What's New

"China and Germany: Why the emerging special relationship matters for Europe"

In a European Council for Foreign Relations report here dated May 2012, its authors - Hans Kundnani, its editorial director, and Jonas Parello-Plesner, a senior policy fellow - caution that -

• For the European Union, China displays a tendency to deal with Berlin rather than Brussels as China sees Germany as increasingly possessing real power in the European Union just as its economy is becoming more dependent on China.

• Both Germany and China share common interests as the world's leading exporters, savers, and holders of large trade surpluses. They also share a similar belief in monetary and fiscal discipline and a desire to improve global economic governance, which is a kind of "post-crisis alignment".

• In foreign policy, Germany sees eye to eye with China in an aversion to the use of force, while China in additon, hopes to leverage Europe through Germany to balance against U.S. global dominance particularly in the wake of America's Pivot to Asia.

The authors opine that "Germany's instincts remain European, but (German) officials are frustrated by the failure of their attempt to develop a common strategic European approach to China and do not feel they can wait any longer. Germany must not give up on Europe. But the rest of Europe also urgently needs to help Germany to be a good European by developing a real "strategic partnership" with China before it is too late. The EU should identify where Europe can help Germany in its relationship with China; empower the European External Action Service (EEAS) to co-ordinate a "top-down" approach to China policy; and explore new formats for dealing with China ".

China's apparent preferance for Berlin is in part due to the realization of Brussels' difficulties in navigating through the interests of 27 Member States. What is more revealing, however, is the irony in proposing that the EEAS should be empowered to coordinate a "top-down" EU approach to foreign policy towards China.

As a watered-down euphemism for a real EU diplomatic service, the very contrived creation of the EEAS speaks volumes for the refusal of Member States, particularly the more powerful ones amongst them including Germany, to give up state sovereignty in foreign policy to a "top-down" pan-EU approach.

So while the EEAS may be tasked to coordinate or define a "top-down" common EU policy, the outcome may well fall victim to incoherence in reconciling the irreconcilable.

The condundrum is clearly that a common EU foreign policy, as in the case of a common fiscal policy, cannot really happen without a formal political union of all the Members into a "United States of Europe"".

Is real change underway in North Korea?

TV panel discussion on Inside Story of 26 September, 2012 with Aljazeera English together with Doug Bandow, a senior fellow at the Cato Institute specialising in foreign policy; and Glyn Ford, a former member of the European parliament and the author of North Korea on the Brink: Struggle for Survival.

Click here

Read a background report  here  "Reform Sprouts in North Korea?" in Yale Global Online dated 26 July, 2012 by Dr John Delury, an assistant professor of East Asian Studies at Yonsei University Graduate School of International Studies and a senior fellow of Asia Society's Center on US-China Relations. He has taught Chinese history and politics at Columbia, Brown, and Peking University, and received a PhD in Chinese history at Yale. 

U.S. Public opinion on China and Foreign Policy

The Chicago Council on Global Affairs, founded in 1922, is a prominent, independent and nonpartisan organization committed to influencing the discourse on global issues through contributions to opinion and policy formation, leadership dialogue, and public learning. The Council released on 10 September the results of its survey of American public opinion on U.S. foreign policy, in which more than 1,800 Americans were sampled. Click here

According to its press release -

"Fewer Americans are concerned about international terrorism as a “critical” threat to the United States than at any point since September 11, 2001. While a majority is still worried, the intensity of concern about terrorism has steadily declined. At the same time, most Americans do not credit the wars in Iraq or Afghanistan with reducing the threat".

"While Americans consider the Middle East as the greatest source of future threats, they are gradually shifting their foreign policy focus towards Asia and a rising China, viewed as important more for their economic dynamism than as a potential threat. For the first time since the Council first asked the question in 1994, a majority of Americans (52%) see Asia as more important to the United States than Europe (47%)."

The "Survey finds that the views of “Millennials”—those between the ages of 18 and 29—are shifting in a more pronounced way than those of older Americans. They see the world as less threatening, and show less concern than other age groups about international terrorism. Islamic fundamentalism, and the development of China as a world power. Millennials also favor a less activist approach to foreign policy, with a slight majority (52%) saying the United States should “stay out” of world affairs, compared to just 35 % among older age groups".

"When looking at partisan differences, the 2012 Chicago Council Survey finds that political polarization on many aspects of U.S. foreign policy is overstated. Opinions in “red” and “blue” districts overall are similar. While the parties often differ in degree, there is generally consensus among the majorities. Independents, however, distance themselves from both Republicans and Democrats. They are less likely than both to support an active U.S. role in global affairs and less likely to view U.S. leadership as “very” desirable".

Other key findings of the 2012 Chicago Council Survey include:

• Just over half (54%) support an attack by U.S. ground troops against terrorist training camps and facilities, down from 82 percent in 2002.

•  Majorities oppose the UN authorizing a strike on Iran (51% opposed), oppose a unilateral U.S. strike on Iran (70% opposed), and do not want to get involved in a potential Iran-Israel war (59% opposed).

• To deal with the crisis in Syria, majorities of Americans support diplomatic and economic sanctions (63%) as well as a no-fly zone in Syria (58%).

More specifically,

• There is a strong sense that the wars have overstretched America''s militarry and strained its economic resources for dubious gains. The public are more than ready to end this chapter of American foreign policy.

• Finding themselves in a more multipolar world and aware of domestic economic constraints and the limits of military power, Americans prefer to play a less dominant role in the world whenever possible.

• Most Americans believe that the Iraq war has worsened America's relations with the Muslim world and will not lead to the spread of democracy in the Middle East.

• Americans also continue to see the United States as the most influential country in the world today, even as this influence iis seen as decreasing relative to other countries.

• While they see American leadership as desirable, Americans clearly reject the role of the United States as a hyperpower and want to take a more cooperative stance.

• Overall, Americans view Asia as important because of its economic dynamism rather than a threat. However, they also recognize that over the longer term, Asia's - and especially China's - rise could be a negative development for the United States. The development of China is viewed by a minority (40%) and even less by Millennials (30%) as a critical threat.

• Americans are equally divided between those who say that the United States and China are mostly partners (48%) and mostly rivals (47%), the percentage of Americans saying that China is mostly partner has grown. A majority of Democrats (54%) see China as a partner while a slight majority of Republicans (51%) and Independents (53%) view China as a rival.

• Seven in ten Americans say China is more important than Japan. The same majority believe that the United States should undertake friendly cooperation and engagement with China (69%) rather than actively work to limit China's growth (28%). This majority is strong and non-partisan, consisting of Democrats (72%), Republicans (65%) and Independents (71%). 

• However, majorities of all groups think China trades unfairly (Republicans (74%), Democrats (63%) and Independents (68%).

• A majority (53%) says that the United States should put a higher priortiy on building up strong relations with traditonal allies like South Korea and Japan, even if this might diminish U.S. relations with China. However, there is a substantial and growing minority (40% up from 31% in 2010) holding the opposite view.

• While U.S. officials have recently attempted to recast America's ""Pacific pivot" as a multifaceted policy rather than solely as a military one, concern about China's ability to draw regional actors into its economic orbit along with its growing mucularity in the South China Sea is a clear motivating concern. There is a majority support (54%) for the shift of military and diplomatic resources towards Asia but with only 9% supporting it strongly and 45% "somewhat".

• Asked to name which is more important to the United States, 39% select Europe while 31% choose Asia and 29% opt for the Middle East. Democrats (54%) and Independents (56%) are more likely to favour Asia over Europe than Republicans (45%).

• 53% consider maintaining superior military power worldwide a "very important" foreign policy goal, down 14% from its peak in 2002.There is continued majority support for global American military edge but selective cuts are preferred (68%).

• More Americans are wary of getting involved in potentially high-cost foreign entanglements. In response to questions that imply unilateral rather than multilateral action, majorities (both Repulicans and Democrats) oppose using U.S. troops if China invaded Taiwan (69%, up 8 points since 2004) and if North Korea invaded South Korea (56%),

• There is no clear majority support for using U.S. troops to defend Israel if it were attacked by its neighbours; as in 2010, Americans are essentially split down the middle (50% opposed, 49% in favour). In an Israeli-Palestinian conflict, 30% support America taking the side of Israel while 65% prefer not taking either side. Democrats (78%) and Independents (69%) prefer not taking sides while a slight majority of Republicans (51%) want to take the side of Israel (an increase of 12 points over a decade).

• As a general rule, when it is necessary for the United States to use military force, 24% think it best for America to act on its own, 36% as part of NATO or other allied operation, and 38% as part of a United Nations operation.

The PEW Research Centre's Global Attitude Project, in their report dated 18 September 2012, entilted "US Public, Experts Differ on China Policies"here shows that the US public is deeply concerned about China's economic power but differs from experts as to how America should respond. Few see China as trustworthy, although the young seem relatively more trusting of China. Though most want to share leadership with China, a majority feels that the US remaining the leading superpower would make the world more stable, with the experts believing that a stong relationship with China is important.                                                      

"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.

"No water, no power - Is there enough water to fuel China’s power expansion?"

A timely warning is sounded in the latest report dated September 2012 by HSBC Global Research on Climate Change. Click here

This highlights China's looming water conundrum as follows -

"China plans to add more than the total installed power capacity of the US, the UK and Australia by 2030. Consequently, industry faces more water and electricity shortages. Nearly half of China’s GDP is earned in water-scarce provinces (including such economically dynamic cities as Beijing, Shanghai and Tianjin). Looking ahead, ambitious expansion plans for power capacity could face real water constraints. This is expected to drive an increased focus on water and energy efficiency in the power, industry and mining sectors. Project financiers, investors and companies should consider resource shortages and more efficient options before funding, investing and expanding."

Hong Kong's changing industrial dynamics

An overview on Hong Kong's Changing Dynamics dated 19 September 2012 is provided in the Trade Development Council's Hong Kong Trader, an international online business platform.

It outlines that although services accounted for 93% of Hong Kong's economy in 2010, "the production-related activities of the numerous vibrant trading firms – many with corporate headquarters here" must be appreciated "to recognise the relevance of Hong Kong manufacturers to today’s commercial fabric".

These comprise the “four pillar industries” of trading and logistics, financial services, producer and professional services, and tourism, which together represented 58% of Hong Kong's GDP in 2010, as well as six targetted new "industries" where Hong Kong enjoys an advantage - cultural and creative industries, medical services, education services, innovation and technology, inspection and certification services, and environmental industries.

The battle to harness these changing industrial and business dynamics has just begun, judging from the TDC article.

Download Hong Kong Changing Dynamics - TDC Hong Kong Trader 19 Sept 2012

China's battle for talent

""Beyond Factory Floor: China’s Plan to Nurture Talent" - YaleGlobal, 10 September 2012

"Determined to hone innovation, China reforms education, invests in talent incubators" - this sums up  an article published in YaleGlobal Online by Xu Liyan, a researcher and Qiu Jing, a research fellow, both at Samsung Economic Research Institute in China.

YaleGlobal elaborates, "China is determined to evolve into a global hub for innovation. With climbing college enrollment and a R&D staff exceeding 1.5 million, the nation is reforming its higher-education system, hiring practices and immigration regulations; encouraging cooperation with industry; developing new majors in the sciences in areas like alternative energies and new-materials engineering; and offering incentives for Chinese students who studied overseas to return home." 

“Plans are underway for 1200 education facilities – or ‘talent incubators’ – for training technicians to be built in major cities by 2020.”

"The government is also funding initiatives to develop leaders in philosophy, social science, publishing, culture, the arts and heritage protection. The goal is to transform Chinese firms into multinationals ranking among the world’s top companies and develop soft power".

However, "China and other nations must use care not to create an excess supply of talent amid a shortage of jobs, contributing to a lifetime of disappointment", warn the Samsung researchers.

Download YaleGlobal - Beyond Factory Floor - China’s Plan to Nurture Talent - September 2012

The soaring EAGLEs

As the West continues to be embroiled in sovereign debt crisis and economic malaise, the world's gravitas has been quietly shifting towards the emerging economies.

A BBVA research report "EAGLEs Flash" dated 24 July 2012 Click here outlines how fast the corporations of the so-called EAGLEs (Emerging And Growth Leading Economies) have expanded-

"EAGLEs are not only the largest contributors to global growth; their corporations are also becoming world-class players. In this year Fortune Global 500 ranking EAGLEs corporations’ revenue peaked up to 22% of total revenue reported. Their stronger relevance is even more dramatic when considering that in 2005 their share was only 7%".

"Among EAGLEs, Chinese companies are the ones with the largest current share of revenues, 14%, followed by Korean, Brazilian and Russian with a share around 2% each. Meanwhile G7’s corporations share decreased to 64% from 80% in 2005. US companies led the decline with a reduction of almost 9 percentage points".

"State Owned Enterprises (SOE) in oil business, utilities and finance lead the EAGLEs ranking, with the exception of two electronics private companies in Korea and Taiwan. These sectorial and ownership facts highlight the strategic role of commodities as well as banking in the growth agenda".

Clearly amongst the EAGLEs, China dwarfs the rest. This is reflected not only in the share of global corporate revenues reported but even more significantly in the overarching role of commodities in their growth, largely driven by China's breakneck resource-intensive demand in recent years.

In a Third Quater 2011 Issue 10 research report "On Wings of EAGLEs, The Nex Emerging Giants Take Flight", BBVA also identified a dozen other countries to watch in the so-called EAGLEs’ Nest.  Common across all EAGLEs are the rise of the consumer middle class, and
vast infrastructural requirements. Click here for this BBVA report.

The growing importance of the emerging economies is captured in my earlier analysis "Rise of the TIMBIs" - Jack A Goldstone in Foreign Policy" dated 15 January, 2012 . Click here

A further BBVA update (September 2012) showcases the latest rise of the Philippines as a smaller EAGLE.

Download BBVA Research Update - Can the Philippines become a EAGLE

Unlocking China's Retail Potential - A Colliers International research report

Download Unlocking China's Retail Potential - A Colliers International research report

"The Secretive world of the Communist Party" - CESRAN academic paper

The article dated 6 September 2012 throws some light on the inner workings of the Communst Party of China (CPC). It is by MARTINE BULARD, and was first published at Le Monde diplomatique, where she is deputy editor.

This article was re-published at CESRAN, a non-partisan, non-profit international think-tank founded by a group of Turkish academics in 2008.

Download The Secretive World of the Communist Party - CESRAN, 6 September, 2012

To gain a deeper understanding of "How are China's top leaders selected and how stable is China's Communist Party", Click here