CHINAwatch

Signs of China making the grade at the world's top table

Warts and all notwithstanding, China has quietly making the world's top table since 2014. This is borne out partially by the following dynamics -

(a) The Economist updated its interactive chart to predict the year when the Chinese economy would overtake that of the United States, using an interplay of growth rate, inflation, and RMB appreciation assumptions. Assuming US growth rate of 2.25% and inflation rate at 1.8% against, on China's part, assumed annual growth rate of 7%, inflation rate of 3% and an average annual RMB appreciation of 3%, the Chinese economy would overtake the US by 2021, only two years later than earlier forecast. A lower Chinese growth rate of 6% would only delay the overtaking point by one year, by 2022. It seems highly probable, therefore, that China's economy would reach the world's top spot within a decade. 

(b) The Centre for China and Globalisation, a Beijing think-tank, shows that China’s outbound investments exceeded its inbound investment in 2014, according to a report of The Economist. China is now exporting her capital across the globe. For example, the acquisition in September 2014 of the world's largest pork producer - Smithfield Goods of the United States - speaks volumes. A New York Times interactive map of China's outbound investments around the world is instructive. China is clearly transiting from "Made in China", through "Made by China" to "Owned by China".

(c) In a rare poll conducted by the Harvard Kennedy School, citizens on five continents and in 30 countries, including China, were asked to identify and evaluate the job performance of 10 of the most widely recognized global leaders. President Xi Jiping came first (with a 7.5 score), followed by Indian Prime Minister Modi (7.3), German Chancellor Angela Merkel (7.2), US President Obama (6.6), British Prime Minister David Cameron (6.5), French President François Hollande (6.3), Japanese Prime Minister Shinzō Abe (6.1), and Russian President Vladimir Putin (6.0). 

(d) 2015 witnessed further evidence of China's top-table status: IMF's acceptance of the RMB as No.3 world currency; the founding of the Asia Infrastructure Investment Bank (AIIB); and the rolling out of a One Belt, One Road project of global proportions. The latter aims to build 81,000 km (50,000 miles) high-speed rail in 65 countries, with potential investment estimated at $1.4 trillion, 12 times the post-war US Marshal Plan for Europe ($120 billion in today’s prices).

(e) Meanwhile, China is playing a more proactive role as a "responsible stakeholder" in the global commons. Witness China's leading role at COP21 in Paris. In the United Nations, China already fields the largest peace-keeping contingent among Permanent Members of the Security Council. As for UN peacekeeping funding, China will soon become the second largest contributor (an increase from 6.64% to 10.29%), ahead of Japan (dropping from 10.83% to 9.68%), but still well behind the United States (28.57%).  

Would a rising and more assertive China be challenging the stability of the global order led by the United States?

Notwithstanding China's perceived revisionist assertiveness, China's foreign ventures are largely defined by the primacy of domestic politics or imperatives, according to Cameron Munster, President and CEO of the East West Institute (EWI), a global strategic think tank headquartered in New York. These translate into an overarching priority of maintaining stability, both internal and external, to enable China to develop into a modern relatively well-off nation by 2030. These inform China's intention to prize cooperation over confrontation with the United States, while managing the give and take in the inherent contradictions of a multi-polar world where distribution of power is becoming more diffused.  

 

From Old to New China: Tectonic shifts for Asia in 2016?

A Special Report dated 15 December 2015 by Natixis, a French corporate and investment bank, examines the following tectonic shifts in China -

(a) The RMB - Cheap to Expensive

(b) Demographics - Rural to Urban

(c) Growth - Catching-up to Innovation

(d) Consumption - Essential to Leisure

(e) Geopolitics - Status Quo to Revisionist 

Download From Old to New China Tectonic shifts for Asia in 2016

Along with China's explosive digitized move from online to offline commerce and her embrace of COP21's game-changing momentum towards a low carbon future, the world is on the cusp of an epoch-defining transformation - Finance, Business, Lifestyles, Values, not to mention the Distribution of Global Power. Things are unlikely to stay the same again. 

Changing face of China's Cities

Savills, a leading UK-based estate agency, takes an in-depth look at the economic make-up of China's First and Second-Tier Cities in a fast-changing urbanization landscape. 

Download 2015-savills-china-cities

China's leading role at Paris COP 21

China is taking a leading role at COP21 in Paris. The nation is set to account for 30% of global investments in renewable energies through to 2020. As Intended Nationally Determined Contributions (INDC) at COP21, China is to pledge that 20% of her energy consumption will come from non-fossil fuels by 2030. China has built the world's largest solar farm with one-gigawatt capacity in Qinghai and announced plans to set up the world’s largest national cap-and-trade scheme by 2017. 

According to an optimistic report by WWF (November 2015) China’s Future Generation 2.0 - Assessing the Maximum Potential for Renewable Power Sources in China to 2050, (a) Around 84% of China’s electricity generation can be met by renewable sources by mid-century; (b) China could meet or beat both of its commitments to peak its overall carbon emissions and have non-fossil fuels in primary energy use representing 20% by 2030; (c) Given political will, coal can be eliminated from the power mix by 2050 or even earlier; (d) Over the period 2015-2050, the total costs for an electric power system run mainly with renewables would be less emissions intensive and cheaper than a system dominated by coal; and (e) improved cost and emissions results are to be driven by smart grids. 

Download China_s_future_generation_2_0_report                  

A Brookings Institution short brief of November 2015 captures China's Ambitious Targets and Policies. How China is cleaning up and may be Seeing Daylight  is described in an article in The Economist (28 November, 2015: Special Report on Climate Change). 

128 INDCs have been rolling in from 150 countries, representing 88% of the world's emissions. This is building up a momentum for a more positive outcome at Paris compared with previous efforts.

China's green drive is informed by growing concerns with energy security, pollution, and the imperatives of transforming the nation's development to more sustainable, balanced and higher-quality growth. Ahead of COP21, China released a Report compiled by some 550 scientists and experts, on the environment impact of Climate Change on the country. 

The mood this time is vastly different from the last Climate Change summit at Copenhagen, according to an interview on 2 December by Amanpour on CNN with Kevin Rudd, President of the Asia Society Policy Institute and former Prime Minister of Australia. 

The spoilers at COP 21 should no longer include China Click here, but a handful of fossil-fuel export-dependent countries. Yet, rankles are likely to remain, if not leading to a "bloodbath", between developing and developing countries, including both China and India, over ideas such as a global carbon tax and verifiable and legally-binding agreements.  

China’s Renminbi approved by IMF as a main world currency

Much has been said that the RMB's inclusion in the IMF's Special Drawing Rights (SDR) is no more than symbolic. Like a student wining a Gold Star at elementary school, says Ben Bernanke on his Brookings blog. The New York Times is more sanguine, pointing out that it "will help pave the way for broader use of the renminbi in trade and finance, securing China’s standing as a global economic power".

In any event, this has been a planned and hard-won prize for China, however symbolic to start with. After all, the RMB is given the third place (11%) in weight in the make-up of the SDR, after the dollar (42%) and the euro (31%) but ahead of the British Pound (8%) and the Japanese yen (8%).  

The Financial Times has come up with a basket of perhaps more focused and in-depth analyses. The SDR decision was seen as a pivotal moment, a historic vote of confidence in China's on-going financial reform. Albeit still relatively minor in global usage compared with the US dollar, China's One Belt, One Road is likely to turbo-charge its popularity, says the financial newspaper. 

Nevertheless, winning this SDR accolade may not translate into RMB appreciation, at least in the near term. The Economist explains why.