What's New

The Beginning of the End of Dollar Supremacy and the Looming Financial Turmoil

A presentation to the EGN (Executive Global Network) Founding Chairmen Group Hong Kong on 14 April 2023.

Download The Beginning of the End of Dollar Supremacy (PDF)

Macau and Hong Kong different paths to China. Why?

Inside Story TV panel discussion with Aljazeera English on 20 December, 2020

Shenzhen 40th anniversary, Greater Bay Area and what HK makes of it

Backchat with RTHK (Radio Television Hong Kong) on 27 August, 2020 (My segment is in the bottom bar, from 9:15 - 9:30 a.m., time counter 04:00)

A new Asian Century looms?

The Future is Asian , proclaims Parag Khanna, acclaimed globalist and author of this seminal book launched in February 2019.

According to the book review on Amazon.com, "Far greater than just China, the new Asian system taking shape is a multi-civilizational order spanning Saudi Arabia to Japan, Russia to Australia, Turkey to Indonesia—linking five billion people through trade, finance, infrastructure, and diplomatic networks that together represent 40 percent of global GDP. China has taken a lead in building the new Silk Roads across Asia, but it will not lead it alone. Rather, Asia is rapidly returning to the centuries-old patterns of commerce, conflict, and cultural exchange that thrived long before European colonialism and American dominance. Asians will determine their own future—and as they collectively assert their interests around the world, they will determine ours as well".

Evidently, Khanna's Asia is far more extensive, extending to Russia and the Middle East. A more circumscribed study of the emerging dominance of Asia comes in the form of a discussion paper dated September 2019 by McKinsey Global Institute- The future of Asia: Asian flows and networks are defining the next phase of globalization .

The paper makes the following salient observations -

(a) By 2017, Asia accounted for 42% of global GDP in terms of purchasing power parity, ahead of 40% of Europe and North America combined. By 2040, Asia's share is expected to increase to 52% in PPP terms and 46% in real terms, representing 39% of global consumption. 

(b) Global cross-border flows are shifting toward Asia on seven of eight dimensions—trade, capital, people, knowledge, transport, culture, resources, and the environment. The only flow that has declined is waste (environment).

(c) Asia’s integration is increasing with a shift toward regionalization. 60% of goods traded, 71% of investment in start-ups and 59% of foreign direct investment (FDI) are intraregional, with 74% travelling within the region.

(d) Asia is not monolithic but rich in diversity, resilience, and competitive strengths, yet highly integrated and mutually complimentary in metrics of innovation, market, labour, capital and cultural diversity. 

(e) There are Four Asia's: Advanced Asia (Australia, Japan, New Zealand, Singapore, and South Korea) with strengths in technology, capital and high-end consumption; China, a class of its own, acting as Asia's anchor an hub in connectivity and a hotbed for innovation; Emerging Asia (Bhutan, Brunei, Cambodia, Indonesia, Laos, Malaysia, Mongolia, Myanmar, Nepal, the Philippines, Thailand, and Vietnam) with dynamism in labor productivity, growth potential and intraregional connectivity; and India and Frontier Asia (Afghanistan, Bangladesh, Fiji, Kazakhstan, Kyrgyzstan, Maldives, Pakistan, Sri Lanka, Tajikistan, Turkmenistan, and Uzbekistan) with a large, young population and broader range of external trading relationships outside Asia.

(f) By 2040, China's GDP is likely to reach $36 trillion, bigger than the rest of the Four Asia's combined ($31 trillion) 

(g) As China shifts from labour-intensive manufacturing, thanks to US-China trade war, Emerging and Frontier Asia's are picking up a share of this relocation. Advanced Asia and China are leading start-ups in Emerging Asia. 

(h) Asia is a dynamic hub for people, idea and culture flows. By 2018, outbound international airline passengers had risen to more than 415 million. A number of cities are becoming more cosmopolitan, such as Seoul, Bangkok, Manila, Hanoi, and Auckland.

It is evident that the 21st century is being redefined by Asia's growing connectivity and gravitas, where China is likely to exercise an outsized role. Apart from the Asian Infrastructure Investment Bank (AIIB), the New Development Bank, and the Belt and Road, China and much of the rest of Asia will be even more closely bound together when the Regional Comprehensive Economic Partnership (RCEP) Agreement is concluded by the end of this year. This will cover ASEAN and all their respective free trade agreement partners, representing 47.4% of world population, 32.2% of global economy, 29.1 % of global trade, and 32.5% of global investment flows.

There are also good reasons for China to be welcomed and to join the Comprehensive and Progressive Trans-Pacific Partnership Agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam effective December 2018. 

Against the above background, any grand strategy to isolate or decouple China may increasingly seem like a pipedream. 

Listen to a McKinsey podcast for a Conversation about the Future of Asia.

Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area

Released on 18 February, 2019, the Greater Bay Area Development Plan is designed to transform this massive urban connurbation into a regional, if not global, innovation-driven, holistic, liveable economic powerhouse by 2022-35. A comparison with other leading GBAs of New York, Tokyo, and San Francisco shows that the Guangdong-HK-Macao GBA is the largest in popoluation (about 70 million), largest in area (about 56,000 sq km), by far the largest container throughput, by far the busiest aviation hub, and ranks second only to the New York GBA as a world leading financial center. 

The Plan hopes to capitalize on the Area's excellent geographical location, robust economic growth, concentration of key innovative factors, advanced level of internationaization, massive infrastructural connectivity, solid complentarity between cities, Hong Kong and Macao's One Country, Two Systems and linkages with China's Belt and Road Initiative. 

As far as Hong Kong is concerned, the Plan aims " To consolidate and enhance Hong Kong’s status as international financial, transportation and trade centres as well as an international aviation hub, strengthen its status as a global offshore Renminbi (RMB) business hub and its role as an international asset management centre and a risk management centre, promote the development of high-end and high value-added financial, commercial and trading, logistics and professional services, etc., make great efforts to develop the innovation and technology industries, nurture emerging industries, establish itself as the centre for international legal and dispute resolution services in the Asia-Pacific region, and develop into an international metropolis with enhanced competitiveness." 

In the coming years, there will no doubt be intensifying competition between leading cities in the GBA, challenges of closer socio-economic integration with Hong Kong and Macao's One Country, Two Systems, as well as repercussions from freer flow of goods, services, people, talent, ideas and capital.

If managed with flair and imagination, the Area could well emerge as a global GBA paragon. The test of the pudding, however, is in the eating.

National Plan for structural re-alignment of industries in North East, East, Central, and West regions, November 2018

The above National Plan (2018 国家产业调整布局) is a detailed guide for the re-alignment of exisitng and new industries between various provinces, cities, prefectures and counties in the North East, East, Central and West regions. It aims at the orderly phasing-out, upgrading and regional, provincial, and locational postioning of exisitng and new industries, including new materials, new energies, digital and information technologies, intelligent manufacturing, aerospace, transportation, shipping, pharmaceuticals, food and other consumer products, as well as a variety of light industries. 

Somewhat reminiscent of a planned economy, the above Plan is a good example of how China's reformed development model manages to achieve rapid growth by combing national planning, state direction, the private sector, and free market dynamics. 

As between various provinces and localities, competition is very keen. Competition with foreign enterprises both in China and overseas is expected to redouble following current trade war accommodations and adjustments

As for the perceived fatal flaw of State-Owned Enterprises predominance, let's not forget that the private sector in China remains very much alive and kicking. All it takes is a stroll along some of the many busy shopping and recreational districts throughout China. Indeed, as part of a relief package in response to the trade war, a substantial Mid-Term Lending Facility (TMLF) is designed to support the private sector. Click here (PowerPoint presentation Slide 11).

Singapore is a shining example of how state-backed conglomerates can co-exist synergistically with a vibrant private sector. (China's Crisis of Success, William Overholt, Cambridge University Press, 2018, pp. 246-7). Although the author doesn't think that this could apply to China on account of Singapore's much smaller size, there is no convincing argument why size alone would make this inapplicable.  

Download 2018 国家产业调整布局  

China releases 2020 action plan for air pollution

Feng Hao's article of 6th July in China Dialogue , an independent organization focussing on China's ecological challenges, outlines the import of China's latest 2018- 2020 Air Pollution Action Plan and catalogues some of the achievements and shortfalls of the antecedent Action Plan. 

The latter Plan only set PM2.5 targets for the three big city clusters of Beijing-Tianjin-Hebei and the Pearl and Yangtze Deltas. 

"In Beijing this meant reducing PM2.5 levels from 89.5µg/m³ (micrograms per cubic metre) down to 60. To do so, Beijing closed its coal-fired power stations, and banned people in surrounding areas from burning coal for heat. These measures were costly and controversial, but they enabled the city to achieve an annual average PM2.5 level of 58µg/m³ – a drop of 35%.

..... In the end, China’s three biggest city clusters (Beijing-Tianjin-Hebei, and the Pearl and Yangtze deltas) all beat their targets.

But even so, no Chinese city yet reaches the World Health Organization’s recommended annual average PM2.5 level of 10µg/m³. And as of the end of 2017, only 107 of China’s 338 cities of prefectural level or higher had reached the WHO’s interim standard of 35µg/m³."

Without setting new targets, the new Action Plan puts pressure on laggard cities and regions. Emphasis is placed on the rust-belt Fen-Wei Plains, which include Xi’an and parts of Shaanxi, Henan and Shanxi provinces. Also targeted is the worsening problem of ozone pollution, adding new reduction targets by 2020 of 10% for VOCs (volatile organic compounds) and 15% for nitrogen oxides emissions (on a 2015 baseline).

What a smart city blueprint would look like - a Hong Kong example

An |"infographic" summary of the  South China Morning Post shows in concrete terms how Hong Kong could become a smart city of the future. The summary is based on recommendations of a government-commissioned Hong Kong Smart City Blueprint Consultancy Study using the Smart City Boyd Cohen model comprising six themes: Economy, Government, People, Living, Environment, and Mobility. 

Greening the Belt and Road Initiative

According to a May 2018 report of the International Renewable Energy Agency headquartered in Abu Dhabi, 43% of the world's renewable energy jobs are in China. These include 65% of global solar PV jobs, 44% of wind energy jobs, and 21% of hydro power jobs. Download IRENA_RE_Jobs_Annual_Review_2018

China's green energy capacity underpins the attainment of President's Xi's dream of a "Beautiful China", part and parcel of the "China Dream" of national renaissance in coming decades. It also supports the clarion call of greening China's global Belt and Road Initiative. 

According to a WWF/HSBC report Greening the Belt and Road Initiative of January 2018, hydro-electric power accounts for 22% of all BRI projects, ahead of rail infrastructure (19%), manufacturing (13%), coal (12%), miscellaneous (12%), ports (8%), roads (7%) and other energy resources (7%). Three-quarters are in power and transport infrastructure, though still devoid of solar PV or wind power projects. The investment trend seems to shift towards special economic zones, manufacturing and urban infrastructure development. Hence, the BRI has huge potential to help realize the UN Sustainable Development Goals, including Industry, Innovation and Infrastructure, Sustainable Cities and Communities, Clean Water and Sanitation, Climate Action, Life on Land and Life below Water. 

Download WWF-HSBC Repaort - Greening-the-belt-and-road-initiative

A concurrent study Greening the Belt and Road by Renmin University in collaboration with the City of London Corporation, Green Finance Initiative, among others, proposes wider partnership with multilateral development banks, more room given to private capital, better project debt management, and more effective green finance governance covering conservation, bio-system adaptation, 
carbon capture and storage, energy efficiency, including co-generation, and smart grids, pollution control, prevention, and treatment, green buildings, green products and materials, renewable energies, sustainable agriculture and forestry, sustainable transport infrastructure including urban rail, metro, electric and hybrid vehicles, recycling, waste management, as well as water efficiency and wastewater treatment. 

Download Renmin Universityb et al Greening-the-Belt-and-Road

 

 

"Amazing China" documentary

Still facing some of the world's most intractable economic, social, political and environmental challenges, during the past five years, China has managed to transform itself in ways almost beyond recognition. Examples inlcude the world's most awe-inspiring transport and logistical infrastructure such as high-speed rail, sky-scraping suspension bridges, massive container ports, life-changing mobile payment systems, eye-catching green developmnents and wide-ranging poverty relief. A CGTN documentary, an English-language redux of CCTV's highly-acclaimed series "Amazing China", showcases some of the dramatic changes of China's socio-econmic landscape, propaganda notwithstanding. Don't log off at the end of the first epistle. The video automatically rewinds to the next.