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Showing posts with label AIIB. Show all posts
Showing posts with label AIIB. Show all posts

Sunday 24 January 2016

Don’t blame China for global economic jitters; China contributed >25% global growth

‘There has never been a real recovery in North America and western Europe since 2008.’ Photograph: Kai Pfaffenbach/Reuters

The US stock market has just had the worst start to a year in its history. At the same time, European and Japanese stock markets have lost around 10% and 15% of their values respectively; the Chinese stock market has resumed its headlong dash downward; and the oil price has fallen to the lowest level in 12 years, reflecting (and anticipating) worldwide economic slowdown.

According to the dominant economic narrative of recent times, 2016 was the year when the world economy would recover fully from the 2008 crash. The US would lead this recovery by generating growth and jobs via fiscal conservatism and pro-business policies. Reflecting the economy’s robust growth, the US stock market reached new heights in 2015, although disrupted by the mess in the Chinese stock market over the summer. By last October, US unemployment had fallen from the post-crisis peak of 10% to 5%, bringing it back close to the pre-crisis low. In a show of confidence, last month the US Federal Reserve finally raised its interest rate for the first time in nine years.

Not far behind the US, the story goes, have been Britain and Ireland. Hit harder than the US by the financial crisis, they have, however, recovered handsomely because they kept their nerve and stuck to the right, if unpopular, policies. Spending cuts, focused on wasteful welfare spending, accelerated job creation by making it more difficult for people to live off the taxpayer. They sensibly didn’t give in to the banker-bashers and chose not to over-regulate the financial sector.

Even the continental European economies have been finally picking up, it was said, having accepted the need for fiscal discipline, labour market reform and cutting business regulations. The world – at least the rich world – was finally set for a full recovery. So what has gone wrong?

Those who put forward the narrative are now trying to blame China in advance for the coming economic woes. George Osborne has been at the forefront, warning this month of a “dangerous cocktail of new threats” in which the devaluation of the Chinese currency and the fall in oil prices (both in large part due to China’s economic slowdown) figured most prominently. If our recovery was to be blown off course, he implied, it would be because China had mismanaged its economy.

China is, of course, an important factor in the global economy. Only 2.5% of the world economy in 1978, on the eve of its economic reform, it now accounts for around 13%. However, its importance should not be exaggerated. As of 2014, the US (22.5%) the eurozone (17%) and Japan (7%) together accounted for nearly half of the world economy. The rich world vastly overshadows China. Unless you are a developing economy whose export basket is mainly made up of primary commodities destined for China, you cannot blame your economic ills on its slowdown.

The truth is that there has never been a real recovery from the 2008 crisis in North America and western Europe. According to the IMF, at the end of 2015, inflation-adjusted income per head (in national currency) was lower than the pre-crisis peak in 11 out of 20 of those countries. In five (Austria, Iceland, Ireland, Switzerland and the UK), it was only just higher – by between 0.05% (Austria) and 0.3% (Ireland). Only in four countries – Germany, Canada, the US and Sweden – was per-capita income materially higher than the pre-crisis peak.

Even in Germany, the best performing of those four countries, per capita income growth rate was just 0.8% a year between its last peak (2008) and 2015. The US growth rate, at 0.4% per year, was half that. Compare that with the 1% annual growth rate that Japan notched up during its so-called “lost two decades” between 1990 and 2010.

To make things worse, much of the recovery has been driven by asset market bubbles, blown up by the injection of cash into the financial market through quantitative easing. These asset bubbles have been most dramatic in the US and UK. They were already at an unprecedented level in 2013 and 2014, but scaled new heights in 2015. The US stock market reached the highest ever level in May 2015 and, after the dip over the summer, more or less came back to that level in December. Having come down by nearly a quarter from its April 2015 peak, Britain’s stock market is currently not quite so inflated, but the UK has another bubble to reckon with, in the housing market, where prices are 7% higher than the pre-crisis peak of 2007.

Thus seen, the main causes of the current economic turmoil lie firmly in the rich nations – especially in the finance-driven US and UK. Having refused to fundamentally restructure their economies after 2008, the only way they could generate any sort of recovery was with another set of asset bubbles. Their governments and financial sectors talked up anaemic recovery as an impressive comeback, propagating the myth that huge bubbles are a measure of economic health.

Whether or not the recent market turmoil leads to a protracted slide or a violent crash, it is proof that we have wasted the past seven years propping up a bankrupt economic model. Before things get any worse, we need to replace it with one in which the financial sector is made less complex and more patient, investment in the real economy is encouraged by fiscal and technological incentives, and measures are brought in to reduce inequality so that demand can be maintained without creating more debts.

None of these will be easy to implement, but we know what the alternative is – a permanent state of low growth, instability, and depressed living standards for the vast majority.

By Ha-Joon Chang, Guardian Economics News

China Should Take Advantage of Industry 4.0 to Shift Economy: Bill Gates

Philanthropist and co-founder of Microsoft, Bill Gates attends a panel "Preparing for the Next Pandemic" at the World Economic Forum in Davos, Switzerland, on January 22, 2016. [Photo: Imagine China]


Microsoft founder Bill Gates has urged China to take advantage of the Fourth Industrial Revolution so as to face the challenge of transforming its economy.

He made the remarks on the sidelines of the ongoing World Economic Forum Annual Meeting in Davos.

"Well China's obviously got a lot of people, a lot of smart people. It's moved to not only have more people college educated, but lots of engineers, to raise the quality of those engineering skills. It's created a recognition that if people invent something that they can be rewarded for that, which is leading to all new sorts of companies. Not just the IT space, although that's the most visible, but also more and more in biology, robotics, those things, so China's going to carry its weight. "

Gates also expressed his optimism about China's economic future.

"There are a lot of great talents in China. You know, building up the educational system, you know, I think China has got a very bright future. I have a lot of confidence in China partly because they take long-term view; they look at what other countries are doing. You know China is going to contribute more and more to the world's innovation."

Figures from China's National Bureau of Statistics showed that the country's Gross Domestic Product in 2015 registered an annual growth rate of 6.9 percent, the lowest level since 1990.

Though slowing, China still contributed to more than 25 percent to global economic growth.

The Fourth Industrial Revolution, also termed as Industry 4.0, is marked by convergence of smart technology including artificial intelligence with the industrial sector.- (CRI Online)

China to Contribute More to World's Innovation: Bill Gates

With a strong ambition to promote science and research, China is going to contribute more and more to the world's innovation, Microsoft's founder Bill Gates has said.

In an interview on the sidelines of the World Economic Forum (WEF) Annual Meeting 2016, Gates said China would probably become a huge participant in the Fourth Industrial Revolution, which is already under way and bringing a fast and disruptive change for most industries.

Talking about the new revolution, Gates believed the digital revolution, something he spent most of his life working on, was a huge factor.

The Fourth Industrial Revolution refers to the ongoing transformation of our society and economy, driven by advances in artificial intelligence, robotics, autonomous vehicles, 3D printing, nanotechnology and other areas of science.

A key enabler of much of these new technologies is the Internet where Microsoft and Gates has been a leading contributor to the progress.

"An industrial revolution is coming to increase productivity very dramatically," Gates said, "It creates opportunities, and it creates challenges."

New technology changes would free some labor, so that people can do more in culture sector, according to Gates.

He said China had built some advantages in science and technology through its educational system, and the country had a strong will to promote its contribution in different sciences sectors.

"China obviously has a lot of people and a lot of smart people," Gates said, "Not only a lot of people college-educated, but also a lot of engineers with the quality of engineering skills. "

"With the recognition that people have done something that they can be rewarded for that, many experts have been leaded to have new companies, in IT sector, biology, robots and other those things."

"China is going to carry its weight," he said.

In recent years, the former internet elite has been dedicating to driving innovation in global health and development. As the Co-chair of the Bill & Melinda Gates Foundation, Gates decided to join force with China's Tsinghua University to establish the Global Health Drug Discovery Institute(GHDDI) in Beijing during his Davos visit.

"China has made incredible progress in reducing poverty and shares the foundation's commitment to harnessing advances in science and technology to address the critical health challenges affecting the world's poorest people," Gates said.

"We are excited about GHDDI's potential to drive innovation in global health research and development, and look forward to partnering with Tsinghua University on our continued work to address the world's most pressing global health challenges."

In an article released during WEF, Gates pledged his foundation would invest more in innovation in the coming years. He told Xinhua that the investment that went to China's innovation was expected to increase gradually.

Asked whether he worried about China's economic slowdown, which may hinder innovation progress, Gates said he was quite optimistic about China's economic outlook.

"I have a lot of confidence in China, partly because they take a long-term view, and partly because they look what other countries are doing," he said.

Faced with a challenge of turning the economy into new directions, Gates said China had great talent to achieve its goal.

"Most countries would envy a 6.9 percent growth, I think China has a bright future,"he said, adding "China is going to be contributing more and more to the world's innovation." - Xinhua Web Editor: Zhang Peng

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Thursday 21 January 2016

AIIB attracts nations from East, West, its fate connects to Chinese economy


AIIB’s fate connects to Chinese economy

The Asian Infrastructure Investment Bank (AIIB) officially opened for business on Saturday. In the past two years or so, the bank has been a subject of heated discussion as a symbol of change in the world order. However, its significance hinges on a number of factors in future, rather than the founding itself.

There are many advantages in terms of the bank's operation and management. Infrastructure construction in Asia, which the AIIB is centered on, is virgin territory that has huge potential to be tapped. There is ample scope for the bank to find its role.

With 57 countries as founding members, the starting point of the bank is high. Besides, China as the initiator has abundant capabilities of infrastructure construction, and its experience is applicable to developing countries.

Nonetheless, disadvantages also exist, among which the biggest is the adverse attitude of the US over the bank. It will be more costly for the AIIB to overcome problems than for the World Bank and the Asian Development Bank at critical moments. Therefore, the AIIB must be operated with superb management, leaving no room for any opponents.

The further development of the Chinese economy will provide indispensible strategic support for the AIIB to increase its heft.

The reason why the AIIB could be founded, despite obstructions from the US and Japan, is that the growth of the Chinese economy has shored up the confidence of the participants.

Since its founding, the AIIB has been connecting its destiny to the Chinese economy. The confidence the world has in the Chinese economy will be projected onto the AIIB.

The AIIB touches a nerve of major global powers of the US and Japan. Its inclusive nature enables its smooth start. China has its own interests, but it cannot put its interests above those of the other countries. We should avoid a zero-sum situation, but integrate Chinese interests with others', and make achieving a win-win result a goal rather than a slogan.

With the changing times, China can't expand its power through coercion. It must integrate into the world system and develop in a way that is acceptable to the majority of the world's states.

The AIIB represents China's taking of global responsibilities as a big power. The US, as the world No.1, can capriciously vandalize the rules it makes at some critical moments. But China cannot do so. It has to be well-disciplined in serving the world so as to be recognized and accepted as a rising power in the world. - Global Times

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Sunday 17 January 2016

Asian Infrastructure Investment Bank, opens to lay down milestone for global economic governance



  Xi pushes for 'perfection of the system


BEIJING: China has pledged US$50mil (RM221.25mil) to the Asian Infrastructure Investment Bank (AIIB) to support infrastructure projects in less developed countries.

Launching the China-led bank here yesterday, Chinese President Xi Jinping said this proved China’s willingness to shoulder more international responsibility and “push for the perfection of the international system”.

“This is a historic moment,” he added.

With an authorised capital of US$100bil, AIIB was proposed as a global multilateral financial institution by Xi in 2013 to finance infrastructure development in Asia, including energy/power, transportation/telecommunications, rural infrastructure/agriculture development, and water supply/sanitation.

Representatives from 57 founding members, including Malaysia, attended the ceremony at the Diaoyutai State Guesthouse.

Malaysia, which holds 0.11% share and 0.36% of voting share in AIIB, was represented by Treasury deputy secretary-general Datuk Mohd Isa Hussain.

The three largest shareholders of AIIB are China, India and Russia, with a 30.34%, 8.52% and 6.66% stake respectively.

Each allocation is based on the size of the member country’s economy.

The bank, based here, is largely seen as a rival to the US-led World Bank and Interna­tional Monetary Fund.

The United States and Japan have shunned the AIIB while US allies – including Britain, France and Germany – have signed up as founding members.

AIIB president Jin Liqun promised to run AIIB as an organisation that is “lean, clean and green”.

“The bank will make a positive and significant difference in Asian development,” he said.

Speaking on behalf of the non-regional founding members, Luxembourg Finance Minister Pierre Gramegna said the fact that the idea to form AIIB came from the east was a testament to the rebalancing of the world’s economy.

“Without basic infrastructure, markets cannot function well and growth is limited. AIIB will be a boost to the Asian economy, and become a platform for cooperation that will foster economic integration and inter-regional connectivity,” he said.

By Tho Xin Yi The Star/Asia News Network

AIIB opens to lay down milestone for global economic governance

BEIJING, Jan. 16, 2016 (Xinhua) -- Chinese PresidentXi Jinpingaddresses the opening ceremony of the Asian Infrastructure Investment Bank (AIIB) in Beijing, capital of China, Jan. 16, 2016. (Xinhua/Li Xueren)

BEIJING, Jan. 16 (Xinhua) -- The Asian Infrastructure Investment Bank (AIIB), a China-initiated multilateral bank, started operational on Saturday, marking a milestone in the reform of global economic governance system.

Representatives of the 57 founding countries gathered in Beijing for the AIIB opening ceremony in Diaoyutai State Guesthouse. Chinese President Xi Jinping made a speech.

With joint efforts of all the members, the AIIB will become "a professional, efficient and clean development bank for the 21st century" and "a new platform to help foster a community of shared future for mankind, to make new contribution to prosperity of Asia and beyond and lend new strength to improvement of global economic governance," Xi said.

During the ceremony, Chinese Finance Minister Lou Jiwei was announced to be elected as the first chairman of the AIIB board of governors. Jin Liqun was elected the first AIIB president.

In addition to subscribing capital according to plan, China vowed to contribute 50 million U.S. dollars to the project preparation special fund to be established soon, to support the preparation for infrastructure development projects in less developed member states.

The AIIB will promote infrastructure related investment and financing for the benefit of all sides, Xi said, keeping Asia's enormous infrastructure development demand in mind.

Calling the initiative to establish the AIIB "a constructive move," Xi said it will enable China "to undertake more international obligations, promote improvement of the current international economic system and provide more international public goods."

Statistics from the Asian Development Bank (ADB) show that between 2010 and 2020, around eight trillion U.S. dollars in investment will be needed in the Asia-Pacific region to improve infrastructure.

Xi expected the China-initiated institution and other existing multilateral development banks to complement each other for mutual strength and cooperate on joint financing, knowledge sharing and capacity building.

In his address at the founding conference of the AIIB council on Saturday afternoon, Chinese Premier Li Keqiang said the operation of the new multinational development bank is "of positive and constructive significance for the global economic governance reform."

Hailing Asia "an engine" for the global economic growth, Li said the sustainable development of the Asian economy and regional economic integration rely on the infrastructure construction and connectivity, which would help facilitate the flow of trade, investment, personnel and information.

The aim of China initiating the AIIB is to widen financing channels, expand general needs and improve supply so as to bring along the common development in the region and promote world economic recovery with its own achievements, he said.

The premier called on the AIIB to integrate the China-proposed Belt and Road initiative with each country's development strategies, promote international cooperation on production capacity and innovate more modes to realize a diverse and inclusive cooperation.

Global leaders extended congratulations to the opening of the multilateral development bank.

"The ADB will cooperate closely with AIIB in supporting the development of the Asia Pacific region," said ADB President Takehiko Nakao in a congratulatory message to the opening of the AIIB.

"We will cooperate closely to provide support and constructive suggestions for the AIIB development," said Yoo Il-ho, deputy prime minister of the Republic of Korea at the opening ceremony.

China's Vice Finance Minister Shi Yaobin said in an interview with Xinhua that China does not intend to apply for financial support from AIIB in the initial stage.

"Though as the biggest shareholder of AIIB and the biggest developing country in the world, China is fully qualified to gain loans from the AIIB, but we made the decision mainly because that many other countries in the region are in more urgent need for infrastructure development," said Shi.

Shi said China holds 30.34 percent of the whole capital stock, with the first batch of capital stock worth 1.19 billion U.S. dollars already in place.

The AIIB was proposed by President Xi Jinping in October 2013. Two years later, the bank was formally established as the Articles of Agreement took effect on Dec. 25 last year.

As its name suggests, the AIIB will finance construction of infrastructures -- airports, mobile phone towers, railways and roads -- in Asia.

Amid the evolving trend of the global economic landscape, Xi expected the AIIB will help make the global economic governance system more just, equitable and effective. - Xinhuanet

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Saturday 11 April 2015

The global centre of gravity shifting to Asia

“Danny Quah of the London School of Economics has calculated the world’s economic centre of gravity and reckons that, thanks to Asia’s rise, over the 70 years from 1980 to 2050 it will move eastwards from the mid-Atlantic all the way to somewhere between India and China. By 2015, the halfway point on this great journey, it will have reached the city of Bandar-e Mahshahr, in Iran, on the north-eastern tip of the Persian Gulf .”
 Danny Quah’s calculation of the world’s economic centre of gravity has been included in The Economist’s eye-catching statistical landmarks of 2015

Many see the rush to join the Asian Infrastructure Investment Bank as the beginning of a new international financial order and the decline of US dollar hegemony.

BRITAIN’S recent decision to join the Asian Infrastructure Investment Bank (AIIB) as a founder member has led to a kind of stampede by other allies of the United States in Europe such as Germany, France and Italy to follow suit.

So did two other important Asia-Pacific allies, Australia and South Korea. The only other major US ally in Asia which did not was Japan.

What is striking is that these allies went against the express wishes of the US which apparently saw the AIIB as a potential challenge to the domination of the international financial architecture by the US-controlled World Bank and the International Monetary Fund.

Particularly stunning is the British decision. According to senior fellow at the Department of Politics and International Studies at Britain’s Cambridge University Martin Jacques, in this year’s Boao Forum, this is the first time since Breton Woods in the 1940s, except for one occasion when Britain refused a US request to send troops to Vietnam, that Britain had ever said no to the US so publicly!

Jacques exaggerates somewhat as he should have begun with 1956 as the year when Britain abandoned an independent foreign policy, as a result of its misbegotten adventure in Suez, and became a faithful junior partner to the US.

Still, it is no less remarkable, even beginning with 1956, for it took about six decades before a clear British nay to the US came about.

Many saw the rush to join the AIIB as signifying the beginning of a new international financial order and the decline of US dollar hegemony, with China deemed to be the new or most influential nation.

Some, however, saw Chinese weakness rather than strength in this spectacle.

London’s Financial Times argued that resorting to a multi-lateral institution to exercise influence suggests weakness as China will be less able to get its own way, not to mention possible badgering from non-governmental organisations in future deliberations of the AIIB, than if it could do so by bilateral means.

It remains to be seen if a new financial order will eventuate. I will however make a few points about this development.

One is that it has shown in a dramatic way the global reach of Chinese economic strength, especially in the financial arena.

While it is true that China is already an economic force in other parts of the globe such as in the continents of Africa and South America, not to mention Asia and Australia, this is probably the first time that a major European nation has made an economic decision with obvious political implications favourable to the Chinese.

Someone defined a superpower as a nation or state that can project dominating power and influence in the globe, sometimes in one region or more, and that has the potential to attain global hegemony.

In this respect we can consider China an economic superpower.

Of relevance to our understanding of Chinese strength is the reason behind the British decision.

Britain in the past year or two has evinced a more positive attitude towards China.

According to an analysis in the Internet magazine, Counterpunch, the recent British economic recovery has been mainly based on financial flows to property and infrastructural projects in London and the south of England, and the prosperity of the City of London.

And the city of London is what keeps Britain from becoming a third-tier economy.

This is so important that David Cameron and the Conservatives could conceive of Britain leaving the European Union if the EU were to mess with the running of the City by imposing regulations.

A lot of the money recently has come from China and Britain is very keen to be involved in the offshore trading of the Chinese renminbi. Thus, there is every prospect of Britain getting more action from a China, with foreign reserves of around US$4tril (RM14.68tril), looking for more ways to use the renminbi.

Joining the AIIB in such a fashion, not only brings with it the prospect of possibly getting a leg up in future AIIB projects, but also gains Chinese goodwill. But it is important not to exaggerate Chinese strength. It is a superpower only in the economic arena, and not in other spheres such as the military and political.

Militarily, the US far exceeds China in the amount of money spent and in technological sophistication. Politically, what China can at present offer cannot match the global impact of values associated with the US such as democracy and human rights.

Even in the economic sphere, the Chinese Gross Domestic Product is only equal in size to the US in purchasing power terms, and not in dollar terms where the US GDP is more than one and the half times that of China.

In per capita terms, US GDP is at least four times more. And the US is still far more advanced in the sophistication of its financial market and industrial structures.

The significance of this AIIB development is not a demonstration of raw Chinese economic power.

It is unlikely to do away with the WB or the IMF.

It is really another symptom, this time in Europe and in the financial arena, of the global centre of gravity shifting to Asia.

By Dr. Lee Poh Ping

> Dr Lee Poh Ping is a Senior Research Fellow at the Institute of China Studies in the University of Malaya. The views expressed here are entirely the writer’s own.


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Sunday 5 April 2015

The AIIB groundswell; Asian development to the fore

Washington's Lobbying Efforts Against China's 'World Bank' Fail As Italy, France Welcomed Aboard. The cheese really does stand alone. Every single U.S. ally with the exception of Japan have all hopped on board the Asian Infrastructure Investment Bank, or AIIB. Italy and France were approved on Thursday to become founding members, bringing the total membership base to 33 from the original 21.

The AIIB groundswell

Just in time for the deadline, an impressive coalition of countries have signed on for the newest development bank on the block

THE deadline of March 31 has passed, and 52 countries are now on the list of would-be founders of the Asian Infrastructure Investment Bank (AIIB).

The China-led bank was launched in October last year at the Great Hall of the People in Beijing, a year after Chinese President Xi Jinping proposed a bank to offer funds for development projects during his official visit to Indonesia.

The initiative would promote regional inter-connectivity and economic integration, he said when delivering a speech at the Indonesian Parliament.

In the past few days leading up to the deadline, news of more countries hurrying to join the AIIB made headlines, especially when a few of them announced the decision at the recently concluded Boao Forum in Hainan province, which Xi officiated.

The world was watching closely to see if the United States and Japan would sign up as founding members just before the deadline, but both have decided to opt out of the bank that is seen as a rival to the Western-dominated World Bank and International Monetary Fund.

Back in October last year, the bank had confirmation from 21 countries to participate as founding members – Malaysia was one of them – all of which are in the Asian continent.

The tipping point came when the United Kingdom announced its decision to join the AIIB in the middle of March, to the surprise of many.

More countries followed suit right after that, including France, Italy, Germany and Switzerland.

Martin Jacques, a senior fellow at the Department of Politics and International Studies at Britain’s Cambridge University, said the rise and growing awareness of the Chinese possibility in the context of a multilateral initiative pressed Britain to act the way it did, making AIIB not just an Asian institution but a global one.

“I think this is an extraordinary historical moment,” he said in a panel discussion during the Boao Forum.

“The new institutions (AIIB and the New Development Bank operated by Brazil, Russia, India, China and South Africa) do not necessarily conflict with the Bretton Woods institutions. They are very different.

“The developing countries now account for nearly 60% of global Gross Domestic Product and they represent 85% of the world population.

“The new institutions, unlike the Bretton Woods institutions, are being defined as relevant to the needs of this 85% of world population, most of whom are concentrated in this continent.”

Countries which have missed the March 31 deadline can still join as ordinary members, while those that have already submitted their application will find out if they are on the final list of founding members by April 15.

With an initial capital of US$50bil (RM184bil), AIIB is scheduled to be officially established at the end of the year, after the rules are finalised and signed in mid-2015.

New Zealand’s former Prime Minister Jenny Shipley said there is a need to define “infrastructure” to determine the types of projects that are qualified to obtain funding from the AIIB.

“If I could be provocative – if you were to put a diverse group of qualified women and men together and ask them the question, you’ll get a broader definition than if you just ask the question of classical male concept of buildings,” she said.

“We need to stand in the shoes of the people whose lives will be unleashed if we get this right. Just bringing in the classical morals of the same thing would not give us the breakthrough.”

Josette Sheeran, the president and Chief Executive Officer of the Asia Society, chipped in on this, citing Indian Prime Minister Narendra Modi’s agenda of building more toilets as an example.

“The reason young girls don’t go to school in India is that there is no toilet. That’s the kind of infrastructure that would really capture the mind of humanity and transform hope in the world,” she said.

Former Pakistan Prime Minister Shaukat Aziz was more concerned about the governance of the new banks, placing emphasis on professionalism, transparency and quality leadership.

“The people hired for AIIB must be professionals who know what infrastructure financing is all about,” he said.

“The quality of people will determine the ability of these banks to analyse risks to give money and to make credible loans which are payable back.”

Transparency, in the opinion of Deloitte global chairman Steve Almond, is also key to attract the private sector to come onboard.

“The regional or sub-regional projects are arguably the ones that bring the greatest impact to economic development. But because they go across the borders, they are also harder to manage and least likely to attract private sector capital,” he said.

“We need the mechanism to provide confidence to the private sector, and transparency governance is one of the compelling reasons to encourage them to come and join the projects.”

And what is the magic that would make good governance work?

Li Ruogum, former chairman and president of Export-Import Bank of China, believes in understanding.

“This newly established institution cannot just clone the older one, as we are working in a very different environment.

“We have to accumulate our experiences and need to have a mind of innovation. All should come together and understand each other, and try to achieve good governance.”

Check-in-China by Tho Xin Yi

 
Asian development to the fore

Chinese President Xi Jinping. - AFP  
Hungry for development: In 2013, President Xi Jinping proposed a new development bank, the Asian Infrastructure Investment Bank. One year later, 22 Asian countries had signed up, including 10 Asean countries - Blooberg

Asia’s need for better infrastructure and more development is too important to be held to ransom by outdated big power politics and petty posturing.

FOR many observers, the US “pivot” (later renamed “rebalancing”) to the Asia-Pacific was classic Obama: the rhetorical flourish was more dramatic than the policy substance.

In the second half of its first term, the Obama administration sought to assign two-thirds of its military assets to the Asia-Pacific theatre, up from the standard half from the even split between the Pacific and the Atlantic.

By the middle of its second term, officials were struggling to maintain a semblance of a policy largely left to coast under its steadily diminishing momentum. US foreign policy, and by extension US defence policy, appeared distracted by other concerns.

The State Department and the Pentagon seemed consumed at once by the Syrian debacle, Iraq’s instability, rising terrorism everywhere, civil war in Ukraine, Europe’s problems with Russia, Iran’s nuclear programme and an uppity Israel.

Then there were the ever-present ­budgetary constraints. Deploying another 16% of military assets to the Asia-Pacific, from half to two-thirds, seemed hardly noticeable or achievable.

Meanwhile, officials were anxious to insist that the rebalancing had nothing to do with the rise of China and its growing assertiveness in the region. It was, they said, part of efforts to preserve US strategic interests.

Whatever the choice of words, and however implicit China may be as motivation, rebalancing was fast becoming history. By March last year, a Pentagon official admitted it was going nowhere.

However, the Obama administration’s gift of verbalising policy intent made US intentions clear enough.

President Obama had famously said the US should be writing trade rules in the Asia-Pacific rather than let China do it.

Thus, the Trans-Pacific Partnership, a trade pact with controversial demands that swiftly became synonymous with US trade preferences. But China had not been idle either.

In 2013, President Xi Jinping proposed a new development bank, the Asian Infrastructure Investment Bank (AIIB). One year later, 22 Asian countries had signed up, including all 10 Asean countries.

In Asia, the world’s most promising continent for rapid economic growth, infrastructure needs for development are peaking. The IMF, World Bank and Asian Development Bank (ADB) can serve only a fraction of its needs: between 2010 and 2020 alone, some RM30tril is needed.

China set a deadline of March 31 this year for countries around the world to sign up as Prospective Founding Members (PFMs) before operations begin later in 2015. China would provide the biggest contribution to the authorised capital of US$100bil (RM363.49bil) and initial subscribed capital of US$50bil (RM181.75bil).

The US immediately saw this as a game-changer challenge to its dominance in global lending. For decades, it has controlled the World Bank, and through its European allies, the IMF and through its ally Japan, the ADB.

These institutions have been known to set tough conditions on debtor countries that may not serve domestic aspirations or national interests. A cash-rich China also felt it remained under-represented in these institutions even after becoming a leading global economy.

Washington had hoped, even expected, that its allies and friends would stay away from the AIIB as a rival institution. But like its pivot or rebalancing strategy, that hope steadily faded.

In Europe, Britain as the closest US ally was the first to sign up to the AIIB early last month. Soon, other major European economies like France, Germany and Italy followed, as did all the Scandinavian countries.

Washington then quietly pressured Japan, South Korea and Australia to stay away. But Seoul and Canberra signed up anyway. By then, the US had started to soften its stand, denying that it had ever pressured any country to stay away. It was only unsure if the AIIB would adhere to best practices in international lending.

Then, other US allies like Taiwan and Israel also signed up. The US was becoming increasingly isolated, with only Japan as the other major economy for company.

But not for long, perhaps. Last Monday, Japan’s ambassador to China, Masato Kitera, said in a Financial Times (FT) interview that Japan would join the AIIB as well, probably around June.

That came as a bombshell to the conservative Japanese government. It would seem too much of a betrayal of yet another US ally, the final one being the “unkindest cut of all”.

The next day, on the deadline for countries to sign up as PFMs for the AIIB, Tokyo denied that Ambassador Kitera ever said such a thing. Chief Cabinet Secretary Yoshihide Suga said Japan had no imme­diate plans to join the AIIB.

Besides being a US ally, Japan was also wary of the prospect of the AIIB undercutting the ADB.

Whatever the actual chances of Japan joining the AIIB, Tokyo would want to underplay it as much as possible.

Like the US, Japan said it was reluctant to sign up because of uncertainty over the AIIB’s standards. But countries such as Britain and Singapore that have joined said the best way to ensure high standards was to get on board and be part of the decision-making process.

To be part of that process, it was necessary to sign up early before the big decisions were made. The terms and conditions of lending and borrowing have still to be firmed up as dozens of countries including giants like India and Russia are already in.

The FT report also revealed that Japanese business leaders were pressuring their government to join the AIIB. Mitsubishi bosses, for example, had expressed confidence in Jin Liqun, a former senior ADB official who will head the AIIB.

On the deadline last Tuesday, China announced that 30 countries had been admitted as PFMs. More than a dozen others were in the queue.

Then a flood of criticisms and denuncia­tions of the stubborn US position came, mostly from within the US itself. Analysts and commentators, including in Forbes and The Economist, said the US administration had miscalculated badly in staying out, only damaging US long-term interests in East Asia and the Pacific.

Former US Secretary of State Madeleine Albright also condemned the US position, lamenting the way Washington had scored another own goal by rebuffing the AIIB. The US had placed itself behind the curve in changes in the Asia-Pacific rather than stay at the leading edge.

If and when Japan finally signs up, the US may have to be resigned to becoming a part of the AIIB. But as a latecomer, it may be limited to playing only a bit part such as an observer rather than sit at the main table.

China has long regretted the US fixation with what it calls a Cold War “them against us” bipolar mentality that frustrates progress on many fronts. For the countries of Asia hungry for more development, progress must not be held hostage to big power rivalry.

Ultimately, any rivalry between the US and China today is not over political ideology but economic ideology: the Washington Consensus of free trade rhetoric where the state and private industry are at odds with each other versus the emerging Beijing Consensus of close public-private partnerships that have worked so well for so much of Asia already.

US opposition to a proven formula for Asia is most unlikely to win friends and supporters anywhere, least of all in Asia.

By Bunn Nagara Behind the headlines

> Bunn Nagara is a Senior Fellow at the Institute of Strategic and International Studies (ISIS) Malaysia.

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27 Oct 2014
Chinese President Xi Jinping's (C-R) meeting with the members of the Asian Infrastructure Investment Bank (AIIB) in the Great Hall of the People in Beijing, China 24 October 2014. 21 Asian countries are the founding ...

Tuesday 11 November 2014

Asia-Pacific Economic Cooperation meeting China 2014

Magnificent fireworks showed at APEC grand banquet

  • FTAAP & Maritime Silk Road to boost connectivity

    China for many years has proposed to establish a comprehensive and inclusive free trade zone known as the Free Trade Area of the Asia Pacific, or FTAAP, at the APEC meetings.



    China, ROK presidents hail conclusion of substantive talks on FTA

    China and South Korea have concluded negotiations on a bilateral free trade agreement in Beijing. Chinese President Xi Jinping and his South Korean counterpart Park Geun-hye confirmed the news in a meeting Monday, on the sidelines of the ongoing APEC meetings.



    China's Xi, Japan's Abe hold meeting

    Chinese President Xi Jinping has held a meeting with Japanese Prime Minister Shinzo Abe at the Great Hall of the People



  • China needs to be at the top of the global value chain: expert
BEIJING, November 11 (People’s Daily Online) - To better adapt to interconnectivity of Asia-Pacific area, China needs to step forward to higher level in global value chains, an expert with APEC said after a high level forum.

The 2014 Beijing APEC meetings focus on interconnectivity in Asia-Pacific region, infrastructure and Free Trade Area of Asia-Pacific. According to Zhang Lijun, Director of China APEC Development Council, it is of high importance for China to have a clear conception about its role in value chains and supply chains.

To promote interconnectivity in the region is to connect Chinese economy with that of the world. “If not cooperate with supply chains, China may not have a clear mind of its economic role in the market,” said Zhang.

China has long been regarded as the workshop of the world. However, China is shifting its focus to knowledge-intensive industries as well as protection of intellectual property by changing the mode of growth. Only in this way can China realize its updated version of economy, Zhang said.

Besides, according to Zhang, the establishment of Asian Infrastructure Investment Bank (AIIB) is beneficial to advanced Chinese enterprises to seek fortune abroad. Zhang mentioned that China would play a major role in AIIB. Therefore, Chinese preeminence and voice in cooperation will be valued and guaranteed.

In view of the declining export, investment in foreign infrastructure provides good opportunity for China to make up losses from export, Zhang said.

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Monday 27 October 2014

Big boost for Asia with the Asian Infrastructure Bank (AIIB) launch, a positive step!

Financing required as Asia remains with looming infrastructure needs
Chinese President Xi Jinping's (C-R) meeting with the members of the Asian Infrastructure Investment Bank (AIIB) in the Great Hall of the People in Beijing, China 24 October 2014. 21 Asian countries are the founding members of the AIIB, an initiative by China. - EPA



THE launch of the US$50bil Asian Infrastructure Bank (AIIB) is a positive step for the development of Asia where large areas remain with looming infrastructure needs.

There has been good work done by other international bodies, but due to the vast financing needs of the region, there is always place for another major bank to put in the good work.

The AIIB was launched in Beijing last Friday at a ceremony attended by Chinese finance minister Lou Jiwei and delegates from 21 countries including India, Thailand and Malaysia, said Reuters.

It aims to give project loans to developing nations with China set to be its largest shareholder with a stake of up to 50%.

In a speech to delegates after the inauguration, Chinese President Xi Jinping said the new bank would use the best practices of the World Bank and the Asian Development Bank, said Reuters.

The authorised capital of the bank would be US$100bil; the AIIB would be formally established by the end of 2015 with its headquarters in Beijing.

There was a huge demand for infrastructure investment in Asia; the Asian Development Bank (AIIB) put that at around US$8 trillion of investment during the current decade, said the Singapore Business Times (SBT) in a report earlier.

A principal motive in proposing the AIIB was to invest part of China’s US$4 trillion foreign reserves in higher-yielding assets than US Treasury bills, said SBT, also quoting diplomatic sources.

In addressing the potential rivalry between the AIIB and other international aid bodies, one has to look at the big picture in what will benefit Asia in the long run.

If carried out successfully, infrastructure development across Asia will help narrow the gap between the more and less developed areas.

China is already in partnership with India to develop infrastructure and industrial parks in India.

Spreading its infrastructure investments over the rest of Asia would be a natural step towards that development.

After warning on excessive speculation in currency and debt markets, the Reserve Bank of India (RBI) is looking at the low hedging levels by companies and the currency risks they face.

If indirect pressure on companies via their bankers failed, the RBI may consider forcing companies to submit detailed financial information through their lenders, said Reuters, quoting bankers who met with RBI officials earlier this month.

The RBI’s warnings signalled its concern that unhedged firms could be a vulnerable link should global markets buckle, said Reuters.

The central bank had worked hard to build up its defences after India last year weathered its worst rupee crisis in two decades, said Reuters.

Hedging, meanwhile, is expensive because India’s elevated interest rates mean forward premiums are high, said Reuters.

The RBI is keeping tabs on every aspect of companies’ exposure to currency risks.

After working hard to build up its defences on the rupee, the RBI would not want some other segment of the capital market to fail to keep pace.

The bosses at Royal Bank of Scotland (RBS), which is still under government ownership, were dealt an embarassing blow when their proposal to pay high bonuses was shot down.

The Treasury stopped RBS from paying some staff bonuses worth twice their salaries, said Reuters, quoting James Leigh-Pemberton, chairman of UK Financial Investments (UKFI) which controls the taxpayer-owned 79% of RBS.

UKFI had recommended that RBS be allowed to pay that level of bonus to retain staff and attract talent, said Reuters.

Retention of staff is a dicey issue when it involves banks that are still in the throes of reform.

It is a Catch 22 situation where these banks are still experiencing falling revenues and low share prices.

The situation will probably improve when these banks can reap the fruits of their revamp and get off the hook with government owning the stake.


By YAP LENG KUEN... PLAIN SPEAKING  The Star/Asia News Network
Columnist Yap Leng Kuen looks forward to a more balanced infrastructure development in Asia.

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