Category: East Asia & Pacific

Communist China and the New World [Trade] Order

John Metzler

UNITED NATIONS — American exports surged last year to reach impressive new highs. Despite the recession, over $1.8 trillion dollars in U.S. goods were shipped worldwide. But before anyone thinks about popping the champagne corks to celebrate these new commercial successes, the U.S. Commerce Department also announced a dangerously high $498 billion trade deficit, representing an almost 33 percent increase which dampens the effervescence of the rebound.

American exports are booming for many reasons. A gradual global economic recovery, the quality of the products, and a weak dollar which makes the items more attractive, are among the reasons. So too are a number of Free Trade Agreements (FTA) with key global partners. Given the Obama Administration’s politically stated goal of doubling exports, there’s reason for initial optimism. Trade partners and patterns illustrate so very much about international relations well beyond the business bottom line.

East Asia’s growing economic weight brings the region enhanced political clout and global gravity. As recently as 1990, seven of America’s top fifteen export destinations were European. As one would expect the United Kingdom, Germany, France, Netherlands, Belgium, Italy and Spain were on the list. So too were Japan, South Korea and Taiwan. Back then, the People’s Republic of China was number 18. But fast forward twenty years and look at 2010. Five European countries (UK, Germany, Netherlands, France, Belgium) made the list but new players abound. The “new world trade order” has Canada, Mexico, China, Japan, and the United Kingdom in the top five lineup. Italy has been supplanted by Singapore.

Now let’s look at America’s imports. In 1990, four European countries (Germany, UK, France and Italy) were among the top fifteen. The top five still included Canada, Japan, Mexico, Germany and Taiwan. Fasten your seat belts please! In 2010, European countries made up five of the top fifteen sources of imports But the People’s Republic of China has shoved aside Canada, for first place, so the new top five list reads, China, Canada, Mexico, Japan and Germany.

Equally by 2010, China became the world’s second largest economy, pushing Japan into third place.

That the China Trade has swamped American markets, devastated industries, and decimated jobs is glaringly obvious. While American businessmen are gloating over a record $92 billion in exports to the Mainland in 2010, the USA imported $365 billion in products from the People’s Republic. Thus Washington’s trade deficit with Beijing hit a dazzlingly dangerous $273 billion and that’s in a recession! Looking at it another way, this is $273 billion sloshing around in China’s coffers gives Beijing the bling to keep up its global raw materials buying binge.

Major American exports to China include commercial aircraft, semiconductors and sophisticated industrial machines.

By now many readers may be saying and “what about India.?” All the hype about India overtaking China, the Dragon versus the Tiger, etc. Well last year India became the USA’s 14th top source of imports, just behind Nigeria. But look at the numbers. India imported $19 billion in goods from the U.S. while exporting $29 billion to the U.S. The trade deficit was just over $10 billion for the year. Looking at it another way, the U.S./PRC trade deficit in December alone was over $20 billion.

To illustrate how things have changed in less than a generation, tiny but entrepreneurial Singapore (pop 5 million) now has larger two-way trade with the USA than does Italy (pop. 60 million). In today’s world high-tech items seem to surpass fine foods, wines and fashion. Clearly South Korea remains one of the USA’s top bilateral trading partners. In 2010 Korea was our 7th largest importer as well as exporter. Impressive indeed.

Now at long last the Obama Administration has revived an earlier plan by former President George W. Bush to sign a FTA with South Korea. According to the free market oriented Cato Institute, a free trade pact with South Korea would promote both prosperity and security. The U.S./Korea Business Council adds that an additional $35 billion in exports and 345,000 American jobs would emerge from the package, yet to be ratified. Economic power is tilting towards East Asia and away from traditional West European partners. This allows Asia a growing commercial advantage as well as political weight in the global economic order.

John J. Metzler is a U.N. correspondent covering diplomatic and defense issues. He writes weekly for WorldTribune.com.

www.worldtribune.com, February 14, 2011

March 8, 2011
Euro vs. dollar

© Photo: SXC.hu

France is preparing a full-scale reform of the world financial system. Paris, which is chairing the G20 at present, is suggesting lowering the clout of the dollar, abandoning currency and trade wars, and focusing on economic cooperation.

This is not the first initiative of the French authorities for radical reform of the financial system. Paris is practically the main critic of the European Central Bank’s policies and opponent of a strong Euro which is hitting national exports. This time, French Minister of Finance Christine Lagarde has put forward the idea of reforming the world financial system so as to rule out the possibility of the authorities of different countries manipulating currency rates. Dmitry Smyslov, an expert from the Institute of World Economics and International Relations at the Russian Academy of Sciences, agrees that the need for this reform is ripe.

“The first problem is establishing an orderly, well-balanced international currency system, which is different from the one we have now, a system that is dollar-centric but not pinned to any realities or international agreements. The reason is that the Bretton Woods is no longer applied and now there are no clear-cut international boundaries within which the currency system functions.”

The French Minister of Finance did not even try to conceal that she was first and foremost unhappy about the respective moves of the USA and China. Those two countries are rather openly pursuing weak national currency policies that are beneficial for local manufacturers but detrimental for European ones. Experts warn that for this very reason these two giants of the world economy will be against the radical reconstruction of the world financial system. Analysts recommend that Europe should start with itself, that is establish a uniform taxation system, strengthen the economic integration of the EU and, most importantly, sort out its debts. The burden of this indebtedness is what is worrying investors and discrediting the Old World currency, Dmitry Smyslov says.

“Another issue for the EU authorities is improving how the European Currency Union functions. To achieve this aim, countries should agree upon their national budgets and centralize their coordination. Simultaneously, a permanent mechanism for helping countries in trouble should be set up.”

It is not all that simple. Even the establishment of a 750 billion euro Rescue Fund in 2010 could not do without a scandal. Some countries openly declared that they did not want to bail out their imprudent neighbours. While the Europeans were arguing, China built up its gold reserves, adding 19% in 2010, and even began to buy up the bonds issued by European countries. This strengthened the yuan even more. The USA breathed down China’s neck, raising the value of the dollar, pumping cash into the market and selling more and more bonds to foreign investors. France is hardly likely to be able to change this situation without serious support from other members of the G20.

, Feb 8, 2011

March 8, 2011
China’s Defense Budget Draws Concern

BEIJING—Japan expressed concern over China’s planned double-digit rise in defense spending this year, highlighting trepidation in the region about China’s escalating military and economic might after a week of fresh Chinese territorial confrontations with Japan, South Korea and the Philippines.

Japan Foreign Minister Seiji Maehara urged the Chinese government to be more transparent about how it planned to use its newfound military firepower, saying, “Whether it should be regarded as offensive or defensive would require a close look.”

The comments came after China announced plans early Friday to increase its defense budget by 13% this year and as the week’s clashes built on concerns that China will increasingly use its escalating military power to assert its territorial claims in the region

Such fears have prompted many of its neighbors to to shore up defense ties with the U.S. and beef up their own militaries, threatening to push Asia into a new arms race.

China expects to spend 601.1 billion yuan ($91.4 billion) on defense in 2011, up from 533.4 billion yuan last year, Li Zhaoxing, spokesman for the National People’s Congress, told a news conference ahead of the start of the legislature’s annual session on Saturday.

The projected rise is faster than last year’s 7.5% increase—the slowest clip in decades—but is significantly slower than the roughly 19% annual growth in years before 2010.

The headline figure does not, however, include key items such as arms imports and the program to develop a stealth fighter and an aircraft carrier, according to foreign military experts who estimate that China’s real defense spending is far higher.

Mr. Li said the military budget would be used for purposes including “appropriate armament development,” training and human resources, while stressing that it remained relatively low as a proportion of China’s GDP and overall budget, and dismissing concerns that it threatened neighboring countries.

“China’s defense spending is relatively low in the world,” he said. “Every bit of China’s limited military strength will be used for safeguarding national independence, sovereignty and territorial integrity. He reiterated China’s oft-repeated refrain that its efforts “will not pose a threat to any country.”

On Wednesday, Japan scrambled fighter jets to chase off two Chinese military planes which it said flew within 34 miles of disputed islands in the East China Sea, which are known as Senkaku in Japan and as Diaoyu in China.

Japanese government spokesman Yukio Edano said Japan would not protest formally as the Chinese planes did not leave international airspace, but he also voiced concern over China’s growing military power and said Japan would monitor the situation. China’s Foreign Ministry didn’t immediately respond to a request for comment.

Relations between Asia’s two biggest economies plunged to their lowest point in years in September following collisions near the islands between two Japanese coast guard patrol boats and a Chinese fishing vessel.

In December, Japan, which in 2010 was surpassed by China as the world’s No. 2 economy, revised its national defense guidelines, which were drawn up during the Cold War, to shift focus away from Russia and toward the emerging threat from China.

China’s more forceful stance on territorial issues has also alarmed other countries in the region.

On Wednesday, the Philippines deployed two war planes to protect oil explorers who complained that they were being harassed by two Chinese patrol boats in a disputed area of the South China Sea.

The Philippine government demanded an explanation Friday for the incident at Reed Bank near the Spratly Islands, which are claimed by China, Brunei, Malaysia, Taiwan, Vietnam and the Philippines.

Chinese Embassy spokesman Ethan Sun reiterated his country’s claim to the Spratly Islands and adjacent waters, but said Beijing was committed to maintaining peace and stability in the area and resolving disputes through peaceful negotiations, according to the Associated Press.

South Korea’s Coast Guard said Friday it seized two Chinese fishing boats and their crews on Thursday after they were found fishing illegally in South Korea’s Exclusive Economic Zone, 64 miles southwest of Keokrulbiyeol island in the west sea.

During the process, one South Korean policeman was hurt by a weapon wielded by Chinese fishermen, and one Chinese fisherman was shot in his leg, the coast guard said.

China’s Foreign Ministry didn’t immediately respond to a request for comment on that incident.

Chinese officials and academics have toned down their rhetoric this year in an apparent bid to address concerns that China is becoming increasingly assertive on territorial claims, and that it plans to challenge U.S. military supremacy in the Asia-Pacific region.

In January, China jolted the region with a test flight of a new stealth jet fighter, indicating that China is further along in using the advanced technology than previous Pentagon statements had suggested.

China is also developing an antiship ballistic missile that could threaten U.S. naval vessels in the Asia-Pacific region, where the U.S. has long been dominant.

However, Mr. Li pointed out that China’s military spending accounted for only about 6% of China’s national budget, which he said was lower than in recent years—and well below the level of the U.S.

The defense budget “will see some increase, but the ratio of spending to GDP is quite low—lower than in many countries,” he added.

The Wall Street Journal

March 4, 2011
Bank of India becomes first to offer trade settlement in yuan

Saibal Dasgupta

BEIJING: Bank of India has become the first Indian bank to offer trade settlement facility between the rupee and the Chinese RMB from Hong Kong. This follows intense persuasion by the China Banking Regulatory Commission, which is trying to gain acceptance of the RMB as an international currency.

“We are the first Indian bank to offer real-time settlement facility in RMB to Indian exporters and importers. It will be save a lot of time because settlement in US dollars usually takes three working days,” Arun Kumar Arora, BoI’s chief executive in Hong Kong, said during a recent visit to meeting regulators in Beijing.

Indian buyers are at present making payments in US dollars, and they often have to convert rupee into the US currency for the purpose. The US dollars will no more be the intermediary currency as the BOI is offering direct settlement between the rupee and the Chinese money.

Chinese exporters want their money in the local currency, which is regarded as more stable compared to the US dollar. They are also in a position to have their way because Indian buyers do not have an alternative source of low-cost goods, sources said.

The process has been facilitated by a recent memorandum of understanding signed between the Reserve Bank of India and the CBRC to enhance banking relationship between the two giant neighbors.

BoI has opened a RMB with the Bank of China, which will provide real time settlement with buyers and sellers across all provinces of China. The move is part of a campaign by the Hong Kong Monetary Authority, which has persuaded 100 foreign banks to enter into arrangements with Chinese banks for trade settlement in RMB.

“We will sell RMB against the US dollar, and companies can buy as much as they want provided they have the right papers. For individuals, the limit of 20,000 RMB a day,” Arora said. He expects settlements for an amount ranging between 200 million and 300 million in the first year.

Hong Kong is the only offshore market for the Chinese currency. The past year saw $400 billion of Chinese yuan being traded in Hong Kong against other currencies.

BoI is also awaiting permission from Chinese regulators to establish a branch in Beijing, where it has been running a representative office for the past four years. It has recently signed an MoU with the CBRC on converting the representative office into a branch. The bank has been running a branch in the boom city of Shenzhen for the past four years. The Shenzhen branch will also be involved in providing additional support for the trade settlement business.

timesofindia.indiatimes.com, Feb 24, 2011,

February 28, 2011
Standoff at Tahrir Sq.

by Kutluk Ozguven

29 January 2011

The rules of the game have been simple: Police trumps protesters. Masses trump police. Army trumps masses. If the army stands back, you have a revolution (Iran 1979, Romania 1989, Tunisia 2011), if not, then bloodshed (Hungary 1956, China 1989, Algeria 1992). I don’t recall any popular uprising successful over a fully functioning armed force determined to go all the way. That is why armed forces are always considered as backbones of corrupt dictatorships.

This weekend we shall see if the Egyptian armed forces, which the latest Wikileaks leak as US believes it to be unhappy, at least in the mid-ranking officers, but probably higher, will open fire to stop the masses or the masses will blink, or it will give way to the people. Egyptian army is a conscript army and there is no part of the Egyptian society that may be counted on apart from the westernised elites, whose children do not operate tanks during military service. The news is that the Egyptian army are already mobilised into urban areas and taken control of strategic points.

Egyptians I came to know during a series of visits for international projects were a very kind people, members of a polite and civilised nation, well known among the other Arabs with their humour and taking things lightly. This nation of gentle farmers has been easy to manage by foreign soldiers (the Hyksos, Ptolemeans, the Mamluke, Ali Pasha troops) or domestic warlords, perhaps exact opposite of Chechens or Afghans. They are patient, soft-spoken, happy in the face of any event, and cultured. In short, any megalomaniac tyrant’s dream population.

They have gone through a westernisation process predating Turkey, and a secularisation process of 50 years under socialist dictatorship. Save occasional and sensational terror incidents, there is no history of popular uprising or even any active political formation, except for the elitist Muslim Brotherhood, structured in 30s as a Muslim answer to Freemasonry, who wouldn’t even entertain the idea of going on the streets with sweaty youngsters. Americans and Israelis are all over the country, to the degree that five star Cairo hotels put on Hebrew-language TV channels for their guests from their northeastern neighbours. It has highest number of Internet access in the region with 20 million users and more advanced in some software technologies than, say, Turkey.

Therefore, one wouldn’t expect a popular uprising overthrowing one of the most entrenched dictators of the world. Most well-informed experts, political commentators or social analysts certainly did not expect that the events would have gone out of control to this degree where it is becoming more and more unlikely that Mubarak will survive. When he unplugged the Internet less than a day ago, I recalled another ridiculous caricature, Alan Rickman’s Sheriff of Nottingham cancelling Christmas. He could have blocked social networks and slowed down the e-mail, but that would be too sophisticated to epitomise this wily little people who see it their birth right to enslave tens of millions of human beings. Which explains the situation better than any verbose expertise: it is the tyranny of stupid, primitive, incompetent minds over masses much more sophisticated and much deeper than them.

When one sees all these Middle Eastern or Central Asian rulers and their small social segments whom they depend upon to man their security forces or financial institutions, one cannot help but be only deaf to any economic analysis. Despotism is always a disaster for economy because meritocracy is not allowed and accountability does not exist. The small clique of rulers milks the real productive people and eventually kills their productivity long before they would expire naturally. This leaves society weak and inefficient. If we add to the two factors the global financial system, which get the lion’s share of the bounty and only leaving crumbs to the visible rulers, it is obvious that the dictatorship is not a long term stable solution. Either the nation is annihilated from within or without, or it throws its rider. The last military period in Turkey, 1997-2002, is a good accelerated example to despotic cronyism, when the rampant economy of 1997 was brought to bankruptcy in four winters. Imagine that being practiced 30 years or 50 years.

It is true that the 2011 Domino events stem from people wanting to get rid of the despotic cronyism, with them seeing that it is no more to mind one’s own business anymore as there is no business being left. And this is why analysts keep calling them secular uprisings, emphasizing the difference between Iran, Algeria, Hama or others. But this distinction comes out of their own mental compartmentalisation rather than the field. There is no separation between three elements that are in force here: people’s dignity, economic development and return to Islam. In the middle-east, or any once-have-been Islamic nation, the three are inseparable.

Economic development is impossible without a level playing field and risk taking, bold, free, entrepreneurial players and accountable refereeing. That is impossible without popular social consent and social contract without privileged classes, aristocracies and caste systems. Perhaps in Hindu society, or in Confucian society. But not where Islam had been the source of social order with its egalitarian principles, holistic justice concept and personal freedoms. Once the verses of the Quran are practiced at some point by any society, it can never have another long-term working social system. That is why in any free election in the Middle East at any given time, Muslim-leaning parties have always won without exceptions. Therefore however secular the protests might have been, if there will be political freedom, reversal of de-Islamisation will be part of it.

This is why many in the Middle East look towards the Turkish experiment. Without oil and natural sources, and to confess, with little ingenuity, by simply doing things as they should be done, Turkey turned from the military-dominated status to a richer, functional democracy managed by Muslims.

The Tunisians, Jordanians, Algerians, Yemenis and Egyptians want this, no more. The talk of Turkey without oil is doing well with a free society, with secularised and religious people coexisting under a religious president, with none of the pretentious extravaganza is the greatest fairy tale to Arab ears. A fantastic dream which had been once ruled out as absurd. They just want the same. But when they get it, as they will, another fairy tale that was once ruled as absurd, will inevitably roll on: the cooperation and eventual unity of these independent states.

If the troops on the Tahrir Square open fire, the process will only be delayed. But not stopped.

January 29, 2011
Chinese president concludes state visit to US

Chinese President Hu Jintao left Chicago for home on Friday after concluding a four-day state visit to the United States, during which Hu and his US counterpart Barack Obama agreed to build a China-US cooperative partnership based on mutual respect and mutual benefit.

“It is also conducive to world peace and development,” Hu said.

In his speech, Hu elaborated on the domestic and foreign policies of the Chinese government and on how to advance China-US relations in the new era.

“Working together hand in hand, we will build and develop a China-US cooperative partnership based on mutual respect and mutual benefit and deliver greater benefits to the people of our two countries and the world over,” he said.

The Chinese president flew to Chicago on Thursday afternoon to continue his visit to the United States.

On Friday, Hu, accompanied by local officials, visited Walter Payton College Preparatory High School in downtown Chicago.

The high school houses the Confucius Institute in Chicago (CIC), which primarily focuses on the Chinese language and cultural education programs and is the only such institute targeting primary and middle school students in the United States.

Later in the day, Hu visited an exhibition of companies operating in the US Midwest. Most companies at the exhibition in Chicago’s suburban city of Woodridge are Chinese-funded ones.

During his tour of the exhibition, Hu encouraged Chinese companies operating in the US to play a bigger role in promoting economic and trade cooperation between the two countries.

The success of Chinese companies in the United States is a specific example of the China-US mutually beneficial cooperation, he said.

The operation of these companies not only yields profits for themselves, but adds momentum to economic development in the US Midwest, he added.

At least 40 Chinese businesses now have operations in the Chicago area, and the number is growing. For example, Wanxiang America Corp., which makes solar panels, has opened plants and a headquarters around Chicago in the last two years.

Before leaving the US for home, Hu sent a message of thanks to US President Obama, expressing his belief that through the efforts of the two sides, China-US relations would be further developed to better benefit the peoples of the two countries and make a greater contribution to world peace, stability and prosperity.

The Chinese president began his state visit on Tuesday in Washington. The visit, Hu’s second as head of state, is aimed at enhancing the positive, cooperative and comprehensive relationship between the two countries.

Hu last visited the United States in April 2006.

President Hu, who began his visit on Tuesday, had extensive and in-depth discussions with Obama at the White House on Wednesday on major bilateral, regional and world issues.

The Global Times

January 22, 2011