|Having his say: A screengrap of www.jho-low.com website which contained the letter|
PETALING JAYA – Fugitive businessman Low Taek Jho has proclaimed his innocence over allegations related to 1Malaysia Development Bhd (1MDB) in a signed letter uploaded to his personal website.
Low, also known as Jho Low, admitted that in hindsight, he might have done things differently.
“But any mistakes I made do not amount to the sweepingly broad and destructive allegations being made against me.
“Let me be clear: I am innocent,” Low wrote.
The website, www.jho-low.com, also contains legal documents related to the 1MDB case, news media articles on him and 1MDB as well as statements by Low’s lawyers.
A notice on the website said that jho-low.com was created on behalf of Low through his legal counsel to provide information to the public.
A search on the Internet archive shows that the website has been updated since 2015 but until recently only contained general information on Low.
According to the WHOIS database, jho-low.com was created on June 2, 2014.
Yesterday, the link to the website was shared extensively on social media, after the undated letter was posted.
“I only ask that everyone – courts, prosecutors, and the general public – keep an open mind until all of the evidence comes to light,” Low wrote in the letter.
The financier wrote that for the past several years, he had been subjected to a series of allegations around the globe in relation to the operations of 1MDB.
He said many of the allegations had originated from blog posts, “improper” leaks from governmental agencies around the world, or unproven allegations filed in court, where he had never been afforded an opportunity to set the record straight.
“I have been paraded in effigy through the streets of Kuala Lumpur, and photographs from my younger days plastered in tabloids across the globe.
“It has become clear that there is no platform where objective information can be presented regarding this issue – and no jurisdiction that hasn’t been poisoned by gossip, innuendo, and unproven allegations.
“This website is an effort to change that,” Low wrote.
The 36-year-old Penangite is described as a “global philanthropist, investor and entrepreneur” on the website.
A check with an official from a public affairs firm representing Low confirmed the veracity of the website.
Meanwhile, Swiss whistleblower Xavier Justo, in an immediate response, said: “The Jho Low website does not show any proof of his innocence.
“It is just a bunch of legal documents showing that he wants a few cases to be dismissed.
“It’s the way the justice system works, you can be as guilty as guilty is and ask for a case to be dismissed. It’s not proof of innocence,” he told The Star.
The former PetroSaudi International executive said he was appalled at Low’s attempts to defend himself through the website.
“Any decent person will face justice (in court) if he can prove that he is innocent,” he said.
He added that he was amazed at Low’s attempts to try to “stop the distribution of books, abuse the justice system and hire public relations officers to defend his reputation while also creating a website to tell fairy tales”.
Low’s current whereabouts are unknown; he has been speculated to be hiding in China or the Caribbean.
He and his father, Tan Sri Low Hock Peng, were charged in absentia in Malaysia last month over money allegedly stolen from 1MDB.
Last week, Low, through the London-based law firm Schillings, sought to ban the books, The Sarawak Report by Clare Rewcastle Brown and Billion Dollar Whale by The Wall Street Journal’s Tom Wright and Bradley Hope, from going on sale.
Credit: Razak Ahmad The Star/Asia News Network
Li: ‘Malaysia must remember that by targeting Chinese investors in an unreasonable way, this will scare away not only FDI from China, but also from other countries.’ – credit: Malaysia Today
INVESTMENTS and mega contracts linked to China will have to brace for rocky times ahead if Prime Minister Tun Dr Mahathir Mohamad continues unchecked with his incessant tirade against Chinese endeavours in Malaysia.
The golden era for Chinese investments, which possibly peaked during the rule of former prime minister Datuk Seri Najib Razak, seems to have come to an unceremonious end.
The future of foreign direct investment (FDI) from China is now seen as unpredictable – at least for the next 3-5 years – under the new government of Dr Mahathir, according to Datuk Keith Li, president of China Entrepreneurs Association in Malaysia.
|Li: ‘Malaysia must remember that by targeting Chinese investors in an unreasonable way, this will scare away not only FDI from China, but also from other countries.’|
“The series of comments made on Chinese investments by the PM have affected the confidence of Chinese investors. Those who originally wanted to come are adopting a wait-and-see attitude, while those already in are careful about their expansion plans,” says Li in an interview with Sunday Star.
The outspoken leader of Chinese firms notes that businessmen from the mainland are “worried”, although some comments of the Prime Minister were later “clarified” by other Cabinet Ministers or the PM’s Office.
“Malaysia must remember that by targeting Chinese investors in an unreasonable way, this will scare away not only FDI from China, but also from other countries as well,” adds Li.
Since his five-day official visit to China that ended on Aug 21, the 93-year-old Malaysian leader has caused anxiety to all by making shocking announcements.
While summing up his China trip on Aug 21, he declared he would cancel the RM55bil East Coast Rail Link (ECRL) and two gas pipelines being built by Chinese firms.
As the ECRL is of strategic importance to China’s Belt and Road Initiative – the policy which Dr Mahathir has repeatedly voiced his support for, Beijing would expect a renegotiation of the contract terms rather than an outright cancellation.
Dr Mahathir had reasoned that with national debt of over RM1 trillion, Malaysia could not afford these projects. In addition, these contracts are tainted with unfair terms and smacked of high corruption.
Although the Prime Minister said Chinese leaders understood Malaysia’s situation, reactions of Chinese nationals on social media were unforgiving with many suspecting Dr Mahathir “has other motives”.
Many see Dr Mahathir as attempting to raise Malaysia’s bargaining power in the negotiation for compensation for the cancelled projects. China, according to social media talk, is asking for RMB50bil as compensation.
On social media, there are also suggestions that Dr Mahathir is aiming at his predecessor as most China-linked projects were launched during the rule of Najib.
During the rule of Najib, Malaysia-China relations were intimate.
This has resulted in the influx of major construction and property companies from the mainland, followed by banks and industries.
But on May 9, Dr Mahathir’s Pakatan Harapan coalition toppled the Barisan Nasional government of Najib after the most bitterly fought general election in local history.
The second-time premier has put the blame on Najib for the massive 1MDB financial scandal, which Najib has denied, and mismanagement of the country’s finance.
And while the Chinese nationals are all riled up by the cancellation of ECRL, Dr Mahathir came up with an ill-advised statement.
Last week he ordered a wall surrounding Alliance Steel, which is investing US$1.4bil (RM6bil) for a massive steel complex, to be demolished. This was seen as unreasonably targeting a genuine FDI.
Although the foreign ministry later clarified that the leader had mistaken the wall to be built around the Malaysia-China Kuantan Industrial Park (MCKIP), the anger of Chinese nationals lingers on.
The industrial park is a G-to-G project to jointly promote bilateral investments. There is an even bigger sister industrial park in China that houses many Malaysian firms. All these were built during Najib’s reign.
Dr Mahathir’s statement has also caught the attention of China’s Global Times, the mouthpiece of the Communist Party of China.
In an editorial on Aug 28, the news portal warned: “Many words of Kuala Lumpur can spread to China via the Internet, causing different reactions. How the Chinese public sees China-Malaysia cooperation is by no means inconsequential to Malaysia’s interests.”
It noted “while Dr Mahathir advocates pursuing a policy of expanding friendly cooperation with China … but when it comes to specific China-funded projects, his remarks gave rise to confusion. Like this time, it is startling to equate the controversy surrounding a factory wall with state sovereignty.”
Global Times added: “When such remarks are heard by Chinese people, the latter find it piercing. They will definitely make Chinese investors worry about Malaysian public opinion and whether such an atmosphere will affect investment in the country.”
In fact, it would be unwise for the government to disrupt MCKIP. Co-owned by Chinese, IJM Corporation and Pahang government, this industrial park has lured in Chinese FDI of over RM20bil.
It is an important economic driver in the East Coast and has aimed to create 19,000 jobs by 2020.
While the “wall” statement might be seen as a minor mistake, Dr Mahathir’s flawed announcement last Monday that foreigners would be barred from buying residential units in the US$100bil (RM410bil) Forest City stirred another uproar.
On Aug 27, Reuters quoted Dr Mahathir as saying: “That city that is going to be built cannot be sold to foreigners. Our objection is because it was built for foreigners, not built for Malaysians. Most Malaysians are unable to buy those flats.”
Currently being developed by Country Garden Holdings of China, this 20-year long project, built on reclaimed land in Johor Bahru, aims to house 700,000 people. As about 70% of the house buyers are Chinese, some locals fear this could turn into a China town.
Unlike Alliance Steel that has stayed silent, Country Garden fought back by seeking clarifications from the PM’s Office.
In a statement, the major Chinese developer said all its property transactions had complied with Malaysian laws.
Citing Section 433B of the National Land Code, it added a foreign citizen or a foreign company may acquire land in Malaysia subject to the prior approval of the State Authority.
In addition, it said Dr Mahathir’s comment did not correspond with the content of the meeting he had with Country Garden founder and chairman Yeung Kwok Keung on Aug 16.
During the meeting, Dr Mahathir said he welcomed foreign investments which could create job opportunities, promote technology transfer and innovations.
In fact, this forest city project – along with ECRL – were the main targets of attack by Dr Mahathir before the May 9 election.
Opposition to these projects had helped drive Dr Mahathir’s election campaign, during which he said was evidence of Najib selling Malaysia’s sovereignty to China.
These projects, together with major construction contracts won by Chinese and the inflow of industrial investments, place the total value of Chinese deals at more than RM600bil in Malaysia.
But few would expect Dr Mahathir to use his powerful position to resume his attacks on China-linked projects so soon after his so-called “fruitful visit” to Beijing.
During his official visit to Beijing, the Malaysian leader was accorded the highest honour by China, due mainly to respect for “China’s old friend” and strong Malaysia-China relations built since 1975.
Dr Mahathir was chauffeured in Hongqi L5 limousine, reserved for the most honourable leaders, and greeted in an official welcome ceremony by Premier Li Keqiang. He was also guest of honour at a banquet at Diaoyutai State Guesthouse hosted by President Xi Jinping.
But beneath these glamorous receptions, there were reservations exuded by the Chinese for this leader whose premiership is scheduled to end in two years.
There were no exciting business deals signed in Beijing. There was absence of high diplomatic rhetoric that “Malaysia-China ties have been elevated to another historic high”, oft-repeated during Najib’s past visits.
Many even notice that Premier Li and Dr Mahathir had a cool handshake after their short joint press conference in Beijing.
And although China promised to buy Malaysian palm oil, the statement was qualified with “price sensitivity”, which means it will not buy above market price.
In addition, there was no mention of “buying palm oil without upper limit”, which was promised to Najib last year.
If Dr Mahathir’s original intention was to target Forest City and its owners, his move has certainly backfired. The country will have to pay a price for his off-the-cuff statement.
The “new policy” will have serious ramifications as it would hit the value of the properties not only in Forest City but also in other China-linked and non-Chinese projects.
Country Garden’s Danga Bay project will also be hit. It now faces a more daunting task of selling the balance of about 2,000 units in Danga Bay, according to a Starbiz report.
Other Chinese developers like R&F Princess Cove and Greenland Group will be affected.
VPC Alliance Malaysia managing director James Wong told Starbiz there may be legal suits against the government.
“That may force Country Garden to scale down because it has invested a lot with its industrial building systems factory and an international school, among other investments. It will impact Country Garden and Malaysia’s property sector negatively,” Wong said.
“Foreign buyers and other foreign companies will shy away,” Wong added.
The change in government and the insensitive comments on China-funded projects have turned Malaysia into a high-risk investment destination for the Chinese, according to Li.
“We don’t know which China projects will be targeted next. Looking back, it’s a blessing in disguise that we were pushed out of the RM200bil Bandar Malaysia project. It is also lucky that Chinese money has not gone into the RM30bil Melaka Gateway project,” says Li, who owns a travel agency in Malaysia.
“In the immediate future, more tourists from China are likely to shy away from Malaysia.
“Malaysia may not hit the target of having three million visits from China this year,” Li adds.
Credit: Ho Wah Foon The Star
Malaysia Bans Foreigners From Project https://www.bloomberg.com/news/videos/2018-08-28/malaysia-bans-foreigners-from-project-video ..
BEIJING: China’s Premier Li Keqiang said on Monday his government is willing to promote bilateral ties and economic cooperation with Malaysia as Malaysian Prime Minister Tun Dr Mahathir Mohamad visited China to discuss trade and investment.
The agreements reached on Mahathir’s trip showed the two countries would remain friendly in the long term, Li told a joint news conference at Beijing’s Great Hall of the People.
Mahathir is seeking to renegotiate, and perhaps cancel, billions of dollars worth of Chinese-invested projects entangled in domestic graft probes.
Ties have been strained since a stunning election victory returned Mahathir to power in May and he then suspended unpopular Chinese projects authorised by former premier Datuk Seri Najib Razak.
Najib courted Chinese investment and was a cheerleader for President Xi Jinping’s signature Belt and Road Initiative in Southeast Asia during his decade-long rule.
However, Mahathir has vowed to discuss the ”unfair” deals on his visit.
The Malaysian premier said his trip had been fruitful and that he believed China would look sympathetically towards the problems both sides have to resolve.
Addressing Mahathir directly, Li asked if he believed they had consensus on upholding free trade.
“I agree with you that free trade should be the way to go but of course free trade should also be fair trade,” Mahathir said.
“We should always remember that the level of development of countries are not all the same. We do not want a situation where there is a new version of colonialism happening because poor countries are unable to compete with rich countries,” he said. – Reuters
Malaysia welcomes China’s participation in transport projects: People
PRIME Minister Tun Dr Mahathir Mohamad is scheduled to be in China from August 17 to 21, during which he is expected to meet President Xi Jinping and Premier Li Keqiang.
The visit is special because Dr Mahathir is returning to China once again as prime minister after a 17-year gap. His last official visit to China as prime minister was in October 2001 to attend the Apec CEO summit.
Dr Mahathir is a regular visitor to China. In the 22 years of his first stint as prime minister (1981-2003), he visited China seven times. He visited nine more times after he retired, making it a total of 16.
This coming visit has an added significance because he is leading a different government and there are several touchy issues standing in the way of good relations between the two countries.
In his previous official visits, he was leading the Barisan Nasional government. In this visit, he is leading Pakatan Harapan which ousted Barisan in the May 9 general election.
Chinese leaders are familiar with Barisan. Back in 1974, it was the leader of this newly-formed coalition Tun Abdul Razak Hussein who made the ground-breaking visit to China. That visit resulted in Malaysia becoming one of the earliest countries in South-East Asia to recognise China.
Bear in mind that although Indonesia recognised China in 1950, their relationship soured and was suspended between 1967 and 1990. Singapore, a predominantly Chinese nation, recognised China only in 1990, and Brunei did so in 1991.
It was not an easy decision for Malaysia because it already had diplomatic relations with Taiwan since its independence in 1957.
The recognition of Taiwan was reflective of Malaysia’s pro-Western stance and staunchly anti-communist policy. The armed communist insurgency starting in 1948 did not help to endear Malaysia to China.
With the disbanding of the Malayan Communist Party (MCP) following the 1989 peace accord, which involved the MCP and the governments of Malaysia and Thailand, the Malaysian Chinese Association (MCA) became the last remaining vestige of the Chinese revolution in Malaysia.
It was no coincidence that while the MCP was fashioned after the Chinese Communist Party (CCP), MCA was the mirror image of the Chinese Nationalist Party, Kuomintang.
Abdul Razak’s own party, the United Malay National Organisation (Umno), was staunchly anti-communist. Still, Abdul Razak pulled it off and received overwhelming endorsement from voters at the 1974 general election in which the enlarged Barisan coalition was contesting for the first time.
So, given this very long history of mutually beneficial relationship and Dr Mahathir’s own affinity with China, his visit is not only special but also offers the two countries the opportunity to clarify and sort out issues that could stand in the way of good relations.
Dr Mahathir had wanted to visit earlier but time was not favourable. Proving his seriousness about wanting to put the relationship between the new Malaysian government and China on a good footing, he sent Tun Daim Zainuddin as his emissary.
Like Dr Mahathir, Daim is a familiar face in Beijing. Back in the 1980s during his first stint as Finance Minister, Daim took an active part in supporting China’s new role in international financial organisations like the Asian Development Bank, World Bank and the International Monetary Fund.
During his visit to Beijing on July 18, Daim handed over Dr Mahathir’s letter to Premier Li and had discussions with Foreign Minister Wang Yi.
It is clear that neither China nor Malaysia would want the 44-year relationship to be jeopardised by issues that cropped up during the time of former Prime Minister Datuk Seri Najib Tun Razak.
Among these are the Chinese loans for the construction of the East Coast Railway Line (ECRL) and the little known Suria Strategic Energy Resources Sdn Bhd (SSER) pipeline project.
It is highly possible that China, in extending these loans and entering into construction agreements for the projects, was acting in good faith in line with its One Belt One Road (OBOR) policy but along the way, this was perverted by irresponsible elements in Malaysia and China.
Neither China nor Malaysia should suffer the embarrassment and financial losses caused by these people and their associates. The relationship between the two countries is too precious to be allowed to be soured by their irresponsible and criminal actions.
Dr Mahathir said in a recent interview with the Hong Kong-based South China Morning Post that his less-than-favourable view of some Chinese-backed deals, deemed overpriced and lopsided against Malaysian interests, did not mean he was hostile towards Beijing.
More recently, he said Malaysia would seek to do away with these projects if they continue to be unfavourable to the country and a burden to the people.
The Pakatan administration and the people of Malaysia must not be made to shoulder the burden of irresponsible acts of Najib and
As Dr Mahathir has pointed out, Malaysia and China developed “a very good relationship” during his first tenure as prime minister and there is no reason why this would not continue during his comeback era.
A. KADIR JASIN
KUALA LUMPUR (Aug 16): Prime Minister Tun Dr Mahathir Mohamad will make an official visit to China from tomorrow until Tuesday (Aug 17-21, 2018) at China’s Premier of the State Council Li Keqiang’s invitation.
Malaysia’s Foreign Affairs Ministry said in a statement today Dr Mahathir and Li will witness the signing of three memoranda of understanding (MoUs) to mark the strengthening of the Kuala Lumpur-Beijing strategic partnership. The MoUs are in the areas of agriculture and agricommodity, the statement said.
According to the statement, Dr Mahathir will be accompanied by his spouse Tun Dr Siti Hasmah Mohd Ali. The delegation includes Foreign Affairs Minister Datuk Saifuddin Abdullah, Primary Industries Minister Teresa Kok Suh Sim, International Trade and Industry Minister Ignatius Darell Leiking, Agriculture and Agro-based Industry Minister Datuk Salahuddin Ayub, Minister in the Prime Minister’s Department (Law) Datuk Liew Vui Keong, Entrepreneurship Development Minister Mohd Redzuan Md Yusof and Perak Chief Minister Ahmad Faizal Azumu, according to the statement.
“This is the maiden visit by YAB Prime Minister to the PRC (People’s Republic of China) after assuming office in May 2018. YAB Prime Minister visited the PRC seven times during his term as the 4th Prime Minister of Malaysia from 1981 to 2003.
“During the visit, YAB Prime Minister will be visiting Hangzhou and Beijing. In Hangzhou, YAB Prime Minister is scheduled to meet provincial leaders, undertake a visit to Alibaba Group Corporate Headquarters and Zhejiang Geely Holding Group. In Beijing, YAB Prime Minister will be meeting Premier Li Keqiang and President Xi Jinping respectively to discuss bilateral issues as well as regional and international issues of mutual interest,” the statement said.
Chong Jin Hun
|Negative rates: Pedestrians walking past the Bank of Japan (BoJ) headquarters in Tokyo. BoJ’s goal remains
at keeping real interest rates as negative as possible, as long as the economy performs. — Bloomberg
IT’S mid-term review time as the US yield curve begins to flatten.
This curve tracks the relationship between interest rates of US government debt obligations. Normally the yield curve is rising, with long-term bonds having yields higher than short-term obligations.
But occasionally the curve inverts, with long bonds yielding less than short Treasury bills – a historical predictor of future recessions and bear markets in stocks. Recently, the curve has become noticeably flatter, with short rates rising and longer yields remaining stagnant. This has led many analysts to think that the yield curve will soon invert.
But that does not mean a recession is imminent. Just returned from an extended visit back to Harvard. Touched base with my mentors and professors at both extremes of the economic spectrum. They are all split on what this flattening really means. In the event it does invert (the gap today being below 0.3%), recession has almost always (over the past 50 years) followed within a year or so. But few see a recession soon on the horizon.
The first half has come and gone. The ongoing transition to more normal conditions continue in the context of a robust US economy; continued progress in the orderly normalisation of US monetary policy; and re-awakened sensitivities to geopolitical and protectionist risks.
There will be higher interest rates, some inflation concerns and trade tariffs coming-on in the context of markets more readily accepting two to three more rate hikes by the Fed in 2018. The prospect of a global trade war makes everyone very cautious.
Once we start down the road of tariff increases and threats of more to come, the dangers of retaliatory miscalculations are real and very scary. Still even an inverted yield curve should not be on top of our worry list under today’s accommodative monetary conditions.
The world economy benefitted from four drivers of higher growth: the healing process in Europe, re-bound from slowdowns in Brazil, India and Russia; soft landing in China; and pro-growth measures in US.
To persist, Europe needs to do much more. Also, there is hope that recent tariff tensions would eventually lead to fairer and still-free trade which recognises the inter-dependent nature of global supply chains, and show greater willingness to protect intellectual property rights, modernize trade arrangements and reduce non-tariff barriers. Yes, more rate hikes from the Fed are still on the cards. But the same by the European Central Bank (ECB) and Bank of Japan (BOJ) demand trickier manoeuvring.
This is an area that warrants close monitoring since volatility will likely persist. At least for now, fears of Japan-like deflation in US and Europe are effectively gone. But OECD is worried global growth is not yet self-sustaining. It’s strength in 2018 is largely due to monetary and fiscal policy support – and lacking in rising productivity gains and sweeping structural reforms. In Europe, the “clock is ticking”; without reforms, more populist uprisings will appear as the upswing ages and then fades. US inflation is not only returning to the Fed’s 2% target, but also likely to exceed it. In Europe, consumer prices were last still lower than a year ago – below the ECB’s target of just below 2%. Fear of the spectre of deflation has led BOJ to remain cautious about tapering its monetary easing program. Will just have to wait and see.
IMF warns that the world’s US$164 trillion debt pile (at 225% of GDP) is bigger than at the height of the financial crisis a decade ago. One-half was accounted for by US, Japan and China. What’s needed is for US fiscal policy to be recalibrated to bring down the government debt to GDP ratio (80%) and for China to deleverage its US$ 2.6 trillion private debt. There is no sign either is being done which runs the risk of triggering yet another financial crisis.
Growth will falter
Growth in US can slow considerably when the boosts from last year’s tax-cuts in US fades in 2019 and 2020. IMF now warns that US will grow at about one-half the 3% annual pace forecast by the White House over the next 5 years, reflecting the effects of growing massive fiscal deficit and continuing trade imbalance. For US, sluggish productivity remains a key determinant. In 2Q18, GDP picked-up to rise 4.1% (2.2% in 1Q18) the fastest pace in nearly four years, reflecting broad-based momentum.
But worker productivity advanced 1.3% from a year earlier, consistent with the sluggish 1.2% average annual rate in 2007-2017, well below the better than 2% annual average since WWII. Spending by consumers, businesses and government as well as surging exports all appeared solid in 2Q18. The expansion enters its 10th year this month, building on what is already the second longest expansion on record. Faster growth which has helped to drive the unemployment rate to its lowest level in 18 years, fueled quick corporate profit growth.
Median estimates place GDP growth at 2.8% in 2018, 2.4% in 2019 and 1.8% over the long run. But everyone has growth slowing next year because of falling business and consumer sentiment, reflecting trade disputes with China and many US allies, and uncertainty whether rising business investment is sustainable.
The big concern is the economy overheating – already, it is bumping up against capacity constraints as labour markets tighten. Still, the consensus is that the next downturn will not arrive until 2020. Most economists expect 3% inflation over the next year. What worries me most is the deteriorating global political and strategic environment.
Not so much the economic outlook directly. The world is changing too much, too fast.
So much so, the geopolitical situation is getting worse – open warfare between Israel and Iran, the disgraceful state of Palestine, and uncertainties surrounding Donald Trump and Vladimir Putin, and lack of leadership in Europe. Trade barriers are causing much anxiety. It is as though what’s put in place since WWII isn’t worth a damn anymore.
Europe and Japan
Latest indications from the Brookings-FT Index for Global Economic Recovery (Tiger) show global growth has peaked and momentum has started to fade. Indeed, financial markets are already reflecting mounting vulnerabilities. With weak economic data in 1H’18, Europe and Japan have since cooled. In late 2017, eurozone was still growing at 3.5%: Germany at 4%, France 3%, Italy 2% and Spain 3.5%. But activity slackened to only 1.2% in early April; even Germany recorded a sharp dip – down to only 1%, reflecting waning monetary easing effects and supply-side constraints. The outlook is for a strong above trend upswing for the rest of the year. OECD now expects GDP growth in 2018 to be 2.2% (2.6% in 2017) and in 2019, 2.1%.
For eurozone, the window for reforms is closing – ranging from the implementation of dual currencies for its members to putting European Parliament in charge of economic policy, including the euro-budget. Japanese GDP shrank 0.1% in 1Q18 despite a rise in capital investment. Household spending unexpectedly fell. Still, recovery is expected to be driven by a weak yen brought about by monetary stimulus (BoJ has been buying assets at US$740 billion a year to drive down long-term interest rates). But underlying inflation is stuck at 0.5%. BoJ’s goal remains at keeping real interest rates (after inflation) as negative as possible, as long as the economy performs. OECD forecasts growth in Japan to be 1.2% in 2018 (1.7% in 2017); the same in 2019.
China and BRICS
Many emerging markets (EMs) are still enjoying momentum from 2017, but there is growing concern about rising debt and vulnerabilities to capital flight as interest rates in US rise. For those recently emerged from recession, viz. Russia, Brazil and South Africa, their urge to return to strong levels of activity remains sluggish.
China and India have fewer concerns for their immediate outlook. Still, they need to reform their economies to help raise living standards to catch up. The main challenges will be to execute particular reforms – not just to the financial system but also to SOEs and local governments, including getting rid of corruption.
China’s GDP rose 6.7% in 2Q’18, the slowest pace since 2016. Retail sales held up rather well as did exports. Still, measures to curb rampant borrowing are biting – investments in infrastructure and manufacturing by SOEs and local governments have since slackened. These efforts, in the midst of headwinds from abroad (especially protectionist tariffs), have led to downgrades in growth for the rest of the year. IMF now forecasts GDP growth in China to average 6.5% in 2018 (6.8% in 2017) and about the same in 2019.
Recent depreciation of China’s currency, the yuan, exposes crucial vulnerabilities within the world’s second-largest economy as it faces escalating trade tensions with the US. The currency posted its biggest ever monthly fall against US$ in June (3.4%) and has since lost more ground. This slide marks a departure for the currency often regarded as an anchor of stability for Asia and other EMs.
As Beijing assesses the options, it finds itself between a rock and a hard place because (i) People’s Bank of China (PBoC) intervention means selling its US dollar stash of reserves – which stood at US$3.11 trillion in June; (ii) it could instead raise domestic interest rates, thereby making the currency more attractive which might help to shore up the yuan. But it also risks weakening an already slowing Chinese economy just as the trans-Pacific trade war starts to bite; and (iii) it could impose stricter controls on China’s capital account which will likely spook overseas funds that have rushed into China’s domestic bond and equity markets this year at an unprecedented rate.
However, to internationalise the yuan, China has to keep fund flows relatively unencumbered. The PBoC has sensibly pledged to keep the RMB “generally stable.” In July, China implemented a mix of tax cuts and greater infrastructure spending citing growing uncertainties, as it ramps up efforts to stimulate demand to counteract a weakening economy.
As for India, I wrote extensively on what’s happening there (my July 2018 column: “India: Chugging Along but Needs More Firepower” refers).
What then are we to do
As I see it, China and China-India centred Asia is now the heart of the world economy. Their steady growth has been a source of stability in an otherwise unsteady world.
Of late, developments in China received more scrutiny than usual because of the context: Chinese stock market has since fallen into bear territory, and a growing trade dispute with the world’s largest economy, US. Despite China’s astonishingly sustained expansion, the economy is widely considered vulnerable because growth in output has been underwritten by an even faster increase in debt.
The nation’s gross debt – both public and private – is now estimated at over 250% of GDP. The worry is not just the volume of debt but its quality. China’s domestic policies encourage high savings.
Those savings, held in banks, have been funneled to companies, especially SOEs. The credit quality of the loans is hard to assess but is likely to be uneven. China has since begun to slowly tighten the credit taps, with even tighter rules on shadow banking and more scrutiny for both local government financing and public-private investment projects.
At the same time, a sharp increase in the number of defaults by corporate issuers has revived anxieties about Chinese debt. In my view, it is the tighter credit conditions and defaults, rather than worries about a trade war, that best explain the recent 22% decline in the Shanghai Composite index from its January highs.
Tightening credit policy is also a compelling explanation for the weak macro-economics. Credit growth fell, and growth in fixed investment followed. This appears to be having some effect on consumer sentiment as well.
No doubt, Trump’s tariffs on US$50bil of Chinese imports (and threatens US$200bil more) will have a direct (but unlikely to be catastrophic) impact on growth. But China is now an investment-led rather than an export-led economy.
Still, it is the knock-on effects that are most feared. If the escalation of hostilities leads to a reduction in foreign direct investment in China, the long-term impact could be significant. True, China may be facing a delicate moment economically.
But given China’s deepening role in the world economy, any pain that the US manages to inflict on it would be quickly shared with the US and the broader world – at a moment when Europe’s economy is slowing, and many EMs looking unstable.
On the whole, China’s economy will remain strong and resilient. Whatever happens, I think this won’t change the Chinese situation much.
Former banker Tan Sri Lin See-Yan is the author of The Global Economy in Turbulent Times (Wiley, 2015) and Turbulence in Trying Times (Pearson, 2017). Feedback is most welcome.
WITH the announcement of the new Housing and Local Government Minister, Zuraida Kamaruddin, there have been a lot of news and interviews on her proposals to put our housing industry in order.
Her new plans will help create a new housing environment in our country if well executed. I particularly like the minister’s assurance that there won’t be any political intervention in decision-making, especially in housing development matters.
The key objective of the ministry is to synchronise all affordable housing schemes under one roof with the establishment of the National Affordable Housing Council, which is expected to be announced in August.
The streamlining will involve four agencies, Syarikat Perumahan Negara Bhd, 1Malaysia Civil Servants Housing Programme (PPA1M), Rumah Mampu Milik Wilayah Persekutuan (RumaWIP), and 1Malaysia People’s Housing Scheme (PR1MA).
With this prompt move, the housing ministry will have better control over the construction of affordable houses, and will attempt to resolve the mismatch between market supply and demand in certain housing segments.
Apart from the new supply, we should also look at our current housing supply. As at end-2017, we have 5.4 million houses, of which 21% or 1.15 million were low-cost houses and flats. This should be sufficient to accommodate the critical housing needs of our Rakyat if they were allocated to the right group of people.
In my last article, I mentioned that there were potential leakages in our previous distribution system that had caused the failure of qualified applicants to buy or rent a low-cost home.
In early June 2018, the new Housing Minister requested owners of People’s Housing Projects (PPR units) who were renting out their units to foreigners to evict their tenants within 90 days.
It is important for the authorities to carry out surveys on residents of low-cost housing after certain grace period to ensure the ownership and tenancy of government housing fall into the right hands.
By addressing the current leakages and with the identification of the right target audience, the issue can be quickly resolved.
Our new government plans to set up an online platform for application of affordable housing in the future. This would be an effective way to gather market demand based on the actual requirement and ensure greater transparency in the allocation process.
In addition, the government promises to build one million affordable homes within 10 years. It also suggests the housing price for the B40 group (with a median monthly household income of RM3,000) to be around RM60,000, and equipped with basic facilities such as a park and a community hall.
Based on the contributing factors of housing development which include land, the approval process and resources, only the government can build houses at the price of around RM60,000.
Only the government can gather land bank through compulsory land acquisition of agriculture land, then to convert the land for housing development, and increase housing projects with public funds.
As taxpayers, I believe we are more than happy to help elevate the living standards of the B40 group knowing very well that our money is well-spent in making a difference for the future of our nation.
I applaud the new government for taking the bold measures in putting things in order, and walking the talk by planning for more affordable housing.
Offering affordable housing and a comfortable living environment are essential criteria in building a sustainable future for our country. Whenever the government announces more constructive measures and makes things more transparent, the market environment becomes more optimistic. With this confidence, the Rakyat will be more than willing to do our part as taxpayers to achieve the common goals for the benefit of all.
Food for thought Alan Tong
Datuk Alan Tong has over 50 years of experience in in property development. He was the World President of FIABCI International for 2005/2006 and awarded the Property Man of the Year 2010 at FIABCI Malaysia Property Award. He is also the group chairman of Bukit Kiara Properties. For feedback, please email email@example.com.
China will impose 25 percent in tariffs on 659 US goods worth $50 billion, including soybeans, cars and seafood.
The move came as a tit-for-tat response to the tariffs announced by the Trump administration Friday morning. An expert said the US decision does not aim to tackle the trade deficit with China but to block the Chinese government’s efforts in high-tech development.
Tariffs on 545 US goods worth $34 billion will take effect on July 6, involving agricultural products, car parts and seafood, according to a statement released by China’s Ministry of Commerce (MOFCOM) on Saturday morning. Soybeans, which are China’s biggest import from the US in value, are on the list.
Chemicals, medical equipment and energy products from the US will also be subject to 25 percent tariffs, which will be announced at a later date.
The revised list is longer and involves more categories of products than a preliminary list of 106 US goods published by the ministry in April, but the total value of the products remains at $50 billion.
A Chinese commerce expert found that aircraft were removed from China’s new list, which is noteworthy.
“We need aircraft [from the US]. We have to consider the costs of the countermeasures we plan to take,” Bai Ming, deputy director of the Ministry of Commerce’s International Market Research Institute, said on Saturday soon after the Chinese tariffs were announced.
It’s like acting as a soccer referee who will not call out the offenses and let the play continue when the game still benefits the attacking team even though an attacking player is fouled, Bai further explained.
China is one of the fastest-growing civil aviation markets in the world, and 15 to 20 percent of Boeing’s aircraft deliveries are projected to end in the Chinese market over the next two decades, according to Morgan Stanley.
The US has kept changing their mind and ignited a trade war, which China does not want and will firmly oppose, a spokesperson of the MOFCOM said immediately after US took trade measures on China. “This move not only hurts bilateral interests, but also undermines the world trade order.”
“China and the US still have hopes of negotiating and reaching an agreement, as both the tariffs announced by the two countries will not take into effect until next month,” said Wang Jun, deputy director of the Department of Information at the China Center for International Economic Exchanges.
Wang told the Global Times that the removal of aircraft from the new list can be a signal that China still wants to talk, and also aircraft can be a valuable chip in the next round of trade negotiations.
Meanwhile, Wang said the Trump administration’s newly published list is not so much a solution for the trade deficit problem with China as efforts to hinder China’s technology development.
US President Donald Trump on Friday announced 25 percent tariffs on $50 billion in Chinese goods, containing industrially significant technologies related to China’s “Made In China 2025” strategy.
According to a list published by the office of the US Trade Representative, the tariffs will be applied on more than 1,000 types of Chinese goods, including aircraft engine parts, bulldozers, nuclear reactors and industrial and agricultural machinery.
American industry also opposed Trump’s decision.
“Imposing tariffs places the cost of China’s unfair trade practices squarely on the shoulders of American consumers, manufacturers, farmers, and ranchers. This is not the right approach,” US Chamber of Commerce President and CEO Thomas J. Donohue said in a statement posted on the chamber’s website on Friday.
By Zhang Ye Source:Global Times
China on Tuesday launched a swift and sharp response to the latest trade rovocations from the US, which threatened to slap tariffs on almost all Chinese exports to the US, calling the US move “blackmail” and vowing to respond with strength to protect its own and the world’s interests.
Dealing with the US is difficult, but China can easily
refuse theft and coercion. China will remain with the US through
negotiations and war. If a trade war between the two becomes fierce, the
result will not provide a favorable political environment for President
China will launch an immediate, powerful response to US
tariffs on billions of dollars’ worth of Chinese goods, threatening to
target US goods on the same scale and intensity, a spokesperson for the
Chinese Ministry of Commerce (MOFCOM) said on Friday.
US President Donald Trump’s trade and fiscal policies are
likely to increase the risks to the US and global economy, the
International Monetary Fund (IMF) said Thursday.
China has unveiled a list of products from the United
States that will be subject to additional tariffs in response to US
announcement to impose additional duties on Chinese imports.
Japan may have led Malaysia’s Look East
policy of yore, but the stakes are heavily tipped in China’s favour now
as the leader of..