China meets with Asean diplomats to propose resuming South China Sea talks – SCMP

The South China Morning Post has reported that China is meeting with Asean diplomats to propose resuming South China Sea talks.

Key notes

• Beijing conveys its concerns about the rising risk of conflict over the contested waters.
• Discussion follows US Secretary of State Mike Pompeo’s announcement of a harder line concerning China’s ‘unlawful’ claims.

Lead paragraphs and points

Three weeks after US Secretary of State Mike Pompeo announced his country’s new position on the South China Sea, Beijing summoned diplomats from 10 Southeast Asian countries for a meeting to convey its worries about the rising risk for conflict over the contested waters.

Asean diplomats believe the meeting underscores Beijing’s desire to keep its Asian neighbours closer to its side and push Washington out of the picture after the Trump administration signalled a tougher approach against what it calls Beijing’s “unlawful” claims in the South China Sea.

They also said that Beijing has recently shown more willingness to discuss ways to resolve the South China Sea dispute, an issue it has been trying to push aside to instead focus on bilateral economic cooperation.

Market implications

China’s claims to almost all of the South China Sea are sharply contested by Brunei, Malaysia, the Philippines, Vietnam and Taiwan and it has been a theme on the back burner for markets for the best part if two decades. 

The article states that during a meeting on Thursday with the visiting Indonesian Foreign Minister Retno Marsudi in Hainan, Chinese Foreign Minister Wang Yi said that China is ready to work with Asean countries to ensure an early conclusion for the code of conduct.

Regional experts believe progress on the code has become more important than ever given the increased US pressure and rising tensions between China and Asean countries.

In respect to markets, this is an evolving situation, 'To be continue....' with no immediate impact in the forex space.