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The Future Report 2012

The Report, produced by Global Futures and Foresight, a strategic futures thinl-tank, looks into global stratefic drivers in the coming decades up to 2050.

Download The Future Report 2012, Global Futures and Foresight

China and the World by 2030

Heralding his forthcoming book ("China 2030, Springler, June 2012") in a presentation on 9 May 2012 to the Oxford China and World Economy Forum, Hu Angang of the Institute for Contemporary Chinese Studies, Tsinghua University, oulines how China's economy would regain its one-third share of the global economy by 2030, similar to the position it held in 1820.

With a GDP per capita over half but a total size more than double of the United States (in PPP terms), coupled with advances in science and technology, human capital, innovation and a greener and more equitable economy, China would be experiencing a kind of Renaissance reminiscent of the country's glorious past.

Download Hu Angang - China and the World by 2030 

Sobriety needed in shale energy exuberance

There is global shale gas euphoria, particularly in the United States, which has the world's second largest shale gas reserve with ready fracking technology to extract this abundant energy resource. It seems a god-sent answer to America's prayer for total energy independence, cheap and "greener" fuel, creation of millions of jobs, and boosting a lack-lustre economy. There is increasing expectation that America will be able to export its excess energy, earning more profits and global influence, notwithstanding sharpening debate. There is even renewed optimism of a new American Century.

The reality is often hidden beneath the surface. In "Fracking Hell: The Untold Story", a LinkTV documentary on YouTube exposes the alarming risks of ground and surface water pollution and the threats to local environment and civilan lives as a result of a sudden skyrocketing jump in fracking activities across America.

China has the world's largest shale gas reserve, which is however located inside much more technically-difficult topography. See the collection of reports and data in The Golden Age of Gas

China's fracking technology is not as advanced but the United States has indicated willingness to share it. If so, the vast opportunities for an energy-hungry and energy-security-obsessed China seem only too good to miss.

But it seems that the fracking technology is not as ecologically safe as it is made out to be. If the environmental and health fall-out from fracking is allowed to multiply, the expected shale gas bonanza could well turn into a mind-boggling nightmare that could eventually spell an ecological if not socio-political "Collapse". 

In his eponymous work (Penguin Books, 2006) on the disappearance of past civilizations including that on Easter Island, Jared Diamond provides an apt warning that the shale gas exuberance needs a strong dose of sobriety. The alluring music of energy abundance could well turn out to be the songs of Sirens to ecological doom.

Apart from ecology, there is also a sharp warning from Shalebubble.org, "the joint effort of Post Carbon Institute, Energy Policy Forum, and Earthworks, with the goal of providing critical analysis — using industry and government data — to counter the false claims that domestic supplies of shale gas and shale oil (tight oil) will ensure energy security and significant long-term economic benefits to the US".

According to a summary on their website, the current  shale oil and gas frenzy is "nothing more than a bubble" with diminishing returns, a "drilling treadmill" of a "frentic pace of drilling to offset declines", and "Wall Street (promoting) the drilling frenzy in order to profit from mergers & acquisitions, resulting in prices lower than the cost of production".
 
If Shalebubble.org's analysis is true, the current shale oil and gas euphoria may well morph into a huge bubble that is going to burst in a ecological disaster of epic proportions with tears from environmentalists and investors alike.

Europe - death or re-emergence?

With almost monthly, if not weekly, twists and turns in the prognosis on the future of a Europe struggling to cope with a looming sovereign debt crisis and the challenges for long-term economic viability, pundits could be forgiven for being uncertain as to which way the Eurozone and the rest of Europe would be heading.

A YouTube slide presentation by Stefan Molyneux on Freedomain Radio, purportedly the largest and most popular philosophy show on the web, paints a general picture of impending demise.  Click here

Molyneux's presentational style is persuasive, backed up by slides full of instrucstive data, although not many people are convinced by his subtle refrain that it's all the fault of "statism"(and he is referring to the West!). It seems that, according to him, if all state interventions and regulations are lifted, all would be well.

In any event, it seems fair to say that notwithstanding some signs of improvement, Europe is by no means out of the woods. Indeed, according to Bob Janjuah at Nomura reported on Business Insider. Europe may well be heading for another global market clash by about 25 - 50%. Click here

A much more authoritative, indepth and insightful analysis is offered by Professor Klaus Schwab, Founder and Executive Chairman of the renowed World Economic Forum, in his thought-provoking e-book "The Re-emergence of Europe" released on 14 December, 2012.

Download Professor Klaus Schwab, WEF - Re-emergence of Europe, December, 2012

Looking back on the recent history of Europe, Professor Schwab argues that the importance of the European project extends far beyond economic integration. It underpins the long-term peace of the continent, as exemplified by the award to Europe of the Nobel Peace Prize 2012.

Professor Schwab points out that nothing less than a trajectory to greater banking and fiscal union, if not political union, would support long-term viability of the Eurozone.

Exit for devalution, however, would create much larger problems that it is purported to solve, according to Professor Schwab. "An overwhelming number of economists, international civil servants and plicy-makers argue that a fragmentation of the eurozone would cause a new depression and massive wealth destruction around the world and would also end the period of economic integration that has characterized world politics since the end of the Second World War."

Notwithstanding huge social reactions and nationalistic divisions, as of October 2012 there has recently been some noticeable movements towards greater convergence. A process of "internal devaluation" of debtor countries in the form of contraction of relative domestic demand has seen significant shrinking of budget deficits and a greater balance between income and expenditure, with sharply falling unit labour costs.

"Consequently, countries such as Ireland, Portugal and Spain have experienced a generally strong performance in exports and are now registering a current-account surplus .... Amazingly, Irish, Portuguese and Spanish export growth has not only kept pace with Germany's in recent years but have out-performed the UK's", Professor Schwab explains.

Contrary to binary thinking - either austerity or growth - Professor Schwab believes that a mixed approach is feasible, including structural reforms particularly in the labour markets, product regulation and a mix of government spending in a growth agenda.

Professor Schwab's prudent prognosis is that "Europe will survive and its currency - the euro - will remain intact, even in a truncated form (if just one country were to exit, for example). After a crisis of several years (possibly up to ten), Euorpean momentum will begin to grow again and will even surprise us positively ..." His relative optimism is based on Europe's unique and valuable assets - generally high-quality human capital and good governance, especially as regards sustainability, and quality and dignity of life. 

Many painful and arduous reforms remain to be tackled, to be sure, including creative destruction of a system of excessive welfare entitlements to improve long-term productivity and competitiveness. However, there is no immutable reason why some of the weaker states could not "take the bull by the horns" in emulating Germany's earlier succcessful economic and social reforms.

Many risks and obstacles remain on the way, according to Professor Schwab. He groups them into three broad categories: (1) Political and societal backlash (2) Policy miscalculations and (3) Capital flight and bank runs.

In terms of the social acceptability of reforms, Professor Schwab believes that a turning point has been passed and "from now on .... there are likely to be more surprises in Europe in general, and the Eurozone in particular, on the upside rather than on the downside."

If Professor Schwab's optimism proves to be prescient, as the world's largest economy up to now, a better and more viable Europe, which is "still founded on the same social values and freedoms as before", would have a profound impact on the future world order, and "ultimately for mankind as a whole".

Global risks 2013

The World Economic Forum produces an Insight Report "Global Risks 2013" which offers a comprehensive overview of global risks in various categories.

Download WEF Global Risks Report 2013

The top five most likely global risks are -
 
1. Severe income disparity
2. Chronic fiscal imbalances
3. Rising greenhouse gas emissions
4. Water supply crises
5. Mismanagement of population aging

A detailed Risk Landscape of 50 Global Risks is presented as follows -
 
Economic Risks

1. Chronic fiscal imbalances
2. Chronic labour market imbalances
3. Extreme volatility in energy and agricultural prices
4. Hard landing of an emerging economy
5. Major systemic fincial failure
6. Prolonged infrastructure neglect
7. Recurring liquidity crises
8. Severe income disparity
9. Unforeseen negative consequences of regulation
10. Unmanageable inflation or deflation

Environmental Risks

1. Anti-biotic resistant bacteria
2. Failure of climate change adaptation
3. Irredeemable pollution
4. Land and waterway use mismanagement
5. Mismanaged urbanization
6. Persistent extreme weather
7. Rising greenhouse gas emissions
8. Species over-exploitation
9. Unprecedented geophysical destruction
10. Vulnerability to geomagnetic storms

Geopolitical Risks

1. Critical fragile states
2. Diffusion of weapons of mass destruction
3. Entrenched organized crime
4. Failure of diplomatic conflicdt resolution
5. Global governance failure
6. Militarization of space
7. Pervasive entrenched corruption
8. Terrorism
9. Unlilateral resource nationalization
10. Widespread illicit trade

Societal Risks

1. Backlash against globalization
2. Food shortage crises
3. Ineffective illicit drug policies
4. Mismanagement of population aging
5. Rising rates of chronic diseases
6. Rising religious fanaticism
7. Unmanaged migration
8. Unsustainable population growth
9. Vulnerability to pandemics
10. Water supply crises

Technological Risks

1. Critical systems failure
2. Cyber attacks
3. Failure of intellectual property regime
4. Massive digital misinformation
5. Massive incident of data fraud/theft
6. Mineral resource supply vulnerability
7. Poliferation of orbital debris
8. Unforeseen consequences of climate change mitigation
9. Unforeseen consequences of nanotechnology
10. Unforeseen consequences of new life science technologies

A similar, and perhaps more precise, global risks assessment is provided in the Chartered Institute of Insurance (CII)'s Centenary Future Risk Series Report 6 - Insuring for a stronger world (2012) - Future Risks mind map (p.7).

Download CII Centenary Future Risk Series - Report 6 - Insuring for a stronger world

Economic Risks

1. US economic decline
2. Asian threat to Western competitiveness
3. Currency War
4. Eurozone collapse
5. Fall of Bretton Woods - return to protectionism
6. Chinese financial crisis
7. Rising economic uncertainty
8. Stagnation

Political Risks

1. Political unrests across emerging markets
2. Rising geopolitical uncertainty
3. Chinese social unrest
4. US political paralysis
5. National/international terrorism
6. Breakdown in public trust of state institutions

Investment in technology

1. Slowdown of investment in new tech
2. Reduced use of technology in business
3. Reduced understanding of technology

Technological "Black Swans"

1. Cyber crime
2. Failure of largescale IT systems
3. Widespread data loss or corruption
4. Global spread of disease through international travel

Technology and Risk management

1. Out-of-date computational models
2. Failure to understand model limitations
3. Failure to horizon scan

Adaptation to climate risks

1. Poor local infrastructures
2. Town planning in hazardous areas

Global warming

1. Extreme weather events
2. Crossing tipping points
3. Rising sea levela
4. Water shortages

Energy risks

1. Geopolitical tension over scarce resources
2. Exploation for new energy sources

Aging population

1. Cost of age-related spending to public purse
2. Intergenerational fairness
3. Falling economic productivity
4. Rising liabilities of pension funds
5. Adequacy of pension income
6. Increased chronic disease

Poverty trap: high fertility and low life expectancy

1. Violent internal conflict and social unrest
2. Increased antagonism towards developed countries

Global population growth

1. Fears of overcrowding
2. Concerns about immigration
3. Increased risk of pandemic

By means of a fictional "Special Report - The Remarkable Rebound 6 February 2030", in which the world looks back on how some of the major risks have been contained or overcome, the CII proposes the following preventive measures against a disastrous outcome -

1.  Reform to the international economy - global economic imbalances; EU fiscal and political union; sustainable international trading system
2. A vibrant private sector - effective financial services including insurers and banks
3  Private sector-led growth through partnership between research centres, entrepreneurs and business leaders
4. Climate Change mitigation and adaptation, involving insurers and risk managers
5. Improving healthcare and pensioner security - extended working lives and cost-effective use of telecare
6. Greater private savings
7. Dynamic technological change improves lives; avoidance of "black swans" through enhanced risk management

Apart from a whiff of self-interest in some of the recomendations, few would doubt their validity, but not too many are likely to be convinced that they will be sufficient or will all be delivered. However, the test of the pudding is in the eating. There is still some time for the Remarkable Rebound of 6 February 2030 to become a reality. 

China's water risks

According to China Water Risks, a Hong Kong -based non-profit think-tank on the subject, water moved from the sidelines into the spotlight in China 2012 and is expected to stay in 2013.

In an online report "2012 Review and 5 Trends in 2013"of 4 February 2013, the NGO says, "In China the tipping point has come. Li Keqiang, China’s next Premier-to-be in March, said that China’s limited water resources have become serious economic and social development constraints; saving water and improving water-use efficiency are priorities".

The 2012 Review highlights the following -

(1) Water remains a top priority for the Chinese government;
(2) More floods & droughts;
(3) Low levels of water in lakes and rivers and potential  diversions;
(4) Reputation at risk with more pressure from naming-&-shaming campaigns & public protests;
(5) Investors & Companies continue to play catch up

The 5 Trends in 2013 are -

(1) A pro-water government;
(2) Multi-pronged approach in managing water for agriculture;
(3) Energy security – no choice but to plow ahead with hydropower & fracking but tech could save us;
(4) Supply chains continue to be under fire; and
(5) More corporate action and financial institutions incorporating water risks into valuations.

According to World Economic Forum's Global Risks 2013 Report, Water Risk continues to stay in the top five global risks by Likelihood and Impact.

So the world water crisis looks critical, especially China. A stern warning is sounded in a report dated September 2012 by HSBC Global Research on Climate Change - "No water, no power - Is there enough water to fuel China’s power expansion?" Click here

Nevertheless, it appears from the Water Risk assessments that there is now a glimpse of hope as China's leadership, China's own NGOs and the private sector are all beginning to seize the moment.

The very active role China's NGOs are playing in addressing the country's water risks also testifies to the rapid development of China's civl society.

The developing world is becoming more affluent

According to a BBVA Research Report (January 2013), "Lower-income and poor people stood at about 80% of of the population in emerging countries in the 80s and 90s. Things started to change dramatically in 2000; in fact, by 2010, 660 million had been added to the first stages of the middle-class. In the same vein, middle and high middle classes more than doubled in a decade."

This explosive trend produces many risks as well as opportunities. Think energy, resource and food scarcity and resultant regional rivalries. Think global inter-connectivity. But also think brands and life-style products at the mass-market end and luxury goods at the top end in a world sans frontiers.

Download Emerging Middle-Class in fast-track mode - BBVA Research, January, 2013

The World by 2030

The world is heading towards 2030 with much greater uncertainty as epochal trends and paradigm shifts are playing out. That's according to the latest report by the Washington D.C -based National Intelligence Council - "Global Trends 2030: Alternative Worlds" dated December 2012.

The report admits that global economic power is definitively shifting to the East and the South, reversing the historic rise of the West since 1750.

By 2030, the developing world will account for over 50% of the world's economy with China displacing the United States as the largest economy.

Power will become more diffused in a multipolar world, including individuals and other non-state actors, characterised by unprecedented urbanization, rise of the middle-class, new, disruptive, or lethal technologies, resource constraints, more aging populations, and risks of more crises and conflicts.

America will lose its global dominant position but is likely to remain primus inter pares amongst all nations. By all accounts, a great re-balancing of the world will be taking shape, perhaps not dissimilar to the European "long peace" set in motion by the Congress of Vienna in 1815, which was also a mutli-polar period of rapid social, economic, technological and political change. However, many a black swan could change the game along the way.

According to the report, how America will navigate this changed world is likely to shape its fate, including that of the United States itsef, for better or for worse. 

The full NIC report follows.

Download National Intelligence Council - Global Trends - Alternative World - November 2012

Extracts of the most salient tabular summaries are here.

Download Extracts - National Intelligence Council - Global Trends - Alternative World - November 2012

The NIC report may be put into better perpective with reference to the so-called soaring EAGLEs (Emerging and Growth-Leading Economies) here

Or when read in conjunction with the latest World Bank Report "China 2030: Building a Modern, Harmonious, and Creative High-Income Society", which was undertaken jointly with the Development Research Centre of the State Council. Click here

The following China-centred dynamics are also relevant  -

(a)  According to Goldman Sachs, by 2050 the top ten economies in the world will be, in descending order, China ($70 trillion), US (about $38 trillion), India (about the same as the US), Brazil (barely over $10 trillion), Mexico (just under $10 trillion), Russia, Indonesia, Japan, United Kingdom, and, lastly, Germany (about $5 trillion). Only four of the G7 would thus remain on this list. Except the US, the other three G7 countries, Japan, UK, and Germany, would fall to the bottom. The combined economic weight of the six so-called Emerging and Growth-leading Economies (EAGLEs), what may be called the E6, would be over two and half times more than the remaining G4. Amongst the EAGLEs are the so-called BRICS (Brazil, Russia, India, China and South Africa), of which China's economy is bigger than the rest of the BRICS combined.

(b) According to Huang Renwei, Vice President of Shanghai Academy of Social Sciences, compared with a rising China, the relative strategic power of the United States is declining due to-

(i) its mounting debt exceeding sustainable limits, threatening the status of the US Dollar as the world's dominant currency;

(ii) its increasingly constrained financial capacity is likely to reduce its military capacity, its R & D expenditure and hence its ultimate technological lead;

(iii) the American-dominated global alliance may come apart in a decade or two if the United States becomes less and less able to provide most of the public goods holding such alliance together; and

(iv) geopolitics are giving way to geo-economics where China is building a China-centric regional economic infrastructure (read regional production and supply chain) reinforced by such economic alliance as ASEAN-China Free Trade Area, the largest in the world by population.This is happening while the West, including Japan, struggles to re-start their weakened economies by one form of quantitative easing or another (read money-printing).

See Huang's remarks (in Chinese) on Xinhuanet on 20 December 2012 here

(c) Rapidly being ""internationalized", the RMB, though remaining non-convertible on the capital account, is already ipso facto "eclipsing" the U.S. Dollar as the world's "reference currency". Click here

(d) according to “World Intellectual Property Indicators 2012” released by the Switzerland-based WIPO (World Intellectual Property Organization) on 11 December 2012, China tops the world in 2011 patent applications. China also leads head and shoulders in trademark applications as well as industrial design. As a developing country, China is therefore well on track to overcome the Middle Income Trap. Click here

(e) As the world is increasingly becoming eco-conscious, China is starting to lead in a number of renewable energies, including solar, wind and hydro. In particular, China is pushing for the rapid development of electric cars, through heavy state subsidy towards private ownership and intensive research and development, including green battery technologies. This promises to revolutionize the world's entire auto industry.

(f) Shale gas is set to change the shape of the world of energy. Click here for "The Golden Age of Gas" In addition, the widespread use of abundant shale gas in America and China will weaken the strategic clout of the Middle East and other oil-producing countries, with all that implies. As the world's leading energy consumer for a long time to come, China is well poised to benefit from America's expected shale gas bonaza and her own vast shale gas reserve, the world's largest, provided problems of water scarcity, groundwater pollution and lack of advanced fracking technologies can be overcome.

In sum, provided China continues to maintain an even keel in the run-up to 2030 (though that is by no means a foregone conclusion), the country, together with or in addition to America, is set to influence, if not shape, global dynamics much more than the National Intelligence Council report seems to imply.

IEA World Energy Outlook 2012

An Executive Summary released on 12 November 2012 follows.

Download IEA World Energy Outlook 2012 - Executive Summary

"Xinjiang Poised to Become China’s Largest Coal Producer"

In its latest analytical report dated 20 September 2012, Click here China SignPost, a research-based consultancy, highlights the following key points, which "will move global coal, natural gas, and crude oil markets" -

• In 2011, Xinjiang produced 120 million tonnes of coal. In our base case estimate, Xinjiang will produce ~240 million tonnes per year of coal in 2015 and slightly over 750 million tonnes per year in 2020.
• This would make Xinjiang one of the world’s 5 largest coal producers by volume.
• By 2020, Xinjiang could export 200 million tonnes per year of coal to other parts of China by rail, 200 million tonnes per year as electricity, and potentially 100+ million tonnes per year as chemicals and liquid fuel.
• Low-cost thermal coal and coal-by-wire electricity from Xinjiang could pose a significant competitive threat to shale gas development in Central and Southwestern China, which are target markets for coal and electricity produced in Xinjiang.
• Xinjiang coal could be delivered in physical form to Central China at a cost of around US$3.30 per million BTU, whereas shale gas in the region is likely to cost US$5 per million BTU or more to produce.
• Xinjiang could produce more than 250,000 bpd of liquid fuels from coal and potentially as much as 1 million barrels per day if producers increased their water use efficiency and China’s National Development & Reform (NDRC) allowed the expansion.