Geopolitics

China, Japan and South Korea Play a Game of Diplomatic Mahjong

Four years after the idea of a free trade agreement between China, Japan and South Korea was put forward, the three countries are stuck in a tense diplomatic game of words and horse-trading.

Korea-China-Japan summit (Cheong Wa Dae)
Korea-China-Japan summit (Cheong Wa Dae)

By Daisuke Kondo
经济观察报E.O/Worldcrunch

BEIJING - Last September, China, Japan and South Korea launched the Trilateral Cooperative Secretariat in Seoul. South Korean Shin Bong-Kil, a former ambassador for international economic cooperation and a prominent expert on China and Japan, was appointed as Secretary-General.

It has taken quite a lot of twists and turns for the three countries to get to where they are now.

"The CJKFTA negotiations will be launched this year". It took a good four years for the three countries' leaders to reach a consensus on signing these few words about a future Free Trade Agreement at the China–Japan–South Korea trilateral summit held in Beijing this May.

The trilateral summit was initiated by former Japanese Prime Minister Taro Aso, at the end of 2008, when the financial crisis spread from the United States to the rest of the world. The idea behind the meeting was "uniting the three East Asian countries to deal with the crisis."

The relations between China, Japan and South Korea have always been very complicated. For example, at the Japan and South-Korea summit held in Kyoto at the end of last year, President Lee Myung-bak got into a fierce argument with Prime Minister Yoshihiko Noda by talking about the issue of the forced prostitution of Korean "comfort women" during the Second World War. Since then, Noda has held a grudge against Lee.

Endless arguments and humiliations

It hasn't been plain sailing at all for these two countries. Before the meeting held two weeks ago in Beijing, the two countries' delegations fought about where the meeting should happen. President Lee eventually made a concession and agreed to go to the hotel where the Japanese delegation was staying. The meeting only lasted 15 minutes. This set the record for the shortest meeting of the two countries' leaders since the normalization of their relationship in 1965. Moreover, those 15 minutes replicated what happened last year with President Lee again launching into a long-winded speech about the comfort women.

At the same time, the two nations' economic ministers were also supposed to meet. But when the Japanese minister Yukio Edano arrived at the hotel where the Koreans were staying, he was told that the Korean delegation wasn't ready to see him - forcing his limousine to circle around the hotel until the delegation was all set.

As for the Chinese and the Japanese, even if it is the 40th anniversary of their resumption of diplomatic relations, their relations aren't exactly cordial either. The two parties' Prime Ministers - Wen and Noda - also got into a serious argument over the Diaoyu Islands issue at their May 13th meeting.

With terribly bad timing, the fourth World Uyghur Congress, an international meeting of exiled Uyghurs who oppose China's occupation of East Turkestan, was held in Tokyo a day before the two prime ministers' meeting. Diplomatic faux-pas. The summit meeting between President Hu Jintao and Noda, as well as the talks originally scheduled on May 14 and May 15 between the Chinese Foreign Minister and the Japan Federation of Economic Organizations, were cancelled.

However, it's because of the tension between any two of the three countries that the formation of a trilateral community is particularly important.

New economic ties

Aside from bickering, the three countries managed to sign 18 ministerial-level agreements as well as over 50 framework agreements. The countries' economic ties are also deepening. China is the biggest trade partner of both Japan and South Korea. The three nations account for 22% of the world's population and 20% of global GDP and trade volume.

Japan and South Korea's dependence on China is 20% and 30% respectively. They have both stepped into the "Chinese economic circle".

So should Japan give precedence to the Trans-Pacific Partnership Agreement (TPP) with the U.S. as its core, or the Free Trade Agreement (FTA) led by China? This has certainly put the indecisive Noda and his government in a tremendous dilemma.

In Japan's economic circles, where economic recovery is the priority, the majority of people hope for a quick and positive outcome with the trilateral FTA. After all, a combination of China-Japan-South Korea + ASEAN will create the world's biggest economic community and trade market.

According to one Korean journalist who was present at the May summit, President Lee wants to sign the FTA with China before signing the trilateral one. Currently, the largest Korean objector to the Japan-South Korea FTA is the Hyundai Group, where President Lee once worked. Hyundai is sure to suffer if the agreement is signed.

I spoke to a Chinese scholar specialized in Chinese diplomacy. He used the NAFTA signed between America, Canada and Mexico in 1994 as an example, and believes that if the China-Japan FTA or the China-South Korean one were signed first, the trilateral FTA would be achieved more easily because the two smaller countries will both be worried about their rival monopolizing the Chinese market.

Of course, all three parties have realized by now that the negotiations will not be an easy task.

Diplomatic mahjong

One of the Japanese foreign officials who participated in the May session expressed as much: "We call it diplomatic mahjong. In other words, there are continuous trade-offs and exchanges between the three parties in over 90 kinds of industries. In each industry, every country has to face objections from insiders or domestic politicians. This mahjong game is never going to be easy. "

The analogy of a "diplomatic mahjong" is a very interesting one. Nevertheless, since there are only three players in the game, I wasn't sure it was pertinent, because you generally need four for a mahjong game. But the Japanese official explained: "There's a shadow player – America – the boss of Japan and South Korea."

Since Prime Minister Noda stepped into the political arena last September, the announcement of Japan's participation in the consultations around the trilateral FTA is the first time he has gone against America's will. He is wondering how he is going to justify all this to the boss when he returns home.

Even though a China-Japan-Korea FTA will probably be signed eventually, a game with a shadow player is certainly going to be a long one.

Read the original article in Chinese

Photo - Cheong Wa Dae

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Economy

Air Next: How A Crypto Scam Collapsed On A Single Spelling Mistake

It is today a proven fraud, nailed by the French stock market watchdog: Air Next resorted to a full range of dubious practices to raise money but the simplest of errors exposed the scam and limited the damage to investors.

Sky is the crypto limit

Laurence Boisseau

PARIS — Air Next promised to use blockchain technology to revolutionize passenger transport. Should we have read something into its name? In fact, the company was talking a lot of hot air from the start. Air Next turned out to be a scam, with a fake website, false identities, fake criminal records, counterfeited bank certificates, aggressive marketing … real crooks. Thirty-five employees recruited over the summer ranked among its victims, not to mention the few investors who put money in the business.

Maud (not her real name) had always dreamed of working in a start-up. In July, she spotted an ad on Linkedin and was interviewed by videoconference — hardly unusual in the era of COVID and teleworking. She was hired very quickly and signed a permanent work contract. She resigned from her old job, happy to get started on a new adventure.


Others like Maud fell for the bait. At least ten senior managers, coming from major airlines, airports, large French and American corporations, a former police officer … all firmly believed in this project. Some quit their jobs to join; some French expats even made their way back to France.

Share capital of one billion 

The story began last February, when Air Next registered with the Paris Commercial Court. The new company stated it was developing an application that would allow the purchase of airline tickets by using cryptocurrency, at unbeatable prices and with an automatic guarantee in case of cancellation or delay, via a "smart contract" system (a computer protocol that facilitates, verifies and oversees the handling of a contract).

The firm declared a share capital of one billion euros, with offices under construction at 50, Avenue des Champs Elysées, and a president, Philippe Vincent ... which was probably a usurped identity.

Last summer, Air Next started recruiting. The company also wanted to raise money to have the assets on hand to allow passenger compensation. It organized a fundraiser using an ICO, or "Initial Coin Offering", via the issuance of digital tokens, transacted in cryptocurrencies through the blockchain.

While nothing obliged him to do so, the company owner went as far as setting up a file with the AMF, France's stock market regulator which oversees this type of transaction. Seeking the market regulator stamp is optional, but when issued, it gives guarantees to those buying tokens.

screenshot of the typo that revealed the Air Next scam

The infamous typo that brought the Air Next scam down

compta online

Raising Initial Coin Offering 

Then, on Sept. 30, the AMF issued an alert, by way of a press release, on the risks of fraud associated with the ICO, as it suspected some documents to be forgeries. A few hours before that, Air Next had just brought forward by several days the date of its tokens pre-sale.

For employees of the new company, it was a brutal wake-up call. They quickly understood that they had been duped, that they'd bet on the proverbial house of cards. On the investor side, the CEO didn't get beyond an initial fundraising of 150,000 euros. He was hoping to raise millions, but despite his failure, he didn't lose confidence. Challenged by one of his employees on Telegram, he admitted that "many documents provided were false", that "an error cost the life of this project."

What was the "error" he was referring to? A typo in the name of the would-be bank backing the startup. A very small one, at the bottom of the page of the false bank certificate, where the name "Edmond de Rothschild" is misspelled "Edemond".

Finding culprits 

Before the AMF's public alert, websites specializing in crypto-assets had already noted certain inconsistencies. The company had declared a share capital of 1 billion euros, which is an enormous amount. Air Next's CEO also boasted about having discovered bitcoin at a time when only a few geeks knew about cryptocurrency.

Employees and investors filed a complaint. Failing to find the general manager, Julien Leclerc — which might also be a fake name — they started looking for other culprits. They believe that if the Paris Commercial Court hadn't registered the company, no one would have been defrauded.

Beyond the handful of victims, this case is a plea for the implementation of more secure procedures, in an increasingly digital world, particularly following the pandemic. The much touted ICO market is itself a victim, and may find it hard to recover.

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