Showtime for China’s E-commerce giant, Alibaba world-wide

Alibaba_Chinese_logoAlibaba, China’s eCommerce giant, has quickly come onto everyone’s radar as it presents the possibility of being the largest tech IPO ever. According to the New York Times, the company is expected to go on the market at a value of roughly $200 billion – larger than US tech companies Amazon, eBay or Facebook. This week, we bring you articles to explain who Alibaba is and what you can expect from them in the future.

Two weeks, three continents, and 100 meetings. That — and founder Jack Ma celebrating his 50th birthday on the road — is what it will take for Alibaba Group Holding Ltd. to pull off the largest initial public offering in U.S. history.

The Chinese e-commerce company is weighing a plan to start marketing the share sale to investors on Sept. 3, with management traveling across Asia, Europe and the U.S. before an initial public offering in the middle of the month, people with knowledge of the matter said.

The schedule, put forth by banks managing the IPO, would have meetings begin in Hong Kong and Singapore before executives travel to London and eventually host their first U.S. event in New York on Sept. 8, the people said, asking not to be identified discussing private information. The timeline has Alibaba targeting a Sept. 16 trading debut, the people said.


The investor meetings — called a roadshow — will give Alibaba the opportunity to answer questions from the world’s biggest fund managers and build demand for its shares. With Alibaba and selling shareholders expected to raise as much as $20 billion, the IPO has the potential to be the largest in the U.S. The company’s official price range is expected to be revealed on Sept. 2.

Photographer: Tomohiro Ohsumi/Bloomberg

Jack Ma, chairman of Alibaba Group Holding Ltd., speaks at SoftBank World 2014 in Tokyo, Japan.


Monday Pricing

For trading to start on Sept. 16, Alibaba would have to set a final price the day before — a Monday. It is uncommon for companies in the U.S. to price IPOs on a Monday, in case news over the weekend negatively impacts market sentiment in the final day of the deal.

The plan is tentative and could change, although Alibaba wants to avoid debuting near the Jewish holiday the following week, one of the people said.

With six financial advisers already managing the sale, Alibaba plans to name additional banks that will have smaller roles on the deal, according to people familiar with the matter. The company will also update investors with earnings from the quarter through June, those people said.

Credit Suisse Group AG (CSGN), Deutsche Bank AG, Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley and Citigroup Inc. are the most senior banks on the IPO. Alibaba may end up using more than 20 financial advisers in total, one person said.

Shares of Japanese wireless carrier SoftBank Corp. (9984), Alibaba’s largest shareholder, rose 2.4 percent at the close in Tokyo. Florence Shih, a Hong Kong-based spokeswoman for Alibaba, declined to comment.

Birthday Celebration

At $20 billion, Alibaba’s sale would edge past Visa Inc.’s $19.65 billion IPO in 2008 as the largest in U.S. history, data compiled by Bloomberg show.

Alibaba plans to divide executives into two separate teams, which will lead to about 100 meetings in total, according to the people. The teams will mostly be together for the larger group meetings, while separating to meet with individual investors, they said. The company hasn’t yet determined who from management will be attending each meeting, the people said.

In the U.S., Alibaba will also visit with investors in Boston, the Mid-Atlantic region, Kansas City, Chicago, Denver, Los Angeles and San Francisco, the people said.

On Sept. 10, when Ma celebrates his birthday, investor meetings will be held in New York, they said.

Alibaba is waiting until September to begin marketing the share sale as it seeks regulatory approval of its prospectus, a person with knowledge of the matter said last month. The company, which originally targeted an early August trading debut, is holding off to avoid rushing the deal as it continues discussions with the U.S. Securities and Exchange Commission, according to the person.

Discounted Valuation

The Chinese e-commerce operator may set its set its IPO value at $154 billion, or 22 percent below analyst valuations, in a move that could avoid repeating Facebook Inc. (FB)’s listing flop, according to the average estimate of five analysts surveyed by Bloomberg last month. The same analysts give Alibaba an average post-listing valuation of $198 billion, the survey shows.

Alibaba said yesterday it will sell its small-business lending arm to the company that already controls payments affiliate Alipay, separating itself from the last of its major financial units ahead of the IPO.

The sale takes financial and regulatory risk relating to the operations off of Alibaba’s balance sheet, while increasing the pool of profits the company can generate from them, the filing shows. The agreement also lifts a $6 billion cap, under certain conditions, on funds that Alibaba could receive if Alipay or its parent company go public, the filing shows.

By Zijing Wu and Leslie Picker Bloomberg

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Global bank profits hit US$920bil, China accounted for 1/3 total; Globalized RMB to stabilize world economy

LONDON: China’s top banks accounted for almost one-third of a record US$920 billion of profits made by the world’s top 1000 banks last year, showing their rise in power since the financial crisis, a survey showed on Monday.

China’s banks made $292 billion in aggregate pretax profit last year, or 32 percent of the industry’s global earnings, according to The Banker magazine’s annual rankings of the profits and capital strength of the world’s biggest 1,000 banks.

ICBCLast year’s global profits were up 23 percent from the previous year to their highest ever level, led by profits of $55 billion at Industrial and Commercial Bank of China (ICBC). China Construction Bank, Agriculture Bank of China and Bank of China filled the top four positions.

Banks in the United States made aggregate profits of $183 billion, or 20 percent of the global tally, led by Wells Fargo’s earnings of $32 billion.

Banks in the eurozone contributed just 3 percent to the global profit pool, down from 25 percent before the 2008 financial crisis, the study showed. Italian banks lost $35 billion in aggregate last year, the worst performance by any country.

Banks in Japan made $64 billion of profit last year, or 7 percent of the global total, followed by banks in Canada, France and Australia ($39 billion in each country), Brazil ($26 billion) and Britain ($22 billion),The Banker said.

The magazine said ICBC kept its position as the world’s strongest bank, based on how much capital they hold – which reflects their ability to lend on a large scale and endure shocks.
China Construction Bank jumped to second from fifth in the rankings of strength and was followed by JPMorgan , Bank of America and HSBC .

ICBC, which took the top position last year for the first time, was one of four Chinese banks in the latest top 10.

Wells Fargo has this year jumped to become the world’s biggest bank by market value, after a surge in its share price on the back of sustained earnings growth. Its market value is $275 billion, about $75 billion more than ICBC.

The Banker said African banks made the highest returns on capital last year of 24 percent – double the average in the rest of the world and six times the average return of 4 percent at European lenders.- Reuters

Globalized RMB to stabilize world economy

RMBBEIJING, June 27 (Xinhua) — The globalization of the yuan, or renminbi (RMB), will not only benefit the Chinese economy, but generate global economic stability, a senior banker has said.

The yuan did not depreciate during the 1997 Asian financial crisis or the 2008 global financial crisis, helping stabilize the global economy, Tian Guoli, chairman of the Bank of China, said at a forum in London last week, according to the Friday edition of the People’s Daily.

China’s economy ranks second in the world and its trade ranks first, so it is thought that use of the RMB in cross-border trade will be a mutually beneficial move for China and its trade partners.

The yuan has acquired basic conditions to become an international currency as China’s gross domestic product took 12.4 percent of the world’s total and its foreign trade 11.4 percent of the world’s total in 2013, Tian said.

According to the central bank, RMB flow from China hit 340 billion yuan (55.74 billion U.S. dollars) in the first quarter of 2014, replenishing offshore RMB fluidity. The balance of offshore RMB deposits hit 2.4 trillion yuan at the end of March, 1.51 percent of all global offshore deposits. Offshore trade between the yuan and foreign currencies doubled in the first quarter from the fourth quarter of last year.

Analysts widely forecast five steps in RMB internationalization: RMB used and circulated overseas, RMB as a currency of account in trade, RMB used in trade settlement, RMB as a currency for fundraising and investment, and RMB as a global reserve currency.

Already, some neighboring countries and certain regions in developed countries are circulating RMB, indicating the first step has been basically achieved.

Data provider SWIFT’s RMB tracker showed that in May, 1.47 percent of global payments were in RMB, a tiny amount compared to the global total but up from 1.43 percent in April. This indicated progress in the second and third steps.

Some countries in southeast Asia, Latin America and Africa have or are ready to take RMB as an official reserve currency. It indicated the fourth and the fifth steps are burgeoning.

Investors are also optimistic about RMB globalization. Bank of China’s global customer survey shows that over half of the respondents expect RMB cross-border transactions to rise by 20 to 30 percent in five years. And 61 percent of overseas customers say they plan to use or increase use of RMB as a settlement currency.

Li Daokui, head of the Center for China in the World Economy under Tsinghua University, said RMB internationalization is a long-term process and should be made gradually based on China’s financial reforms, including freeing interests and reforms on foreign exchange rates.

Dai Xianglong, former central bank governor of China, forecast that it will take about 10 to 15 years to achieve a high standard of RMB internationalization.

Among the latest moves toward RMB internationalization is the naming of two clearing banks to handle RMB business overseas.

The central bank announced last Wednesday that it has authorized China Construction Bank to be the clearing bank for RMB business in London, and the next day named the Bank of China as clearing bank for RMB business in Frankfurt.- Xindua

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Malaysian Minister admits poor education system, students are below par

Minister admits poor education system, says blueprint is the answer

Education Minister II Datuk Seri Idris Jusoh has admitted that Malaysia’s education system was below par as shown in global rankings, and cited Putrajaya’s National Education Blueprint as the solution.

Education Min_IDRIS-JUSOH“It is vital to assess and compare our education system against the international standards. Out of 74 countries, Malaysia ranked in the bottom third in the Programme for International Student Assessment (Pisa) 2009+.

“This is below the international and OECD average,” said Idris, referring to member states in the Organisation for Economic Co-operation and Development.

“Primary and secondary school education standards need to improve, particularly so in bridging the gap between urban and rural areas… at the higher education level, we continue to face challenges mainly in the area of graduates’ ability to be employed,” Idris (pic) said in his speech at the 18th Malaysian Education Summit in Petaling Jaya, today.

Idris said the Education Blueprint, launched in September last year and formulated with the help of 55,000 stakeholders, would benefit Malaysia as international education standards continued to rise.

He added that another blueprint for the higher education sector was currently being prepared to among others, to empower university governance, democratise access to higher education and improving employability of graduates.

He also said a “war room” was being planned to ensure that the higher education blueprint, to be launched by year’s end, would be carried out smoothly.

“I know the responsibility is great, I cannot shoulder the burden alone. But we must keep on listening, we have to keep deliberating to ensure that Malaysian education is at par ‎at least with other countries.

“But that’s not good enough for me.‎ I want Malaysian education to be better than other countries in the world,” Idris told some 200 delegates comprising academics and education stakeholders.

On Tuesday, the annual QS University Rankings: Asia 2014 revealed that Malaysian universities lagged behind those from neighbouring Singapore and Hong Kong.

The National University of Singapore topped the list of Asian countries, but the University of Malaya was placed at the 32nd spot. Other local universities in the top 100 include Universiti Kebangsaan Malaysia in the 56th place, Universiti Sains Malaysia (57), Universiti Teknologi Malaysia (66) and Universiti Putra Malaysia (76).

Malaysian public universities last month were left out of the latest ranking of the annual Times Higher Education (THE) Top 100 Universities under 50 years old.

Four Asian universities were ranked among the top 10 of the world’s young universities, including South Korea’s Pohang University of Science and Technology which took the top spot, Korea Advanced Institute of Science and Technology (3), Hong Kong University of Science and Technology (4) and Nanyang Technological University, Singapore (5).

Malaysia, however, failed to get on the list for the second year running. In the first rankings list in 2012, Universiti Kebangsaan Malaysia (UKM) was ranked 98th.

Malaysia was also absent from the Times Higher Education World Reputation rankings list which was released in March, losing out to other Southeast Asian countries.

Malaysia’s continuous failure to feature in any university rankings despite a huge education budget every year has not gone down well with the opposition, which has taken Putrajaya to task for the miserable performance.

The Education Ministry received RM38.7 billion in 2013 and has been allocated a total of RM54 billion this year – the biggest allocation yet.

Contributed BY ANISAH SHUKRY, The MalysianInsider

Malaysian students are below par, says Idris

Malaysian students are below par when compared with their contemporaries in other countries, acknowledged Education Minister II Datuk Seri Idris Jusoh.

Although literacy rates were rising in Malaysia, it was vital to assess and compare the Malaysian education system against international standards, he added.

“Out of 74 countries, Malaysia ranked in the bottom third in the Programme for Interna­tional Student Assessment (Pisa) 2009+. This is below the international and OECD (Organisation for Economic Co-operation and Development) average,” he said during the 18th Malaysian Education Summit yesterday.

“Primary and secondary school education standards need to improve, particularly so in bridging the gap between urban and rural areas. Though Malaysia has achieved commendable results in terms of providing access, we have to now ensure that access comes together with quality education of international standards.”

Meanwhile, at the higher education level, he said that the challenge was producing knowledgeable, competent and globally competitive human capital.

“Employers in Malaysia face a major problem when it comes to having fresh graduates fill out vacancies,” he said, citing poor command of English as one of the reasons.

The solution to this is the Malaysia Education Blueprint (MEB) 2012-2025, which was launched last September, as well as the soon-to-be-released National Education Blueprint for Higher Education 2015-2025 (Higher Education Blueprint).

Idris said the MEB offered a vision of the education system and students’ aspirations that Malaysia both needed and deserved and outlined 11 strategic and operation shifts that would be required to achieve that vision.

“The need for the Education Blueprint is justified in the context of raising international standards; the government aspiration of better preparing Malaysian children for the needs of the 21st century; and increased public and parental expectations of education policy,” he said.

“We have had international experts from the World Bank, Unesco, and OECD to work with our national partners to evaluate the performance of our national education system in the development process of the Education Blueprint. Overall, more than 55,000 stakeholders were consulted in its formulation.”

“The Higher Education Blueprint will also be introduced in order to ensure consistency with the primary and secondary education system, and allow for seamless progression in terms of educational offerings, opportunities and advancement,” he added.

The Higher Education Blueprint will address challenges such as empowering university governance, democratising access to higher education and improving graduate employability.

contribute by Jeannette Goon The Star/Asia News Network

Here’s The New Ranking Of Top Countries In Reading, Science, And Math:

The OECD is out with new global rankings of how students in various countries do in reading, science, and math. Results of the full survey can be found and delved into here.

You can see below how Asian countries are obliterating everyone else in these categories.

The United States, meanwhile, ranks below the OECD average in every category. And as the WSJ notes, the US has slipped in all of the major categories in recent years:

The results from the 2012 Program for International Student Assessment (PISA), which are being released on Tuesday, show that teenagers in the U.S. slipped from 25th to 31st in math since 2009; from 20th to 24th in science; and from 11th to 21st in reading, according to the National Center for Education Statistics, which gathers and analyzes the data in the U.S.

Here are the top countries

OECD_Pisa screen shot 2013-12-03

Sources: Business

Always in sight, forever in my heart

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Asians can and must think strategically, not to be dominated by the West

Can Asians think?

CAN Asian Think is a provocative book written in 1998 by the dean of the Lee Kuan Yew School of Public Policy at the National University of Singapore, Kishore Mahbubani, a prolific and brilliant thinker.

The book is a combative rebuttal of the idea that the dominant Western (read American) ideas are universalist, arguing that the Rest (of the World) has a lot to teach the West.

Re-reading it after more than 16 years, the questions raised by Mahbubani are as relevant as ever. Personally, I found the title rather condescending – of course Asians can think! The real issue is whether Asians can think strategically in their own interest, or whether they think that the dominant Western philosophy and values are so comfortable and relevant that they simply accept that the West is best.

The intellectual tide is going full circle. Since 1998, we have experienced two full-scale crises – the Asian financial crisis of 1998-1999 in which some Western polemicists gloated over Asian hubris, and the Great Recession of 2007-2009, when even Western intellectuals questioned whether unfettered capitalism was a dead end.

As one Asian leader said, when our teacher stumbles, what does the student do? This strategic question has not been completely answered, or at least the answers are different for different Asian countries.

Now that the West has begun to recover, we are going through a reversal of fortunes. Emerging economies are going to bear the brunt of global adjustment. At least three Asian economies are counted among the Fragile Five (India, Indonesia, Turkey, Brazil and South Africa), and there is considerable worry that China may be going through a hard landing.

President Obama’s trip to Asia was a belated personal confirmation of his “Pivot to East Asia” policy, first articulated in 2012 by then Secretary of State and Presidential wannabe Hillary Clinton. As the United States began to withdraw from Iraq and Afghanistan, and its discovery of shale oil making it less dependent on the Middle East, the Pivot strategy involved strengthening bilateral ties with allies in East Asia, and working relationships with emerging powers, such as China. The immediate unintended consequence of the Pivot policy was the eruption of the Ukraine crisis, whereby Russia took advantage of European weakness and diversion of US attention to effectively bring Crimea back to the Russian sphere of influence.

All of a sudden, the Cold War, defined as the struggle between Big Powers, re-emerged into the global risk equation.

Russian  Victory Day parade
Russian soldiers march at the Red Square in Moscow during a Victory Day parade. Thousands of Russian troops marched in Red Square to mark 69 years since victory in World War II in a show of military might amid tensions in Ukraine following Moscow’s annexation of Crimea. -AFP

The word “pivot” originally arose from a paper “The Geographical Pivot of History”, delivered exactly 110 years ago by Sir Halford Mackinder (1861-1947), then director of the London School of Economics. In his second book in 1919, Mackinder, considered the father of geopolitics and geostrategy theory, enscapsulated his theory of the Heartland in a dictum: “Who rules East Europe commands the Heartland; Who rules the Heartland commands the World Island; Who rules the World Island commands the World.”

The Heartland is of course Central Asia, previously part of the Soviet Union, and the World-Island is the largest landmass of Euroasia, from Atlantic Europe to the East Asian Pacific coast, which commands 50% of the world’s resources. Many of today’s areas of geopolitical risk are at the frontiers of the Heartland – Ukraine, Syria, Afghanistan, Iraq, Iran and the South China Sea.

Mackinder’s innovation was to examine national strategy on a global scale, recognising that the British empire must use geography and strategic policy to its advantage against competing great powers.

Former British colonies understood very well the British strategy of “divide and rule”, playing off one faction against the other, so that Britain could rule a subcontinent like India without expending too much resources. But Britain did not hesitate to apply gunboats or cannon to maintain the strategic balance. Similarly, Britain played off one European power against another, until weakened by two world wars, her former colony, the United States emerged as the global superpower.

Seen from the long lens of history, we are in the second Anglo-Saxon empire, with America being the new Rome. Just as the Roman empire shifted its capital from Rome to Constantinople (now Istanbul) in the 20th century, power shifted westward from London to Washington DC.

In the 20th century, two island economies, Britain and Japan, played leading roles in intervening in the continents of Europe and Asia through maritime power, but by the 21st century, air and technological power through size and scale changed the game in favour of the United States. The United States is a continental economy defended by two oceans, the Pacific Ocean and the Atlantic, without a military rival within the Americas.

In contrast, Asia has been historically riven by war and territorial disputes.

In his new book, the Revenge of Geography, geostrategist Robert Kaplan argued how politics and warfare were determined throughout history largely by geography.

Even though the arrival of air travel and Internet suggest that the world may become borderless, the reality is that the world is becoming more and more crowded.

When the First World War broke out in 1914, the global population was only 1.7 billion, with a death count of 16 million. By the Second World War, the death count reached as high as 85 million, when world population was only 2.3 billion.

The next World War will be fought over water and energy resources, because there are limits to natural resources even as the global population exceeds 7 billion, going towards 9 billion by 2030.

For the world to avoid global conflict will require great skills and mutual understanding, because the geopolitical risks of political miscalculation and accidents are extremely high in an age of rising tensions due to inequality, chauvinism, religious and ethnic polarisation. As an old African saying goes, when elephants fight, the grass gets trampled. In the next big fight between the nuclear powers, there will be no winners.

Now that is something that not just Asians must seriously think about.

- Contributed by Tan Sri Andrew Sheng

Tan Sri Andrew Sheng is Distinguished Fellow of the Fung Global Institute. The views expressed are entirely the writer’s own.

Internet Speed in Asia, Telekom Malaysia Not so broadband but a chore !

 Malaysia’s Speed is slower than Vietnam and Cambodia
Slow and costly: An internet user waiting for a page to load.

PETALING JAYA: Malaysians may be one of the most globally-connected people but it’s not necessarily at a speed they want.

According to a new global survey, the average broadband speed in Malaysia is slower than Vietnam and Cambodia in the region, and barely ahead of Myanmar.

Almost three times slower than Vietnam, Malaysia at 5.48 Megabits per second (Mbps) was ranked a low 126 out of 192 countries surveyed from May 2013 to April this year in the recent Net Index.

Zooming to the number one spot was Hong Kong with a speed of 78.3 Mbps. Singapore sped to second placing at 66.6 Mbps while South Korea was ranked fourth (53.77Mbps), the United Kingdom 23rd (26.85Mbps) and the United States, 32nd (23.9Mbps).

The survey was conducted by Ookla – a global broadband testing and web-based network diagnostic applications company that compares the download, upload and line quality of broadband connections.

Commenting on the survey results, Federation of Malaysian Manu­facturers (FMM)’s ICT and multimedia committee chairman Dr Neoh Vee Heng said its 2,678 members were generally concerned about the country’s slow Internet speed, the unavailability of wireless and fibre connections, and the high cost of connectivity.

“One member who is investing in a big project in Sepang is very worried about the slow 1Mbps broadband speed in that area.

“More and more FMM members are becoming heavily dependent on the Internet for their global business communications and transactions. Unfortunately, connectivity in Ma­­laysia is slow and costly compared with our neighbouring countries,” he said, adding that it was important for businesses to have fast Internet connectivity at a reasonable cost.

The FMM would meet with the Malaysian Communication and Multimedia Commission (MCMC) to discuss how broadband services could be improved and its cost reduced, he said.

Federation of Malaysian Consumers Associations (Fomca) secretary-general Datuk Paul Selvaraj said slow Internet connection was among the top grouses of consumers.

“Consumers sign up for pricey packages expecting fast, stable connectivity but on most occasions, the telco companies fail to deliver. Despite having highlighted the problem many times before, the telco companies have failed to respond,” he said.

He urged the MCMC to act on telco companies that did not keep their promises because of a clause that says “the speed is not guaranteed due of various factors”.

“It is the telcos’ responsibility to ensure that all the necessary infrastructure is in place before they go around promising speedy Internet connectivity,” he said.

Symantec Malaysia systems engineering director Nigel Tan said the Government had announced an allocation of RM1.8bil under Budget 2014 for the second phase of the High-Speed Broadband (HSBB) project to increase the speed and extend the access areas in the urban, suburban and rural areas.

“This is a key initiative in making access to information easier as the nation moves into an information-driven economy.

“The need for speed correlates with how a huge part of our lives are conducted online – from sending e-mails and e-banking to watching videos and video-chatting.

“Our increasingly digital lifestyle consumes vast volumes of bandwidth,” he said.

He, however, warned that the grass may not be greener on the other side as cybercriminals tend to target computers that were connected to high-speed broadband Internet.

Netizens: Viewing rich content files a chore 

PETALING JAYA: Internet speed in the country is still lagging and varies according to locations, according to netizens here.

IT executive T.Y. Teoh, 29, said the country’s current Internet speed was all right for light browsing of news portals but “absolutely unacceptable” for viewing multimedia-rich content or downloading movie and audio files.

“Even watching a short clip on YouTube is frustrating because it keeps buffering,” he complains. His 3G package is supposed to be for speeds of between five and 10Mbps, but he usually only surfs at the speed of two to 3Mbps.

“For more than RM100 monthly, I feel shortchanged.”

He said 4G connectivity was no better because at different locations, the speed varied vastly.

Citing an example, he said in Petaling Jaya, the speed was usually 50Mbps but in Penang, it was only 20Mbps.

“It is the same telco provider, yet there is a big 30Mbps difference. Why?” he asked.

Bank staff P. John Eric, 38, who is “always online”, said free public hot spots and 4G data plans were still unreliable and unstable.

“In other countries, you get the speed that is advertised – usable hotspots and decent speeds.

“Here, it is all hype,” he said.

Source: by Christina Chin The Star/Asia News Network


How To Speed Up A Slow Broadband Connection | money

A slow broadband connection can be extremely frustrating, especially if you … from one page to the next, going online can become more of a chore than a joy.

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Asian students dominate global exam; Are the Chinese cheating in PISA or are we cheating ourselves?

Asian Student Dominate ExamMemento: In this file photo, parents take pictures of their children outside a high school in Beijing after they finished their national college exams. — AP

AS a ninth-grader, Shanghai’s Li Sixin spent more than three hours on homework a night and took tutorials in Mathematics, Physics and Chemistry on the weekends.

When she was tapped to take an exam last year given to half a million students around the world, Sixin breezed through it. “I felt the test was just easy,” said Sixin, who was a student at Shanghai Wenlai Middle School at the time and now attends high school.

The long hours which focused on schoolwork — and a heavy emphasis on test-taking skills — help explain why young students like Sixin in China’s financial hub once again dominated an international test for 15-year-olds called the Programme for International Student Assessment (Pisa).

Students from Hong Kong, Singapore, Taiwan, South Korea and Japan — all from Asia — were right behind. In the wealthy city of Shanghai, where affluent families can afford to pay for tutors, the results are not representative of China overall, although they are ranked as a group alongside national averages for countries such as tAS a ninth-grader, Shanghai’s Li Sixin spent more than three hours on homework a night and took tutorials in Mathematics, Physics and Chemistry on the weekends.

When she was tapped to take an exam last year given to half a million students around the world, Sixin breezed through it. “I felt the test was just easy,” said Sixin, who was a student at Shanghai Wenlai Middle School at the time and now attends high school.

The long hours which focused on schoolwork — and a heavy emphasis on test-taking skills — help explain why young students like Sixin in China’s financial hub once again dominated an international test for 15-year-olds called the Programme for International Student Assessment (Pisa).he United States and Japan.

Still, they are indicative of education trends in China and elsewhere in Asia — societies where test results determine entrance into prestigious universities and often one’s eventual career path.

Shanghai scored an average of 613 on Maths, as compared with the nearest rival Singapore (573), and the global average of 494. Hong Kong ranked third in Maths, scoring 561, while Japan was ranked seventh and scored 536. The test is given every three years.

In China, educators say hard work is key to their students’ impressive showing. “They listen carefully in the class and do their homework,” said Bai Bing, the headmaster of Sixin’s school, where about 40 students were chosen to take the global test.

Still, Chinese educational experts say the results are at most partial and covers up shortcomings in creating well-rounded, critical thinking individuals. “This should not be considered a pride for us because overall, it still measures one’s test-taking ability. You can have the best answer for a theoretical model but can you build a factory on a test paper?” asked Xiong Binqi, a Shanghai-based scholar on education.

“The biggest criticism is that China’s education has sacrificed everything else for test scores, such as life skills, character building, mental health, and physical health,” said Xiong.

“Shanghai is an exception, and it is by no means representative of China,” said Jiang Xueqin, deputy principal at the High School Attached to Tsinghua University in Beijing. “It’s an international city where its residents pay great attention to education and where there are many universities.”

Affluent Shanghai parents annually spend an average of 6,000 yuan (RM3,190) on English and Math tutors and 9,600 yuan (RM5,100) on weekend lessons.

Shanghai Normal University president Zhang Minxuan said Pisa does not measure students’ social abilities, physical health and aesthetics, and he cautioned against extrapolating to the rest of the country.

“Shanghai students’ top placement in Pisa is no proof of equal development of education in China,” he said, as reported by Shanghai Education News. “There’s no denying, China’s education still has a long way to go.”

By Didi Tang — AP
Are the Chinese cheating in PISA or are we cheating ourselves?

Andreas Schleicher Andreas Schleicher

Whenever an American or European wins an Olympic gold medal, we cheer them as heroes. When a Chinese does, the first reflex seems to be that they must have been doping; or if that’s taking it too far, that it must have been the result of inhumane training.

There seem to be parallels to this in education. Only hours after results from the latest PISA assessment showed Shanghai’s school system leading the field, Time magazine concluded the Chinese must have been cheating. They didn’t bother to read the PISA 2012 Technical Background Annex, which shows there was no cheating, whatsoever, involved. Nor did they speak with the experts who had drawn the samples or with the international auditors who had carefully reviewed and validated the sample for Shanghai and those of other countries.

Others were quick to suggest that resident internal migrants might not be covered by Shanghai’s PISA sample, because years ago those migrants wouldn’t have had access to Shanghai’s schools. But, like many things in China, that has long changed and, as described by PISA, resident migrants were covered by the PISA samples in exactly the way they are covered in other countries and education systems. Still, it seems to be easier to cling to old stereotypes than keep up with changes on the ground (or to read the PISA report).

True, like other emerging economies, Shanghai is still building its education system and not every 15-year-old makes it yet to high school. As a result of this and other factors, the PISA 2012 sample covers only 79 per cent of the 15-year-olds in Shanghai. But that is far from unique. Even the United States, the country with the longest track record of universal high-school education, covered less than 90 per cent of its 15-year-olds in PISA – and it didn’t include Puerto Rico in its PISA sample, a territory that is unlikely to have pulled up US average performance.

International comparisons are never easy and they are never perfect. But anyone who takes a serious look at the facts and figures will concede that the samples used for PISA result in robust and internationally comparable data. They have been carefully designed and validated to be fit for purpose in collaboration with the world’s leading experts, and the tests are administered under strict and internationally comparable conditions. Anyone who really wants to find out can review the underlying data.

Short of arguments about methodology, some people turn to dismissing Shanghai’s strong performance by saying that Shanghai’s students are only good on the kind of tasks that are easy to teach and easy to test, and that those things are losing in relevance because they are also the kind of things that are easy to digitise, automate and outsource. But while the latter is true, the former is not. Consider this: Only 2 per cent of American 15-year-olds and 3 per cent of European ones reach the highest level of math performance in PISA, demonstrating that they can conceptualise, generalise and use math based on their investigations and apply their knowledge in novel contexts. In Shanghai it is over 30 per cent. Educators in Shanghai have simply understood that the world economy will pay an ever-rising premium on excellence and no longer value people for what they know, but for what they can do with what they know.

PISA didn’t just test what 15-year-olds know in mathematics, it also asked them what they believe makes them succeed. In many countries, students were quick to blame everyone but themselves: More than three-quarters of the students in France, an average performer on the PISA test, said the course material was simply too hard, two-thirds said the teacher did not get students interested in the material, and half said their teacher did not explain the concepts well or they were just unlucky. The results are very different for Shanghai. Students there believe they will succeed if they try hard and they trust their teachers to help them succeed. That tells us a lot about school education. And guess which of these two countries keeps improving and which is not? The fact that students in some countries consistently believe that achievement is mainly a product of hard work, rather than inherited intelligence, suggests that education and its social context can make a difference in instilling the values that foster success in education.

And even those who claim that the relative standing of countries in PISA mainly reflects social and cultural factors must concede that educational improvement is possible: in mathematics, countries like Brazil, Turkey, Mexico or Tunisia rose from the bottom; Italy, Portugal and the Russian Federation have advanced to the average of the industrialised world or close to it; Germany and Poland rose from average to good; and Shanghai and Singapore have moved from good to great. Indeed, of the 65 participating countries, 45 saw improvement in at least one subject area. These countries didn’t change their culture, or the composition of their population, nor did they fire their teachers. They changed their education policies and practices. Learning from these countries should be our focus. We will be cheating ourselves and the children in our schools if we miss that chance.

International comparisons are never easy and they aren’t perfect. But PISA shows what is possible in education, it takes away excuses from those who are complacent, and it helps countries see themselves in the mirror of the educational results and educational opportunities delivered by the world’s leaders in education.
The world has become indifferent to tradition and past reputations, unforgiving of frailty and ignorant of custom or practice. Success will go to those individuals, institutions and countries which are swift to adapt, slow to complain and open to change. And the task for governments is to help citizens rise to this challenge. PISA can help to make that happen.

Andreas Schleicher is deputy director for Education and Skills, and special adviser on education policy to the OECD’s Secretary General.

In response to criticisms and questions regarding the validity of high scores achieved by 15-year-olds from Shanghai, China, in the recent PISA assessment, he posted this article to the OECD’s education blog

Sources: The Sydney Morning Herald

Related post:
Malaysia, US, UK and Australia lag in global education ranking as China and Asian countries rise to the top

Malaysia, US, UK and Australia lag in global education rankings as China and Asian countries rise to the top


 Malaysia students score below global average

PETALING JAYA: Malaysian students have scored below the global average under the Programme for International Student Assessment (Pisa) 2012.

According to the results released by the Organisation for Economic Cooperation and Development (OECD), Malaysia scored 421 in Mathematics, 398 in Reading and 420 in Science respectively.

The results achieved in the latest survey showed Malaysia was below the global average score of 494 in Mathematics, 496 in Reading and 501 in Science.

Based on the mean score for 2012, Malaysia is still placed in the bottom third, ranking 52 out of 65 countries, and 55 out of 74 countries in the 2009 survey.

In 2009, Malaysia scored 404 in Mathematics, 414 in Reading and 422 in Science.

Pisa is administered by the OECD every three years on 15-year-olds in both OECD and non-OECD countries and offers students questions in the main language of instruction in their respective countries. Each round focuses on one area of either Reading, Mathematics or Science.

The assessments have been conducted since 2000, with Malaysia taking part for the first time in 2009.

Currently, Malaysian students are at the bottom one-third among more than 70 countries in international assessments like Timms (Trends in International Mathe­mathics and Science Studies) and Pisa. The Malaysia Education Blueprint has set the goal for Malaysia to be in the top third of countries participating in Pisa and Timms by 2025.

Contributed by Kkang Soon Chen The Star/Asia News Network

US students lag in global education rankings as Asian countries rise to the top

Students in the United States made scant headway on recent global achievement exams and slipped deeper in the international rankings amid fast-growing competition abroad, according to test results released Tuesday.

American teens scored below the international average in math and roughly average in science and reading, compared against dozens of other countries that participated in the 2012 Program for International Student Assessment (PISA), which was administered last fall.

Vietnam, which had its students take part in the exam for the first time, had a higher average score in math and science than the United States. Students in Shanghai — China’s largest city with upwards of 20 million people — ranked best in the world, according to the test results. Students in East Asian countries and provinces came out on top, nabbing seven of the top 10 places across all three subjects.

U.S. Education Secretary Arne Duncan characterized the flat scores as a “picture of educational stagnation.”

“We must invest in early education, raise academic standards, make college affordable, and do more to recruit and retain top-notch educators,” Duncan said.

Roughly half a million students in 65 nations and educational systems representing 80 percent of the global economy took part in the 2012 edition of PISA, which is coordinated by the Paris-based Organization for Economic Cooperation and Development, or OECD.

The numbers are even more sobering when compared among only the 34 OECD countries. The United States ranked 26th in math — trailing nations such as the Slovakia, Portugal and Russia. What’s more, American high school students dropped to 21st in science (from 17th in 2009) and slipped to 17th in reading (from 14th in 2009), according to the results.

“These numbers are very discouraging,” Eric A. Hanushek, an expert on educational policy and a Paul and Jean Hanna Senior Fellow at the Hoover Institution of Stanford University, told NBC News. “They say that we have to work more seriously at trying to raise the performance that leads to these scores.”

The exam, which has been administered every three years to 15-year-olds, is designed to gauge how students use the material they have learned inside and outside the classroom to solve problems.

U.S. scores on the PISA have stayed relatively flat since testing began in 2000. And meanwhile, students in countries like Ireland and Poland have demonstrated marked improvement — even surpassing U.S. students, according to the results.

“It’s hard to get excited about standing still while others around you are improving, so I don’t want to be too positive,” Jack Buckley, commissioner of the National Center for Education Statistics, told the Associated Press.

Duncan said the results were at “odds with our aspiration to have the best-educated, most competitive work force in the world.”

The scores are likely to reopen a long-simmering political debate about the state of education in America as economically ascendant nations like China eclipse U.S. students’ performance.

American students historically have ranked low on international assessments, owing to a range of social and economic factors — from skyrocketing rates of child poverty to sheer population diversity. Nearly 6,100 American students participated in this round of testing.

“Socio-economic background has a significant impact on student performance in the United States, with some 15% of the variation in student performance explained by this, similar to the OECD average,” according to a PISA summary of U.S. performance. “Although this impact has weakened over time, disadvantaged students show less engagement, drive, motivation and self-beliefs.”

Shanghai students also dominated the PISA exam in 2009, according to the AP.

Tom Loveless, a senior fellow at the Brookings Institution, told the wire service that the educational system in that city is not equitable — and the students tested are progeny of the elite because they are the only ones permitted to attend municipal schools due to restrictions that, among other things, prohibit many migrant children.

“The Shanghai scores frankly to me are difficult to interpret,” Loveless told the wire service. “They are almost meaningless.”

Buckley told the AP that U.S. officials have not encountered any evidence of a “biased sample” of students administered the exam in Shanghai. He said if the whole country was included, it is unclear what the results would show.

Hanushek told NBC News that the performance of Asian teens says a great deal about the modern mindset of the Far East.

“These East Asian countries are hungry,” Hanushek said. “They have the view that improving their lives and improving their future depends on education.”

And the U.S., he added, has grown too accustomed to leading the world in knowledge that it may have lost its edge.

“We have the strongest economy in the world. But everybody is too complacent,” Hanushek said.
The test is premised on a 1,000-point scale. Here’s a sampling of the leading findings:

— In math, the U.S. average score was 481. Average scores ranged from 368 in Peru to 613 in Shanghai. The global average was 494.

— In science, the U.S. average score was 497. Average scores ranged from 373 in Peru to 580 in Shanghai. The global average was 501.

— In reading, the U.S. average score was 498. Average scores ranged from 384 in Peru to 570 in Shanghai. The global average was 496.

Students from all states were tested. For the first time, three states — Massachusetts, Connecticut and Florida — elected to boost participation in PISA to get more state-specific data.

Average scores from Massachusetts rose above the international average in all three subject areas.

Connecticut students scored on average near the global average in math and higher than the global average in science and reading. Florida students on average scored below the global average in math and science and near the global average in reading, according to the AP.

The Associated Press contributed to this report.

PISA Results Show UK Students Lagging Behind Rest Of The World

uk students lag behind rest of world pisa
– The Huffington Post UK/PA

UK teenagers and students are lagging far behind their peers across the world as the country fails to improve its performance in reading, maths and science, a major international report reveals.

Young adults in Singapore, Estonia and Slovenia are storming ahead, despite the UK spending more than average on education. There has been “no change” in the country’s abilities in the basics, according to the latest results from the Programme for International Student Assessment (PISA) study 2012.

The UK was in 26th place for maths, 23rd for reading and 21st for science, it found.

More than half a million 15-year-olds from 65 countries took part in the Organisation for Economic Co-operation and Development’s (OECD) study last year, which assesses how students could use their knowledge and skills in real life, rather than just repeating facts and figures.

The findings show that the UK’s average score for maths was 494 and in reading it was 499, broadly the same as the OECD averages for the subjects and putting the country on a par with nations such as the Czech Republic, France,and Norway.

In science, the UK’s teenagers scored 514 points, above the OECD average and similar to results in Australia, Austria, Ireland, New Zealand and Slovenia.

But it also leaves the UK lagging far behind leading nations including Shanghai in China, Singapore, Hong Kong, Korea and Japan in each of the areas tested.

The OECD concluded that across all three subjects the UK’s average performance in maths has remained unchanged since the PISA tests in 2006 and 2009.

Andreas Schleicher, special adviser to the OECD’s secretary-general, said: “The relative standing and the absolute standing of the UK is really unchanged.”

He added: “In essence you can say that the UK stands where it stood in 2009.”

The results come despite major investment in education in the UK.

The study found that the UK spends more per head on education than the average across OECD countries, at around £59,889 per student between the ages of six and 15. The OECD average is £50,951.

It says that expenditure per student can explain about 30% of the difference in average maths results between countries, but that moderate or high spending per pupil does not automatically equate to particularly high or low performance in the subject.

The report shows that around one in eight (12%) of UK teenagers are considered “top performers” in maths scoring the highest results, this is a similar proportion to the OECD average. Around nine percent were top performers in reading, while 11% fell into this category in science.

And more than a fifth (22%) were “low performers”, compared to the OECD average of 23%, meaning that at best they can solve simple maths problems. Around 15% were low performers in reading, along with 15% in science.

The results also showed that students from an immigrant background in the UK perform as well in maths as other students, whereas in many other OECD countries they score significantly lower.

It adds that UK students are generally positive about school, but like those in many other countries they are less positive about learning maths.

Mr Schleicher said that the latest PISA results could not be used to judge the Coalition Government’s education reforms, saying “you couldn’t possibly see anything of what’s been done in the last couple of years.”

Education Secretary Michael Gove said: “These poor results show the last government failed to secure the improvements in school standards our young people desperately need.

“Labour poured billions of pounds into schools and ratcheted up exam grades – yet our education system stagnated and we fell behind other nations.”

He added that the performance “underlines the urgent need for our reforms”.

Shadow education secretary Tristram Hunt said: “The PISA report is a big wake-up call. Eastern dominance centres on the importance that these high performing education systems place on the quality and status of the teaching profession as the central lever for driving up standards.

“This report exposes the failings of this Government’s schools policy: a policy that has sent unqualified teachers into the classroom and prevented effective collaboration between schools.”

Australian students slipping behind in maths, reading: OECD report

Video: Christopher Pyne says the results are a ‘serious wake-up call’ (ABC News)

Related Story: Labor refuses to back own move to cut university funding by $2.3b
Related Story: Pyne hails ‘national model’ after backflip on Gonski funding
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A new report comparing Australian high school students with 65 other countries shows the nation is slipping further behind in maths and reading skills.

The 2012 Programme for International Student Assessment (PISA) measures the mathematics, reading and science skills of half a million 15-year-olds from around the world.

It found Australian teens placed equal 17th in maths, equal 10th in reading and equal 8th in science.

Asian countries like China, Singapore, Korea and Japan are pulling ahead of Australian students in maths and reading.

The results show Australian students are slipping in maths performance by about a half a year of schooling compared to 10 years ago.

How the states/territories rated:

Maths Science Reading
ACT 518 534 525
NSW 509 526 513
VIC 501 518 517
QLD 503 519 508
SA 489 513 500
WA 516 535 519
TAS 478 500 485
NT 452 483 466
AUST 504 521 512
Shanghai 613 580 570

The decline was stronger in girls than boys, with girls dropping to the Organisation for Economic Co-operation and Development (OECD) average.

The report also found a wide gap between students in different parts of the country.

Tasmania and the Northern Territory lagged well behind other states in all three areas.

About 14,500 Australian students from 775 schools were measured in the assessment, which was conducted by the Australian Council for Educational Research (ACER) for the OECD.

ACER’s director of educational monitoring and research, Dr Sue Thomson, says gender, Indigenous status and socio-economic status still divide student outcomes.

Australian students from a wealthy background show a difference of about two-and-a-half years of schooling compared to a student from the lowest socio-economic group.

Questionnaire responses have also found girls hold a much more negative view about maths.

“Australia has slipped backwards to the type of gender disparity that was seen decades ago, and the performance scores of girls coupled with a number of particularly negative motivational attitudes puts Australia further away from providing all students with the same educational opportunities,” Dr Thomson said.

Indigenous students are on average performing significantly worse than non-Indigenous students, a difference of about two-and-a-half years of schooling or more in maths, science and reading.

Ms Thomson also raised concerns that more than two-fifths of students failed to reach base proficiency levels in maths.

“These are the levels at which the Ministerial Council set as not really ambitious goals but achievable goals for a country such as Australia and for a large proportion of students not to be achieving those results is quite a worry,” she said.

Twelve other countries also showed declines in maths literacy over 10 years, with the largest decline occurring in Sweden, then Finland, New Zealand, Iceland then Australia.

See how the countries compare in the latest results:

Embed: Map of educational performance, December 4 2013  

Results back Government’s plan to focus on teachers, says Pyne

Education Minister Christopher Pyne says the results are a bad report card on Labor’s years in office.

“In that period our results dramatically declined,” he said.

“These are the worst PISA results since PISA began in 2000.

“They are demonstrably worse than anything that ever occurred under the Coalition government. They are a serious wake up call for the Australian education system.”

He says the report’s findings vindicate the Coalition’s plan to focus on teacher quality.

Prime Minister Tony Abbott says the Government has fixed the school funding issue and school standards are the key to lifting rankings.

“We’ve got the funding sorted out. We need to have a debate about better school performance, about more principal autonomy, about more parental involvement, about more community engagement and above all else, about higher standards and that can now happen,” he said.

Federal Opposition Leader Bill Shorten has used the report to intensify pressure on the Government to adopt all of Labor’s Gonski schools plan.

The Federal Government will go ahead with Labor’s Gonski plan from next year but will only commit to four years of funding.

Mr Shorten says it needs to get on board for the full six years.

“It’s time to implement Gonski in full. It’s time to stop the political games and bandaid solutions and get on board giving the next generation of Australians the best start in life.”

Opposition Education spokeswoman Kate Ellis says the figures are worrying.

“We have always conceded that the system has been broken, that the old Howard-style system is broken, which is why the Labor government went through the biggest reform of our school system in 40 years and why the Abbott Government now cannot afford to toss it aside.”

Kevin Donnelly from the Education Standards Institute says he is not surprised by the results.

“We have in fact been in trouble, if you like, for many, many years.

“We have trouble with disruptive classrooms…[and] we don’t allow our teachers to mentor one another and to help one another. In places like Singapore, they actually respect teachers, children respect teachers, they are well-resourced.

“They have a lot more time to learn from one another and to improve classroom practice.”
He says the debate is not only about funding.

“Money is important, but it gets back to a rigorous curriculum, effective teaching practice, good teacher training – so there are a few things we can look at there.”

Results back push for needs-based funding model: Greens

The Greens say Australia’s results in the report should put more pressure on the Government to adopt a needs-based school funding model.

Senator Penny Wright has attacked the deals the Government struck with Queensland, Western Australia and the Northern Territory on Monday for more school funding.

She says those deals ditch the so-called Gonski funding model in favour of a “no-strings-attached” model.


“It’s not just the quantity of money handed out to the states, it’s the way that money is spent,” Senator Wright said in a statement.

“If that money doesn’t get to the most disadvantaged students, Australia will continue to decline on an international scale.”

The Australian Education Union says the widening gaps vindicate the predictions of the Gonski review.

“This must be a wake-up call to the Abbott Government,” deputy federal president Correna Haythorpe said in a statement.

“They have consistently refused to embrace the Gonski recommendations for more equitable funding arrangements.

“Amid the constant backflips and chaos, it remains impossible to determine whether they even care about the inequity in education and the social and economic cost of it.

“The Government must make a full six-year commitment to the more equitable funding arrangements contained in the Gonski law and agreements if schools are to be given the resources and time required to lift achievement levels and break the connection between disadvantage and poor outcomes.”

PISA in Brief 2012

China’s education system could be model for other countries

Watch Video:

A global education survey has revealed that when it comes to mathematics, reading and science, young people in Shanghai are the best in the world. The findings are part of the 2012 Program for International Student Assessment or PISA. Full story >>

For more on this, we are joined by Wang Yan, Director of the Department of International Communication at the National Institute of Education Sciences.

1. Good evening. It’s not unusual to see Chinese students ace an exam. But do you think training children to be good at taking tests at a young age is a good strategy, or something that should be changed?

2. There was criticism from experts of China’s basic schooling system. But as Chinese students continue to excel internationally, do you think other countries will begin adopting parts of China’s educational model?

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 Shy boys given rooms to grow as they are lagging girls – Rightways

You are being snooped on, Malaysia views US-NSA spying seriously!

Asia being snooped on, too 

Spying by foreign intelligence agencies is also prevalent in Malaysia and other regional countries via the Internet or spying equipment located in embassies.

SO last week it was the turn of Asians to learn that their region was also the subject of foreign spying.

This was no surprise. If American intelligence is spying on Americans, on Latin Americans, and on Europeans (including its top political leader, Angela Merkel of Germany), it is a foregone conclusion that Asia would not be left out.

There is no revelation yet that Asian prime ministers and presidents have had their personal mobile phones and e-mails tapped.

But it is also a foregone conclusion that these things are happening. Be prepared, therefore, to read in the coming weeks about famous Asian leaders, opposition stalwarts, journalists and celebrities being the subjects of snooping.

Nevertheless, the news that American and Australian embassies are being used to snoop on Asian countries justifiably caused outrage in our region. The Australian surveillance is reportedly in cooperation with the United States.

Malaysia is one of the places where Australian intelligence operates to spy, according to reports in the Der Spiegel and Sydney Morning Herald. They revealed that the spying takes place from the Australian High Commission in Kuala Lumpur.

Other Asian countries where the intelligence collection is conducted is the Australian embassies in China, Thailand, Indonesia, Vietnam, Timor Leste and Papua New Guinea.

The news reports also revealed that the US embassies have also been conducting surveillance activities in many Asian countries including Malaysia, Indonesia, China, Thailand, Cambodia and Myanmar.

Malaysia last Friday registered its protests in official notes handed to the Australian High Commissioner and the US Deputy Chief of Mission who were summoned to Wisma Putra. The notes warned that surveillance of close friends could severely damage relations.

Indonesia warned the United States and Australia that the continuation of surveillance facilities inside their embassies threatened to derail years of trust built up between countries.

China also responded to the report that the American embassy in Beijing and consulates in Shanghai and Chengdu operated special spying facilities.

Its Foreign Ministry has demanded an explanation from the United States, saying that “foreign entities must not in any form engage in activities that are incompatible with their status and that are harmful to China’s national security and interest”.

Also last Friday, Brazil and Germany introduced a draft resolution to a United Nations General Assembly committee calling for an end to excessive surveillance.

The press reports on spying in Asian countries are based on information leaked by Edward Snowden, a former contractor with the US National Security Agency.

Newspapers and magazines had previously revealed that the personal phones of the German chancellor and the Brazilian president had been tapped. Both leaders have registered protests directly to US President Barack Obama.

Last week also saw revelations by the Washington Post that the US and British intelligence agencies had found a way of intercepting communications from Google as well as Yahoo as the data were being passed between their data centres.

“We are outraged at the lengths to which the government seems to have gone,” said Google’s chief legal officer.

The Internet giant companies have found that their encryptment system protecting e-mail and other information flowing through its data centres is not secure after all.

The technology companies are worried that their millions of customers will no longer trust that their privacy will be protected.

How will this affect the use of browsing, e-mail, Facebook and other facets of the Internet technology?

US companies and entities currently dominate the global Internet business. Much of the world’s flow of data go through Internet companies based in the United States.

The US administration had projected itself as an honest host of the Internet centres, respecting the rights and privacy of the world’s Internet and e-mail users, and a champion of Internet freedom.

That image has been shattered by the series of revelations emerging from Snowden’s leaked files. The opposite image has replaced it, of a government that has used high technology to gather billions of bits of data on practically all Internet users.

If counter-terrorism was the official reason, this now seems to be only a pretext for also spying on any important person, including one’s closest allies.

Now that they have lost confidence that the United States or other countries will respect privacy of the politicians, companies and citizens of their countries, some governments are now planning to limit the reach of American-based Internet companies.

The Financial Times reported that Brazil is planning regulations that would force technology companies to retain information on the Internet about its citizens and institutions within Brazil itself.

It also said that European officials are discussing the need to have stronger cloud computing capabilities in Europe to protect their citizens’ privacy.

Brazil is also planning to bring up in various UN agencies and fora the need for a global framework to respect and protect privacy on the Internet.

Contributed by Global Trends Martiin Khor
The views expressed are entirely the writer’s own.

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Malaysia views spying seriously

KLUANG: Spying activities on Malaysia by its allies is a serious matter, says Defence Minister Datuk Seri Hishammuddin Hussein.

This is because it can cause relations between Malaysia and these countries, long established based on trust and sincerity, to be tense.

“I believe if this (spying) is not fully explained, our long-established good relations can be adversely affected. Therefore, we need a full explanation on the extent of the spying activities and for what purpose.

“Tensions can be avoided if the allies involved uphold the trust and sincerity in their relations with Malaysia,” he said.

Hishammuddin said this to reporters after attending a Deepavali open house hosted by Johor Unity and Human Resources Committee chairman R.Vidyanathan here yesterday.

The spying issue arose following media reports on the claim made by intelligence informant Edward Snowden that the United States had 90 electronic surveillance facilities throughout the world, including at its embassy in Kuala Lumpur.

In light of this, Hishammuddin wanted a detailed explanation on the matter as such activities could threaten Malaysia’s security and its other interests.

The US ambassador to Malaysia, Joseph Y. Yun, was reported to have explained on the spying claim to Wisma Putra.

Foreign Minister Datuk Seri Anifah Aman said Yun had stated that all surveillance activities by the United States throughout the world were specifically for security, to detect threats of terrorism and weapons of mass destruction.

On his trip to China last month, Hishammuddin said it was aimed at enhancing cooperation in the area of defence, especially through joint exercises, exchange programmes involving navy and other military officers, establishing cooperation between the defence industries of both countries, and efforts to combat terrorism and transnational crime.

Meanwhile in Yan, Inspector-General of Police Tan Sri Khalid Abu Bakar said they would arrest any foreign diplomat found to be involved in spying activities.

“We will not hesitate because spying is a threat to the country’s sovereignty. In the 1980s, we have arrested foreign diplomats involved in spying activities.

“We will do the same again if there is proof of such activities,” he told newsmen after a briefing on the Sungai Limau by-election at the Yan police headquarters yesterday.

- The Star/Asia News Network Monday Nov 4, 2013

Worries over systemic risks of shadow banking and mid-tier banks

Shadow banking

Analysts have been warning on the risks of China’s “shadow banking” system – a sector estimated to have as much as RM4.15tril in assets. 

RAMADAN is always a good time for reflection.

This year, I’ve been researching a new TV documentary series, Ceritalah Indonesia, that I’m hoping to shoot by September.

I want to tell the story of how Indonesia, having endured the Asian Financial Crisis in 1997/1998, ousted President Suharto and then launched into the tumultuous “Reformasi Era” before finding some degree of stability under President Susilo Bambang Yudhoyono.

As a result, I’ve been going over recent history – including the roots of the crisis itself.

Now even though I’m not an economist, it’s been a very interesting journey, especially reading about the various bank failures that sparked off and then deepened the crisis.

Back then, banks seemed to be falling like dominoes: Thailand’s Finance One collapsed spectacularly.

This was followed only a few months later by Bank Indonesia’s surprise decision to close sixteen banks.

As the momentum gathered in intensity, one of Japan’s most important brokerage houses – Sanyo Securities was also shuttered.

Just over a decade later, a similar sequence of events was to take place in Europe and North America as Northern Rock, Iceland’s Landsbanki (better known by its British brand-name Icesave) and Lehman Brothers also failed, leaving in their wake a massive dislocation across the developed world.

Now, as I reflect on the events of 1998 and 2008, I can’t help but sense a similar trend emerging to our north – in China.

Indeed, the next global economic crisis could very well start there. Why?

Well, have you visited the many ghostly, almost totally-empty high-rise communities that have sprung up across the Middle Kingdom?

I can still recall wandering through vast and deserted business quarters in Dalian, Tianjin and Beijing.

At the time, everyone told me that China was different … well that’s what they said about Thailand, Iceland and Spain.

But now after years of over-building: roads, bridges and railway lines, expanding capacity to the highest degree, people are beginning to question China’s growth model.

For many months now, analysts have been warning on the risks of China’s “shadow banking” system – a sector which some estimate to have as much as US$1.3tril (RM4.15tril) in assets.

“Shadow banking”– is simply non-bank lending and borrowing. Investing in hedge funds, venture capital and private equity are all forms of “shadow banking”.

There’s nothing wrong with this: shadow banking often helps individuals or businesses that would otherwise not qualify for conventional bank loans or get credit.

Also, some shadow banking wealth management products offer lucrative returns.

Shadow banking thrived in China with the liquidity that flooded the market in 2008, when its government pumped in a US$586bil (RM1,828bil) stimulus package in response to the subprime crisis.

All this excess liquidity has, however, causing a housing bubble and also saved a number of underperforming Chinese state-owned enterprises from having to reform.

At the same time, Chinese policymakers were debating long-standing calls for them to cool down their economy – a fateful decision as we will see later.

As the astute Henny Sender wrote in the Financial Times on July 11, the investment products which form the backbone of Chinese “shadow banking” have the potential to create yet another subprime crisis.

Why? Well, many of China’s hedge funds are shorting the shares of China’s weaker banks. Does that sound familiar?

According to Sender: “… second-tier banks listed in Hong Kong or in mainland China, including China Merchants, China Minsheng Banking and tiny Huaxia, are vulnerable” as they “… have less ability to absorb losses and more of their balance sheets are tied up with shadow-like activities.”

Minsheng, founded in 1996, is China’s ninth-largest bank by assets and the only private bank amongst its top 10 commercial lenders.

It also, according to JP Morgan, has the fastest growth in inter-bank assets and the highest weighting of interbank liabilities to total interest bearing liabilities.

As mentioned, China’s government was initially determined to “cool” its economy.

The People’s Bank of China (PBOC) hence refused to intervene when the Shanghai interbank offered rate (“Shibor”, China’s LIBOR) spiked to an all-time high, to almost 14% from 3% previously.

This led to fears that the sudden “credit crunch” would leave banks like Minsheng at risk of default, the very thing that caused the collapse of Western banks like Lehman in 2008 due to a sudden lack of liquidity.

Indeed, in late June worried investors sent Minsheng’s shares down by 16.7%, wiping out US$6bil (RM18.7bil) of its market value.

Talk of a crisis forced the PBOC to promise to end the credit crunch.

Still, worries over China’s shadow banking system persist.

As Fitch Ratings has stressed, systemic risk over China’s mid-tier banks is rising due to their credit exposure and weakness in absorbing losses.

It remains to be seen whether banks like Minsheng will indeed become China’s Lehman.

But this much is clear: those who ignore history are doomed to repeat it.

Ceritalah  By KARIM RASLAN

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The West envious of global economy led by China

Asian Consumers

As central banks in the euro zone and Britain edge closer this week to deciding that their flagging economies need yet more monetary stimulus, they can be forgiven for casting an envious eye towards China.

The same goes for the United States. Because of deadlock in budget talks, mandatory federal spending cuts are now being phased. They will brake a recovery that, as Friday’s jobs report is likely to show, is already frustratingly weak.

China, the biggest contributor to global growth in recent years, has plenty of headaches of its own, of course.

Over reliance on investment in heavy industry, a financial system rigged in favour of the state, and a failure to integrate some 140 million rural migrant workers into urban life top the list of structural problems.

Louis Kuijs, an economist with Royal Bank of Scotland in Hong Kong, adds rising inflation, a renewed climb in house prices and a rapid expansion in ‘shadow banking’ to the government’s to-do list for 2013.

But Kuijs and other economists expect outgoing Premier Wen Jiabao to reaffirm a growth target of 7.5 percent for this year when he delivers his last ‘state of the nation’ report to the annual meeting of parliament that opens on Tuesday.

China entered 2013 with solid growth momentum thanks to measured policy stimulus in the second half of last year. That impetus is now fading somewhat after a strong fourth quarter, as figures for January and February will probably suggest.

So, just as the West is looking to China to boost global demand, China is counting on a pick-up in the West as 2013 unfolds to help exports and revive corporate investment, Kuijs said.

“Looking at trade and industrial production indicators, we are all expecting a strengthening global picture, coming especially from the United States and Europe, but it’s still a forecast: it’s not showing up yet in the hard data,” he said.

Euro Zone Disappoints

Indeed, the European Commission is projecting that the euro zone economy will shrink in 2013 for the second straight year. And February’s survey of purchasing managers was downright weak.

“This increases the chances of a rate cut, but it’s still not our baseline assumption,” said Petr Zemcik, director of European economics at Moody’s Analytics in London. “The ECB has done all it can at this stage.”

His comments were in line with a Reuters poll of economists, which saw a 90 percent chance that the ECB, the European Central Bank, would keep its main short-term interest rate unchanged at 0.75 percent when it meets on Thursday.

However, a growing minority expects the ECB will cut rates at some point. Doing so now, right after Italy’s election produced a big protest vote against austerity, would invite the suspicion that the bank was acting out of political panic.

But President Mario Draghi is sure to be quizzed about further easing and possible activation of the ECB’s bond-buying program for euro zone strugglers, especially if the bank lowers its 2013 growth and inflation forecasts again.

Jeffrey Anderson with the Institute for International Economics in Washington, a financial-industry lobby group, said a rate cut would send a useful signal of the importance of growth to voters weary of austerity.

The Italian economy has shrunk for six quarters in a row. Euro zone unemployment hit a record 11.9 percent in January.

At the same time, euro zone finance ministers, who meet on Monday, should excuse Italy from further fiscal tightening as its budget is close to structural balance, Anderson argued.

“Ways must still be found to prod Italy to move on overdue labor market liberalization. But action to boost near-term growth would help Europe to sustain the popular backing necessary to advance the reforms needed for the longer term,” he said in a note.

Bank of England Closer to Easing

In Britain, the government seems determined to stick to budget austerity despite a sharp drop in manufacturing in February and a stinging defeat for Prime Minister David Cameron’s Conservative party in a parliamentary by-election.

This keeps the onus on the Bank of England, three of whose nine policymakers have already voted to expand the central bank’s stock of asset purchases, now set at 375 billion pounds.

That could turn into a majority as soon as Thursday, when the BOE meets to set policy, if a survey two days earlier of the all-important services sector is weak, said Simon Hayes, an economist at Barclays Capital in London.

Further easing by the Federal Reserve is not on the cards. But job figures on Friday are likely to underscore that the U.S. central bank is in no hurry to withdraw its stimulus – the message Chairman Ben Bernanke relayed to Congress last week.

According to a Reuters poll, firms probably added 160,000 non-farm jobs last month, in line with January’s 157,000 gain, while the unemployment rate held steady at 7.9 percent.

That is well above the Fed’s goal of 6.5 percent. Moreover, federal spending cuts, if not reversed, will stiffen fiscal headwinds and could lop 0.5 percent off growth over the rest of this year, many economists estimate.

Nevertheless, Jim O’Sullivan, chief U.S. economist with High Frequency Economics in Valhalla, New York, is confident that it is just a matter of time before the Fed’s ultra-easy policy starts to bear more fruit.

Job growth was already brisk enough to reduce the unemployment rate given a secular decline in the participation rate due to an ageing population, he argued.

“Based on what we’re seeing in the labor market, in the battle between monetary stimulus and fiscal drag, the Fed is winning,” O’Sullivan said. – Reuters

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