America vs China: odds narrowing


Leaders meet: A file picture showing Trump welcoming Xi to the Mar-a-Lago estate in West Palm Beach, Florida during the latter’s visit to the US recently. Xi has a growing economy too behind him, whatever the hiccups. Trump only promises one, without any clarity or logic. – AFP

THE contrast could not be greater. While United States president Donald Trump raves and rants – and belts this or that person – China’s president Xi Jinping looks measured and assured as he offers a global future to the world.

Xi is no angel of course, as his political opponents would know, but his system conserves and protects him, as Trump’s would not. If only Trump were the leader in a centrally controlled political order – but even then his temperament would blow it apart.

Leadership, like politics, is the art of managing the possible. Trump does not understand this, and does not know how. Xi does, knows why, and knows how.

He has a growing economy too behind him, whatever the hiccups. Trump only promises one, without any clarity or logic.

His plan to boost the American economy, based primarily on slashing corporate tax from 35 to 15%, is likely to flounder in an American Congress seriously concerned about its causing the fiscal deficit to balloon.

Already Trump has had to climb down from trying to secure funds from Congress for his dreaded border wall with Mexico in order to avoid budgetary shutdown in September.

The stock market has fallen back from the boost to the price of banks and industrial products following his election. Interest now has returned to what might be termed “American ingenuity stocks” such as Google, Apple and Microsoft on Nasdaq – a proxy for much that is great about America, which Trump’s immigration and closed-door policies threaten to destroy.

Meanwhile Xi has been rolling out his “Belt and Road” plans – something he first envisaged at the end of 2013 – for greater world connectivity and development, committing funds from China and the Asian Infrastructure Investment Bank, and engaging global financial institutions such as the World Bank.

Malaysia, for instance, will be an actual beneficiary with additional projects thrown in. China is Malaysia’s largest trading partner. But the US has not been a laggard, being Malaysia’s fourth largest trading partner. And indeed the US remains the largest foreign investor in Malaysia, both new investments and total stock.

A staggering statistic not often recognised is that total American investment in Asean is more than its investment in China, Japan and India COMBINED!

The point, however, is that this position is being eroded. Trump’s policies are hastening this process. Abandonment of the Trans-Pacific Partnership (TPP) means there is no American strategic peaceful challenge to the Chinese economic juggernaut in Asia-Pacific.

Balance is important to afford choice. Absence of choice means serious exposure to risk. Price, quality and after-service standards are affected, not to mention a new geostrategic economic underlining.

Over-dominance by China in the region is a price not only countries in the region will pay, something that most probably is on Trump’s mind. It is a price that America too will sooner or later have to pay.

China’s Belt and Road proposition is not without its challenges, of course. India is deeply suspicious of the connectivity with Pakistan which cuts across India-claimed Azad Kashmir, about 3000km of it.

The link to the Pakistani port of Gwadar, in southwest Baluchistan on the shores of the Arabian Sea, is seen by India as a Chinese presence at the entrance to the Indian Ocean and a hawk eye on the Indian sub-continent. With the Chinese also in Sri Lanka, India is circumspect on China’s Belt and Road initiative.

There have also been commentaries on some uneconomic linkages which extend right across the English Channel.

All these reservations, however, do not take into account the benefit of connectivity to economies, the time it often takes to get those economic benefits and, most of all, the patience, persistence and long view of history of China and its leaders.

One of the most striking things about the Belt and Road map is that America is not there. Of course, Xi Jinping does not preclude America just as much as the US did not say that China was not permanently excluded from the TPP. And of course, in the Old Silk Routes and shipping lanes, the New World – America – had not been discovered.

But in their revival, led by now rising and then ancient China after 150 years of national humiliation to the present time, there is the irony that the last three quarters of a century of America world dominance is on course to be marginalised, if not supplanted, by the old Eurasian world centred in an ancient civilisation.

Trump does not seem to understand history. The art of the deal is purely transactional. Short-tempered and short-term gratification does not a strategy constitute.

So we have leader, system and economic promise distinguishing the two leaders – and the two countries.

Instead of America first, what we are seeing is Trump hurrying America’s decline relative to a rising China.

We are not seeing a world changed from people wanting to be like a kind of American to being people wanting to be a kind of Chinese. Actually, the Chinese people themselves want to be like a kind of American, with all that wealth, influence and power.

What we are seeing is China – not America – leading the way to that desired, if not always desirable, end. It is China that is driving the next phase in the evolution of world economic development.

Under Xi Jinping, China appears to be heroically moving towards an epochal point in its Peaceful Rise. With Donald Trump, America is being led backwards and inwards, with all the problems of its governance now all coming out. It is in grave danger of losing in the peaceful competition.

Not knowing how to play that game – certainly under its current President – there remains the danger of the status quo power lashing out against the rising one.

The Greek historian Thucydides observed: “It was the rise of Athens and the fear that this instilled in Sparta that made war inevitable.”

A Harvard professor has studied what is now called the Thucydides Trap and found in 12 out of 16 cases in which this occurred in the last 500 years, the outcome was war.

There are many potential flash points against the background of China’s rise – the North Korean Peninsula and the placement of THAAD missiles in the south, the South China Sea – where Trump may temperamentally find cause to lash out. This is the trapdoor he might take the world down because of failure to compete peacefully.

By munir majid – crux The Star

Tan Sri Munir Majid, chairman of Bank Muamalat and visiting senior fellow at LSE Ideas (Centre for International Affairs, Diplomacy and Strategy), is also chairman of CIMB Asean Research Institute.
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2017 – expect a bumpy year ahead worldwide


This will be a year like no other, as there will be a thunderous clash of policies, economies and politics worldwide. We should prepare for the challenges ahead and not be only spectators.

THE new year has dawned. Everyone agrees 2017 will be very interesting.

It will also be most problematic. From politics to economics and finance, we’ll be on a roller-coaster ride.

With his extreme views and bulldozing style, President-elect Donald Trump is set to create an upheaval, if not revolution, in the United States and the world.

He is installing an oil company chief as the Secretary of State, investment bankers in key finance positions, climate sceptics and anti-environmentalists in environmental and energy agencies and an extreme rightwing internet media mogul as his chief strategist.

US-China relations, the most im­­por­­tant for global stability, could change from big-power co-existen­ce, with a careful combination of competition and cooperation, to outright crisis.

Trump, through his phone call with the Taiwanese president and after, signalled he could withdraw the longstanding US adherence to the One China policy and instead use Taiwan as a negotiating card in overall relations with China. The Chinese perceive this as an extreme provocation.

He has appointed as head of the new National Trade Council an economist known for his many books demonising China, including Death by China: Confronting the Dragon.

Trump seems intent on doing an about-turn on US trade policies. Measures being considered include a 45% duty on Chinese products, extra duties and taxes on American companies located abroad, and even a 10% tariff on all imports.

Thus 2017 will see protectionism rise in the United States, the extent still unknown. That is bad news for many developing countries whose economies have grown on the back of exports and international investments.

Europe in 2017 will also be pre­occupied with its own regional problems. The Brexit shock of 2016 will continue to reverberate and other countries facing elections will be less open to the world and become more inward-looking.

As protectionism, xenophobia and narrow nationalism grow in Western societies, Asian countries should devise development strategies based more on domestic and regional demand and investments.

2017 may be the year when resource-rich China, with its deve­lopment banks and its Belt and Road Initiative, fills in the economic void created by Western trade and investment protectionism.

But this may not be sufficient to prevent a finance shock in many developing countries now beginning to suffer a reversal of capital flowing back to the United States, attracted by the prospect of higher interest rates and economic growth.

In 2017 Malaysia will be among the countries most vulnerable to this, due to the large foreign ownership of local bonds and shares.

As capital flows out and the currency depreciates further, the affected countries’ companies will have to pay more for servicing loans contracted in foreign currencies and imported machinery and parts, while consumers grumble about the rising cost of living.

On the positive side, exporters will earn more in local currency terms and tourism will increase, but this may not be enough to offset the negative effects.

Thus 2017 will not be kind to the economy, business and the pockets of the common man and woman. It might even spark a new financial crisis.

The old year ended with mixed blessings for Palestinians. On one hand, they won a significant victory when the outgoing President Barack Obama allowed the adoption of a United Nations Security Council re­solution condemning Israeli settlements in occupied Palestinian territories by not exercising a veto.

The resolution will spur international actions against the expansion of settlements which have become a big obstacle to peace talks.

On the other hand, the Israeli lea­dership, which responded defiantly with plans for more settlements, will find in Trump a much more sympathetic president. He is appointing a pro-Israel hawk as the US ambassador to Israel.

With Trump also indicating he will tear up the nuclear power deal with Iran, the Middle East will have an even more tumultuous time in 2017.

The commencement of floods in some parts of Malaysia during the holiday season, ironically following days of the taps going dry for millions in the Klang Valley, is a pre­lude to the environment continuing to be a critical issue in 2017.

Unfortunately, low priority is given to the environment. Hundreds of billions of dollars are allocated for highways, railways and urban buildings but only a trickle for conservation and rehabilitation of hills, watersheds, forests, mangroves, coastal areas, biodiversity or for serious climate change actions.

2017 should be the year when priorities change, that when people talk about infrastructure or deve­lopment, they put actions to protect and promote the environment as the first items for allocation of funds.

This new year will also be make-or-break for climate change. The momentum for action painfully built up in recent years will find a roadblock in the United States as the new president dismantles Oba­ma-initiated policies and measures.

But Trump and his team will face resistance domestically, including from state governments and muni­cipalities that have their own climate plans, and from other countries determined to carry on without the United States on board.

Indeed, if 2017 will bring big changes initiated by the new US administration, it will also generate many counter-actions to fill in the void left in the world by a withdrawing United States or to counter its new unsettling actions.

There are opportunities to think through and alternatives and re­forms that are needed on global and national economies, on the environment and on geo-­politics.

Most of the main levers of power and decision-making are still in the hands of a few countries and a few people, but there has also been the emergence of many new centres of economic, environmental and intellectual capabilities and community-based organising.

2017 will be a year in which ideas, policies, economies and politics will clash, thunderously, and we should be prepared for the challenges ahead, not just be spectators.

Global Trends 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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Trump and China’s bumpy ride begins


Trump’s diplomacy
Hot button: Trump’s unpredictability is making him a big topic in China.— AFP

THE rest of the world will have to fasten its seat belts while the current worrying clash of superpowers China and the United States plays itself out. Although the saga of the underwater drone ended peaceably earlier this week, the drama signalled that the competition between the two has entered a new era. With help from the ubiquitous social media, their diplomatic engagement is taking place in real time swiftly, unpredictably and amid considerable tension.

The inauguration of President Donald Trump on Jan 20 is expected to see US-China ties transformed into a guarded quasi-friendship requiring day-to-day reassessment. The stability that prevailed during the eight years of the Obama administration is unlikely to survive. Trump is given to knee-jerk reactions and ill-considered grandstanding for the sake of quick gain and publicity, as well as for his brash pursuit of the art of the deal, none of which bodes well for US’ relations with Beijing.

Still a month from taking office, Trump has already endangered his country’s long-standing recognition of the One China Policy by accepting a phone call from Taiwanese leader Tsai Ing-wan, a breach of protocol adopted after Washington formally recognised communist China in the early 1970s.

President Barack Obama immediately warned that any shift from this policy would have a serious impact on American dealings with Beijing, an important trading partner and backer of the US economy. Aiming to renegotiate extant overseas deals, Trump does not appear to care, and seems ready to test Chinese mettle on every issue.

China’s regional neighbours are aware that the nature of its relationship with the US increasingly depends on Beijing’s dealings with other countries, including the 10 nations of South-East Asia.

The attitude in the Philippines has radically changed. Whereas Manila traditionally regarded the US as the region’s military guardian, current President Rodrigo Duterte- taking umbrage at perceived American slights-has welcomed Chinese overtures. Thanks to Washington’s tendency to overreach in its authority, perceptions elsewhere are not so different.

Thus, its chief justification for wielding influence here to serve as a stopgap against China assertiveness is on the wane.

The Philippines’ abrupt refusal to be a pawn in either of the major powers games is admirable, even if it comes with risks. With sovereign territory in the South China Sea at stake, Duterte is taking a gamble in realigning with Beijing, but if those two countries can settle their differences amicably and equitably, it will have been worthwhile. The other South-East Asian claimants to maritime territories in dispute are sure to follow suit.

During the Trump presidency, more than at any time before, China has a golden opportunity to show the region and the world that it is rational and responsible in its overseas dealings. With goodwill and a commitment to peace and stability, it can take advantage of America’s loss of credibility over the election of a man who is ignorant of foreign affairs and absent in the spirit of international diplomacy. Patriotism and profit alone guide Trump, and nearly half the American electorate stands by him.

Also to be expected is a cautious realignment among the more developed Asian powers particularly Japan, India and South Korea which might pursue greater mutual cooperation as a safeguard against potential American error and affront under Trump.

No one will be surprised, meanwhile, if President Trump cosies up to Russia. While he and Vladimir Putin deny there is any special bond between them, evidence to the contrary has mounted. But using Russia as a foil against China would be detrimental to American financial and geopolitical interests. And, for Asia, while Russian investment is welcome and valued, Moscow has only a modicum of Beijing’s economic clout.

Sources: The Nation/Asia News Network

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US electoral democracy is failing, enter the China model? 21st century belongs to strivers

US electoral democracy is failing, enter the China model? 21st century belongs to strivers


Authoritarian regimes and dictators around the world must feel vindicated by the just concluded presidential race in the United States, the one-time champion of liberal democracy that had the habit of exporting if not imposing its political system and the accompanying values to the rest of the world.

It is not so much the final outcome of last week’s race as the entire democratic process that is being questioned or scrutinized in and outside the US.

In the run-up to the Nov. 8 election, spectators of American politics were served with the tale of a contest between two candidates, both with problematic backgrounds and flawed characters.

More negative revelations about the candidates emerged as the election day neared to raise serious questions about their credibility and competency of whoever is elected to lead the world’s most powerful country.

The American media had rightly if not unkindly described this as an election where voters had to choose between the lesser of two evils.

When that choice fell on Donald Trump rather than Hillary Clinton, there was more indignation, both at the outcome as well as the electoral process.

What went wrong with the system, many people asked?

Is the American electoral system failing that we should question its effectiveness and efficiency in picking national leaders? Or are we seeing signs of fatigue in the system that has evolved in the last two centuries? To describe this as a systemic breakdown of the electoral process would probably go too far, and would give pretext for countries to conveniently discard or to forget liberal democracy.

Maybe it is worth recalling that just eight years ago, the same system gave America its first black president in Barack Obama, who was reelected in 2012. This year, the same system almost produced the first US woman president.

Still, the 2016 American presidential race, from the process to the final outcome, gives plenty of ammunition to those who doubt the ability of liberal democracy in producing great leaders.

The timing could not be worse, coming as the US superpower status is waning, through a combination of its own failing strengths and the rise of China challenging America’s supremacy.

Liberal democracy a la America had its strong appeals in recent history that it seemed to be the natural or only course for any nation to go. Theories were postulated about the first wave, second wave and third wave of democracy. There may not be a fourth wave, at least not until nations are convinced that this is really the best way to move forward.


Enter the China model
.

Because it is a system that has proven efficient and effective, and certainly delivered the economic goods, it is now being touted as the better option than liberal democracy for developing countries looking for the right kind of nation-building model, including in the way they pick their leaders.

One caveat about the China model, however: Forget freedom and basic rights, the fundamental tenets that underpin liberal democracy.

What matters is that the system brings economic growth and development and raises people’s prosperity. The suppression of some freedoms and rights — big or small is relative — is the price nations have to pay to ensure stability, a prerequisite to development.

Freedoms and basic rights can come later, if at all.

In The China Model — Political Meritocracy and the Limits of Democracy (2015, Princeton University Press), author Daniel A. Bell shows how China introduced a meritocratic system that has produced leaders the nation can be proud of.

The leaders that have come out of this system have consistently produced rapid growth rates that turned China from a large poor developing country to the second-largest economy in the world in these last two decades.

The system still ensures periodic changes of national guards to prevent China from becoming a dictatorship. It offers a degree of predictability to ensure stability, a factor sorely missing in liberal democracies. It is not a perfect system by any measure, but it is a model that has evolved in China out of the socialist system that the founding fathers of the People’s Republic of China launched in 1949.

But if countries are not comfortable with the costs to freedom and basic rights that the China model entails, they should probably take another look at the US democracy, and consider 2016 as an aberration rather than a system that is failing, a system that is suffering from fatigue and needing reforms.

Americans need to look at the role of the political parties and the way they produced presidential candidates. Surely a country of 320 million people deserved better choices than Trump and Clinton. How their track records and flawed characters got past the political screening system is simply baffling.

The US electoral system — including the primaries and the conventions — is simply too long and too expensive for any country to emulate. For that price, Americans should feel they are being shortchanged by the system.

This year’s voter turnout, estimated at 58 percent this year, is another reflection of the growing public apathy toward the electoral system or the candidates it produced.

The 2016 American presidential race saw the ugliest and most divisive campaigns ever seen that inevitably would leave behind a sour taste, even if Clinton gave a gallant concessionary speech.

The US election has become one big and long political show of selecting the most popular, but not necessarily the most capable candidate. One could compare it with American Idol, but even this reality TV show has been pulled out due to viewers’ fatigue.

If this is the picture of democracy, then many nations around the world would want none of it.

The US electoral system actually has built-in self-correcting mechanisms such as the two-term limits and the various institutional checks-and-balances to prevent the emergence of a despot.

The First Amendment, and the independent media, ensure that people will always have the right to speak up and to be heard, even if they have made the wrong choice.

But these may not be enough to restore the faith in liberal democracy in producing great leaders. This faith has further waned after the 2016 US presidential election. One could also throw in Brexit as another product of a democratic exercise in the Western world that has gone wrong.

In many countries, liberal democracy is no longer considered the best political system in selecting national leaders. It is not the only way forward. The China model has never been more attractive alternative in some countries, including Indonesia, still grappling with nation building.

America can help restore faith in liberal democracy by carrying out the necessary electoral reforms. It needs to show once again that democracy is the best political system in selecting leaders because it is based on the principles of respecting freedoms and basic human rights.

Yes, America can be great once again. But probably it would be asking too much from the new elected president.

By Endy Bayuni, Editor-in-chief of The Jakarta Post

Can China overtake US to lead the world?

Trump’s trade tempest

Discussions were running high on global governance among Western public opinion on the eve of the Asia Pacific Economic Cooperation (APEC) leaders meeting in Lima, Peru. Some Western media outlets hold the US is giving up its global leadership following Donald Trump’s election as US president on promises to abolish the Trans-Pacific Partnership (TPP) and withdraw from the Paris climate deal. They believe a rising superpower, China, will replace the US to lead the world.

Trump’s campaign remarks do reveal his intention to retract US global strategy. He seemingly wants to focus more energy and resources on reviving the US economy and social development. But as the US has been central to globalization, Trump is unlikely to take on the traditional isolationist road.

The West likes to use “leadership” to define the function of a major power. Admittedly, different countries have different powers and obligations due to varied national strength. The world after the Cold War was dominated by US leadership. Washington designed and maintained a string of systems, including the world trade system, the financial system, the Internet system, the security pattern and so on.

The US has invested much into maintaining this leadership and also gained considerable benefits. In the foreseeable future, it’s impossible for the US to abandon its global leadership.

The US sought supremacy over everything in the past few years. However, it didn’t have enough national strength to bolster this unrealistic goal. Trump appears to be redesigning the US leadership, withdrawing the country from fields in which he thinks resources are being wasted. China thus will gain some room to exert its influence, but is China ready?

China still cannot match the US in terms of comprehensive strength. It has no ability to lead the world in an overall way, plus, neither the world nor China is psychologically ready for it. It’s beyond imagination to think that China could replace the US to lead the world.

But as China is rapidly developing, bringing about changes to the global power structure, its participation in global governance will be a natural and gradual process, which Beijing cannot rush or escape.

If Washington withdraws from the Paris climate deal, China can stick to its commitment, yet it won’t be able to make up for the loss caused by the US. Or if the US takes on an anti-free trade path, the messy consequences will be beyond China’s ability to repair.

But on the other hand, the US, under the leadership of Trump, cannot rope in China’s neighboring countries to contain China or isolate China from the world trade system. Obama’s administration had worked to undermine China-initiated projects, such as the Asian Infrastructure Investment Bank and the “One Belt and One Road” initiative, but to no avail.

So Sino-US cooperation is the only choice for future global governance. For a long time to come, the leadership of the US will be irreplaceable, meanwhile, China’s further rise is inevitable.

– Global Times

Commentary: 21st century belongs to strivers 

“The 21st century is the time for the Chinese,” said the CEO of a Chinese mobile phone company at the recent launch of a new product. The CEO remarked that Western bigwigs will finally be surpassed by Chinese strivers who are determined to change their lives through hard work.

He further explained that, although some companies in developed countries are leading the world in many aspects, their bureaucracy, laziness, arrogance and ego will hinder their development.

To some extent, all Chinese people in the past 100 years are strivers who have managed to change their own fates and the fate of their country through sheer diligence; this trend is vividly illustrated by the process of reform and opening-up. After keeping their noses to the grindstone despite hardships and difficulties, Chinese people have finally succeeded in ushering in a new era.

Those who have doubted China over the years were not aware of the strivers’ true personalities. The strivers desperately thirst for better lives. They are able to bear unbearable hardships and endure unendurable suffering. Such morale and pluck can never be defeated.

The struggle of a software company in Guangdong, which has grown from a small enterprise into an industry titan, offers an inspiring story. During a trip to Germany for an exhibition shortly after the company’s founding, both boss and employees slept on park benches in order to save money. More importantly, none of them complained about having to do so.

In 2009, China needed to build a large exhibition area, as the guest of honor of that year’s Frankfurt Book Fair. However, shortly before the opening of the event, construction was not yet complete because of German workers’ fixed schedule. Therefore, the Chinese exhibitor invited workers from China to complete the work, and that team was able to finish before the opening ceremony.

It is the effort, hard work and sweat of these strivers that have contributed to China’s current development. Their willingness to struggle came from a thirst to change their fate.

In recent years, many Chinese enterprises are expanding their business in Africa. Instead of spending money on entertainment, Chinese employees there save money to make phone calls to their families back home. This priority was not received well by some locals, who believe that one should enjoy life with one’s money. As a result, people cooked up stories that Chinese employees in Africa were prisoners sent by the Chinese government. Believing these rumors, some Western media outlets even slammed China for human rights violations. Finally, a media outlet from the U.K. discovered the truth. These Chinese workers are just the same as their Western counterparts: they love their families and hope to change their lives through hard work. They consider it their life purpose to improve the quality of life of their families, especially their children. The U.K. outlet ultimately concluded that the unyielding spirit of Chinese people is unrivalled, and they will certainly change the world.

Hard work pays. This is the basis for social function. Any society will collapse without such faith.

China is no longer the impoverished country it was 30 years ago. Even so, the enterprising spirit of its citizens has endured. The country needs to stay confident, especially during the “new normal” of slower economic growth. As long as its people have the faith to change fate through hard work, they should fear no difficulty.

One dare not say that the 21st century is destined to be the era of China, but it certainly belongs to the strivers who are determined to change their lives through work.

This article was edited and translated from 21世纪属于渴望奋斗改变命运的”泥腿子”

Source: People’s Daily

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The Age of Uncertainty


We are entering the age of dealing with unknown unknowns – as Brexit and Turkey’s failed coup show

The dark future of Europe

THE Age of Uncertainty is a book and BBC series by the late Harvard economist John Kenneth Galbraith, produced in 1977, about how we have moved from the age of certainty in 19th century economic thought to a present that is full of unknowns.

I still remember asking my economics professor what he thought of Galbraith, one of the most widely read economists and social commentator of his time. His answer was that Galbraith’s version of economics was too eclectic and wide-ranging. It was not where mainstream economics – pumped up by the promise of quantitative models and mathematics – was going.

Forty years later, it is likely that Galbraith’s vision of the future was more prescient than that of Milton Friedman, the leading light of free market economics – which promised more than it could deliver. The utopia of free markets, where rational man would deliver the most efficient public good from individual greed turned out to be exactly the opposite – the greatest social inequities with grave uncertainties of the future. Galbraith said, “wealth is the relentless enemy of understanding”. Perhaps he meant that poverty and necessity was the driver of change, if not of revolution.

The economics profession was always slightly confused over the difference between risk and uncertainty, as if the former included the latter. The economist Frank Knight (they don’t make economists like that anymore) clarified the difference as follows – risk is measurable and uncertainty is not. Quantitative economists then defined risk as measurable volatility – the amount that a variable like price fluctuated around its historical average.

The bell-shaped statistical curve that forms the conventional risk model used widely in economics assumes that there is 95% probability that fluctuations of price would be two standard deviations from the average or mean.

For non-technically minded, a standard deviation is a measure of the variance or dispersion around the mean, meaning that a “normal” fluctuation would be less than two; so if the standard deviation is say 5%, we would not expect more than 10% price fluctuation 95% of the time.

Events like Brexit shock us because the event gave rise to huge uncertainties over the future. Most experts did not expect Brexit – the variance was more than the normal. It was a reversal of a British decision to join the European Union, a five or more standard deviation event – in which the decision is a 180 degree turn. The conventional risk management models, which are essentially linear models that say that going forward or sequentially, the projected risk is up or down, simply did not factor in a reversal of decision.

In other words, we have moved from an age of risk to an age of uncertainty – where we are dealing with unknown unknowns.

There are of course different categories of unknowns – known unknowns (things that we know that we do not know), calculable unknowns (which we can estimate or know something about through Big Data) and the last, we simply do not know what we may never know.

Big Data is the fashionable phrase for churning lots of data to find out where there are correlations. The cost of big computing power is coming down but you would still have to have big databases to access that information or prediction. Most individuals like you and me would simply have to use our instincts or rely on experts to make that prediction or decision. Brexit told us that many experts are simply wrong. Experts are those who can convincingly explain why they are wrong, but they may not be better in predicting the future than monkeys throwing darts.


Five factors

There are five current factors that add up to considerable uncertainty – geopolitics, climate change, technology, unconventional monetary policy and creative destruction.

First, Brexit and the Turkish coup are geo-political events that change the course of history. In its latest forecasts on the world economy, the IMF has called Brexit “the spanner in the works” that may slow growth further. But Brexit was a decision made because the British are concerned more about immigration than nickels and dimes from Brussels. This is connected to the second factor, climate change.

Global warming is the second major unknown, because we are already feeling the impact of warmer weather, unpredictable storms and droughts. Historically, dynastic collapses have been associated with major climate change, such as the droughts that caused the disappearance of the Angkor Wat and Mayan cultures. Iraq, Afghanistan, Syria, Sudan and all are failing states because they are water-stressed. If North Africa and the Middle East continue to face major water-stress and social upheaval, expect more than 1 million refugees to flood northwards to Europe where it is cooller and welfare benefits are better.

The third disruptor is technology, which brings wondrous new inventions like bio-technology, Internet and robotics, but also concerns such as loss of jobs and genetic accidents.

Fourthly, unconventional monetary policy has already breached the theoretical boundaries of negative interest rates, where no one, least of all the central bankers that push on this piece of string, fully appreciate how negative interest rates is destroying the business model of finance, from banks to asset managers.

Last but not least, the Austrian economist Schumpeter lauded innovation and entrepreneurship as the engine of capitalism, through what he called creative destruction. We all support innovation, but change always bring about losses to the status quo. Technology disrupts traditional industries, and those disappearing industries will create loss in jobs, large non-performing loans and assets that will have no value.

Change is not always a zero-sum game, where one person’s gain is another’s loss. It is good when it is a win-win game; but with lack of leadership, it can easily deteriorate into a lose-lose game. That is the scary side of unknown unknowns.

I shall elaborate on how ancient Asians coped with change in the next article.

By Tan Sri Andrew Sheng

Tan Sri Andrew Sheng writes on global issues from an Asian perspective.

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China, the shy superpower


This once sleeping dragon has taken full flight but believes in flapping its wings softly to allay fears of its real intentions.

Vision and ambition: Xi (right) speaking with US Secretary of State John Kerry at the end of the eighth round of the US-China Strategic and Economic Dialogue at the Great Hall of the People in Beijing, China. — EPA

TWO years ago, it was predicted that China’s economy would surpass the United States as the world’s biggest. But instead of rejoicing and thumping its chest, the Chinese government strenuously sought to play it down.

This led to several articles on the Internet sporting headlines like “Why China doesn’t want to be number one”, “Why China hates being No. 1” and “China ‘fearful’ of becoming world’s number one economy”. This was in the first half of 2014.

Indeed, China was declared No. 1 by the end of that year but with the slowing down of its economy, it has slipped back to second place with the United States taking back the pole position.

Beijing must have heaved a sigh of relief but to many, China is still the power to reckon with. After all, the ambitious One Belt, One Road (Obor) Initiative launched by President Xi Jinping in 2013 remains a key strategy, through which China will become an undisputed regional and global power.

In fact, even if its economy is now second to the United States, China is widely seen as the superpower of the 21st century. But that is also a title Beijing is extremely uncomfortable with and one which Chinese leaders reject vehemently.

“China is not a superpower, we are still a developing country … we have a long way to go to realise modernisation” was how Chinese premier Li Keqiang responded to questions from visiting editors from Asia News Network in Beijing on May 31.

Granted, China is a very big country and there are still millions among its 1.3 billion citizens who need to be lifted out of poverty. But by just about every yardstick, China measures up to superpowerhood.

By some reckoning, it achieved that status when it successfully detonated its first nuclear bomb in the late 1960s. Since then, it has built up a formidable military force with the world’s biggest standing army of 2.2 million.

Results from a survey in Australia and major Asian countries by a group of regional think tanks released last week showed that a wide majority of Australians and significant numbers of Asians already consider China more powerful than the United States.

China, once the sleeping dragon, is fully awake and airborne, creating huge turbulence and strong winds that are felt across the globe.

But no, “there are no grounds for China to become a superpower and neither does China have the intention to be one,” Li told the ANN editors.

Neither does it see itself as a Big Brother but a good friend to all, regardless of size and wealth.

The same consistent message of assurance was given by Jin Liqun, president of the Asian Infrastruc­ture Investment Bank (AIIB), when he met the editors in a separate session.

The AIIB was one of the financial institutions created to support Obor, now renamed the Belt and Road Initiative, which came about because China was dissatisfied with existing multilateral lending entities like the World Bank, the International Monetary Fund and the Asian Development Bank.

But the AIIB has also created suspicion and skepticism over China’s motives.

The eloquent Jin, who fielded a wide range of questions, kept to the script which was to give the assurance that China had no ill intentions and that the AIIB would be fully transparent in its activities and guided by three principles in choosing the projects to fund, namely that they must be financially sustainable, environmentally friendly and socially acceptable.

What’s more, he pointed out that if the AIIB is so bad, why have 57 countries become members and another 30 on the waiting list?

Why indeed. While he admitted that the AIIB had an international trust and credibility issue, he bristled when I suggested that nations signed up because they were basically hedging their bets.

After all, which country wouldn’t want the chance to get their development projects funded by a new lender in town? It is no skin off their nose.

Neither did Jin take kindly to my comment that he had painted a very rosy picture of the bank and its aims.

“I take issue with you. I never pick the rosy pictures, I always pick the realistic pictures,” he said.

Yet for all his claims of openness and transparency, no editor could pin him down on details on the type of projects that the AIIB would fund and the shortcomings of existing development banks that led to the creation of the AIIB.

Instead, Jin quoted from Jane Austen’s Mansfield Park, “Skepticism must always be forgiven, you know, because there is no hope of a cure”, substituting “selfishness” in the original text with “skepticism”.

Even though the editors met Jin and Li separately, their answers to all the questions were essentially same: China comes in peace; all it wants is cooperation and stability; it believes in prospering with its neighbours and has no desire to bully any country, no matter how small or weak; and it definitely has no wish to be a superpower.

As the Chinese say, you can talk till your saliva dries up but to no avail. China is just too massively important and influential, and it also harbours ambitions that go beyond military and economic ascendancy.

It is, as the BBC puts it, even “supersizing science” in its quest to become a global leader in science and technology. One of its most visible efforts is the building of the biggest radio telescope, the 500m Aperture Spherical Teles­cope, that when completed in September, will dwarf the current title holder, the 300m Arecibo Observatory in Puerto Rico.

It is also making huge investments in medical research and in the exploration of both inner and outer space. Its scientists have built a vessel to explore the world’s deepest oceanic trenches, all in the name of science.

But even that has reportedly spooked certain nations as they fear China will use its advanced marine technology to further its control in the territorial disputes in the South China Sea which have been dragging on for years.

The world’s “beautiful game” too has caught China’s fancy. It wants to be a football superpower by 2050 and has unveiled a blueprint on how to achieve it: build at least 20,000 football training centres and 70,000 pitches by 2020, according to the BBC.

Clearly, this is a nation with great ambitions and many achievements that it can be justifiably proud of, so why such extreme modesty and humility in dealing with the world?

Back in 2014, various experts and observers gave their take on it. The general consensus was that one of the biggest reasons was China’s fear of responsibility as in the classic line, “with great power comes great responsibility”.

Fortune.com opined that while the Chinese government would love to brag about its growing global influence, it is also pragmatic. It doesn’t want the “cumbersome international obligations” like being the world’s policeman and donor that are expected of a superpower or economic giant.

It would also seem that Chinese leaders believe taking the “softly, softly does it” line of diplomacy is most reassuring to the rest of the world and will create the least line of resistance to their overtures.

But it appears that this overly modest and diffident approach hasn’t quite worked as planned. Beijing may want to rethink its strategy because, to quote Shake­speare, it’s a case of “the lady doth protest too much, me thinks”.

By June H.L. Wong Sunday Star Focus

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Secessionism rising in the West; Scotland independence an inconvenient possibility; Scots choose to stay with UK


Scotland Independence
By Luo Jie

Tide of secessionism rising in the West

The Scottish independence referendum has come as a shock to the world at large. Even if the result of the vote vetoes independence for Scotland and maintains the unity of the UK, it is not so much a false alarm as a tremor shaking the whole Western system.

The UK is a representative country in the Western world. Despite the fact that the disintegration of the British Empire saw the painful departure of most of its colonies, the historic referendum on Scottish independence jeopardizes the integrity of its homeland. It is the fiercest outbreak of secessionism that has plagued major European countries in recent years.

The referendum is different from massive riots or disturbances in which immigrants acted as the main forces. It displays in a direct way a division in United Kingdom society. It is a showdown with the purpose of getting a “divorce.”

The referendum conveys a signal that the Western system has taken on numbness and lost efficacy in dealing with conundrums. People in the rest of the UK did not take seriously the term “Scottish independence” years ago, which, however, has kept swelling and become a major factor for the UK’s destiny. UK Prime Minister David Cameron made an appeal for Scotland to stay within the union and the US President also urged Scots to vote against independence, hoping the UK “remains strong, robust and united.” Western countries are making concerted efforts to save a united UK.

There is also secessionism in the Oriental world, notably in China, India and Russia, where, however, legal, political and moral systems play an effective role. Liberal practices in the UK might have worked in the past, but now are facing immense uncertainty.

Since the end of the Cold War, the West has come to the pinnacle of power step by step, while the Oriental world has been threatened by myriad crises. Nonetheless, emerging countries have flourished now after more than 20 years has passed. They have overcome deadly shocks and developed an effective control system.

There are signs that the West has started feeling anxious in front of the collective competition of emerging economies. Western society now apparently lacks confidence in an unprecedented way. Terms like solidarity, cooperation and diligence have long disappeared from the dictionary of many Westerners, who instead pursue maximized profits by using financial or political means.

Meanwhile, the vigor of the Oriental world is deeply rooted in people’s hard work and political progress gained at the cost of bitter lessons in the past. This represents a development trend of the world: Human society is seeing narrower gaps, which will likely be the essence of globalization.

Source:Global Times Editorial

Scotland: An inconvenient possibility 

Scotland Independence1

William Wallace, Robert the Bruce, David Cameron.

It’s ironic but if there is a yes vote in the referendum in Scotland on Thursday, and it is once again ruled from Edinburgh rather than London, it will be in large part thanks to David Cameron, the incumbent prime minister of the United Kingdom. Not only did he have to give his government’s consent for the referendum to go ahead, but he also ruled out the option of what is now being referred to as devo-max, the devolving of more powers to the Scottish parliament, and instead insisted on a straight yes or no choice to the question: Should Scotland be an independent country?

With the opinion polls at the time showing a healthy majority in favor of maintaining the Union, it was decided a straight yes/no independence referendum would result in vote in favor of keeping the union. However, that is looking a lot less like a sure bet now, with the polls showing the yes and no votes running neck and neck.

Just 10 days before the referendum, with the polls showing an upswing in people saying they intended to vote yes, the three main English parties struck a deal and pledged to give more powers to the Scottish parliament. But no details have been forthcoming of what this entails and no timetable presented. So it will probably not sway the minds of many still undecided voters.

If there is a yes vote, the Scottish government will have to set in motion the process for a written constitution, and there are hard negotiations that will need to be completed, not least on key issues such as a currency union, Scotland’s share of the UK’s national debt, and what will happen to the four submarines carrying missiles armed with Trident nuclear warheads that are stationed in Scotland, before the proposed independence date of March 24, 2016.

An independent Scotland will also have to negotiate for membership of NATO and the European Union. The rest of the UK, or rUK as it is known, would retain membership of NATO and the UN Security Council, as the government in London would retain control of Trident, but there would be growing pressure from those living in some cloud-cuckoo land of an imperial past for it to opt out of the EU.

Those claiming that Scotland is better off as part of the UK have been suggesting it is not a foregone conclusion that an independent Scotland will be able to join the EU. They have also tried to paint a dire picture of the future with the support of the oil companies and big banks, which have threatened to head south.

However, while independence does mean uncertainties, most of which can and will be resolved through negotiation, it also offers new opportunities. Despite the no camp’s unproven portents of doom, there is a belief among many, not just in Scotland, but elsewhere in the UK, that too much power is centralized in Westminster, and it favors the wealthy at the expense of the poor. The wealth gap continues to widen and this is evident not just in Scotland, but also elsewhere in the UK.

With a growing number of people struggling to pay their bills, there is a perception that those supposed to safeguard their interests are too busy finding ways to pad their claims for expenses and voting for their own pay rises to listen to their concerns. It has been said only half in jest that it is London and the South East of England that should go independent, because they are far removed in mindset from the more community based values of the rest of UK.

The Better Together pro-unionists have tried to portray the yes voters as hearts-over-minds anti-English nationalists nursing historical hurts as well as present grievances. Yet to many in Scotland, not just Scots, but residents of other nationalities, including English, better together means people in Scotland working together for a fairer society, one that is not victim to the whims of the unchecked free-market pursuit of profit. The central question for many is which option, a business-as-usual more-of-the-same no vote or an uncertain-hopes-for-the-future yes vote, offers the best chance of creating a more caring and equitable society.

To overseas observers who say Scotland would become irrelevant if it votes for independence and the UK diminished in stature without Scotland, most of those who intend to vote yes might reply, that’s just fine; Scotland is just a small country on the fringe of Europe that doesn’t need or want to strut upon the world stage – something its leaders should bear in mind if the vote is yes.

By Hannay Richards (China Daily)/Asia News Network

Cameron thanks Scots for choosing to stay, promises a more unified UK

 UK Prime Minister David Cameron is now delivering a speech. Let’s go live to see what he is saying.
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