China holds parade in celebration of the People’s Liberation Army (PLA) 90th Birthday



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What message did China’s military parade send?

China holds ceremony to mark 90th anniversary of PLA founding

Chinese President Xi celebrates military in speech  focused on peace, future – CGTN America

BEIJING — President Xi Jinping said Tuesday that the Chinese People’s Liberation Army (PLA) is moving rapidly toward “strong” informationized armed forces.

Xi said the PLA has transformed from a “millet plus rifles” single-service force to one that has fully-fledged services and has basically completed mechanization.

He said that the PLA must be bold in reform and adept in innovation while staying away from rigidity and stagnation at any time and under any circumstances.

Xi reaffirmed the Communist Party of China (CPC)’s absolute leadership over the PLA.

“To build a strong military, [we] must unswervingly adhere to the Party’s absolute leadership over the armed forces, and make sure that the people’s army always follow the Party,” he said.

Xi called for a new generation of “capable, brave and virtuous” army “with souls” in order to build a strong military.

Calling political work the “lifeline” of the PLA, Xi said troops must have ironclad faith, beliefs, disciplines and responsibilities, and retain their nature and tenet as the people’s army.

Xi has urged the country’s armed forces to bear in mind the sacred duty of fighting for the people.

The PLA is deeply rooted in the people and the strength comes from the people, said Xi.

Xi called on the PLA to maintain its close relationship with the people and “go through thick and thin” with them.

The PLA should also actively contribute to the economic and social development in stationed areas to benefit the people with actions, said Xi.

Xi urged boosting integrated military and civilian development amid efforts to build a strong military.

China must build a national strategic system and capacity of military-civilian integration, he said.

The CPC has established its thoughts on building a strong military in a new phase, Xi said.

The Party has put forward a series of new ideas and requirements concerning national defense and military building in the past five years since the 18th CPC National Congress, which together constitute the CPC’s thoughts on building a strong army in the new phase, Xi said.

The Party’s military strengthening theories should be constantly enriched and developed to cope with new challenges and solve new problems under new circumstances, he said.

He stressed “coordinated, balanced and inclusive development” of economic and national defense construction.

China will never compromise on its sovereignty, security or development interests, Xi said.

“The Chinese people love peace. We will never seek aggression or expansion, but we have the confidence to defeat all invasions. We will never allow any people, organization or political party to split any part of Chinese territory out of the country at any time, in any form,” Xi said.

“No one should expect us to swallow the bitter fruit that is harmful to our sovereignty, security or development interests,” he said.

Xi, also general secretary of the Communist Party of China Central Committee and chairman of the Central Military Commission, made the remarks while addressing a grand gathering in celebration of the PLA’s 90th founding anniversary.

Source: China Daily/Asian News Network

PLA ready to guard sovereignty 

 

Standing ready: Chinese paramilitary policemen stand in formation at Tiananmen Square after attending a ceremony to commemorate the 90th anniversary of the founding of the People’s Liberation Army at the Great Hall of the People in Beijing. — AFP

BEIJING: The Chinese army will step up its pace of improving its joint combat capabilities and “stand ready to fight and win at any time”, State Councilor and Minister of National Defense Chang Wanquan said.

Speaking about the cross-Straits situation, Chang said yesterday the People’s Liberation Army is “confident, capable and fully prepared to resolutely safeguard State sovereignty and territorial integrity”.

Chang made the remarks during a speech at a grand reception marking the 90th anniversary of the founding of the PLA, which fell yester­day.

President Xi Jinping, who is also general secretary of the Communist Party of China Central Committee as well as chairman of the Central Military Commission, attended the reception along with other party and state leaders.

The PLA has come a long way since its birth during the armed uprising in the city of Nanchang on Aug 1, 1927, when it had only 20,000 soldiers.

Xi oversaw and addressed a grand military parade on Sunday marking the 90th anniversary at the Zhurihe Training Base in North China’s Inner Mongolia region.

Yesterday morning, Xi attended a grand ceremony in Beijing commemorating the 90th anniversary and delivered a speech.

Led by Xi, the PLA has been advancing reform, technological upgrades, boosting training and combat readiness, Chang said.

Through this, it has achieved thorough restructuring and greatly enhanced its combat effectiveness, he added.

The military will press ahead with reforms and staunchly focus on winning in combat and training for readiness, Chang said.

Speaking of the cross-Straits situation, Chang said adherence to the 1992 Consensus and opposition to Taiwan independence constitute the political foundation of peace and development of cross-Straits relations.

Any form of secessionist attempt by anyone at any time would surely be opposed by the whole Chinese people and nation, he added.

Noting the Chinese military’s role as a contributor to world peace, he said the PLA facilitates global development and supports international order.

As of June, the Chinese military had participated in 24 UN peacekeeping missions, sending 31,000 personnel, 13 of whom lost their lives on duty. — China Daily/Asia News Network

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Turmoil in Korean Peninsula


 

Park Geun-hye – Ousted from office

 

Park ousted but her policy stays in S.Korea

The South Korean Constitutional Court on Friday upheld the parliament’s decision to impeach Park Geun-hye, making her the first democratically elected president in the country to be deposed. Park may also face criminal charges.

A few months back, when Park’s close friend Choi Soon-sil was first exposed of wrongdoing, few people thought Park would be impeached. But as her misdeeds including her involvement in Choi’s illegal profiteering and graft by herself were disclosed one by one, the true life of Park startled South Korea and the entire world.

The impeachment of Park has no direct connection with its diplomatic policies. However, if the leader of the opposition party is elected president later, South Korea may have a chance to shift diplomatic policies.

During the first half of Park’s presidency, China-South Korea relations changed for the better, as Seoul maintained a balance between Beijing and Washington.

Despite South Korea being an ally of the US, its trade volume with China reached more than double that with the US.

There is a strong pro-US political faction in South Korea. Whenever South Korea’s relations with North Korea become strained, they would try their best to push the country back to its old route of aligning with the US.

The leader of South Korea’s biggest opposition party has been leading a popular poll as a presidential contender. He holds a negative attitude toward THAAD. South Korea may change its diplomacy if he wins the election, though the scale of change is still hard to predict.

South Korea appears to have completely overthrown Park, however, Park’s policies, especially her signature work to deploy THAAD in South Korea, are still being 100 percent implemented by the caretaker government.

If Park is only a “princess” lacking the ability of judgment and easily being manipulated, then her presidential decisions should be thoroughly re-examined; if she was truly strategically visionary for the country, then her relationship with Choi would not be so scandalous.

We have to say that South Korean society’s attitude toward Park is full of contradictions.

Attacking Park and in the meantime upholding her policy is not a reasonable behavior.

Park’s decision to accept THAAD has pushed her country closer to the US, which is a serious geopolitical mistake.

It turned South Korea from as a country benefiting from its proximity to two big countries into a pawn of the US in Asia, making it a miniature Japan instead of an independent country. If South Korea doesn’t correct its path, Park’s legacy would still be in control of the country, as if she remains in the presidential hall.

Seoul shares fate with Pyongyang, not Washington

The South Korea-US Combined Forces Command kicked off their annual joint Key Resolve military exercise on Monday. The USS Carl Vinson aircraft carrier and F-35B stealth fighters will arrive in South Korean waters to conduct the exercise, which will simulate a preemptive strike against North Korea’s nuclear and missile facilities when signs of attack are detected. The US military is also deploying a new-type of Gray Eagle drone in South Korea that is capable of striking North Korean targets.

The Yonhap news agency, citing government sources, reported that the drills will include missions that could penetrate Pyongyang and target war command and key military facilities. They send an explicit radical threat to Pyongyang.

To decapitate the North Korean leadership and to punish “the South’s imperialist running dogs” with nuclear weapons are both the craziest threat Pyongyang and Seoul have sent to each other. They are equally hysterical, expressing both sides’ viciousness to destroy the other.

The US-South Korean joint drills without doubt are a deterrent against North Korea. How can Pyongyang remain indifferent facing a military exercise that includes more than 300,000 military personnel to carry out missions targeting its war command and top leader? In such a case, by no means will both sides be in the mood for negotiations. Even if they sit down, they cannot establish a minimum degree of trust for talks.

By deterring North Korea, the US and South Korea are encouraging the country to take a firm grip on the nuclear capabilities it has acquired so far. They intend to scare Pyongyang, but the actual effect is the opposite. Instead, Pyongyang believes that nuclear weapons are the reason why Washington and Seoul dare not put their plan of subverting the North’s regime into practice.

Through joint drills, more and more US strategic weapons are deployed on the Peninsula, posing a greater potential threat to China. Seoul may have more sense of security. But it disregards China’s security concern, it may even feel schadenfreude. To the Chinese people, the South Korean government has lost its rationality on the security issue.

China has participated in the tough sanctions the US and South Korea launched against the North, while the two countries rejected China’s proposal that the US and South Korea suspend their military exercises in exchange for a halt of North Korea’s nuclear activities.

The US and South Korea often accuse China of being uncooperative, but the reality is they are uncooperative over China’s mediation.

The US is here to stir up more trouble in Northeast Asia. By hitching itself to the US chariot, South Korea naively thinks it shares a common destiny with the US. However, if war breaks out, the battlefield is bound to be the Korean Peninsula while the US is on the other side of the Pacific Ocean. South Korea and North Korea are the two who really share a common destiny.

Put a break on Peninsula vicious cycle 

 
US and South Korean diplomats gave a negative response to the proposal raised by Chinese Foreign Minister Wang Yi Wednesday on the issue of the Korean Peninsula. During a press conference Wednesday on the sidelines of the ongoing annual sessions of the National People’s Congress, Wang noted that Pyongyang, which is promoting its development of nuclear weapons and ballistic missiles, and Washington and Seoul, which are holding large-scale military exercises to pile increasing military pressure on North Korea, are like “two accelerating trains coming towards each other, with neither side willing to give way.” Wang stressed that the priority for now is to “flash a red light and apply the brakes on both trains.”

US Ambassador to the UN Nikki Haley responded Wednesday local time that the US must see “some sort of positive action” from North Korea before it could take Pyongyang seriously at the negotiation table. Cho Tae-yul, South Korea’s UN ambassador was more direct, saying “This is not a time for us to talk about freezing or dialogue with North Korea.”

However, those two diplomats’ remarks do not mean that the appeal from Beijing only had a life that lasted several hours.

In fact, Wang’s solution is the only way out to resolve the North Korean nuclear issue apart from the use of force. It won’t be easy for all three sides, the US, South Korea and North Korea, to take a step back, but when warfare is so imminent, if they don’t want to fight, they might eventually be forced to choose the path which China suggested.

Of course, if they are so determined to go to war, although China does not wish to see that, still, they are free to go ahead.

In the eyes of the Chinese people, the North Korean nuclear issue was not created by Pyongyang alone. The country’s insistence on developing a nuclear program is without doubt a wrong path, yet Washington and Seoul are the main forces that have pushed North Korea to this path.

Now they want to stop Pyongyang from going ahead while refusing to reduce the impetus they are giving to North Korea. In the end, they failed to reach their goal and blame China for not being cooperative enough.

Wang’s suggestion aims at stopping the vicious circle on the Peninsula through an abrupt brake.

It must be uncomfortable to do so, nevertheless, it can avoid the worst-case scenario. It is believed that even if Washington, Seoul and Pyongyang refuse to admit it ostensibly, they will consider the option raised by China to avoid war.

China has expressed its willingness to be a “railway switchman” over the Korean Peninsula issue, but what happens next depends on Pyongyang and Seoul, as well as on whether the new US President has the boldness to make a peaceful decision. If the two trains resolve to have a head-on collision, a switchman will be of no use even if he wants to help.

THAAD provides a reason for China to elevate nuclear prowess

According to reports from South Korea and the US Tuesday, the two countries have started deploying the Terminal High Altitude Area Defense (THAAD) anti-missile system in South Korea. Parts of the shield, including launch vehicles, have already arrived, and service personnel and other equipment will be put in place within two months.

It seems that Washington and Seoul are determined to accomplish the installation of THAAD before the coming South Korean presidential election.

In the end, China has not been able to prevent THAAD from being set up in South Korea, but this was predicted by most observers at the beginning. Therefore, Beijing should keep calm and adopt resolute and efficient measures to minimize its threat toward China. In the subsequent games, Beijing will step by step make South Korea feel the pain and make the US realize its mistake.

We should start from increasing sanctions toward Seoul in an orderly way, comprehensively lower the level of Sino-South Korean exchanges, roll back all the privileges that Seoul has gained from China, and just maintain a normal relationship between the two.

Over the past years, South Korean commodities and cultural products have been particularly popular among Chinese consumers given the close ties between Beijing and Seoul. But we can take the current opportunity to squeeze South Korean cultural products out of the Chinese market. This is the price the country must pay for the THAAD deployment.

China should also focus on military countermeasures and strategically deal with more threats. The deployment of THAAD in South Korea has two consequences – it directly threatens military activities within China, moreover, it sets a precedent that Washington can arbitrarily implement its anti-missile arrangements around China. Both will jeopardize China’s security.

Can we neutralize THAAD technically? Research in this field must be enforced. If possible, Beijing must realize it at all costs. One thing is for sure, China’s related strategic weapons must target South Korea’s Seongju County, where THAAD will be installed.

We must prevent the US from setting up more THAAD batteries to China’s southeast or redeploying tactical nuclear weapons on South Korean soil. All that cannot be achieved by simply sanctioning the Lotte Group. The THAAD deployment will become a turning point in the Northeast Asian paradigm. When we take one step forward, we must think two steps, three steps ahead.

The most essential task for China now is to boost its military power. The THAAD installation has offered China a crucial reason to increase and improve its tactical nuclear weapons. It would be worth it if Beijing can comprehensively elevate its strategic nuclear power because of THAAD.

The world has come to a crossroad where Washington is attempting to establish global military hegemony through its anti-missile system, while Beijing and Moscow are trying to smash that plan. This is the essence of the reality.

Sources: Global Times

Kim Jong-nam’s murder masterminds back in North Korea


 

Official story: Noor Rashid speaking to the media during the press conference at Bukit Aman.

KUALA LUMPUR: Four suspects being hunted by Bukit Aman in the assassination of North Korean exile Kim Jong-nam are believed to be back in Pyongyang after leaving the country for Jakarta immediately after the attack.

The four – Rhi Ji-hyon, 33, (arrived in Malaysia on Feb 4), Hong Song-hac, 34, (arrived Jan 31), O Jong-gil, 55, (arrived Feb 7) and Ri Jae-nam, 57, (arrived Feb 1) – left for Jakarta from KLIA2 immediately after the attack on Monday.

From Jakarta, sources say they flew to Dubai and Vladivostok before reaching Pyongyang.

“They may have taken the long route to shake off the authorities,” sources said.

Deputy Inspector-General of Police Tan Sri Noor Rashid Ibrahim said Malaysian police are cooperating with Interpol and other relevant bodies overseas to track them.

Bukit Aman’s first priority is to collect all evidence on the suspects’ involvement in the case.

“Next plan is to get them. We will use all resources to pursue them,” Noor Rashid told a press conference, the first by the police since the killing.

On the possibility that the murder was politically motivated, Noor Rashid said the police were not interested in any political angle.

“What we are interested in is why they committed such a crime in our country.

“Any political angle can be put aside as it is not our job to worry about political matters.

“We want to get at the truth and bring the perpetrators to justice,” he said.

He said police were also looking for North Korean citizen Ri Ji-u, 30, also known as James, along with two others to help in investigations.

Of those arrested, Vietnamese Doan Thi Huong, 28, arrived from Hanoi on Feb 4 while Indonesian Siti Aisyah, 25, a spa masseuse, entered the country via Batam on Feb 2.

North Korean Ri Jong-chol, 47, was arrested on Friday and entered Malaysia on Aug 6 last year.

“We are in the process of identifying the two others sought to assist in the investigations,” said Noor Rashid.

“We hope anyone with information can come forward,” he said.

On Jong-nam’s post-mortem, Noor Rashid said that it was conducted on Feb 15 at Hospital Kuala Lumpur.

“The cause of death is still unknown. We are waiting for the toxicology and pathological test results. I think in a few days, we will get the toxicology result.

“The case will be referred to the deputy public prosecutor for fur­ther instructions and investi­ga­tion,” he said.

Priority is given to close family members or next of kin to claim the body and they have been given two weeks to do so, added Noor Rashid.

“It is very important for close family members of the deceased to come forward to assist us in the process of identification, which is based on our legal procedures and Malaysian law.

“However, as of today, we have not met the next of kin. We are trying very hard to get the next of kin to assist us,” he said.

In the event that the family does not show up, Noor Rashid said police will look at further options.

Sources: By  farik zolkepli, jastin ahmad tarmizi, merga watizul fakar, adrian chan The Star

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Korean web of intrigue: Malaysia hunting for Kim Jong-nam murder


Two women suspects in Kim Jong-nam assassination remanded for seven days

KUALA LUMPUR: Two women arrested in connected with the assassination of Kim Jong-nam, the half-brother of North Korean leader Kim Jong-un, have been remanded for seven days.

Selangor police chief Comm Datuk Seri Abdul Samah Mat said the two women have been remanded until Feb 21 to assist in the investigations.

One of the women has a Vietnam passport bearing the name Doan Thi Huong while the other has an Indonesian passport bearing the name Siti Aishah.

“They have been remanded. So far, there is no press conference as a press statement have been issued. We will update if there is anymore development,” Abdul Samah told The Star Online.

At 11.05am, Magistrate Sharifah Muhaymin Abd Khalib was at the Sepang police headquarters to grant the police’s application to remand the woman with the Vietnam passport.

Jong-nam, 45, was killed by two women who splashed his face with a chemical at the KLIA2 departure hall at about 9am on Monday. He was about to leave for Macau.

The women later got into a taxi and fled.

One of the women, who has the Vietnam passport, was arrested at the airport on Wednesday when she tried to board a flight out.

The woman with the Indonesian passport was arrested at 2am on Thursday.

Police are looking for four men who were in the company of the two women at the airport when Jong-nam was killed.

By Farik Zolkepli and Joash Ee De Silva The Star/|ANN

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South Korea can’t tackle new Trump Order alone, be prepared new Trump order !


Trump-tanic by Stephff | China Daily

South Korea, in particular, could take a leaf from Japan’s playbook on preparing for a face-off and making the right structural reforms.

It’s official. A new world order, aka, the Trump Order, has been set in motion.

Most of us should have been ready for it, since the man had been more than clear about backtracking on America’s global trade policies. And now, in one flamboyant gesture, he has overturned his predecessor Barack Obama’s decision to join the TPP.

As one of the key members, Japan is up in arms. Prime Minister Shinzo Abe has vowed he would continue to try and persuade President Donald Trump.

At the same time, Tokyo appears to be quite ready to face the new threat.

Japan is a country that downplays the number of naval destroyers it has in order to keep its frenemies in check, and to assure them it still has a long way to go in terms of military defense. In reality, Tokyo is armed with seemingly worn-down subs that can actually be made battle-ready at a moment’s notice.

The Abe Shinzo administration has been ready to face off with Trump for a while now, and internal government sources say the foundations have already been laid. Prime Minister Shinzo Abe has already put in motion the necessary structural reforms to wean Japan off of the US or make Japanese firms more competitive in the face of high tariffs. Abe is also preparing to enlist the support of high-profile companies such as Softbank, which has been pledging more investment in America.

Further, Japan is looking to cut loose from China, which has made it clear it won’t play into US hands.

In contrast to Japan and China, South Korea has a smaller say. But that does not mean it has less on the line.

The country stands as the world’s 11th-largest economy in terms of GDP, but it also depends on exports for more than two-thirds of it. So any policy decisions by its chief trade partners are bound to have a profound impact — even more so now that its internal economic affairs are in a mess due to the ongoing impeachment. South Korea truly cannot afford to have its global partnerships jeopardized.

During his presidential campaign, Trump has already called the US-Korea FTA a failed partnership that has robbed the US of 100,000 jobs. 

The Seoul government should have long been brainstorming a strategy to keep the deal on track, and must readily communicate its plans with the public before the concerns mushroom into something bigger.

The alliance with the US goes far beyond military issues, and the significance should not be downplayed or tainted in any way if Korea is to continue pursuing its national interests.

The strategy should be laid out in such a way to prevent Koreans from harboring unnecessary ill sentiment toward the US, and vice versa. For this, both governments will have to cooperate seamlessly. Trump must realize the contribution that Koreans and the Korean economy are making in the US.

That while it may not be comparable in size to other nations such as Japan and China, there is no going around the fact that in the end, cliche has it may sound, it is indeed a global economy.

Korean firms should take a cue from Softbank and find ways they can offer more support for the Korean economy as it faces the aftershocks of Trump’s latest policy move.

As for the US, it must remember that Korean companies like Hyundai, Samsung and LG have been seeking cheaper entry into the US for years via countries like Mexico and Vietnam.

The change of a regime must not pull the plug on these efforts for the sake of global partnership. And needless to say, the products and services brought into the US also help create livelihoods there, and give Americans what they need.

All of this should not be forgotten or put on a back burner. As already witnessed in the Lehman Brothers meltdown, the intricate web of global trade and finance ensures that the demise of a single company can affect so many more.

But, in a weird and twisted way, I do envy the American people. Sure, there could have been someone better than Trump, who psychologists have branded as narcissistic and delusional.

But for many Americans, Trump is doing what they have only dreamed of doing and saying. To say out loud, that they think America is the best, that they are scared of anyone appearing to infringe upon its beliefs and interests, even at the expense of other nations and peoples. To say that the US won’t play the peace-brokering leader who is constantly mindful of others, including rivals. To say, the US will start acting only for its benefit-regardless of how short-sighted this may be.

To have a president, as strange as he may be, who for now, appears so committed in his campaign, does draw an odd contrast with our embattled President Park Geun-hye who now seems anxious only to cover her own tail.

In some ways, they are similar in that they seem to prioritize themselves. But at least for now, Trump is giving many Americans the promise they need, as twisted or unorthodox his methods may be.

In a similar fashion, but based on a strategic and acceptable approach, Korea should be ready to protect its interests and its people amid the fast-changing global order. And all other players in the economy must be ready to lend a helping hand.

By Kim Ji-hyun

Kim Ji-hyun is The Korea Herald’s Tokyo  Correspondent. The views expressed here are entirely the writer’s own.
 

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.

Global Reset 2016~2017


In a world facing challenges and uncertainties, embrace opportunities for success through innovation.

“I went looking for my dreams outside of myself and discovered, it’s not what the world holds for you, it’s what you bring to it. –Anne Shirley”

THE world is currently at a paradox. Tensions and uncertainty for the future are rising in times of prevailing peace and prosperity. While changes are taking place at an incredibly fast speed, such changes are presenting unprecedented opportunities to those who are willing to innovate.

Recently, most global currencies had weakened against the US dollar (USD). This may give rise to some concern, but it is worth placing in proper perspective that most countries would trade with a few countries instead of just one. Furthermore, we are living in a world with low economic growth, increased mobility and rapid urbanisation.

In such a global landscape, it is important to embrace change and innovation in a courageous way to shape a better future. In L.M. Montgomery’s Anne of Green Gables, Anne Shirley said, “I went looking for my dreams outside of myself and discovered, it’s not what the world holds for you, it’s what you bring to it.”

Paradox, change and opportunity

In the World Economic Forum Global Competitiveness Report 2016-2017, World Economic Forum head of the centre for the global agenda and member of the managing board Richard Samans stated that at a time of rising income inequality, mounting social and political tensions and a general feeling of uncertainty about the future, growth remains persistently low.

Commodity prices have fallen, as has trade; external imbalances are increasing and government finances are stressed.

However, it also comes during one of the most prosperous and peaceful times in recorded history, with less disease, poverty and violence than ever before. Against this backdrop of seeming contradictions, the Fourth Industrial Revolution brings both unprecedented opportunity and an accelerated speed of change.

Creating the conditions necessary to reignite growth could not be more urgent. Incentivising innovation is especially important for finding new growth engines, but laying the foundations for long-term, sustainable growth requires working on all factors and institutions identified in the Global Competitiveness Index.

Leveraging the opportunities of the Fourth Industrial Revolution will require not only businesses willing and able to innovate, but also sound institutions, both public and private; basic infrastructure, health and education, macroeconomic stability and well-functioning labour, financial and human capital markets.

World Economic Forum editor Klaus Schwab stated in The Fourth Industrial Revolution that we are at the beginning of a global transformation that is characterised by the convergence of digital, physical and biological technologies in ways that are changing both the world around us and our very idea of what it means to be human. The changes are historic in terms of their size, speed and scope.

This transformation – the Fourth Industrial Revolution – is not defined by any particular set of emerging technologies themselves, but by the transition to new systems that are being built on the infrastructure of the digital revolution. As these individual technologies become ubiquitous, they will fundamentally alter the way we produce, consume, communicate, move, generate energy and interact with one another.

Given the new powers in genetic engineering and neurotechnology, they may directly impact who we are, and how we think and behave. The fundamental and global nature of this revolution also pose new threats related to the disruptions it may cause, affecting labour markets and the future of work, income inequality and geopolitical security, as well as social value systems and ethical frameworks.


A dollar story

When set in a global landscape where there is uncertainty for the future, when compared to other countries, Malaysia’s economy is performing quite well.

ForexTime vice president of market research Jameel Ahmad said, “When you combine what is happening on a global level, the Malaysian economy is in quite an envious position.”

For 2016, the USD has moved to levels not seen in over 12 years. The dollar index is trading above 100. This was previously seen as a psychological top for USD.

The Malaysian ringgit (MYR) is not alone in the devaluation of its currency. All of the emerging market currencies have been affected in recent weeks.

Similarly, the British £(GBP) has lost 30% this year, falling from US$1.50 to US$1.25 per GBP. The Euro (EUR) has fallen from US$1.15 to US$1.05 in three weeks.

The China Yuan Renmenbi (CNY) is hitting repeated historic lows against the USD. The CNY is only down around 5%.

Jameel believes that the outlook for the USD will be further strengthened. While the dollar was already expected to maintain demand due to the consistent nature of US economic data, the levels of fiscal stimulus that US Presidentelect Donald Trump is aiming to deliver to the US economy will encourage borrowing rates to go up.

This means that it is now more likely than ever that the Federal Reserve will need to accelerate its cycle of monetary policy normalisation (interest rate rises).

Most were expecting higher interest rates in 2017. Trump has also publicly encouraged stronger interest rates. However, when considered that Trump is also promising heavy levels of fiscal stimulus, there is a justified need for higher interest rates, otherwise inflation in the United States will be at risk of getting out of control.

The probability for further gains in the USD due to the availability of higher yields from increased interest rates will mean further pressure to the emerging market currencies.

With populism resulting in victories in both the United States’ presidential election and the EU referendum in the United Kingdom in 2016, attention should be given to the real political issues in Europe and the upcoming political elections in 2017, such as those in Germany and France.

Jameel said, “Until recently, political instability was only associated with developing economies. We are now experiencing a strong emergence across the developed markets. This might lure investors towards keeping their capital within the emerging markets longer. Only time will tell.”

In Malaysia’s case, the economy is still performing at robust levels, despite slowing headline growth. Growth rates in Malaysia are still seen as significantly stronger than those in the developed world.

There are going to be challenges from a stronger USD and other risks such as slowing trade, but the emerging markets are still recording stronger growth rates than the developed world.

Adapting to creative destruction

In a world where changes are taking place rapidly, the ability to adapt to changes plays an important role in encouraging innovation and growth. Global cities are achieving rapid growth by attracting the talented, high value workers that all companies, across industries, want to recruit.

In an era where 490 million people around the world reside in countries with negative interest rates, over 60% of the world’s citizens now own a smartphone and an estimated four billion people live in cities, which is an increase of 23% compared to 10 years ago, these three key trends are shaping our times.

Knight Frank head of commercial John Snow and Newmark Grubb Knight Frank president James D. Kuhn shared that the era of low to negative interest rates has reduced investors’ expectations on what constitutes an acceptable return. The financial roller coaster ride that led to this situation has made safe haven assets highly sought after.

A volatile economy has not stopped an avalanche of technological innovation. Smartphones, tablets, Wi-Fi and 4G have revolutionised the spread of information, increased our ability to work on the move, and led to a flourishing of entrepreneurship.

Fast-growing cities are taking centre stage in the innovation economy and in most of the global cities, supply is not keeping pace with demand for both commercial and residential real estate.

Consequently, tech and creative firms are increasingly relying upon pre-let deals to accommodate growth, while their young workers struggle to find affordable homes.

As the urban economy becomes increasingly people-centric, regardless of a city being driven by finance, aerospace, commodities, defence or manufacturing, the most important asset is a large pool of educated and creative workers.

Consequently, real estate is increasingly a business that seeks to build an environment that attracts and retains such people.

Knight Frank chief economist and editor of global cities James Roberts said, “We are moving into an era where creative people are a highly prized commodity. Cities will thrive or sink on their ability to attract this key demographic.

“A characteristic of the global economy in the last decade has been the phenomenon of stagnation and indeed decline, occurring alongside innovation and success. If you were invested in the right places and technologies, the last decade has been a great time to make money; yet at the same time, some people have lost fortunes.

“The locations that have performed best in this unpredictable environment have generally hosted the creative and technology industries that lead the digital revolution, and disrupt established markets.” The rise of aeroplanes, automobiles and petroleum created economic booms in the cities that led the tech revolution of the 1920s and 30s. Yet elsewhere, recession descended on locations with the industries that lost market share to those new technologies like ship building, train manufacturing and coal mining.

In a world where abundant economic opportunities in one region live alongside stagnation elsewhere, it is not easy to reconcile the fact that countries that were booming just a few years ago on rising commodity prices are now adapting to slower growth.

Just as surprising are Western cities that are now thriving as innovation centres, when they were dismissed as busted flushes in 2009 due to their high exposure to financial centres.

Roberts said, “This is creative destruction at work in the modern context. The important lesson for today’s property investor or occupier of business space, is to ensure you are on-the ground where the ‘creation’ is occurring and have limited exposure to the ‘destruction’. This is not easy, as the pace of technological change is accelerating at a speed where the old finds itself overtaken by the new.

“However, real estate in the global cities arguably offers a hedged bet against this uncertainty due to the nature of the modern urban economy, where those facing destruction, quickly reposition towards the next wave of creation.”

The industries that drive the modern global city are not dependent upon machinery or commodities but people, who deliver economic flexibility.

A locomotive plant cannot easily retool to make electric cars, raising a shortcoming of the single industry factory town. Similarly, an oil field in Venezuela has limited value for any other commercial activity.

However, a modern office building in a global city like Paris can quickly move from accommodating bankers in rows of desks to techies in flexible work space. Therefore, there is adaptability in the people in a service economy city which is matched by the city’s real estate.

In the people-driven global cities, a new industry can redeploy the ‘infantry’ from a fading industry via recruitment. Similarly, the professional and business service companies that served the banks, now serve a new clientele of digital firms.

In contrast, manufacturing or commodity-driven economies face greater barriers when reinventing themselves.

Today, landlords across the world struggle with how to judge the covenants of firms who have not been in existence long enough to have three years of accounts, but are clearly the future.

Consequently, both landlord and tenant need to approach real estate deals with flexibility. Landlords will need to give ground on lease term and financial track record, and occupiers must compensate the landlord for the increased risk via a higher rent.

Another big challenge for the Western global cities will be competition from emerging market cities that succeed in repositioning themselves away from manufacturing, and towards creative services. The process has started, with Shanghai now seeing a rapid expansion of its tech and creative industries.

The big Western centres still lead in services, but the challenge from emerging markets cities did not end with the commodities rout. They are just experiencing creative destruction and will emerge stronger to present a new challenge to the West.

From Mak Kum Shi The Star/ANN
 

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