Hong Kong, London Vie to Fund One Belt, One Road

♠ Posted by Emmanuel in ,, at 5/17/2017 04:12:00 PM
Xi Jinping hawks OBOR to Filipino flunkies. Apparently, there are many of these sorts all over the world.
So we may have expressed some doubts about the now-legendary PRC "One Belt, One Road" project--otherwise known as the "New Silk Road"--coming true. However, there is an interesting corollary to the story. What if China's erstwhile economic rivals buy into the hype? The Americans, for instance, are comparing the decrepit state of US infrastructure and the beleaguered Donald Trump's ever-doubtful intentions to fix it with such a massive-scale, global effort:
China excels at spectacle, and the Belt & Road Forum was as much PR stunt as anything. But the vast scale of the plan and the national ambition behind it dwarfs anything leaders are contemplating in Washington, or European capitals. “If you compare this to what the United States is doing—trying to rescue the steel and aluminum sectors and open a few markets for its goods—we’re pretty small potatoes,” says Scott Kennedy, an expert on the Chinese economy at the Center for Strategic and International Studies. “China is more organized and they’re planning more strategically than the United States.”
Apparently, there is some kind of nascent Western inferiority complex when it comes to infrastructure. The Americans aside, the British want in on a piece of the action. However, they will have to duke it out with the PRC's erstwhile Hong Konger compatriots to help finance the enormous project if a South China Morning Post article is to be believed:
Hong Kong and London have locked horns at a two-day high-level forum in Beijing over which city is best placed to act as the ­finance hub for China’s global trade and commerce strategy. At the first day of the Belt and Road Forum for International ­Cooperation, Hong Kong Chief Executive Leung Chun-ying ­insisted the city was “the preferred destination” for capital flows from the mainland. Leung cited the city’s status as the largest offshore settlement centre for yuan trade and its title as the world’s No 1 stock market for new listings in 2016.
C.Y. Leung may not exactly be an authoritative source on the matter at this point in time since he's the lame duck chief executive of Hong Kong. His British counterpart's place in the political space may be more secure since his Conservatives look set to win an overwhelming majority against the decrepit Labour Party:
However, [Leung's] bid was swiftly challenged by British Chancellor of the Exchequer, Philip Hammond. Referring to the sheer scale of funding required for China’s “Belt and Road Initiative”, which promises to be in the trillions of US ­dollars and would require mobilising the world’s capital markets, Hammond said Leung’s pitch was “elegantly made”, but “London is not an alternative to Hong Kong”.
Aside from the question of whether OBOR will be realized anywhere close to the scale of the PRC vision, it is amusing to find financial centers vying to be locales for where the fundraising will be conducted. That is, OBOR may be more smoke and mirrors  and vaporware more than anything, ah, concrete, but that's not stopping folks from bending over backwards to court the favor of the Chinese Communist Party.
At the very least, then, consider it a well-done PR job. 
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One Belt, One Baloney? PRC's Silk Road Revival Doubts

♠ Posted by Emmanuel in ,,, at 5/14/2017 04:15:00 PM

Over the weekend, Chinese President Xi Jinping hosted an elaborate event in Beijing concerning the PRC's idea of reviving the historical Silk Road. Spanning much of Asia and the Middle East besides, this trade route epitomized many of the things China wants to be today: (1) at the center of world trade, (2) involved in infrastructure, and (3) a prime mover of international relations. This, of course, stands in contrast to the retrograde "America First" stylings of the racist-protectionist-isolationist American president, Donald Trump.

Some hackles were raised about the invitation being extended to North Korea, of all nations, but certainly we'd rather have it peacefully trading with the rest of us than firing missiles to draw attention to itself?

More to the point, though, how realistic is this plan? A few months ago, an op-ed appeared in the Hong Kong-based South China Morning Post (usually a Communist Party-friendly outlet) placing the "One Belt, One Road" project's viability in question by way of Japan's example from only a few years back of doing something similar: using infrastructural might to extend not only diplomacy but also trade with its neighbors:
Facing a deep slowdown after years of investment-fuelled growth that culminated in a huge property and stock market bubble, the leaders of Asia’s largest economy [China] come up with a cunning plan. By launching an initiative to fund and construct infrastructure projects across Asia, they will kill four birds with one stone.

They will generate enough demand abroad to keep their excess steel mills, cement plants and construction companies in business, so preserving jobs at home. They will tie neighbouring countries more closely into their own economic orbit, so enhancing both their hard and soft power around the region. They will further their long term plan to promote their own currency as an international alternative to the US dollar. And to finance it all, they will set up a new multi-lateral infrastructure bank, which will undermine the influence of the existing Washington-based institutions, with all their tedious insistence on transparency and best practice, by making more “culturally sensitive” soft loans. The result will be the regional hegemony they regard as their right as Asia’s leading economic and political power.
However, the author Tom Holland delivers the punch line that, actually, the Japanese tried all this stuff before and failed:
[I]t’s actually a description of a strikingly similar plan rolled out by Japanese prime minister Keizo Obuchi in the 1990s. That too promised to provide work for Japan’s recession-hit construction sector by building Japanese-funded infrastructure projects around Asia. And it even included a proposal – never realised – to establish an Asian Monetary Fund to lend to regional governments on easier terms than either the IMF or World Bank.
Unfortunately for Beijing, the precedent is hardly encouraging. From the start the scheme was plagued by bickering over conditions and allegations of corruption. A handful of infrastructure projects did get built, but the reality fell woefully short of Tokyo’s grandiose dreams. Far from cementing Japan’s economic ascendancy across Asia, the project left a legacy of bad blood, and marked the beginning of a financial retreat from around the region that Japan has only recently begun to reverse.
The rest of the editorial notes that rampant corruption elsewhere siphoned funds away from projects, and those bits that actually did get built ended up as "white elephant" projects: transport initiatives that cost so much to maintain that they could not be sustained and were eventually shelved. Certainly, the OBOR and New Silk Road tags characterize some grandiose initiative. (See the map pabove.) Whether the Chinese have the actual sense to scale these to reality-based bits is another question since linking the Middle East all the way to the Far East is not a vision based on modesty. 

Scaling it appropriately to meet local needs of the countries involved is key. That is, participating countries will plump for maintaining infrastructure built (with Chinese support) insofar as they can benefit from it going forward. However, if benefits are not evident--or mainly serve the purpose of transit through a country instead of serving the citizens of the countries in question first and foremost--the Japanese example provides ample cautions.

UPDATE: A warning is that investment in OBOR countries has, actually, dropped off in recent times, though there are caveats associated with this as a gauge:
Foreign direct investment from China to countries identified as part of the BRI fell 2 per cent in 2016 year on year and has dropped an additional 18 per cent so far in 2017, according to commerce ministry data. Non-financial FDI to 53 BRI countries totalled $14.5bn last year, comprising only 9 per cent of overall outbound FDI...
Chinese experts counter that published figures do not paint a complete story. Jia Jinjing, chief researcher at the Renmin University’s Chongyang Institute for Financial Studies in Beijing, said much outbound FDI passes from China through an intermediate country before reaching its final destination, making the commerce data an unreliable gauge of total BRI investment.
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Post-Brexit, Will the EU Stop Speaking English?

♠ Posted by Emmanuel in at 5/12/2017 07:23:00 PM
"We don't need no pidgin English!" The Academie Francaise may be ascendant with the UK leaving the EU.
I've talked about how English has become entrenched in global use--most often as a widely-spoken second language--because of its more "open source" nature [1. 2]. That is, people come up with new words to fit novel situations, and these become part of the global lexicon. Think about "Grexit" and "Brexit", which would have been unintelligent gibberish only a few years ago. The Internet has certainly played its part in establishing a common language as well. 

It is apropos that we make use of those examples drawn from the trials and tribulations of the European Union since the self-ejection of the UK from the EU may have significant consequences for the use of English in that institution. Just as English is widely used as a second language worldwide, accounting for its ubiquity, so has it functioned within the EU. In short, most participants from the 28 (shortly 27?) member states have at least some familiarity with English.

However, European Commission President Juncker seems to be warning us that, with the UK leaving the EU, it becomes harder to justify using the language of the leavers. Cut it out, English speakers, in so many words:
European Commission President Jean-Claude Juncker has told a conference in Italy on the EU that "English is losing importance in Europe". Amid tensions with the UK over looming Brexit negotiations, he said he was delivering his speech in French. "Slowly but surely English is losing importance in Europe and also because France has an election," he said, explaining his choice of language.

He called the UK decision to leave the EU "a tragedy". Laughter and applause greeted his comment about the English language, and he could be seen smiling wryly. "We will negotiate fairly with our British friends, but let's not forget that it is not the EU that is abandoning the UK - it is the UK that's abandoning the EU, and that makes a difference," he said.
Luxembourg where Juncker hails from is partly French and partly Germany speaking. What we need to figure out here is whether English will be retained from a practical standpoint. Just because the UK is leaving the EU, it doesn't mean that fewer EU nations' citizens will be less familiar with it anytime soon. That much is obvious.

Of course, there may nonetheless be a political backlash against speaking English. After all, it is the language of the leavers.

After decades and decades of getting its teeth kicked in because of French authorities at the Academie Francaise decreeing what the language is, French may again be the language of (European) diplomacy. An improbable comeback for French may be on the cards, then, at the EU--just as Brexit was in itself rather improbable.
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Can California Save the US From Trump's Stone Age?

♠ Posted by Emmanuel in at 5/03/2017 06:01:00 PM
Californians don't dig coal.
Yes it can! Or, at least if you listen to New York Times columnist and bestselling author Tom Friedman. Although Friedman meanders a bit getting to the point--blasting Trump for advocating environmentally and socially backward policies along the way--he ultimately ends up there. In his version of events, the "California effect" in which most companies choosing to operate in that state have to meet higher environmental and social standards, usually meaning that they adopt similar standards nationwide, saves the rest of America from Trump's degeneracy:
I believe California’s market size, aspirational goals and ability to legislate make it the most powerful opposition party to Trump in America today. How so? Trump wants to scrap Obama-era standards requiring passenger cars to average about 51 miles a gallon by 2025; today it’s just under 37 miles a gallon. But as The Los Angeles Times recently noted, under the Clean Air Act, California “can impose emissions standards stronger than those set by the federal government, and a dozen other states have embraced the California rules.”
Overall, California is said to show that a better America is possible that is economically, socially and environmentally progressive:
Also, notes Energy Innovation founder Hal Harvey: “California has a renewable portfolio standard requiring that 50 percent of all electricity come from wind, solar and other renewables by 2030. Another 15 percent already comes from existing nuclear and hydro — so our grid will be 65 percent decarbonized in 13 years...”

As Kevin de León, leader of the California State Senate, told me: California has far more clean energy jobs than there are coal jobs in all of America, and California’s now nation-leading growth rate in jobs gives the lie to everything Trump says: You can have gradually rising clean energy standards, innovation, job creation and G.D.P. growth — all at the same time...

California is also leading the resistance to Trump’s draconian immigration policies, with a web of initiatives embracing tighter border controls while also creating health care, education and work opportunities for illegal immigrants who have been living here responsibly and productively.
Another thing I would point out is that California was in very sorry shape--especially financially--at the start of the millennium. The legendary Governor Jerry Brown deserves a lot of credit from getting the state going again.

If the US had elected Jerry Brown--it's had many chances--instead of Donald Trump, I think the rest of the world would be much less worried about being dragged back into the Stone Age. We can only hope Friedman is right about the present. I'd only that Brown is actually the opposite of Trump in being fiscally conservative instead of trying to super-size budget deficits:
Brown knows better than anyone, presiding over a state that proudly adheres to the popular stereotype of California social liberalism, but not to the more damaging one of Democratic profligacy. Brown is the rare progressive who can balance the books, who can sell fiscal restraint to Bay Area liberals and gay marriage to Orange County evangelicals.
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World's Loneliest ATM Machines...in North Korea

♠ Posted by Emmanuel in at 5/01/2017 01:06:00 PM
"Those are just props, right?" The ATM at North Korea's brand-new "international airport".
A recent New York Times article claims that, actually, North Korea is experimenting with economic liberalization on a controlled basis. That is, small markets featuring wares made by local traders are popping up all over the country. What's more, it claims that the totalitarian dominance of the Kim regime is lessened as more of these merchants pop up and become more affluent.

Unless you're a communist diehard, you'd probably agree that something that could really spur this nascent turn towards entrepreneurship is international economic integration. Unfortunately, however, that appears to be something that is well beyond what is allowable by the Kim regime. What evidence do we have to back up this statement? Consider the world's loneliest ATM machines...at North Korea's airport. Apparently, these devices were not meant for local consumption but by Chinese tourists. With North Korea in China's doghouse at the moment for nuclear tests and (comically failed) missile launches, these ATMs do not look to become operational anytime soon. From the Associated Press:
ATMs are an alien enough concept in North Korea that those in the capital's shiny new Sunan International Airport have a video screen near the top showing how they work and how to set up an account to use them. The explanatory video is in Korean, but the machines, which are meant primarily for Chinese businesspeople and tourists, don't give out cash in the North Korean currency. ATMs are not entirely new to the North.

Years ago, the Ryugyong Commercial Bank installed one in a midrange tourist hotel in central Pyongyang frequented by Chinese. Another ATM was spotted at the airport last year, but it never appeared to be turned on. Additionally, customers who flash the bank's gold or silver ATM cards at two upscale stores that sell a wide array of imported foods and luxury items qualify for discounts. How much North Korea's ATMs have actually been used is a matter of debate.

Booking office employees said the ATMs at the airport's international terminal were installed a few months ago but are still in a "test phase." According to tellers at the bank's small office in the hotel where it has its other ATM, none of the machines are working because of Chinese sanctions that they said kicked in last month.
So North Korea is experimenting with accoutrements of the running dogs of capitalism...but ATMs are still too much of a step into the unknown at this point in time.
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