho Chi Minh City, young Vietnamese are displaying promising flashes of entrepreneurial energy in technology and services. The challenge is to nurture such industries by simplifying a byzantine tax system, reducing graft and reducing barriers to starting new businesses.

Moving upmarket and supporting the creation of new job growth from the ground up is vital to avoiding the “middle-income trap.” That’s when a developing nation stalls out near $10,000 per capita. The odds strongly favor Vietnam beating it but there is no telling what the next group of leaders have in mind reform-wise.

Even so, Vietnam’s successful 2020 makes it more role model than cautionary tale.

“Several elements of Vietnam’s development success could serve as an example to other countries,” says IMF economist Anja Baum. “Some factors, such as a long coastline, supporting exports, are country-specific, but others could be replicated in other countries.”

Baum advises prioritizing broader education reforms that reach all children, both urban and rural, and social safety nets to soften the blow to labor markets as Vietnam moves from lower-income manufacturing to more innovation-driven growth.

Vietnam is holding its Communist Party Congress this week in Hanoi, where crucial policy decisions will be made for the economy. Image: AFP

Yet as China, India, Indonesia and other developing growth stars demonstrate, epochal change is never a given. It requires steady and targeted policy upgrades to raise living standards and validate investors’ optimism.

Change, meantime, is made harder at a moment when Vietnam faces pressure to decide whether to cozy up to the US or integrate more closely with China.

Vietnam has proved its skill at beating the odds and rising above adversity. But whether it can continue this run in 2025 and beyond will owe much to what party bigwigs decide this week at their Congress.

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India’s ‘Solar Man’ lights path out of poverty with clean power

India’s ‘Solar Man’ lights path out of poverty with clean power

Since he was a child, Santipada Gon Chaudhuri had sought ways to help India’s rural poor, so when the electrical engineer was invited to visit a co-worker’s home in the Himalayan village of Herma in the early 1980s, he saw his chance.

“I was appalled to see how local communities were living in darkness after sunset,” remembered Chaudhuri, 71, who then worked for the government in the northeastern state of Tripura.

“Some used kerosene lamps, but even kerosene was not always easy to get. Since I had both the skill and position to try and provide power to them, it made me act,” he said.

The villages of Tripura are located on tough, hilly terrain, where Chaudhuri realized it would be hard to put up power lines.

“But they had solar energy in abundance,” he said in an interview.

In 1983, he used government funding to install solar panels for 70 homes, as well as running a community television and water pump — the first time anyone in the hamlet had seen electric light.

That small project sparked a career dedicated to bringing energy to people in impoverished, remote communities, a mission that earned Chaudhuri the moniker of India’s “Solar Man.”

Today, more than 100 homes and businesses in Herma are lit by an updated solar energy system, allowing villagers to be more productive while reducing their use of expensive, polluting fuels like kerosene.

“Life in the village would come to a complete standstill after sunset. But with light in our homes now, our children are studying until night,” said villager Sumoti Riyang, 33.

“Shops and business establishments remain open in the evening. We can work more. All this is generating more income for us,” she said.

In his Kolkata office, adorned with awards he has won since his first project nearly 40 years ago, Chaudhuri said he gets “great satisfaction” from seeing how solar power has changed lives in Herma, connecting residents to the modern world.

Career of firsts

Herma was the first tribal village in the country to gain access to solar power, and by 1989 Chaudhuri had led the installation of solar technology in nearly 40 villages across India’s northeastern states.

Four years later, he developed India’s first centralized solar power station with a distribution network on Sagar Island in the Sundarbans, home to one of the world’s largest mangrove forests, supplying 100 households through power lines.

The project was considered a breakthrough at a time when solar technology “was largely confined to laboratories and prototypes”, said Samrat Sengupta of the New Delhi-based Centre for Science and Environment (CSE), a nonprofit think tank.

By 2000, more than 400,000 people in villages around the Sundarbans national park were using solar power, through a mix of mini-grids and domestic solar power systems.

At the time, the area had the highest per-capita consumption of solar power in the world, Chaudhuri noted.

The project earned him an Ashden Award, known as the “Green Oscars,” and the Euro Solar Award from Germany.

In 2006, it also inspired India’s then-President A.P.J. Abdul Kalam to invite Chaudhuri to design a captive solar unit for the presidential palace.

“Chaudhuri’s work is a classic example of empowerment of indigenous communities through solar power,” said Arun Tripathi, director general of the National Institute of Solar Energy, an autonomous body under the renewable energy ministry.

In 2009, Chaudhuri installed the country’s first grid-connected solar plant in West Bengal’s Jamuria village, a 2-megawatt (MW) project serving 5,000 families.

This was lauded as an “environmental breakthrough” because, until then, solar power had been limited to remote areas without access to electricity, said CSE’s Sengupta.

Jamuria was the first location to use solar to replace coal power in the grid, bringing clean energy into the mainstream, he said, noting it cut the amount of coal burned locally by 2,000 kilograms per hour and decreased carbon emissions.

Floating solar

Sengupta and others said Chaudhuri’s work helped pave the way for India’s National Solar Mission, launched in 2010.

The initiative, on which Chaudhuri consulted, had an initial target of producing 20 gigawatts of solar power by 2022.

Having already nearly doubled that ahead of time, India has set a new goal of 100 gigawatts.

But as its solar power expansion has gained pace, a growing population and increasing urbanization have made finding enough land for big projects more difficult.

In response, Chaudhuri came up with India’s first floating solar power station.

In 2014, after joining the nonprofit NB Institute for Rural Technology, which he now heads, he led construction of an experimental 10-kilowatt government-funded floating solar panel on a lake in Kolkata’s New Town.

“Designing the floating structure of the panel and anchoring it in the water body were major challenges,” he said.

That project grew into a national program that now generates more than 1,700 megawatts of solar power from floating panels in various coastal states around the country.

Despite its progress, India’s solar push has some limitations including high capital costs, scarcity of land and the need for sunny weather, said Partha S. Bhattacharyya, former chairman of Coal India Limited, the world’s largest coal producer, which is also investing in solar energy projects.

“Thermal (coal) power is reliable and consistent, due to greater grid stability,” he added.

Chaudhuri and his team are currently experimenting with solar-powered pumps that push water up to a higher storage reservoir that can then generate hydro-electricity using micro turbines, supplying villages when needed.

“The very concept of solar power has changed from simply providing lights to controlling carbon emissions,” Chaudhuri said. “It is time that we seriously think about how to leave behind a more livable world for future generations.”

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Lego Group building a Greater China empire

Lego Group building a Greater China empire

The Lego Group will continue to develop new products that resonate with distinct and different consumer tastes in Hong Kong, Taiwan and mainland China as people in the three markets tend to prefer different products.

“In Hong Kong, brands are a big part of our everyday life… superhero and Disney-themed Lego products are quite popular,” Troy Taylor, the general manager of Lego (Hong Kong, Taiwan and Macau), said in an interview with Asia Times.

“Taiwan’s buyers have a deep interest in Japanese brands. Lego Super Mario did very well. NASA Space Shuttle and Ninjago are also very popular there.”

Lego Monkie Kid is tailored made for the Chinese market. Photo:

“Mainland tourists would purchase different things, such as Lego City and Lego Friends. The mix is a little different,” Taylor said, adding that the company launched the Monkie Kid products for the Chinese market last year.

“We are a Danish company. Predominately our brand has been very strong in western Europe, United States, Australia and New Zealand,” he said. “Over the past five to six years, we’ve developed products for the local consumers in Asia. Monkie Kid is one of them. It’s a classic tale of the Journey to the West.”

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China breaks off big tech’s romance with the state

China breaks off big tech’s romance with the state

China’s state-run anti-monopoly bureau has tightened its regulations on big tech players, as shown by its recent move against the country’s largest e-commerce company, Alibaba Group.

Alibaba was hit with a record antitrust fine of 18.2 billion yuan (more than A$3.6 billion) over the weekend for supposedly abusing its market dominance. The company, which operates the digital payment platform Alipay and offers bank loans to entrepreneurs, issued a public apology:

“Alibaba accepts the penalty with sincerity and will ensure its compliance with determination. To serve its responsibility to society, Alibaba will operate in accordance with the law with utmost diligence, continue to strengthen its compliance systems, and build on growth through innovation.”

Meanwhile, questions have been asked about the whereabouts of Alibaba’s founder Jack Ma. In October last year, Ma lashed out at China’s financial watchdogs and banks.

Among other complaints, he criticized the state-managed financial sector and was subsequently hauled into a meeting with regulators. After that, the always-visible Ma was not seen in public for months.

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U.S. condemns sentencing of Hong Kong activists on ‘politically motivated’ charges

U.S. condemns sentencing of Hong Kong activists on ‘politically motivated’ charges

The United States on Friday condemned the sentencing of several Hong Kong democracy activists for their roles in protests that triggered a crackdown on dissent by China, again accusing Beijing of denying Hong Kongers freedoms they were promised.

U.S. Secretary of State Antony Blinken called the charges against the activists “politically motivated” and demanded the release of “those detained or imprisoned for exercising their fundamental freedoms.”

Hong Kong media tycoon Jimmy Lai was jailed for 14 months on Friday along with four other veteran activists. Martin Lee, who is known as the “father of democracy” in Hong Kong, received a suspended sentence.

The sentences decided on Friday were the latest in a relentless and successful campaign by China to silence dissent since the protests in 2019.

Blinken called the decisions an example of how authorities in Beijing and Hong Kong “undermine protected rights and fundamental freedoms” guaranteed when Britain handed Hong Kong back to China, “in an effort to eliminate all forms of dissent.”

“We will continue to stand with Hong Kongers as they respond to Beijing’s assault on these freedoms and autonomy,” Blinken said in a statement.

Britain and the European Union also condemned the prison terms handed out to Lai and others.

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Rush for carbon credits spurs surge in power company schemes

Rush for carbon credits spurs surge in power company schemes

A rush by companies to buy credits to offset carbon emissions has led to contentious schemes being developed by large power companies including India’s Adani Group and US-based NextEra Energy.

Fundamental to the principle of offsetting is that the projects that generate credits should deliver carbon benefits that are additional to a business-as-usual scenario, and be able to show they would not have been viable without the revenue from offsets.

But some of the most abundant credits are from big renewable energy schemes developed by well-funded power groups, according to data compiled by the Berkeley Carbon Trading Project.

As the world races to decarbonise power grids, climate policy experts are questioning the validity of these renewables offsets — which account for about a third of the more than 1bn credits issued to date.

“If you buy carbon credits from a large-scale renewable electricity project you are making zero difference for the climate,” said Gilles Dufrasne of Carbon Market Watch. Since offsets from renewable energy projects were among the most plentiful and cheapest available, companies looking to neutralise their emissions were buying them “whether they have good intentions or not”.

For renewable energy projects, the financial test for offset credit eligibility has become more difficult to apply as investor demand and government support for clean energy has accelerated. A 2016 study for the European Commission found that many renewables projects were “unlikely to be additional”. 

“The revenue from the [credits] for these project types is small compared to the investment costs and other cost or revenue streams . . . Moreover, many projects are economically attractive,” it found.

There are more than 126m renewable energy credits for sale, each representing a saving of 1 tonne of CO2-equivalent, with roughly 191m used since the early 2000s, according to Trove Research. While some of those available were issued more than a decade ago, many were generated in the past few years.

Offset Project Prices

Renewables credits linked to emissions reductions between 2016 and 2018 from large projects in India and China have largely driven the value of S&P Global’s Platts CEC, which tracks the price of credits eligible for the aviation industry’s flagship offsetting system. It has been valued at about $2.10 per metric tonne of CO2-equivalent since mid March.

“Most people are going to take the easiest way to transact,” which was often a $2 renewables credit, said Jonathan Goldberg, chief executive of advisory group Carbon Direct. Credits from other project types, such as carbon capture schemes, can cost much more.

Special report: Carbon offsets, Most popular types of offset project, 2019

Among the renewables projects with the most available credits — 3.1m, according to the Berkeley data — is a solar-power development by Mumbai-listed Adani Green Energy, tycoon Gautam Adani’s renewables business in which French oil major Total has a 20 per cent stake. Adani has said he intends to build the world’s largest solar-power company by 2025.

The project, designed to deliver 990MW of power to five states in India, is expected to produce 15.5m credits over 10 years, linked to emissions savings from 2017 onwards. Recent buyers of the credits include aerospace manufacturer Boeing.

The application to generate offsets was approved by Verra, a Washington-based body that certifies carbon emissions. It says that without the revenue from the credits, the development would have generated an estimated return of only 6-10 per cent for equity investors, below the benchmark of about 15 per cent for energy projects in India — a figure based on a standardised United Nations methodology.

Project documents state that its debt-to-equity ratio was 70:30. Utility-scale solar and wind projects in India are typically “highly leveraged, with average debt-to-equity ratios of around 75:25”, according to an International Energy Agency clean energy report in November.

In 2019 Adani Green issued $862.5m in green bonds to refinance solar plants. Another Adani solar scheme has been issuing offsets since 2020, and an Adani wind scheme is in the process of registering with Verra.

Special report: Carbon offsets, Most popular locations for offset projects

The same methodology, which in most cases does not consider the financial clout of the project developer, has been applied to two grid-connected solar projects in India by big renewables groups Acme Solar and New York-listed Azure Power, a New Delhi-based solar company. They are expected to produce a combined 30m credits over 10 years, related to emissions savings from 2017 onwards.

Also for sale are half a million credits from a Texas wind farm developed by NextEra Energy, the solar and windpower group that last year briefly overtook Exxon as the most valuable US energy group. The project’s earliest credits related to emissions savings from 2010, but savings made in 2019 produced the greatest number, according to the Berkeley data. Recent buyers include Delta Air Lines and London-listed insurer Hiscox.

Barbara Haya, research fellow at the University of California, Berkeley, said the rules governing which projects could generate offsets should be tightened up “urgently.” 

“We continue to produce more and more credits that clearly do not represent real emissions reductions,” she said. Haya’s 2010 PhD on earlier renewable energy offsetting projects in India and China found that “the large majority” were not additional.

Verra and Gold Standard, another certification body based in Geneva, stopped approving most new renewables projects from the start of 2020. Verra said large projects that applied before the deadline were “more frequently rejected” than smaller schemes. 

“Early [renewables] projects took additional risk and depended on carbon finance to do so — and that investment helped change the space,” Verra said in a statement.

Adani declined to comment, while Acme did not respond to requests for comment. NextEra said it had followed Verra’s protocol.

Azure Power said that while revenue from carbon credits was “small overall”, carbon credit sales could allow certain projects to be viable that otherwise may not reach minimum return. “Ultimately, revenue from the sale of carbon credits allows us to provide lower prices for renewable energy to customers.”

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China’s massed drills near Taiwan take aim at Washington audience

China’s massed drills near Taiwan take aim at Washington audience

Chinese carrier drills and stepped-up incursions into Taiwan’s air defense zone in recent weeks are meant to send a message to Washington to stand down and back off, security sources in Taipei say.

The increased activity — which China, unusually, described as “combat drills” on Wednesday — has raised alarm in both Taipei and Washington, though security officials do not see it as a sign of an imminent attack.

Rather, according to an official familiar with Taiwan’s security planning, at least some of the exercises are practicing “access denial” maneuvers to prevent foreign forces from coming to Taipei’s defense in a war.

“China claimed that the drills are near Taiwan, but judging by their location it’s actually meant for the U.S. military,” said the official in Taiwan, speaking on condition of anonymity as he was not authorized to speak to the media.

As China sailed an aircraft carrier group near Taiwan last week, its air force simulated attacks on American ships, although no U.S. Navy vessels were known to be in the area at the time, the source said.

The U.S. Navy has been carrying out regular transits of the Taiwan Strait, which separates the island from China.

One Western security source said the almost-daily flights by Chinese anti-submarine aircraft in the northernmost part of the South China Sea were probably a response to U.S. missions there, including by submarines, or to show the Pentagon that China can hunt for U.S. submarines.

“They are not chasing Taiwanese subs,” the source said, pointing to Taiwan’s own tiny fleet of four, two of which date from World War II.

Taiwan President Tsai Ing-wen greets former U.S. Deputy Secretary of State Jim Steinberg at a meeting at the presidential office in Taipei on Thursday. | POOL / VIA REUTERS
Taiwan President Tsai Ing-wen greets former U.S. Deputy Secretary of State Jim Steinberg at a meeting at the presidential office in Taipei on Thursday. | POOL / VIA REUTERS

The U.S. Navy does not give details of any submarine patrols near Taiwan or in the South China Sea.

President Joe Biden’s White House has maintained a tough-on-China stance inherited from the Trump administration. That has included more visible support for Taiwan, angering China, which considers the island part of its territory and sees Washington as giving succur to Taiwanese who seek independence, a red line for Beijing.

Two U.S. military officials, speaking on the condition of anonymity, said that although the United States was concerned about Chinese activity around Taiwan, there was no sense of an imminent attack.

“For the past five years, China has been the centerpiece of the United States’ national defense strategy. So of course we’re concerned,” one official said.

China’s Defense Ministry and the U.S. Navy’s 7th Fleet did not respond to requests for comment.

Taiwan’s Defense Ministry said that it was keeping a close watch on “enemy movements” and that it has combat plans to deal with scenarios for a Chinese attack. It did not elaborate.

Although China has escalated its rhetoric in response to U.S. warships passing through the Taiwan Strait, a U.S. defense official said Washington had not seen any kind of operational military escalation by the Chinese in response.

In a statement to Reuters, China’s Foreign Ministry said the United States has “swelled the arrogance of Taiwan independence forces.”

Washington “bears an inescapable responsibility for tensions in the Taiwan Strait,” it added.

A senior U.S. administration official said that regardless of who Beijing’s incursions near Taiwan were aimed at, their effect was direct “intimidation and coercion” of Taiwan.

“Our operations there have been in a pretty steady state consistently,” the official said. “So I don’t think there’s an increased pace of U.S. military operations that are necessarily driving what Beijing is doing. That feels a little bit like an excuse there for what they’re doing.”

The U.S. Navy this month took the rare step of publishing a photo on its main website of a U.S. warship in the Philippine Sea watching China’s Liaoning carrier.

Raising the stakes, China’s Navy said for the first time last week that carrier drills near Taiwan would become routine.

Another U.S. warship sailed through the Taiwan Strait two days after China’s announcement of its carrier maneuvers, part of what the Pentagon refers to as “routine” transits that have prompted Beijing to accuse Washington of causing regional tensions.

“China’s top concern in any Taiwan contingency would be preventing or at least blunting armed intervention by the U.S.,” said Greg Poling, a maritime security expert at Washington’s Center for Strategic and International Studies.

“So demonstrating increased ability to deny U.S. access is a coercive message sent to both Washington and Taipei.”

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