CHINAwatch

How is Hong Kong impacted by changed US-China relations and problems with Covid-19 vaccines

Backchat with RTHK (Radio Television Hong Kong) on 16 February, 2021 (My contribution are imbedded in the top bar, starting from time counter 04:00, 18:16, 21:46, 24:06, and 25:40) 

LAC standoff: PLA, Indian troops begin process of disengagement but will be a long haul

TV panel discussion on CNN News 18 (India) on 11 February, 2021

Rogue Superpower - Why This Could Be an Illiberal American Century

Michael Beckley is Visiting Scholar at the American Enterprise Institute, and the author of Unrivaled: Why America Will Remain the World’s Sole Superpower. Above is the topic of his article dated November/December 2020 in Foreign Affairs. 

Beckley argues that global aging demographics and technological upheaval would ensure that America will remain the world's only Superpower. A "fortress" United States capable of producing everything under the sun thanks to its technological prowess can continue to impose its will on the rest of the world over many decades in the 21st century. This may lead to the United States continuing to act as a "rogue superpower" - 

"an economic and military colossus lacking moral commitments, neither isolationist nor internationalist, but aggressive, heavily armed, and entirely out for itself."

".. the United States would deploy every tool in its coercive arsenal—tariffs, financial sanctions, visa restrictions, cyber-espionage, and drone strikes—to wring the best deal possible out of both allies and adversaries."

"American commerce could steadily shift to the Western Hemisphere and especially to North America, which already accounts for a third of U.S. trade and a third of global GDP. At a time when other regions face setbacks from aging populations and rising automation, North America is the only region with all the ingredients necessary for sustained economic growth: a huge and growing market of wealthy consumers, abundant raw materials, a mix of high-skill and low-cost labor, advanced technology, and peaceful international relations. 

Beckley suggests that a better path could be for the United States to use its unparalleled primacy "to compel trading partners to adopt American standards on labor, the environment, and intellectual property protection.". What is more, along with like-minded allies, the United States could form "a liberal bloc that excludes countries that do not respect open commerce and freedom of expression and navigation."

China as the primary target is the subtext writ large. However, China is changing rapidly. 

According to Washington D.C.-based Brookings Institution, while the U.S. has maintained its position as the technologically dominant power for decades, China has already eclipsed, or is on the verge of eclipsing, the United States in some technologies. Click here

The Carnegie Endowment for International Peace, also D.C.-based, opines that China can be a leading innovator both globally and domestically, having achieved innovation gains in manufacturing, digital platforms, widespread application of digital apps, and basic science R&D in fields such as computing and biotechnology.  Click here

Thanks to vastly different responses to Covid-19, China's economy is expected to overtake the United States five years earlier, by 2028, according to UK's Centre for Economics and Business Research. Click here

Despite trade war and the pandemic, foreign investments continue to pour into China, according to Bloomberg News of 18 December, 2020. Click here According to the Wall Street Journal of 24 January, 2021, China has overtaken the United States as the world’s leading destination for direct foreign investment, the culmination of a trend starting from 2016. Click here

Developing countries have all emerged from Western colonization to become some of of the world's most dynamic economies. Talks of an "Asian century" abound, as in the case of Paraq Khanna's The Future is Asian. The European Union is also beginning to find its more independent path.

Gone are the days of gunboat diplomacy and strong-armed coercion. The Reginal Comprehensive Economic Partnership (RCEP), representing a third of the world's population and GDP, where China is the central trading hub, has happened without the United States. The same goes for the hurried conclusion of the EU-China Trade and Cooperation Agreement (TCA) regardless of US remonstrations. So, while Beckley's suggested better path is preferred, his basic tenet of America's enduring dominance or primacy is questionable. 

Despite some decoupling as a result of the US-China trade war and the pandemic, the global supply and value chains remain largely inter-dependent. No country, United States and China included, can or is in a position to produce everything entirely independently of other nations' input in one form or another, be it parts, components, raw materials, or logistics such as container ports. Taking into account dynamics like pandemics and Climate Change, Beckley's idea of a "fortress America" seems fanciful. After all, as Beckley points out, North America currently represents only one third of global GDP. 

Neither is the idea of an outdated notion of a "US bloc" realistic. Few countries, US allies included (read the EU), really want to be forced to take sides between US and China, pushback on China on certain issues like democracy notwithstanding. 

What is more, according to the D.C.-based Urban Institute, the US population is aging  as well. By 2040, about 20% Americans will be age 65 or older, up from about one in eight in 2000, thanks to improving longevity and stagnant birthrates. 

Nor is America immune from the disruption of technological change which favors the 1% against the 99%, adding to what is already a divided, and some may say, "broken" country. 

Even as China's rise is challenging the extant global order shaped by the United States, it is unrealistic to think that China's national development and trajectory can be arrested or derailed by an Cold War "Fortress America".

Western cynicism notwithstanding, it may be instructive to reflect on President Xi's call at the recent World Economic Forum (WEF) (conducted via Zoom) for more multilateral dialogue and collaboration to build global inclusiveness despite real differences and intensified competition. Click here 

US strategy on China informed by systemic mistrust and misjudgment

Live TV panel discussion with Press TV  on 26 January, 2021. (On GDP per capita, it alone doesn't denote power. For example, Macao's GDP per capita well exceeds that of the United States. Economic size and global connectivity matter.) 

Why was WHO visit to China delayed and what's the global outlook on Chinese vaccines?

Backchat with RTHK (Radio Television Hong Kong) on Monday 11 January, 2021

My contribution was embedded in the bottom bar, starting from time counter 15:40. (As covered in my contribution, my reading of Beijing proved to be correct. The WHO delayed visit was not a retraction, merely time needed to sort out preparations for new emerging pandemic risks. Soon afterwards, Beijing announced that the WHO visit will take place on 14 January, 2021.)

In Focus: South Asia - Military part of overall China threat

Live TV interview on In Focus with Indus News on 6 January 2021 (My contribution starts from time counter 36:45)

Why is China moving to a digital RMB?

The dollar displaced the British Pound as the world’s leading reserve currency at the beginning of the last century. After the Bretton Woods Agreement in 1944 which linked world currencies to the greenback, it has been reigning supreme. Click here

As China opened up and became integrated with the world trading and financial systems, it has been caught in a "Dollar Trap", having to convert excess national savings into secure, internationally-convertible US treasuries.

Despite the global financial crisis of 2008-09, dollar hegemony was strengthened, rather than weakened, argued Eswar Prasad, Chair Professor in International Economics and Senior Fellow at the Brookings Institution. Click here

Over the years, the United States has been enjoying the dollar’s “exorbitant privilege” of almost unlimited money-printing (“quantitative easing” in central bank parlance). As Richard Nixen’s Treasury Secretary John Connally famously said in 1971, “The dollar is our currency, but it’s your problem.” Click here

Arvind Subramanian, Senior Fellow at the Washington D.C. -based Peterson Institute for International Economics, pointed out in 2011 that the world is living in the shadow of China’s economic dominance. More national currencies were moving in tandem with the renminbi (the Chinese yuan) instead of the dollar. Click here

Nevertheless, the still-mighty dollar is now increasingly weaponized to impose economic sanctions on China.

Niall Ferguson, Senior Fellow at the Hoover Institution, opined in 2019 that the explosive growth of Alipay and Tencent online-payment platforms represented a real threat to dollar’s hegemony. Click here

Owing to America’s dwindling domestic savings and a gaping current account deficit, Stephen Roach recently warned in the Financial Times that the dollar’s “exorbitant privilege” is about to end. 

Now China is actively pursuing the issue of a national digital currency. Click here Unlike a speculative cryptocurrency, the digital renminbi is China’s sovereign currency fully backed by the state. It's a natural development as China has become by far the world leader in digital payment systems, accounting for 44% of the global volume.

Driven by latest blockchain technology, China's digital currency doesn't require a bank account. This has huge poverty-relief potential for the massive "unbanked" poor across the globe.

As Chinese banking authorities have full control, the digital currency would help combat illicit financial transactions. The financial data would facilitate the formulation and execution of monetary policies.

As its transactions are instant and transnational, the digital currency would be attractive for international trade settlements with China, including projects in the "Digital Silk Road" of the Belt and Road Initiative.

Admittedly, the latter has been facing increasing headwinds from host countries, such as debt unsustainability, ecological neglect, non-transparency, and corruption. But China’s authorities are learning fast. Working more closely with international organizations like the World Bank and broader stakeholders in host countries and elsewhere, China is making significant headway with Belt and Road projects, doubters and the pandemic notwithstanding. Click here

What is more, the digital currency doesn't depend on the US-controlled SWIFT (Society for Worldwide Interbank Financial Telecommunication) banking system. It is thus immune from dollar-based US sanctions. Click here

According to a July 2019 McKinsey Report China has become more self-sufficient while the rest of the world, particularly Asia and resource-rich countries across the globe, have grown more dependent on China for parts, components, materials, trade and investments. This supply-chain connectivity is not easy to shift, anti-China decoupling notwithstanding. Click here

While the United States and Western allies are not about to warm to China's digital currency anytime soon, more and more countries in Asia, Africa and Latin America, by definition, most of the world's population, are likely to embrace the convenience and opportunities of China's digital payment systems, made even easier and safer by its sovereign digital currency. 

This trend is likely to accelerate with the commencement of the Regional Comprehensive Economic Partnership (RCEP), comprising a third of the world’s population, a third of world GDP, and half of the world’s manufacturing.

The developing world accounted for 49% of world GDP in 2010, and is expected to reach 60% by 2030. Click here China's growing global integration augurs well for widespread acceptance of its sovereign digital currency, speeding up the internationalization of the renminbi.

China’s digital sovereign currency would also help drive China's "dual circulation economy" - accelerating both domestic consumption as well as international trade and investments. The strategy is expected to be formalized in China's upcoming new Five Year Plan (2021-25). 

With the Covid-19 pandemic under much better control compared with other nations, China’s economy is now surging ahead, including exports, investments and domestic consumption. Click here As Alibaba’s “Singles Day” e-shopping bonanza successes show, digital payments will continue to transform retail sectors both in China and worldwide. Click here

Additionally, China’s outbound tourism has occupied the world’s top spot since 2013. Barring the pandemic, it is estimated to be worth $365 billion by 2025.  Click here Even with a trade war, Chinese outbound tourists are expected to make 160 million trips a year. Click here The digital sovereign currency is therefore well-timed. 

In October the dollar lost its top position as the world’s most used payment currency, falling behind the Euro since August 2013, thanks to erosion of perceived value of the dollar, emergence of more attractive Euro and Renminbi-denominated assets, and aversion to greenback-based sanctions. Click here With worsening United States geopolitics, China is likely to park more of its hard-earned savings in other assets, including its own bonds and some of the more viable Belt and Road projects.

Thanks to vastly different performance over the pandemic, China’s economy is now expected to overtake the United States’ five years earlier, by 2028, according to UK’s Centre for Economics and Business Research. Click here

All these developments by no means dethrone the dollar all at once. No other sovereign currency, let alone the renminbi, can remotely compare with the greenback’s global financial width and depth. Even falling by 10% over the past two decades, the dollar still accounts for 62% of global currency reserves.

However, as the Chinese saying goes, nature moistens everything on the quiet 潤物細無聲.  China’s digital sovereign currency is now poised to mitigate the dollar trap, accelerate internationalization of the renminbi and offer an escape route from dollar-based sanctions.

Political Economy of a Biden Presidency and RCEP - Implications for the Asian Region

A PowerPoint presentation to the Hong Kong EGN Founding Chairmen Group on 11 December, 2020

Download Political Economy of a Biden Presidency and RCEP - Implications for the Asian Region 

US arms sales to Taiwan aimed at pushing back against China

Live interview with PressTV on 8 December, 2020.

Anti-Beijing activists handed prison sentences in Hong Kong - whys and wherefores

Live TV interview with TRT World on 2 December, 2020