Kuala Lumpur property: KSK Land ups the ante with iconic 8 Conlay


 
KSK Group Bhd chairman Tan Sri Kua Sian Kooi with daughter Joanne who is KSK CEO & KSK Land Sdn Bhd MD

Flexibility: 8 Conlay units have the flexibility that allows residents to live their story the way they desire.

Fresh from announcing that its branded residence for Tower A at 8 Conlay project will be sold at a record RM3,200 per sq ft, Kempinski Hotel Kuala Lumpur has now been recognised under the Government’s Economic Transformation Programme.

IF 8 Conlay’s RM3,200 per sq ft (psf)selling price has set tongues wagging for possibly setting a new pricing record in luxury living, here is another development to add to the several “firsts” the project has notched since it was announced some two-and-a-half years ago.

Kempinski Hotel Kuala Lumpur, which is a component of 8 Conlay, has been recognised as an entry point project under the Tourism National Key Economic Area (NKEA) of the ETP – the Government’s initiative to propel the economy into high-income status by 2020.

Kempinski Hotels, Europe’s oldest luxury hotelier, is the hospitality partner of 8 Conlay’s owner and property developer KSK Land Sdn Bhd.

The hotelier will provide services for the project’s branded residence towers as well as manage the hotel tower.

“We got it (the endorsement) recently,” declares a proud Joanne Kua, who is the managing director of KSK Land.

According to the 30-year-old, the recognition is a sign of “quality assurance” that will place 8 Conlay on the global map.

“Even though we are in the ETP because of Kempinski Hotel Kuala Lumpur, Kempinski is also servicing our branded residence.

“This means there is a level of service that we need to adhere to for the entire development. This has always been what we have been reiterating at KSK Land, where every development we undertake has to be of good quality, and the service we provide to customers is always on top of our minds,” Joanne tells StarBizWeek.

“Being the owner of Kempinski Hotel Kuala Lumpur, we are proud to be pushing the boundaries by bringing the Kempinski brand into the Malaysian market because we are one of the few – if not only – fully integrated branded residence developments in the KLCC area.”

Kempinski Hotel Kuala Lumpur is slated to open its doors in 2020, coinciding incidentally with the planned “Visit Malaysia Year” in that same year.

In terms of numbers, Kempinski Hotel Kuala Lumpur is projected to bring in RM19.8mil in gross national income or GNI in the year 2020, which is expected to grow in the following years. Job-wise, the hotel is expected to create some 780 employment opportunities when it opens its doors in January 2020, while committed private investments amount to RM360mil, shares Joanne. This RM360mil is the cost of developing the hotel minus the land cost.

Shedding more light on the ETP recognition, the KSK Group director for corporate strategy and investments Pankaj C Kumar says that these numbers have been audited by the panel of auditors at the Performance Management and Delivery Unit or Pemandu, the driver of the ETP initiative.

“We started engaging with them early last year. Under the ETP’s Tourism NKEA, the Government’s plan is to increase the number of four- and five-star hotels, as well as increase the room rate in Malaysia, which is still relatively lower as compared to the region. They also want to create more vibrancy within the KLCC and Bukit Bintang areas,” says Pankaj.

Kempinski Hotels chief executive officer (CEO) Alejandro Bernabé says the ETP recognition raises the profile of its upcoming hotel in Kuala Lumpur. “For us, this creates even bigger expectations not from the construction point of view, but from the deliverance of (service) expectations. With the opening of the hotel in 2020 coinciding with a planned Visit Malaysia Year, we have to ensure we get it right from day one, as we cannot afford to let the honour of the country down,” he says in the joint interview. Bernabé was in town for the launch of 8 Conlay’s signature sales gallery on Wednesday. During the launch, phase one of 8 Conlay’s branded residence units known as YOO8, serviced by Kempinski, was officially open for sale. A private viewing for a select few of around 200 comprising the who’s who of the corporate circle was held on the same evening of the launch.

With piling works having begun at the four-acre site, it seems to be all systems go despite the expected slowdown seen in the property sector by analysts.

And in what is seen as a “coup of sorts” in positioning and differentiating 8 Conlay, the company has teamed up with the crème de la crème of brand partners like internationally-celebrated design company YOO, local architect Ar Hud Bakar and Bangkok-based landscape design firm TROP other than the world-class hotel management services of Kempinski.

8 Conlay unveiled

8 Conlay owes its name to the auspicious address it sits on in Kuala Lumpur’s Golden Triangle. The development comprises of two YOO-interior designed branded residence towers of 57- and 62-storey blocks that will be connected via two sky bridges on levels 26 and 44. The development is complemented by a 68-storey five-star Kempinski Hotel, serviced suites and a lifestyle retail component.

YOO8 comprises two spectacular towers of 1,062 luxury branded residence, ranging from one to three-bedroom units.

Tower A of YOO8 will feature 564 units covering 700 square feet to 1,308 square feet selling at an average price of a whopping RM3,200 psf.

According to the company, 70% of Tower A has been reserved, with 80% comprising Malaysians.

Meanwhile, Tower B of YOO8 will feature 468 units to be launched some time next year.

Can 8 Conlay usher KSK into the competitive world of property?

8 Conlay’s selling price of RM3.200 psf, which is RM500 psf higher than the indicative RM2,700 psf it was only recently looking at, begs the question of whether it can sell in a soft market. Being the maiden venture for KSK Land, all eyes are on the company and its young and petite head honcho, Joanne. After all, 8 Conlay’s entry into the branded residence space is coming after a hiatus of similar launches in the city.

 

Joanne: ‘Price is reflection of interest.’

Joanne: ‘Price is reflection of interest.’

KSK Land is the property arm of KSK Group Bhd, which has insurance as its other core business. KSK Group was formerly known as Kurnia Asia Bhd that was privatised in 2013.

Joanne, who is also KSK Group’s CEO, is the daughter of the 62-year-old KSK patriarch and executive chairman Tan Sri Kua Sian Kooi.

While Joanne is playing a bigger role as the face of property in the KSK stable, it is no secret that senior Kua remains the driving force of the group.

KSK had sold its Malaysian insurance business in 2013 and diversified into property in the same year. It still operates insurance businesses in Thailand and Indonesia.

A quick check with property consultants indicate that the Banyan Tree branded residence is being transacted at prices between RM2,500 and RM3,000 psf, while St Regis was approaching the RM3,000 psf mark as at July estimates.

As for Four Season’s Place, a property consultant puts the going figure between RM3,000 and RM3,500 psf. “At RM3,200 psf, 8 Conlay is trying to position itself in the likes of Four Seasons. However, Four Seasons sold its units much earlier and it would be interesting to see if 8 Conlay is able to match Four Seasons, given the current market situation,” says the property consultant.

Joanne, however, remains optimistic that 8 Conlay would do well and prove the sceptics wrong.

“The price is a reflection of interest coming from the market. At the same time, if you were to compare what’s around the KLCC area, the pricing will justify the product.

“In terms of value, our location on Jalan Conlay is a strong point as in the branded residence market, buyers buy for location, which itself is capital preservation,” she says, pointing out that branded residences command a 30% higher value than luxury apartments based on a recent Knight Frank report.

Bernab: ‘Kempinski Hotel Kuala Lumpur in the ETP raises the hotel’s profile.’
Bernabé: ‘Kempinski Hotel Kuala Lumpur in the ETP raises the hotel’s profile.’

The disproportion between local and foreign buyers is due to the lack of marketing so far. “With the launch of the sales gallery, we are only now officially going out to market. We are eyeing all major cities like Singapore, Shanghai, Beijing, Taipei, Korea, Hong Kong, Japan and the Middle East.”

The project is eyeing an equal spread of local and foreign buyers.

Locally, she shares that interest has been coming from surprisingly “young professionals who are well-travelled and know of Kempinski”.

“A branded residence is something one buys for capital appreciation for the long term. The buyers are a discerning lot and yearn to have a certain lifestyle.”

In terms of benchmarking, Joanne says that 8 Conlay is being benchmarked with other similar branded residences around the world and that prices in Malaysia are still relatively on the low side.

“If you look at branded residences in London, they are really about infusing three components. One is a five-star luxury service provider which you cannot deviate from. The second is the design element. When you partner a good name for design, buyers feel “safe” knowing that what is to be given is of a certain quality and level.

“The third is the architecture component, which often tends to be overlooked. But people who buy a branded residence are discerning buyers who look for offerings that are limited and unique.”

A unique proposition

Joanne describes it as providing a seamless experience for buyers all the way from the outside to the inside.

“When the thought process began to develop 8 Conlay, we looked at the branded residence space around the world and asked ourselves what was really available here. This is when we decided that we had to differentiate ourselves from the rest and would be able to do it,“ says Joanne.

This in essence sealed the company’s partnership with Kempinski. “What is unique about Kempinski is that in every hotel in the different cities it operates, there is a combination of its heritage and the owner’s identity, which I think is a strength many hoteliers don’t have. That’s one of the reasons why we like Kempinski because of the flexibility that allows for both parties’ personalities to stand out. That makes a very good hotel,” says Joanne.

She shares that the affinity to Kempinski is not altogether a new idea to KSK.

“The (Kua) family has had experience with staying at different Kempinski Hotels as we travelled a lot. So, when we were looking to partner a hotelier, Kempinski naturally popped into our chairman’s mind fairly quickly,” she says.

At the same time, Kempinski was also scouting for opportunities in Kuala Lumpur as part of its expansion into this part of the region.

Water theme: A unit designed around the ‘water’ element. Upon entering, one is treated to the magnificent view of KL City Centre beyond the foldable doors.
Water theme: A unit designed around the ‘water’ element. Upon entering, one is treated to the magnificent view of KL City Centre beyond the foldable doors.

“Kempinski is quite exclusive. We choose our projects very carefully and make sure we work with partners that share the same common values.

“We are looking for exclusivity and authenticity and benchmark ourselves with the top residences in the world because customers who buy these residences have choices being well-travelled,” adds Kempinski’s Bernabé.

He reckons that having other branded hotel residences around 8 Conlay is not competition, but rather a good thing for the person who lives there because “if you live in a branded residence, you would want your neighbourhood to be of the same calibre”.

Drawing strength from brand partners

Joanne says 8 Conlay’s strength is the diversity of the international brand partners it has teamed up with, which would serve as an advantage as it markets overseas.

“Tower A is designed by Steve Leung and YOO. Steve Leung is akin to the “Andy Lau of design” in Hong Kong and China, while Kempinski has a strong presence in the Middle East and China,” says Joanne.

“For interior design, we have YOO which is not new to the branded residence segment. It knows what it means to take on the little details that people don’t see in space optimisation. This is why we market our residence fully furnished because that is the strength we want to show in one of our brand partners.

“And as far as the Kempinski name for service is concerned, you can only experience it if you have stayed in one of the Kempinski Hotels and understand the service standard it brings to the table.”

Incidentally, for Kempinski, YOO, Steve Leung and TROP, this is their first time in Malaysia. “The good thing about this is that it gives us a fresh pair of eyes, where we can innovate and do something different.”

Joanne says the company is also not strategising to compete with other players for its retail component. “In fact, we like it that Pavilion is close to us because it provides options for our buyers.

“We are not building a mall, we’re building a retail lifestyle quarter. We are going with the design first, as it needs to complement the whole development and be an attractive point on its own,” she says.

Taking a leaf out of its insurance book

Joanne believes that 8 Conlay’s unique concept will pan out as planned.

“When we conceptualised the project, our chairman Tan Sri Kua made it clear that he wanted to grow into a conglomerate. It’s not that we woke up one morning and decided that we wanted to go into property. The root of our business is in insurance, which is a long-gestation project. There is no denying that property is also for the long term, so there is no right or wrong time to go into this business.

“In insurance, we come from a base where it is all about customer service. So, when looking at property, we also looked at it from a completely different angle … we put ourselves in the customer’s shoes and decided what we could do differently.

“When we decided which direction we wanted to go into in property, the message was very clear – to make sure we added value to the customer.”

“Creating extraordinary living spaces is what we do. KSK Land is formed on this philosophy and our job here is to create something extraordinary for 8 Conlay.”

On her taking on a mammoth project at a relatively young age, Joanne says she does not see her role from a gender perspective. “Any CEO would face the same challenges as me. The important thing is mutual respect, and in KSK, we are a family. We work together and celebrate together.”

By Gurmeet Kaur The Starbiz

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Sino-UK ties herald golden time with West


  • Buckingham Palace prepares for Xi Jinping visit

    President Xi Jinping’s visit will also receive a warm welcome from the British Monarchy. Queen Elizabeth the second, who has met with some of the most famous leaders in recent history, is expected to greet President Xi at Buckingham Palace.

, , , , , ,,

Cameron’s meeting with the Dalai Lama in 2012 was a turning point in Sino-UK relations. For 18 months, Beijing gave London the cold shoulder, while at the same time developing cordial relationships with Germany and France. The low ebb in bilateral ties happened when Europe was deeply troubled. Although China had struggled with Germany and France over the same problem in 2007 and 2008, by 2012, China was much stronger and was deemed more influential. Now, China has become more attractive to Europe than ever, and that has served to transform the foundation of China-EU relations.

The UK has shown its adept diplomatic skills while re-calibrating its relationship with China. It was the first European nation to announce that it had applied to join the Asian Infrastructure Development Bank, an international financial institution proposed by China. This decision thawed the previous discord. Since then, the UK has committed itself to turning London into the biggest offshore yuan center other than Hong Kong. Cameron has received Ren Zhengfei, president of Huawei, one of China’s biggest telecommunications companies. He also invited Chinese companies to invest in a new nuclear power station project. Such actions have set examples in Europe.

As an old empire, the UK has declined, but its foundation is solid. With a special relationship with the US, London knows how to communicate with Washington over China issues.

London making a friendly gesture to China shows that Western countries are trying to redress their deep-rooted political prejudices and explore more potential to develop relations with China.

To a large extent, London’s friendliness toward China stems from the pursuit of more benefits, but it shows that the spillover of China’s development in many respects has become an irresistible attraction. Nothing can guarantee that country-to-country relations will develop on a certain course without having to worry about derailment. So far, historical experience has shown us that the bond of interests is one of the most reliable mechanisms that can maintain a reciprocal bilateral relationship.

China and the UK need each other. As the US is becoming weaker in exporting interests to Europe, China is providing more opportunities to the UK, while China also needs a Western country to set an example for a new China-West relationship.

It must be noted that political and ideological misunderstandings will remain a challenge for both sides. How to deal with them is a long-term issue.- Global Times

TPPA debate will continue although concluded


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Video: http://t.cn/RyEoAkLv http://english.cntv.cn/2015/10/09/VIDE1444344482352696.shtml

FINALLY, the negotiations on the Trans-Pacific Partnership Agreement have concluded. But that’s not the end of the story.

It will be many more days before the text is made public. Until then, there will still be so many questions unanswered.

Enough is known, from media reports and some leaked texts and analyses, to make some preliminary comments.

Firstly, trade is only one part of the TPPA. As important, or more important, are other issues including investment, intellectual property, government procurement, state-owned enterprises, labour and environment.

These other issues are at the heart of the country’s socio-economic structures and policies.

On these issues, the TPPA may have problematic elements for Malaysia. The Malaysian negotiating team has been fighting to lessen the adverse impacts of the main proposals.

It says it won concessions. But what these are, whether they are enough, and the effects are still not clear. What is clear is that “policy space” (a country’s freedom to formulate its own policies) would be very significantly narrowed as a result of the TPPA.

On intellectual property, the blow is perhaps the most obvious. Most patents filed in Malaysia are owned by foreigners. So when patent laws are made stronger, it will benefit foreigners who are the patent holders.

The enhanced monopoly given to patent holders will have adverse effects on Malaysian consumers who will have to pay higher prices and Malaysian companies which cannot make or import generic versions during the patent term.

The renowned medical group, Doctors Without Borders (MSF), condemned the TPPA as the “worst trade agreement for access to medicines”. Patients and treatment providers in developing countries will be the TPPA’s big losers as it will raise the prices of medicines by extending the monopolies enjoyed by the big drug companies and further delaying price-reducing generic competition, according to MSF.

The term of the patent may be lengthened (by adding time taken to register the medicine or approve the patent). Data exclusivity is to be granted for five years (or possibly for more than that, for the new drugs known as biologics), during which the generic companies are not allowed to rely on the test data of the originator firm.

On investment, the TPPA opens the road for foreign companies to be treated as well or better than locals, thus giving them rights of entry and ownership, and free transfer of funds, while prohibiting the host state from imposing performance requirements such as local content, technology transfer and joint ventures.

The TPPA also contains the investor-state dispute settlement system (ISDS), which enables foreign investors to sue the Government in an international tribunal.

Changes in government policies can lead to claims that this is unfair treatment and the foreign investor can ask for compensation for loss of expected future profits.

According to press reports, the TPPA has some safeguards such as diluting the ability of companies to make frivolous claims. Exactly what these are, is not known. The ISDS in any case remains intact as a powerful tool for foreign investors and puts Malaysia in a defensive position.

On government procurement, the space that Malaysia has had to make policies on how the Government does its procurement will be curbed. The preferences given to locals will now give way to national treatment for foreign companies.

Malaysia has been negotiating for more exceptions in terms of the “threshold” of level of expenditure or project value where preferences for locals can still be given, and an exception for bumiputra policy. Details of the final agreement are still not known.

On state-owned enterprises (SOEs), the TPPA will impose disciplines and rules on how these SOEs operate, the subsidies they can or cannot get, and their need to be non-discriminatory when purchasing materials (they cannot give preference to local companies).

The advocates of the SOE chapter seem to want to curb the advantages that SOEs may have, and enable the foreign companies to more effectively compete and take some of their market share. Malaysia has also been fighting for exceptions for some of its SOEs. The final outcome of this is not yet known.

Investment policy, government procurement, SOEs and access to medicines are right at the heart of Malaysia’s political economy and socio-economic structures.

Policies that have been at the centre of the country’s economic and political development have now to be defended as exceptions and flexibilities, and there is a limit to what the other TPPA partners will accept.

The chapters on these issues are bitter pills to swallow and the debate will continue on whether they are worth swallowing.

The direct trade aspects of the TPPA should have such enormous benefit that they more than offset the disadvantages of the other issues. Otherwise, why join the TPPA?

However, Malaysia’s tariffs are on average higher than those of the United States, the main country with whom we do not yet have a Free Trade Agreement.

If tariffs go to zero through the TPPA, Malaysia will thus have to cut its tariffs by more than the US. Whilst we may gain extra exports through the TPPA, we will also have to import more. There is no guarantee that the TPPA will lead to a better trade balance, and there could be an opposite result.

The debate on the TPPA will intensify now that the negotiations have ended. The text should be made available as soon as possible, so that the discussions can be based on the agreement itself. After the TPPA, it will take another two years for the agreement to be ratified and come into force.

Thus, the TPPA is not a “done deal” and the real debate may only be beginning now. It is unfortunate that till now the text is not available.

BY MARTIN KHOR

Martin Khor (director@southcentre.org) is executive director of the South Centre. The views expressed here are entirely his own.

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Asian finance uncertain future


While Asians think long term, their institutional framework remains short term.

Global factory: A cargo ship waits to be loaded with shipping containers at a port in Qingdao, Shandong province. China’s emergence consolidated Asia’s key role as the global factory, supplying the rest of the world with all manner of consumer goods. – Reuters

ANYONE who thinks he can predict the future of Asian finance has to know first how the Asian real economy will be doing. Projections of the future, based on past data, are notoriously inaccurate. But there are general scenarios that we can paint about the mega trends in the global economy that will certainly shape what will happen to Asia.

Roughly every five years, the US National Intelligence Council (www.dni.gov/NIC_2030_project.html) has been publishing scenarios about the future, the latest being for 2030. There are no straight line projections into the future, but rather factors that we do have some knowledge about that will impact on future outcomes.

The key trends are well known, such as demographics, urbanisation, technology and social media, globalisation, climate change and growing risks through social conflict, including terrorism, civil disruption and regional wars. The main trend that makes life much more complicated is the fact that we have moved from a uni-polar world where the US dominant position has weakened relative to the other major players.

Not only are there new powers emerging, such as the BRICS countries, but also non-state players like Isis that can fight across borders without a national identity. This makes coordinated and consistent action much more difficult to manage, which is why there is little agreement at the level of the United Nations, International Monetary Fund and other multilateral institutions.

The McKinsey Global Institute has tried to help corporate captains and policy-makers frame the uncertain future for the period 2015-2025 into basically four possible outcomes. The best scenario is a globally coordinated and distributed growth underpinned by broadening productivity increases.

Next are pockets of global growth with imbalances. Scenario three is low but stable global growth, with lots of muddling through. And the worst is continuing rolling regional crises with volatile and weak growth all round.

Stimulus packages

Most of what is likely to happen would depend on what is happening near term to stimulus packages like quantitative easing (QE) and the outlook for energy prices. Over the long term, the aging of advanced economies, rapid urbanisation (or labour migration) and technology and global connectivity will shape the final outcome.

The near-term outlook is much bleaker in the post-crisis adjustment period. Having shot the world full of steroids in terms of QE, the world’s central banks are moving in divergent paths. The Fed wants to withdraw, while the European Central Bank and Japan are still bent on using very loose monetary policy. But post-crisis, advanced country growth are roughly 2% below potential, and their demand for Asian imports are likely to remain weak.

Which is why Asian finance would depend on what happens in the next decade to the Asian global supply chain. Historians remember that the Japanese led the post-war revival of the Asian economies by being the first to supply the demand for consumer goods by the West.

After growth in Japan peaked in the 1980s, Japan invested heavily in the rest of East Asia to exploit cheap labour and increase its productive capacity. China’s emergence consolidated Asia’s key role as the global factory, supplying the rest of the world with all manner of consumer goods.

The success of the Asian global supply chain meant that Asia ran a current account surplus with the rest of the world, but mostly with the US. With rising incomes and savings, Asia became a net lender to the world, further stimulating global growth as domestic investments, an emerging middle class and demand took most of Asia to middle-income levels.

But such excessive savings were never properly intermediated within Asia. Instead, the excess savings were parked in New York and London, returning to Asia in the form of foreign direct or portfolio investments. Fundamentally, Asia did not upgrade its bank-dominated system of using short-term deposits to fund long-term investments.

Despite aging population, the level of long-term pension and insurance funds and therefore the institutionalisation of long-term savings remained small compared with the banking system.<

Low rate policies

Much of this has to do with a penchant for low interest rate policies, beginning with the Japanese attempts to reflate its economy with ultra-loose monetary policy. Excessively low interest rates meant that investments may not go to the best use of funds, while speculation in asset bubbles became more profitable than upgrading total factor productivity.

China’s stock market gyrations this year symbolise the contradictions within Asia’s financial system. On the one hand, the stock market should be the source of long-term equity much needed for giving the whole economy an equity cushion against overleveraged fragilities.

On the other, the stock market became a casino for retail punters with margin funding.

Which is why the Fed’s decision on raising interest rates has so much impact on the future of Asian finance, because New York and London remain an important intermediary for Asian excess savings.

Capital outflows back to New York and London occur precisely because as Asian excess savings unwind, interest rates will adjust upwards and Asian asset bubbles will accordingly also unwind.

The irony of Asian growth is that while Asians think long term, their institutional framework remains distinctly short term. Asian pension and insurance funds remain too small and lack the firepower and innovative imagination to be the market stabilisers that are needed for the long haul.

The Japanese pension system is the classic example of Asian institutional weakness. By putting the bulk of its savings in domestic government bonds, the system is trapped in terms of returns, since the large Japanese fiscal deficit and debt overhang (roughly twice GDP) can only be sustained by low interest rates. We then have the world’s largest net saver becoming the largest borrower, owing everything to oneself

Can the right hand of an aging person rescue its left hand? Over any demographic cycle, it is the young that will support the old, so one must invest in the young for the future to be bright.

The future of Asian finance is less a technical issue and more a mindset problem. Unless Asian policymakers start thinking more about long-term funding for its young (in thinking as well as action), it will continue to be subject to the whims of monetary policy decision in Washington DC.

Andrew Sheng writes on global issues from an Asian perspective.

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A region evolves with rising China


South-East Asia’s complex big power relations demand careful and considered understanding, where frequent complications and familiar gut reactions do not help.

WHEN countries have difficulty relating to a rising China, part of the problem lies in not understanding where China is heading and not knowing what it will become.

The sheer scale of China’s development and the weight of its trajectory mean that the impact of its rise on the rest of Asia and the world is bound to be considerable and profound.

As a frame of reference, the future of today’s China is often seen in the context of its past: a “Middle Kingdom” entity, the heart of an Asian tributary system, a regional superpower with global pretensions whose once closed-door policy is opening to the world.

Yet none of these references fits because modern China’s pace of change is as rapid as it is vast. Not only is it a post-Deng China, it is now into the fourth- and fifth-generation leadership of post-Dengist society.

A sense of a likely future China may then be deduced through elimination, by discarding what it is unlikely to be.

These include a communist superpower, a nation shaped by a distinct ideology, and one led by a powerful charismatic individual. But what of those things, admittedly few, that it will still be?

One of these is rule by the Chinese Communist Party (CCP), particularly since single party rule continues to be a central bastion of the status quo. Yet even this requires qualification, if not some revision, and is already subject to much speculation.

The CCP has had to undergo some redefinition as circumstances evolve. The state socialism it championed underwent a social(ist) market phase to emerge as state capitalism.

Ideology continues to be diluted as dogma fritters away. Conservatives and reformists both within and outside China agree the trend is irreversible if not also inevitable.

Just about the only thing that a future China is still certain to be is a unitary state. But even this has to be qualified again.

What is now regarded as Greater China – the People’s Republic of China on the mainland, Hong Kong, Macao and Taiwan – are unlikely to be fused into one singularly cohesive whole anytime soon.

Yet they are moving together towards a unitary economy, the basis of the modern nation state. Such a trend is beyond the protestations of democrats and the comprehension of many strategists.

At the same time, provinces are slowly moving towards greater autonomy in economic matters, including in dealings with neighbouring countries. A country as large as China cannot endure too long under strict centralised rule.

And China has endured longer than all others, with the country now into its fifth millennium of continued statehood. These trends and movements take time and may seem imperceptible for other countries, but they are par for the course with China’s enormous timelines.

For decades now, Chinese authorities have also introduced elections at local levels with invited inputs from the Carter Center. Voting has been practised in village and provincial levels, and despite occasional fits and starts the trend is towards a controlled political opening with assured stability.

All of this contributes to the near-incomprehension of today’s China on the part of external observers. A survey of their attitudes, assumptions and responses in any given week attests to this reality.

Questions of whether China (meaning Beijing) can ever govern Taiwan, or even understand Hong Kong, are typical. The real risk of observers not seeing the wood for the trees is ever-present.

A debate of sorts has emerged over China’s likely reaction to a possible win by Taiwan’s Democratic Progressive Party (DPP) in next January’s election. Pessimists who fret over their own cynical pronouncements fail to realise that China is playing for bigger stakes than petty party feuding.

China’s interest in Taipei is Taiwan, not necessarily a Kuomintang (KMT) Taiwan. A lately declining KMT under President Ma Ying-jou has sufficiently energised pragmatists in Beijing to be diplomatic towards the DPP.

Another perennial issue is the presumed rivalry between the US and China. Although competition exists between them, they have more in common than at variance for now and the foreseeable future.

Their shared interests include international security and a single global economy in which both hold the largest stakes. Rivalry in these core areas compromises the interests of both without enlarging opportunities for either.

An understanding of that basic reality is shared between US and Chinese leaders, but apparently not by Japanese ones. The Abe administration is still stuck between old wartime anxieties and proudly snubbing Beijing.

However, China should also not expect anything but Abe’s cancellation of a visit on Sept 3. The occasion, with Western leaders absent, is being presented by some in China as celebrating its victory over Japan.

China: Military parade not aimed at any country

China says its upcoming September 3rd military parade is part of commemorations for the 70th anniversary of its victory in the war of resistance against Japanese aggression, and is not specifically aimed at any country.http://t.cn/RyzoMBy

Nonetheless, the Abe government remains an activist one in provoking competition with China over military issues. Its White Paper released last month inflates China’s maritime military capabilities and even conflicts with US calculations.

Besides the US, Taiwan and Japan, the other barometer of China’s rise as seen through its foreign relations is Asean.

China regards Asean wariness of its territorial assertiveness as limited and negotiable, since not all member countries have rival claims to offshore territory. But Beijing may seriously be underestimating Asean’s sense of solidarity, given not just Asean’s community-building agenda but also its common resolve to develop community cohesiveness.

The established links between China and Asean’s newer CLMV members (Cambodia, Laos, Myanmar, Vietnam) are both limited and fraying in places. Beijing needs to rebuild trust and good faith within Asean as much as in North-East Asia.

China has thus emphasised multi-level, multi-sectoral joint ventures both bilaterally and collectively. Its proposals for a Maritime Silk Road and a One Belt, One Road link to Europe are backed by the China-Asean Maritime Cooperation Fund, the Asian Infrastructure Investment Bank, the New Development (Brics) Bank and China’s own solvency.

On the ground however, Asean collectively seeks enlarged trade volumes with China. However, China’s currency devaluations and the subsequent jolts to regional currencies compromise these goals.

With Indonesia, China is extending cooperation in fighting drug trafficking as Jakarta favours using the yuan for bilateral trade. With Malaysia, China is building linkages in education and industrial development.

Thailand’s post-coup government is seen as leaning towards China, thanks in part to a US snub. Now Thai-Chinese ties are growing over purchases of stockpiled Thai rice and even the prospect of a Kra Isthmus canal.

China’s relations with Vietnam and more so the Philippines will require more time and work. Ironically, Unctad trade data identifies the Philippine economy as the biggest regional beneficiary of China’s rise.

Beijing’s ties with the other Asean countries may be less complicated but still require attention and constant tending. Its record of fully understanding Asean is not impressive.

Overall, Beijing’s relations with Asean and its member nations are economic, diplomatic and socio-cultural, without political interference in their domestic matters. This contrasts with Washington’s largely military posturing and its political pressures on issues of democracy and human rights.

China’s impact on this region is likely to remain non-political and non-military – differing from US interaction. This asymmetry makes up much of South-East Asia’s strategic status quo.

Whether and how it will endure, and whether it deserves to remain, still have to be seen.

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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Can Malaysia’s household debt at 87.9% in 2014 be reduced to 54% ?


BEING a teenager, my granddaughter started to pick up interest on how the economy works, what are the real assets and liabilities in one’s financial planning. As the topic itself can be slightly “dry”, I made an attempt to discuss it in a way that was easier for her to digest.

“Our national household debt to GDP ratio edged up to 87.9% last year. Is the number alarming?” she asked one day.

“It depends. We have good debts and bad debts in life. For example, 10 years later, our new cars may have depreciated more than 80% and our new clothes would have been worn out. Those are liabilities. On the other hand, houses are assets as they will appreciate in the long run. Debts which are backed by appreciating assets are considered good debts,” I said.

As she nodded in agreement with my simple explanation of good debts and bad debts, her question has piqued my curiosity to look into the details of our household debt.

Overall, is our nation having more good debts or bad debts?

Bank Negara report shows that our household debt was at RM940.4bil or 87.9% of GDP as at end of 2014. Residential housing loans accounted for 45.7% (RM429.7bil) of total debts, hire purchase at 16.6%, personal financing stood at 15.7%, non-residential loans were 7.7%, securities at 6.5%, followed by credit cards and other items at 3.9% respectively.

At first glance, our residential housing loans were the highest among all types of household debts. However, a recent McKinsey Global Institute Report highlighted that in advanced countries, mortgages or housing loans comprise 74% of total household debt on average. As a country that aspires to be a developed nation by 2020, our housing loans that stand at 45.7% is considered low. In other words, we are spending too much on other depreciating items instead of appreciating assets like houses.

If advanced economies, which are usually consumer nations, have only 26% debts on non-housing loans, we shouldn’t have as high as 54% loans on items such as hire-purchase (which are mostly cars), personal loans, credit cards and others.

If we were to follow the household debt ratio of advanced economies, our housing loans of RM429.7bil should be at 74% of total household debts, and other loans should be reduced from 54% to 26%, i.e. from RM510.7bil to RM150.9bil. With such reduction, total household debt would be slashed significantly from RM940.4bil to RM580.6bil (existing housing loans plus reduced non-housing loans), the amount would be at 54.2% of GDP instead of 87.9%.

I am wondering why we can’t have a household debt to GDP ratio of 54.2% as illustrated above. Are we spending too much on depreciating items?

Non-housing loans comprise mainly borrowings for cars, personal loans and credit cards. Car value depreciates about 10% to 20% per year based on insurance calculation and accounting practice. Borrowings for personal loans and credit card are also likely to depreciate over time which can be dubbed as “bad debt”.

Perhaps it is time for the Government to introduce massive cooling off measures for non-housing loans in order to curb bad debt in our household debt.

According to our Deputy Urban Wellbeing, Housing and Local Government Minister, our homeownership rate currently stands at 50% and the Government strives to increase the number with more affordable homes. As a comparison, almost 85% of Singaporeans are homeowners.

We can expedite the above vision if more stringent measures are imposed on non-housing loans, it will free up more resources for household financial planning. The rakyat should be encouraged to secure a roof over their heads with effective execution of affordable housing policy by the Government.

It is time to re-look our debt categories and reallocate our resources appropriately. If we are willing to cut back on cars, clothes, shoes and other depreciating items, reducing a household debt to GDP ratio of 54.2% is not only an aspiration, but an achievable reality.

By ALAN TONG Food for Thought

And the more beneficial effect is, more rakyat will have the financial resources to own a house, which is both a shelter and an appreciating asset.

■ FIABCI Asia-Pacific regional secretariat chairman Datuk Alan Tong has over 50 years of experience in property development. He is also the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com.

 

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The global centre of gravity shifting to Asia


Asia_danny-quah-east-shift1“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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