My full-length live TV interview on 30 November on The Worldwith ABC (Australian Broadcasting Corporation). I gave a snapshot analysis of why Trump's presidency is likely to change regional dynamics and soft power in favor of China.
Even Trump says he has an open mind on Climate Change, transcript of his interview with the New York Times suggests that he is likely to put money ahead of climate.
Trump has also vowed to boost the oil and gas industries, including pipelines from Canada and more lands opened up for shale gas fracking.
As pointed out in The Economist leader, The burning question: Climate change in the era of Trump (26 November, 2016), the historic Paris Agreement, supported by 197 nations, is nevertheless likely to endure with or without the United States. Countries threatened by rising sea levels are unlikely to sit tight. Europe's green movement is unlikely to wither. China, the world's worst polluter, is also taking a lead in de-carbonization driven by regime-threatening pollution fears and geopolitical energy security considerations.
As President-elect, Trump has openly declared ditching the Trans-Pacific Partnership (TPP), which was a US-initiative in the first place. Notwithstanding initial denial of World Trade Organization chief Roberto Azevedo, Trump has also hinted at leaving the WTO, which the US was instrumental in founding, if the US cannot renegotiate its terms of trade. The WTO includes 164 countries worldwide and has been the cornerstone of global trade for many decades until its primacy is challenged in recent years by regional and bilateral agreements. China has since been a great beneficiary of WTO which she initially joined at great costs to herself by having to open up her market for many products.
All signs are that a Trump America is likely to retract from its leading role of maintaining the existing global order, unless its intervention can be monetized. This is now greatly worrying allies and as well as rivals. .
China has been seeking to gain more influence as an integral part of the existing global order. America's retreat from it to focus everything on "America First" is likely to hand over much of global soft power to a rising China as a defender of the global commons.
This would have game-changing consequences for an America-dominated world order.
My Guest Lecture at the University of Hong Kong on 22 November 2016.
The PowerPoint presentation, with 72 slides, examines some of the most salient game-changing dynamics of the 21st century, including the Fourth Industrial Revolution, "Connectography", Internet of Things in Smart Cities, Fintech, Blockchain, e-Commerce, e-banking, the global connectivity of the China Dream with One Belt, One Road (OBOR), regional networks, the Paris Agreement on Climate Change, the Rise of State Capitalism, the Demographic Cliff, Capital in the 21st Century, Asset Bubbles, Debt Mountains, Globalization and its Discontents, and the Rise of Nationalism, Chauvinism, Nativism and Localism, all leading to an interconnected, independent yet uncertain world of distributed powers where America's retraction under a Trump Presidency is likely to give way to increasing influence of a dynamic China embracing globalization with a vengeance.
The following analysis was first posted on 4 April, 2016. This is re-posted with the latest updates.
A scathing front-page articleBeware the cult of Xi in The Economist (2 April, 2016) accuses President Xi of turning himself into another Chairman Mao. It accords Mao with "a mischievous sense of humor" while describing Xi as "reserved and unsmiling". It blames him for almost everything from market gyrations last summer to the recent vaccine scandal. It portrays him as confused in policies and lacking in sense of direction for the economy. It describes him as one obsessed with power concentration - being chairman of everything - and indulges in personality cult. It fears that by ripping apart the Communist Party's "corruption for able-job-done" compact, Xi could well do more harm than good for himself and the Middle Kingdom. Above all, it casts Xi as a super-authoritarian ruler bent on shutting down all civil dissent. In the final analysis, Xi does not seem able to bring about greater wealth and economic well-being and a more open society for the Chinese people.
Whilst Xi is no liberal and lots of vested interests feel threatened, my first reaction is that if Xi is as such bad news as the article describes, we would soon see a collapse in China of the social and economic, if not the political order. Yet, according to findings in September last year by PEW, a world-renowned public opinion survey organisation based in Washington D.C., there is widespread belief that standards of living have improved. Indeed, 96% believe that their lives are better than their parents' generation.
As for personality cult, the affectionate nickname "Xi dada" is not his invention. Compared with his recent predecessors, Xi is winning popularity hands down. In a single party state, fawning behavior is commonplace. But the call to rally behind the Party "core" ("hexin") is not a Xi-era phenomenon. The same happened during the Presidency of Jiang Zemin, and even during the weaker rein of President Hu Jintao. In any case, we are not seeing massive Maoist rallies waving the Little Red Book.
Indeed, any mirage of a Maoist revival is more a reflection of a popular nostalgia for ideals of the early Communist Revolution “where its government was clean, its army was the model of serving the people, its working men and women were dignified, and its life was meaningful without "commodification" and consumerism.” Click here (para.11)
A firm hand at the center has come from the realization that previous lax attitude towards provinces has resulted in uncontrolled, widespread corruption, power grabs and blocs of rent-seekers. With the Bo Xilai Affair, it dawned on the top leadership that unless the Party firmly grasps the nettle, its whole legitimacy and survival would be at risk.
The Economist leading article concedes that Xi's anti-corruption campaign has been popular with the Chinese people. What it fails to see is that as corruption has become so deep-seated and far-reaching, the whole legitimacy of the Party is under existential threat without a major surgery. To get on top of powerful opposing vested interests, authority needs to be concentrated as corruption has spread into every corner, including the military. The recent fall from grace of top Party and military brasses is a case in point.
A firm hand is also needed as, through turbulent waters, Xi is shifting China's complex behemoth into a different development model, more oriented towards consumer, innovation, and sustainable development. The unveiling of the country's ambitious Five Year Plan doesn't depict confused policies or a leader lacking in sense of direction.
However, centralized coordination doesn't translate into micro-management. The Five Year Plan, for example, comes from months if not years of input from groups of home-grown and foreign experts across the board, where the input and guidance of Premier Li Keqiang are evident. With its vast size and diversity, 21st-century China is no 16th-century Spain. The comparison with Philip II is a little ludicrous.
All in all, The Economist article under-estimates the complexity in China's change of direction and the need for a firm hand to turn things around, increased authoritarianism notwithstanding. It also conflates China's learning curve in financial reform with sheer incompetence and confused policies.
This happens to tally with the take of Cheng Li, Senior Fellow, Foreign Policy, Brookings Institution - The end of collective leadership in China? Not really- what he makes of the latest communique of the Communist Party of China (CCP) issued at the conclusion of the Sixth Plenum on 27 October, 2016. This sets the tone for the 19th Party Congress in the latter half of 2017. Cheng is the author of a new book, Chinese Politics in the Xi Jinping Era: Reassessing Collective Leadership.
To understand China's complexities and to see if and how China is likely to achieve her Five Year goals, click here.
A 10th October Lowy Institute Analysis by Thomas Wright explores "how US foreign policy would change should Donald Trump or Hillary Clinton win the US presidential election. Wright argues that a Trump presidency could see the United States undermine the liberal international order that it helped to establish. Clinton, by contrast, would be a more traditional internationalist president".
"Trump’s foreign policy will very likely be informed by his core beliefs: opposition to America’s alliance relationships; opposition to free trade; and support for authoritarianism, particularly in Russia".
"Clinton’s foreign policy is likely to reflect a more traditional internationalism, but may also distinguish itself from the Obama administration by a greater effort to deal with regional challenges to order in the Middle East, Europe, and Asia".
"If Clinton wins, she will need to respond to growing populist and nationalist sentiment in America in favour of limiting US engagement in the world".
Never before is an American presidential election been watched and debated so closely by so many nations, most of all the world's rising powers. All, not least Russia and China, are geared up in anticipation of a potential paradigm shift in the dynamics of the world order.
A Brookings Institution analysis by Jeffrey Bader dated 10 October "A framework for U.S. policy toward China" offers some possible pointers on how a new US President, particularly if Clinton wins, may re-calibrate policies in relation to a rising China.
A McKinsey Quarterly article of October 2016 shows that although resource strains have lessened, new technology will disrupt the commodities market in myriad ways.
In particular, the article points out that -
"Technologies, many having little on the surface to do with resources, are combining in new ways to transform the supply-and-demand equation for commodities. Autonomous vehicles, new-generation batteries, drones and sensors that can carry out predictive maintenance, Internet of Things (IoT) connectivity, increased automation, and the growing use of data analytics throughout the corporate world all have significant implications for the future of commodities. At the same time, developed economies, in particular, are becoming ever more oriented toward services that have less need for resources; and in general, the global economy is using resources less intensively.
There are five takeaways -
Resource prices will be less correlated to one another, and to macroeconomic growth, than they were in the past.
You will have more influence over your resource cost structure. Resource productivity remains a major opportunity.
You may find resource-related business opportunities in unexpected places.
The resource revolution will be a digital one, and vice versa.
An Economist Intelligence Unit 2016 assesses how a re-balancing China’s relationship with Africa and Latin America will evolve in the years ahead.
The report contains the following highlights -
"China continues to play a pivotal role in both Africa and Latin America as a trade partner, investment facilitator and financial backer, but there are big questions over how this relationship will evolve in the years ahead in view of instability and uncertainty caused by China’s economic rebalancing act."
"In Africa, China is adopting a more interventionist stance in its dealings to protect its commercial interests, strengthening its trade ties across a wider range of product markets, investing further in strategic supply bases, and pushing ahead with trade- and investment-facilitating finance initiatives".
"Chinese firms remain engaged in Africa and are positioning to snap up extractive sector investments at lower prices, with a view to securing longer-term strategic supplies. This is already taking place in Copper-belt countries such as Zambia, the Democratic Republic of Congo (DRC) and Congo (Brazzaville)".
"Chinese firms are well-placed financially, and strategically connected to tap into growing demand from Africa’s low-income masses, as well as exploit growing demand from parts of the urbanised upper low to lower-middle income segments of Africa."
"Trade and investment by China into Africa will seek to consolidate its presence on the continent, tap into its fast-growing consumer markets, establish production bases closer to its end clients, exploit Africa’s free-trade deals (among regional economic communities and with major international partners), and set up production bases to feed value chains and consumer markets back in China".
"In Latin America and the Caribbean, the direct impact of weaker demand from China, and its indirect effect in the form of lower commodity prices, has forced difficult policy adjustments, particularly for South America’s commodity exporters, which are still ongoing. The Economist Intelligence Unit projects a contraction in regional GDP of 0.3% in 2016".
"Partly in response to concerns of policymakers there to the problem of a growing trade deficit, China has attempted to reboot its relations with Latin America, focusing on investment and technical co-operation, in an increasingly diverse number of sectors that have the potential to improve infrastructure, boost research and development (R&D), and raise the region’s long-term growth rate".
"The expected convergence of Chinese incomes with Latin American per head incomes should also help the region to make some competitiveness gains going forwards, particularly in areas in which it has comparative advantages, such as agribusiness, with the potential to rebalance trade relationships".
"For Latin America to take full advantage of these opportunities, productivity-enhancing reforms and improved intra-regional trade will be necessary in the coming years."
The report points out that "China is Africa’s single biggest trade partner following years of stellar growth since the early 2000s, which reflected China’s insatiable appetite for Africa’s energy products and raw materials, as well as its ability to place a wide range of goods on the African continent.".
China has been effective in tapping into Africa's fast-growing and massive low-priced consumer market populated by its rising lower-middle-class. At the same time, China is replicating her successful model of special economic zones in partnership with a host of African countries, with 15 such zones already established in coastal regions (except Mauritius) and five more planned for coming decades. These are set to accommodate manufacturing and other businesses diversifying or re-locating from China or other places owing to rising costs and other competitive pressures and Africa's attractive development dynamics. They are also poised to support creation of African jobs and development of local skill sets which have become no longer competitive in China and other localities.
As for Latin America, the Report flags up the so called 1+3+6 Plan outlined by President Xi during his state visit in 2014. This entails one plan (the 2015-19 China–Community of Latin American States Co-operation Plan) with three engines (trade, investment and finance), and six priority sectors for co-operation (energy and resources, infrastructure construction, agriculture, manufacturing, scientific and technological innovation, and IT).
A year later, during his visit to Africa, Premier Li Keqiang outlined the so called 3x3 Plan which sets out three priority development initiatives (IT, electric power and logistics), with emphasis on three key actors - government, society and the private sector.
Africa's has huge development potential thanks to its massive young demographic dividend and rich agricultural resources as "food basket" for the world. However, as the Report shows, many African and Latin American countries remain over-dependent on extractive industries. This is becoming increasingly unsustainable as the world is shifting from energy and resource-intensive industries, driven by China's re-balancing and the collapse of energy prices.
How resource-dependent African and Latin American countries will cope is likely to depend on their ability to capture their respective long-term competitive advantage by diversifying into carefully-targeted "linkage industries", supported by vigorous, sustainable policies and measures. On this front, my power-point presentation at a 2015 conference in Zambia - African sustainable development through "quality" extractive industries - may offer some useful food for thought.
A Brookings InstitutionOrder from Chaos ProjectAsia Working Paper No.3 of March 2016 by Jeffrey Bader, a Brookings senior fellow affiliated with the John L. Thornton China Centre. He was the first Director of the China Centre, and was John C. Whitehead Senior Fellow in International Diplomacy from 2012 to 2015. He served in the U.S. government for 30 years in various capacities mostly dealing with U.S.-China relations, including as Special Assistant to the President for National Security Affairs from 2009-2011.
The following extracts may serve to capture the flavour of the Paper -
"By examining China’s goals, what China is not doing, and its contributions to global prosperity, Jeffrey Bader outlines three broad policy options for the United States to respond to the China challenge:
Containment, confrontation, or untrammelled strategic rivalry;
Global cooperation, regional resolve."
"In their extreme versions, the strategies of accommodation and untrammeled rivalry make assumptions about American resilience and Chinese strength that are dubious.
"The accommodation argument, much like the contention in the 1970s that the United States needed to accommodate radically to an emerging multipolar world, seems to project a United States that remains static, that fails to innovate, and that proves unable to maintain its military, political, economic, and cultural advantages. As Lee Kuan Yew said, those who bet against the United States in the 20th century didn’t come out so well, and we have it in our power to ensure, through domestic rejuvenation, that the America short-sellers in the 21st century meet the same fate. A central premise of accommodation also seems to be that China’s rise has a kind of inevitability about it, and that the trajectory of U.S. and Chinese economic strength and national power are converging. Recent weakness in the Chinese economy and signs that systemic reform will remain very challenging undercut the notion that we can make straight line projections from China’s success in the last 20 years in moving from underdevelopment to medium income status."
"The argument for embrace of untrammelled strategic rivalry makes more confident assumptions about U.S. strength and adaptability. But it does not persuasively explain how the United States will be able to subordinate other demanding domestic and foreign priorities to confronting the ambiguous challenge that China poses. Like the proponents of accommodation, its advocates sometimes postulate a China that is 10 feet tall and whose nefarious intentions and secret master plan lie behind normal developments. It dismisses, incorrectly in my view, the wisdom in the trope that if we treat China as an enemy, it will surely become one. Security rivalries lead to security dilemmas and distort destructively the behaviour of those trapped in them. If we conspire to make China an enemy, then every problem we deal with, including Iran, North Korea, climate change, and global terrorism, will become orders of magnitude more difficult to manage. Finally, confrontation with a country that will be our number one trading partner, the major trading partner of many of our friends in Asia and elsewhere, and a foundation of the global economy will impose considerable costs on our own economy and those of numerous other countries and create severe strains with friends who would be negatively impacted."
"Options 1 and 2 have their prominent advocates in the current policy literature, but each would jeopardise important U.S. interests—the former by putting at risk U.S. allies and values, the latter by demanding a greatly expanded U.S. military presence in the region without ensuring greater security. So what kind of actions should the United States take to achieve a balance between acceptance of a larger global role for a constructive China while drawing lines against coercion in China’s neighbourhood? On global issues, a sensible option 3 approach should look for issues on which China, because of its own evolving interests, can and should play a greater role in supporting the global system. A few examples might include:
• Cybersecurity and cyber innovation; • Protection of the rights of foreign investors; • Adoption of the standards of the Foreign Corrupt Practices Act; • Central bank coordination, especially at times of global market instability; • Fisheries treaties and conservation. • Protection of intellectual property rights."
"In addition, there are political, economic, and security measures the United States should adopt, globally and regionally, to protect its interests in the face of the Chinese challenge, including projecting clarity about our commitments to allies, defending principles and international norms in maritime areas, and restricting access to the U.S. market for companies that engage in cyber-theft. But there are opportunities as well for U.S.-China cooperation, such as along with South Korea in constraining the North Korean nuclear weapons program and with the Chinese-sponsored Asian Infrastructure Investment Bank on worthwhile projects."
As a huge country with a vastly different political system, a population the size of a fifth of mankind and many provinces at different stages of development, the trajectory of China as a relatively-recent integral part of the global order admits no simple black-and-white interpretations and responses. The reading of China is made the more difficult when China is now at a critical crossroads of development both economically, socially, ecologically, politically, and geopolitically, not to mention other new challenges to global stability. Jeffrey Bader's more nuanced analysis is therefore timely.