August 8, 2018

Ratings agency Standard & Poor’s looks at the defence, energy and economic security drivers behind China’s grand plan for a new Silk Road . . .

CHINA’s Belt and Road Initiative (BRI) is a gigantic venture capital project, according to a briefing note by the Standard & Poor’s China Senior Analysis Group.
It says an undertaking of the magnitude of BRI has potentially large payoffs as well as large risks.
Success will rest on whether China’s seed money in the BRI will create creditworthy projects that attract true private-sector outside money. “Seen this way, the BRI is arguably the world’s largest attempted venture capital project,” the note says.
“The geopolitical factor is that China has decided it wants to have greater control than Japan in shaping both its economic and security environment in this region.”
Unlike the United States, which shares borders with two countries, China borders no fewer than 17 countries.
“Of particular interest to China are the western borders, which abut Central Asia that was once part of the former Soviet Union.
“These nations tend to be less political and economically stable than China. As such, they are seen as potential sources of risk, particularly in Xinjing province in China’s northwest.”
 The note says that engaging these countries economically and connecting them to Western China through the BRI serves several purposes.

August 2, 2018

CHINA’s dizzying climb to superpower status is heading for trouble. At least, that seems to be the gloomy verdict of Carl Minzner, an American Professor of Law.
In End of an Era: How China’s Authoritarian Revival Is Undermining Its Rise (Oxford University Press, 2018) Minzner analyses the key challenges facing China today — mounting socio-economic problems, worsening governance difficulties, rising social unrest, and increasing social polarisation.
Cynics might point out that many of these problems are confronted by virtually every civilised society.
But Minzner sets out to explain why these shortcomings may be leading to China’s social and political collapse, and why China is looming as a perceived threat to the current world order.
He points out that China’s 1.4 billion people have never had a chance to benefit from the centuries-old Western democratic tradition of state-society relations.
From dynastic Qing rule, they have lurched from Republicanism to Communism, from Five-Year Plans to Cultural Revolution, before morphing - after three decades of severe ideological and economic reform - into “red capitalism”.  
According to the Professor, there are now unmistakable signs of the nation’s immanent dysfunction.    
He nominates a lack of political opposition as China’s greatest weakness … moderate voices and independent civil society organisations committed to gradual institutional reform — these China sorely lacks.    

August 2, 2018

CYBER ATTACKS on critical infrastructure are multiplying, and are now one of the top two or three priorities that CEOs know they must deal with, says Kumar Parakala, Global Digital Leader of the diversified professional services company, GHD.
He says the rate of growth of cyber threats has been exponential — a seven-fold increase in two years. And the costs are escalating.
Lloyds, in a joint report with Cyence, a leading cyber risk analytics modelling firm, estimates that the impact of a major global cyber-attack has the potential to trigger US$53 billion in economic losses.
That is roughly the equivalent of a catastrophic natural disaster like 2012’s Superstorm Sandy.
“A serious global cyber-attack — on predominantly businesses, government agencies and some individuals — is anticipated to cause that level of havoc, Parakala told ATI.
Some expect global cyber-crime damage to reach US$6 trillion annually by 2021 — up from US$3 trillion in 2015.
And spending on cyber security could exceed US$1 trillion from 2017-2021. The rising tide of cyber-crime pushed information security
(a subset of cybersecurity) spending alone to more than US$86.4 billion in 2017, according to the research and advisory group, Gartner.

July 6, 2018

CHINESE online shoppers prefer to buy from Japan, Korea, the U.S. and Australia, in that order, according to new research by Frost and Sullivan An estimated 500 million Chinese are now shopping online . . .

SYDNEY — Cross-border online shopping spending in China has exceeded US$100 billion, almost eight times larger than Australia’s total online shopping market, according to new research by Frost & Sullivan, in conjunction with the Chinese retail strategy firm Azoya Consulting.
The study reveals that 87% of Australian respondents see China as a lucrative market, with huge opportunities arising from affluent Chinese consumers seeking quality products from other countries - but only 20% are satisfied with their current online capabilities in reaching Chinese shoppers.
“With China now the world’s largest online shopping market, Australian retailers and brands need to consider the best approach to reach Chinese consumers if they want to take advantage of this booming opportunity,” said Mark Dougan, managing director, Australia/New Zealand, of Frost & Sullivan.
“The complexities and challenges involved mean a one-size-fits-all approach isn’t appropriate to meet market demands. They need to carefully determine which model will work best for them.”
The study of 1,000 cross border online shoppers in China, as well as 100 international brand owners and retailers in Australia, New Zealand, the US, Canada and the European Union, was conducted in 2018 to understand the strategies, expectations and experiences of online sales in China.
Mid-size and large retailers with annual revenue of over US$50 million participated in the study, with 36% earning annual sales of more than US$1 billion.

July 6, 2018

U.S. doubts over progress in China on IP protection may be at the heart of the current trade dispute. And a 10% U.S. tariff on Chinese exports worth US$200 billion would equate to an estimated 0.2% to 0.3% decline in China’s GDP growth . . .

WASHINGTON — ANZ Bank believes U.S. wariness about technology transfers is still the major hurdle to overcome in resolving differences between the U.S. and China – and, going forward, it expects the U.S. to continue to initiate other trade measures, with China reciprocating.
Following talks in Washington, the two countries issued a joint statement vowing not to launch a trade war against each other, but based on the official release, ANZ researchers do not see any substantial progress in resolving existing issues in the Sino-US trade relationship.

July 6, 2018

Chaoping Zhu, Shanghai-based Global Market Strategist for J.P. Morgan Asset Management, says that if the U.S. does apply 10% tariffs to Chinese exports worth US$200 billion, this will equate to an estimated 0.2 - 0.3 percentage point decline in Chinese GDP growth.
There are several inherent risks, he says:
 1) Global investor confidence may be hurt, leading to slower capital inflows;
2) Multi-national corporations might reallocate their supply chains out of China, making it difficult for China to improve its technology and long-term productivity; and
3) Financial risk may rise since Chinese exporters rely heavily on debt in their business.  
But Zhu believes China has room to counter any economic slowdown with monetary and fiscal policies.
“Deleveraging measures undertaken in the past two years have tightened liquidity conditions, temporarily suppressing infrastructure investment by local governments — and property purchases by urban households,” he says.
“Yet these demands remain strongly intact, suggesting investment could grow quickly as a result of monetary and fiscal stimulus, much as we saw in 2009.”
Zhu says short-term growth would come at the cost of soaring credit risks, posing dangers.

July 6, 2018

Both Donald Trump and Kim Jong-un can walk away from their Summit in Singapore, if not satisfied, at least not scarred . . .

SEOUL — The diplomatic whirlwind of Trumpian proportions tossed both allies and adversaries for a bit of a ride. At the G-7 summit in Charlevoix, Canada (June 8-9), Trump revealed a strong willingness to pursue perceived American interests unilaterally in defiance of Europe, Canada and Japan.
Conversely, at the Singapore Summit a few days later (June 12), he not only agreed with long-standing North Korean assertions that U.S.-South Korean war drills were indeed “provocative”, but unilaterally cancelled them without informing either the Pentagon or Seoul.
Trump professed to be establishing “a very special bond” with Kim.
Unvoiced were his previous derisive dismissals of the “Little Rocket Man” with a small nuclear button.
In Singapore, Trump revealed the educational aspect of the summit. Of Kim Jong-un, he said: “I learned he’s a very talented man. I also learned that he loves his country very much.” In turn, Kim’s people had “great fervour” toward their leader, he added.

But Trump did concede that “I may be wrong . . . I may stand before you in six months and say: ‘Hey I was wrong’.” (This from a man who claimed an ability to assess Kim’s sincerity within the first minute after meeting).
He then revealingly continued: “I don’t know that I’ll ever admit that, but I’ll find some kind of excuse.”
In the run-up to, and in the course of the very brief summit, Trump’s perspective appeared to be that of the businessman he projects himself to be.
In mid-May, Trump announced that, unlike Libya, his idea of an agreement “would be with Kim Jong Un, something where he would be there. He’d be in his country. He’d be running his country. His country would be very rich”.

May 24, 2018

WASHINGTON - The second round of negotiations in Washington between the U.S. and China to resolve a long standing trade dispute has yielded mixed results. With US Commerce Secretary, Wilbur Ross, expected to visit China next to continue the talks, investors will seek credible action from both sides to diffuse trade tensions further.

ON A positive note, the two sides acknowledged the need to avert a trade war and that continued formal talks were the best way to address bilateral trade issues,” says BBVA in a research note.

“Post-meeting statements to this effect from China’s top economic advisor, Liu He, and U.S. Treasury Secretary, Steven Mnuchin, should help soothe unnerved investors’ fears of a lose-lose trade war.

“The former noted that ‘both sides agree not to go ahead with imposing tariffs’, while the latter stated: ‘We’re putting the trade war on hold’.

March 29, 2018

TRADE finance default rates from 2008 to 2016 are low across all products and regions – but despite its low-risk nature, trade finance is a product that is shrinking as banks retreat to their core businesses . . .

Having analysed US$10.5 trillion in trade finance transactions and US$670 billion in export finance exposures, the International Chamber of Commerce  (ICC) has concluded that financing trade is a low-risk business.

March 3, 2018

CHRIS PATTEN is ardently pro-EU. He sees Brexit as a betrayal of the UK - and a bar to Britain remaining a major player on the world stage. And he is clearly no fan of how world politics is panning out . . .

CHRIS PATTEN can be best described as an over-achiever.

Across the 300 pages of his First Confession [Allen Lane, 2017], he wears a bewildering number of hats: Chairman of the Conservative Party; British Cabinet Minister; the EU’s European Commissioner for External Affairs; confidante of Lee Kuan Yew; crony of Margaret Thatcher; chastiser of China; English patriot; Chairman of the BBC; Co-Chairman of the International Crisis Group; advisor to Pope Francis; Chancellor of Oxford University; and — most famously — the last Governor of British Hong Kong. 

March 2, 2018

AN ADB survey finds that 57% of trade finance requests by SMEs are rejected, compared with only 10% for multinational companies . . .

THE Asian Development Bank (ADB) has identified a gap of US$1.5 trillion in trade finance in the global market in 2016.

In its Trade Finance Gaps, Growth and Jobs Survey, the Manila-based multilateral institution found that the funding gap affected — and continues to affect — SMEs most.

March 1, 2018

THE HKSAR Government is committed to the development of innovation and technology and has pledged more than US$3.6 billion to various programmes since 2015, the Financial Secretary, Paul Chan, told delegates to this year’s Hong Kong Startmeup Festival

“To sustain our competitiveness in the 21st century, we need a new engine for our economy in the form of innovation and technology (I&T),” Chan said. 

Hong Kong is focussing on four areas – AI and big data analytics, biomedicine, smart city and fin-tech. “We are also working relentlessly with industry stakeholders to enhance Hong Kong’s ecosystem for start-ups,” he said. 

February 27, 2018

THAILAND is focussing on higher education and smart farming to entice more Australian investors . . .

BANGKOK — The Thai Government has moved to strengthen the teaching capacities of it education system ­— especially in the area of emerging technologies — by encouraging the involvement of foreign higher learning institutions in twinning of courses and curricula, joint co-operative arrangements, and through direct foreign investment.

January 31, 2018

IN THE near term, Thailand’s economic prospects at the close of 2017 are significantly brighter than at any time during the past several years . . .

BANGKOK ­— In terms of its economy, Thailand clearly turned a corner in 2017. What remains murkier, however, is whether Thailand as a society has succeeded in turning the page.
With the year coming to a close, the Thai economy was nearing 4.0 per cent growth as exports, the main pillar, came roaring back to life, approaching a record US$236 billion in value.
While that gross domestic product (GDP) rate does not compare to the soaring figures Thailand posted in earlier decades, it is also a far cry from the gloomy forecasts of critics who claimed the unelected Government was not capable of managing the economy.
With fourth quarter GDP coming in at 4.3 per cent – the highest quarterly rate since the first quarter of 2013 – the National Social and Economic Development Board (NESDB), Thailand’s chief planning agency, raised its growth forecast for the year to 3.9 per cent.
Exports and tourism have been driving most of the gains. But investment has also been key.

January 31, 2018

IT NOW seems clear that Abenomics has many more years to run. One should be wary of Japan sceptics  . . .

TOKYO — In a note on the implications of Prime Minister Abe’s re-election, the Chief Global Strategist of Nikko Asset Management, John Vail, along with NAM’s Chief Investment Officer — Japan, Hiroki Tsujimura, and Head of Japan Equity Fund Management, Jiro Nakano, say there is little doubt that Abe wants a rising stock market.
“Now that his term seems very likely to extend to 2021, Abe will likely work on a constitutional amendment to legitimise Japan’s military forces, and hike the VAT by 2.0 per cent in October 2019, but he will also continue to push for economic reforms and monetary accommodation,” they say.
“Since he is now the most powerful Prime Minister in modern Japanese history, he should be able to achieve all of these goals, especially now that the main Opposition party has been fractured by Yuriko Koike (who) will almost certainly push her Coalition (and all her supporters nationwide, most especially women voters) to vote for the Constitutional amendment.
“Rising stock markets encourage consumer spending via the “wealth effect”, at least among the wealthy segment that accounts for the majority of any country’s personal consumption. The capital gains associated with such are also a major factor in the future reduction of fiscal deficits.”

January 24, 2018

HANOI — Vietnam, buoyed by a revived Trans Pacific Partnership (TPP) trade pact and a regional trade agreement dominated by China, is in the box seat in an  outlook driven by investment and growth .  . . .

THE Trans-Pacific Partnership (TPP) — feared to have floundered after President Donald Trump withdrew U.S. support earlier — gained a second wind at November’s Asian Pacific Economic Co-operation (APEC) meeting in Da Nang. The remaining 11 nations agreed to press on with expanded trade and investment programmes.
“Vietnam is in the box seat right here. It desperately wanted the TPP,” Carl Thayer, a defence analyst with Australia’s University of New South Wales, told ATI.
The revived TPP, now termed the Comprehensive and Progressive TPP after intervention by Canada, is undergoing fresh talks towards a final agreement. The TTP’s 11 nation members would include Australia, Chile, Japan, Malaysia, Mexico, New Zealand, Peru and Singapore.
Vietnam was considered a winner under the earlier TPP pact, with World Bank forecasts that, by 2030, economic benefits would add about 8.0 per cent to its GDP.
The key industries to gain from TPP were textiles and garments and global supply chain operators, as in telecommunications, taking advantage of Vietnam’s close proximity to regional economic giant China.
Vietnam is also a member of the China-dominated Regional Comprehensive Economic Partnership (RCEP), which is centred on the 10 ASEAN nations and  countries with free trade pacts with ASEAN — Australia, China, India, Japan, South Korea and New Zealand.
“Vietnam can follow (the TPP) path and it can follow RCEP, which China is espousing, at the same time — it is not mutually exclusive,” Thayer said.
But Pavida Pananond, a Professor of International Business Studies at Thailand’s Thammasat University, says that, without the U.S. role in TPP, China influence over Vietnam’s trade profile has risen.
Pavida, told ATI said while the “size of potential gains from trade and investment may be reduced for Vietnam, [in the absence of the U.S.] it remains attractive as the only member in Asia with relatively low costs and a large growing market”.
She said that, despite the revised TPP agreement, Vietnam would remain “significant” in its overall standing in intra-regional trade and investment in Asia.
Vietnam’s economic outlook has risen in recent years. “The near-term outlook is positive,” the United Nations reported in its annual economic and social survey for Asia and the Pacific (UNESCAP). The UN has projected Vietnam’s growth at 6.5-6.7 per cent over 2017 and 2018.