Geopolitics

China Is Now The Superpower With Biggest Stake In Afghanistan

China has big business interests in Afghanistan and security concerns on its western border; and following the U.S. pullout and Taliban takeover, Beijing will not tolerate the country becoming a source of regional unrest.

China Is Now The Superpower With Biggest Stake In Afghanistan

Chinese Foreign Minister Wang Yi meets with the political chief of Afghanistan's Taliban, July 2021

Jorge E. Malena

-Analysis-

BUENOS AIRES — For Beijing, the recent U.S. pullout and Taliban takeover makes Afghanistan an urgent matter. A hostile Afghanistan could not only threaten its hold on the "autonomous" western region of Xinjiang, but also the implementation of China's Belt and Road Initiative (or New Silk Road). Chinese interests in Afghanistan relate principally to security, but also the potential impact on the economy.

That is why, hours after the Taliban took over Kabul, Beijing warned the group not to become a refuge for terrorists. In the past five years, China has participated in building transport and energy infrastructures in Afghanistan, within the Belt and Road initiative.
This vast plan includes six land corridors, two of which cross Central Asia: the China-Central Asia-Western Asia corridor, and the China-Pakistan corridor. Once complete, they will allow China to boost trade with Central Asia and the Middle East, as well as expand the development of natural resources business in Afghanistan.

Afghanistan could distract China from other regions.

Afghanistan has around $1 trillion's worth of extractable rare metals in its mountains. It also has the largest unexploited reserves of copper, coal, cobalt, lithium, mercury and gold, also valued at over $1 trillion.

China is the country's largest foreign investor, and needs a stable and safe Afghanistan to make a profit here. Another concern for China, from a longer-term perspective, is that the U.S. withdrawal will benefit Washington by assuring two of its objectives. One is to distract China from other regions (especially the Asia-Pacific zone) and the other, give the United States greater time and resources to contain China.

Before the Taliban took back power, the group's spokesman declared China to be a "friendly country" that was "welcome" to help rebuild and develop Afghanistan. Referring to fears of Muslim separatism in the Xinjiang, he said the Taliban were concerned by "the oppression of Muslims, but we will not intervene in China's internal affairs."

A recent UN Security Council report noted that three militant groups — the Islamic State, al-Qaeda and the East Turkestan Islamic Movement (ETIM, which China considers a direct threat to its security) — are present in Afghanistan. ETIM has hundreds of active members in the Afghan province of Badakhshan that borders Xinjiang; and the organization, according to the Security Council report, wants to create an independent state in Xinjiang. To that end, it facilitates the movement of fighters into China.

The Taliban could stop ETIM from operating in Xinjiang or striking at Chinese projects in Central Asia. But one cannot be certain of this, as the Taliban regime has yet to prove it will govern with moderation. Indeed, it is difficult to know whether or not the Taliban effectively control Islamist groups in Afghanistan, or are prepared to lose legitimacy as a fundamentalist group by agreeing to curb ETIM.

It is simply far too early to know how the Taliban will rule. Their early promises seem aimed at winning international recognition and assuring themselves a fairly stable transition of power. If they honor agreements made before taking power, Beijing will benefit from New Silk Road projects crossing Afghanistan and curbs on separatism in Xinjiang. The United States' withdrawal would also present it with an opportunity: to promote an alternative world order, following reduced Western military presence in Asia.

But if a radical Taliban regime fuels instability in Afghanistan and Islamic militancy in parts of Central Asia where China has interests, or inside Xinjiang, it will be testing China's stated policy of non-intervention in the internal affairs of states.

*Malena heads the Department of China Studies at the Pontifical Catholic University of Argentina.

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!
Society

Debt Trap: Why South Korean Economics Explains Squid Game

Crunching the numbers of South Korea's personal and household debt offers a glimpse into what drives the win-or-die plot of the Netflix hit produced in the Asian country.

In the Netflix series, losers of the game face death

Yip Wing Sum

-Analysis-

SEOUL — The South Korean series Squid Game has become the most viewed series on Netflix, watched by over 111 million viewers and counting. It has also generated a wave of debate online and off about its provocative message about contemporary life.

The plot follows the story of a desperate man in debt, who receives a mysterious invitation to play a game in which the contestants gamble their lives on six childhood games, with the winner awarded a prize of 45.6 billion won ($38 million)... while the losers face death.


It's a plot that many have noted is not quite as surreal as it sounds, a reflection of the reality of Korean society today mired in personal debt.

Seoul housing prices top London and New York

In the polished streets of downtown Seoul, one sees endless cards and coupons advertising loans scattered on the ground. Since the outbreak of the pandemic, as the demand for loans in South Korea has exploded, lax lending policies have led to a rapid increase in personal debt.

According to the South Korean Central Bank's "Monetary Credit Policy Report," household debt reached 105% of GDP in the first quarter of this year, equivalent to approximately $1.5 trillion at the end of March, with a major share tied up in home mortgages.

Average home loans are equivalent to 270% of annual income.

One reason behind the debts is the soaring housing prices. In Seoul, home to nearly half of the country's population, housing prices are now among the highest in the world. The price to income ratio (PIR), which weighs the average price of a home to the average annual household income, is 12.04 in Seoul, compared to 8.4 in San Francisco, 8.2 in London and 5.4 in New York.

According to the Korea Real Estate Commission, 42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s. For those in their 30s, the average amount borrowed is equivalent to 270% of their annual income.

Playing the stock market

At the same time, the South Korean stock market is booming. The increased demand to buy stocks has led to an increase in other loans such as credit. The ratio for Korean shareholders conducting credit financing, i.e. borrowing from securities companies to secure stock holdings, had reached 21.4 trillion won ($17.7 billion), further increasing the indebtedness of households.

A 30-year-old Seoul office worker who bought stocks through various forms of borrowing was interviewed by Reuters this year, and said he was "very foolish not to take advantage of the rebound."

In addition to his 100 million won ($84,000) overdraft account, he also took out a 100 million won loan against his house in Seoul, and a 50 million won stock pledge. All of these demands on the stock market have further exacerbated the problem of household debt.

42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s

Simon Shin/SOPA Images/ZUMA

Game of survival

In response to the accumulating financial risks, the Bank of Korea has restricted the release of loans and has announced its first interest rate hike in three years at the end of August.

But experts believe that even if banks cut loans or raise interest rates, those who need money will look for other ways to borrow, often turning to more costly institutions and mechanisms.

This all risks leading to what one can call a "debt trap," one loan piling on top of another. That brings us back to the plot of Squid Game, "Either you live or I do." South Korean society has turned into a game of survival.

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!
THE LATEST
FOCUS
TRENDING TOPICS
MOST READ