Against better judgment, David Cameron was over-confident in gambling much earlier that a Referendum would silence the Euro-skeptics. Now he has found to his horror how badly he miscalculated the British public mood. He has now fallen in a Pandora's Box which he himself volunteered to open.
As pointed out in the New York Times, Britain Rattles Postwar Order and Its Place as Pillar of Stability . Demands for similar referendums elsewhere in the European Union are already being voiced along with rising isolationist nationalism across the globe. Brexit may well trigger a domino effect which would spell the beginning of the end of the Union which has underpinned peace and stability in Europe after the Second World War.
In any event, losing the membership of the United Kingdom, the world's sixth largest economy with considerable financial and geopolitical assets, the European Union's ability to coordinate European responses to encroachments of the Western Postwar Order by assertive rising powers would be eclipsed. As a result, Russia and China are likely to gain relative clout. Click here
Technically, Parliament can ignore the Referendum. But how can it legitimately overturn the will of a clear majority of voters? In any case, it will be up to a new Conservative leadership to pick up the pieces and to formally invoke Article 50 of the Lisbon Treaty to start the clock ticking on Brexit.
However, there are numerous "good" reasons why a new leadership may be difficult to put together e.g. political in-fighting, lack of ideal candidates etc. The longer the UK drags its feet on pulling the trigger of Article 50, the greater will be the turmoil in and outside the EU. This may wake the EU up to re-think the current rigid one-size-fits-all EU model which has clearly passed its sell-by-date.
Perhaps a differentiated multi-track and multi-currency model may suit the vastly different realities of various Members? Just like a club with different types of membership. EU ala carte, according to Nataxis, a Spanish Bank.
By dragging its feet, the UK may be able to provoke reforms that may result in the birth of a better EU model making the Union stronger and less divided?
Ideally, the outcome may well be a better deal for the UK to remain within the EU. If this should come to pass, it would then make perfect sense for the UK to hold another Referendum.
There are already 3 million scared British people petitioning for another Referendum. Click here What political capital a new Conservative leadership would reap if it is seen to galvanize the reform for a better European Union of which the United Kingdom, with all its constituent parts including Scotland and Northern Ireland intact, can become a staunch Member?
Regardless of the outcomes of Brexit and the Donald Trump campaign, both are symptomatic of popular anger and frustration with the negative impacts of "external" integration. Whether it's Britain for the British or America First, these apparently counter-intuitive phenomena are indicative of xenophobia and a popular desire to look inwards.
As reported in Fortune CEO Daily (15 June), according to latest PEW polling data, 57% of Americans, and similar majorities in many European countries, want their country to "deal with its own problems and let other countries deal with their own problems"; only 37% of Americans and around 40% in European countries are interested in helping "other countries deal with their problems." "Some 49% of Americans go even further, saying they believe "global economic engagement is a bad thing because it lowers wages and cost jobs," compared to just 44% "who think it is a good thing because it creates new markets and growth."
"Whatever voters decide, the message for business is clear. Both Europe and the U.S. are turning inward, and the ramifications for the global economic system set up after World War II are profound", says Alan Murray, Editor of Fortune Magazine.
The implications extend well beyond the economic sphere. As along with the swing of public opinions, the West starts to look more inwards, even if politically nuanced, China is rapidly moving more outwards.
"(a) Today the world invests some $2.5 trillion a year in the transportation, power, water, and telecom systems on which businesses and populations depend. Yet this amount continues to fall short of the world’s ever-expanding needs, which results in lower economic growth and deprives citizens of essential services.
(b) From 2016 through 2030, the world needs to invest about 3.8 percent of GDP, or an average of $3.3 trillion a year, in economic infrastructure just to support expected rates of growth. Emerging economies account for some 60 percent of that need. But if the current trajectory of under-investment continues, the world will fall short by roughly 11 percent, or $350 billion a year. The size of the gap triples if we consider the additional investment required to meet the new UN Sustainable Development Goals.
(c) Infrastructure investment has actually declined as a share of GDP in 11 of the G20 economies since the global financial crisis, despite glaring gaps and years of debate about the importance of shoring up foundational systems. Cutbacks have occurred in the European Union, the United States, Russia, and Mexico.By contrast, Canada, Turkey, and South Africa increased investment.
(d) There is substantial scope to increase public infrastructure investment. Governments can increase funding streams by raising user charges, capturing property value, or selling existing assets and recycling the proceeds for new infrastructure. In addition, public accounting standards could be brought in line with corporate accounting so infrastructure assets are depreciated over their life cycle rather than adding to deficits during construction. This change could reduce pro-cyclical public investment behavior.
(e) Corporate finance makes up about three-quarters of private finance. Unleashing investment in privatized sectors requires regulatory certainty and the ability to charge prices that produce an acceptable risk-adjusted return as well as enablers such as spectrum or land access, permits, and approvals.
(f) Public-private partnerships have assumed a greater role in infrastructure, although there is continued controversy about whether they deliver higher efficiency and lower costs. Either way, they will continue to be an important source of financing in the future. But since they account for only about 5 to 10 percent of total investment, they are unlikely to provide the silver bullet that will solve the funding gap. Public and corporate investment remain much larger issues.
(g) Institutional investors and banks have $120 trillion in assets that could partially support infrastructure projects. Some 87 percent of these funds originate from advanced economies, while the largest needs are in middle-income economies. Matching these investors with projects requires solid cross-border investment principles. Impediments that restrict the flow of financing, from regulatory rulings on investment in infrastructure assets to the absence of an efficient market, have to be addressed. The most important step, however, is improving the pipeline of bankable projects.
(h) Beyond ramping up finance, there is even bigger potential in making infrastructure spending more effective. Accelerating productivity growth in the construction industry, which has flat-lined for decades, can play a large role in this effort."
All the above suggests that given the uncertainty in corporate financing including the degree of private-funding risk aversion, public finance will most probably play a pre-dominant role in infrastructural projects.
This means that an increasingly important role is likely to be played by the newly-founded Asian Infrastructure Investment Bank (AIIB) with 57 Founding Members across the globe (expected to rise to a hundred by the end 2016), together with the BRICS's New Development Bank. It also means that given China's willingness to embrace better banking, project management and governance standards, China's trans-continental Belt and Road infrastructural investment initiative is likely to contribute towards reducing the global infrastructural deficit.
It is instructive that the European Bank for Reconstruction and Development (EBRD) has signed a cooperation agreement with the AIIB and has agreed to carry out joint projects with China’s Silk Road Fund. Click here
A new analytical report from the European Council on Foreign Relations (ECFR) suggests that the European Union is punching below it weight in its approach to Russian and Chinese integration of Eurasia. The following ECFR summary points to the Report's highlights -
"Moscow’s “Eurasian Economic Union” aims to create a Russian-dominated bloc to rival the EU, while Beijing’s “New Silk Road” wants to use financial power to place China at the heart of Eurasia. So far, Europe has treated these projects as unwelcome competition, and kept its distance.This new policy paper .... argues that Europe shouldn’t be afraid of Russian and Chinese efforts to integrate the Eurasian landmass, but should embrace these initiatives and absorb them into its international order, making use of its huge market, soft power, and long experience of regional integration".
"Europe should carve out its own role in Central Asia, deepening its relationship with key nations such as Kazakhstan. These countries need the EU’s market, and look to Europe to protect them from Russian – and to a lesser extent Chinese – control. Europe should ensure that no single country controls all energy routes through Eurasia, and back China’s projects in order to reduce Russia’s control over the region. Member states and EU bodies should invest in the New Silk Road, leveraging their money to ensure that the project meets European standards".
"Finally, Europe should set up a three-way mechanism for cooperation between the EU, EEU, and the New Silk Road, embracing the competition and drawing Eurasia further into its orbit".
Greetings! And the very best wishes to you and your family.
The outcome of a summer of uncertainties is awaited with bated breath. On 23 June, the fate of the UK Referendum on "Brexit" hangs in the balance. At the 18-21 July US National Convention, the Republican Party may well declare Donald Trump its Presidential Nominee. Meanwhile, the vicissitudes of China's economic restructuring and Great Power aspirations continue to confound and bewilder even the most seasoned China watchers. To many, in an increasingly connected world, China's Belt and Road initiative remains an enigma.
Hopefully, the following may offer a few insights into the world's changing dynamics for 2016 and beyond.
I have recently been elected Honorary President of a 1000-member Hong Kong and China-connected business association covering 15 different business sectors with deep and extensive business connections on the Mainland. Over the past 20 years, the Association has organized and received hundreds of China business delegations from and to the Mainland, Greater China, and other parts of the world. It is now-poised to expand business links with Europe and other regions, including investments, M & As, partnerships, marketing and distribution, capitalizing on China's Belt and Road Initiative.
Separately, and strictly in my own personal capacity, you are cordially invited to send me, in confidence, concise details of any proposition for cross-border M & As in any business sector on a no-commitment basis for either side, initially. These include any business or stand-alone assets for sale or acquisition. Please limit details per proposition to a one page self-contained PDF document, including key financial data, any photo images, and contact phone numbers and email addresses.
Relying on my extensive network of some professional contacts worldwide, I will try to match buy and sell sides, and, where appropriate and subject to mutually agreed terms, facilitate subsequent transactions, working with professionals in banking, insurance, due diligence, legal and accounting services as necessary.
Pending final outcomes, I will also be able to feature suitable propositions, redacted as necessary, on my website free-of-charge subject to mutual consent. My website is regularly accessed in some 30 countries, including my 6,000 professional contacts across the globe.
If you wish to consult including corporate board briefings, you may do so by telephone, Skype or video conferencing. Please email me personally at firstname.lastname@example.org or text my Hong Kong mobile +852 98198987.
I can also be reached on Skype at andrew.k.p.leung, LinkedIn at andrewleunginternational, Whatsapp at (852) 98198987, WeChat at Andrewkpleung, Facebook at andrewkinpongleung, and Twitter at @Andrewkpleung
Speaking and lecturing engagements
Throughout the year, I am open to invitations for speaking engagements, visiting lectures including university summer programs and tailor-made electives on China as a visiting/adjunct professor, using English or Putonghua as a medium of instruction. Subject to mutually agreed terms, I am open to propositions to stay on campus for periods of up to several weeks. Please email me with proposals.
A business networking and speaking platform in Hong Kong
As an Advisor to the Denmark-based Executives’ Global Network (EGN) Hong Kong, I wish to extend to you the opportunity of fielding a suitable speaker for an EGN event in Hong Kong. This will be entirely at our own cost with acknowledgement of your support or that of your organization, provided that we are not asked to cover any speaking fee, travel or accommodation expenses.
This newsletter is uploaded to my website here. You may wish to save it for reference or reading at leisure. You may also wish to share the link with your colleagues and friends on Facebook, LinkedIn, Whatsapp, Twitter or other social media devices.
If you wish instant access as soon as these postings appear, just click on “Subscribe to this blog’s feed” under RSS Feed on top of the right-hand column of each blog. Select the appropriate Google feed option. It is absolutely free of charge.
A collection of leading China media and research sites may be found under China Links.
You may find it convenient to save my website on your computer, laptop, tablet, Blackberry, iPhone or iPad as a reference resource.
Cheer up and chill out
While the Year of the Monkey seems to be filled with doom and gloom, you may find joy, hope, inspiration, fun and humor, and perhaps wisdom in my website's repertoire of music, videos, songs and words, There is also a collection in Chinese.
An invitation to breakfast or afternoon tea in Catalonia, Spain
During August to October this year, I will be staying in London. Please drop me a line if you want to take advantage of my presence there.
From 29 August to 3 September, I will be enjoying a short family holiday at the Castell-Platja d'Aro, Catalonia, Spain. If you happen to be in the vicinity, you are most welcome to visit us at the Castell for breakfast or afternoon tea. But please email us early.
I look forward to your guidance, advice, comments, suggestions, and criticisms. Please feel free to share any of my papers, articles, presentations, and TV interviews with your colleagues or friends. You are also welcome to publish any of them with full attribution.
If you think that I may add value to your endeavours in any way, please let me know how I may help. If for any reason you do not wish to receive my emails, just ask me to delete your name from my databank permanently.
The Emerging World will account for almost four fifths of global growth 2015-25. .
Of which, the Asia-Pacific region will account for 78.2% of the increase.
New entrants to the EAGLEs and Nest groups coming mainly from Asia and the Middle East.
Middle classes will continue to reshape the world’s income distribution.
Emerging countries are to increase their share of the global middle classes from 58% in 2015 to 75% by 2025. In 2015, China alone has 350.4 million middle-class people, compared with an aggregate of 297.7 million in North America and European advanced countries and 73.5 million in Japan.
The educational sector will be both the motor and beneficiary of expanding middle classes, counterbalancing the effect of slower growth of labor force.
Fixed broadband adoption will be driven by Emerging Markets with EAGLEs catching up fast with developed nations, thanks mostly to Emerging Asia.
Media Sentiment Digital Index for the EAGLEs countries has improved significantly since late 2015, converging to G7 levels with China, India, Egypt and Turkey leading the group.
Geopolitical risks, cyber-attacks and macroeconomic vulnerabilities are likely to remain the main risks in coming years.
Asymmetric impact of the oil price decline is likely to impact upon current account balances of EAGLEs and Nest countries.
The Center for Strategic and International Studies (CSIS), a think-tank based in Washington D.C., released a 275-page independent review of US Defense Strategy in the Asia-Pacific in January, 2016. The comprehensive report takes into account China's growing multi-directional assertiveness as a rising power, her rapidly increasing military capabilities, particularly A2/AD (Anti-Access and Area Denial), as well as other threats in the region, including North Korea and Russia.
The Report delves into building a stronger security architecture in the Asia-Pacific underpinned by the United States military and its regional allies, in preparation for a high degree of readiness for possible air and naval conflict with a peer-competitor (code for China), a ground battle on the Korean Peninsular, as well as regional nuclear rivalry and other state and non-state threats including natural catastrophes.
Various military concepts are examined, such as "Joint Concept for Access and Manoeuvre in the Global Commons", "Air Superiority and Global Strike", "Freedom from Attack and Freedom to Attack", "Strategic Mobility Infrastructure", the agility of "Places not Bases", and "Joint Mission Defense with Allies".
Reference is made to the development of the "Long-Range Strike Bomber (LRS-B)", missile defense systems such as "THAAD- ER (Terminal High-Altitude Air Defense - Extended Range)" with 9-12 times the range and anti-hypersonic-delivery characteristics, "Directed Energy" (laser) and "Electromagnetic Rail Guns" technologies, as well as unmanned and space-based assets. It covers a gamut of scenarios including cyber and electronic warfare and examines Russian and Chinese strategic interests in the Arctic.
In sustaining the Re-balance, the Report recommends -
Align Asia strategy within the US government and with Allies and Partners;
Strength Allies' and Partners' capability. capacity, resilience and inter-operability;
Sustain and expand US military presence;
Accelerate development of innovative capabilities and concepts.
President Xi Jinping of China has recently adorned a new US-styled title of Commander-in-Chief as head of a newly-reorganized Joint Battle Command. This follows on the heels of a revamped 2015 Military Strategy, a complete re-structuring of China's defense forces, including the development of a blue-water navy, a new Rocket (Missile) Force, a more centralized command, and reorganization into "battle zones". Click here On 12 April, China test-fired DF-4, a 12,000-km range Intercontinental Ballistic Missile (ICBM) capable of reaching all of the United States. These developments suggest that China, too, is alive to and gets prepared for risks of military conflict in the region, including an all-out war.
What does it take to manage the increasing geopolitical rivalry between the United States as the existing global superpower and its perceived challenger? In a TV interview with CCTV in Beijing, Kevin Rudd, President of the Asia Society Policy Institute, a China expert and former Prime Minister of Australia, argues for "Constructive Realism", isolating the red-line issues that cannot be resolved and working on developing trust or cooperation for the rest. Whether this will work remains to be seen.
Meanwhile, while deepening awareness of military risks acts to propel a spiraling of a classic "security dilemma", it also incentivises both sides to enhance mechanisms to manage mutual relations and to avert unwanted escalations.
Asia Society Policy Institute President Kevin Rudd, former Prime Minister of Australia, conducted an interview in Washington DC on 13 April, 2016 with Mr Jin Liqun, President of Asia Infrastructure Investment Bank (AIIB).
During the interview, Mr Jin, an expert international banker and aficionado of Shakespeare and history, was very upfront that the AIIB wanted to learn and partner with Bretton Woods institutions like the World Bank, the IMF and the Asian Development Bank and to develop a new lean, clean and green global financial institution with shared accountability and inclusive partnerships with all stakeholders, including the United States.
On 19 May, the State Council released China's new manufacturing strategy "Made in China 2015" calculated to grow China into becoming the world's leading manufacturing giant by 2049, the centenary of the founding of the People's Republic of China. Report in the China Daily
The strategy leverages China''s four advantages - Market, Enterprises, Strategy and Talent. It will focus on 10 key sectors: New Information Technology; Numerically-controlled Equipment; Aerospace systems; High-tech vessels; High-Speed Rail; Energy Conservation; New Materials; Medical Devices; Agricultural Machinery; Power Generation.
The strategy characterized by marrying manufacturing and information technology, will be guided by Five Principles - innovation, quality, green development, optimizing structure, and talent. It is mandated to achieve significant milestones by 2025 and 2035.
It will start with big projects including national manufacturing innovation centers, intelligent manufacturing including innovative high-end equipment, core electronic devices, high-end universal chips, numerical control machines and large airplanes. According to the plan, there will be 15 such innovation centres by 2020 and double this after another five years. Click here
A pictorial diagram highlighting China's new manufacturing strategy follows -
The transition path to high-technology manufacturing is unlikely to be smooth. A great deal of reliance on China's current manufacturing powerhouse will remain if sufficient jobs are to turn the teeming millions of factory workers into consuming middle-class. Moreover, the global supply and production chain has become highly diffused. Neighboring developing countries like Vietnam, Indonesia and Cambodia are part and parcel of a "Factory Asia" phenomenon. See an explanatory note "Made in China - Global Manufacturing" in The Economist (14 March, 2015)